MaRS Centre for Impact Investing is now seeking a Senior Associate, Capital Advisory Services! From persistent poverty to climate change, we face entrenched social and environmental problems. Fortunately, a growing number of charities, non-profits, co-ops and for-profit companies are building business models to tackle these problems. They are turning to investors for the financing to […]Read More ›
Voting with Dollars – The Social Impact Purchasing Summit
On November 7th and 8th, I had the pleasure of attending the first Social Impact Purchasing Summit (SIPS). The event was held in Vancouver and co-hosted by Enterprising Non-profits, LOCO, BuySmart, and ISIS at the Sauder School of Business. The Summit offered a unique opportunity for the various players involved with social purchasing to share stories, learn about opportunities, and discuss and address the challenges of bringing social purchasing into the mainstream. Given the impressive turnout, as well as the range of organizations represented, it is safe to say that the event was a success and helped to further the discussion surrounding social purchasing.
A highlight of the conference occurred during one of the first presentations when a quotation was projected which read, “Every time you spend money, you’re casting a vote for the kind of world you want”. This quotation nicely captures the rationale to engage in social purchasing: purchasing decisions demonstrate the social values of organizations.
With respect to the key “takeaways” from the conference, there were a number of common themes that weaved into the various presentations. These themes will be summarized below.
On a broad level, it was noted that the perception of value and what to consider in the procurement process need to be reconsidered. First and foremost, this involves recognizing the social value that can be derived from purchasing goods and services from socially motivated organizations. This is a significant shift as it implies that purchasers need to consider more than just cost, and they need to define metrics to assess the “total value” of a purchase.
Currently, procurement policies that include considerations beyond cost generally focus on environmental issues. While this is an important area to address, other social issues are often overlooked. Thus, it will be necessary to ensure that these other issues are also included in the assessment of the “total value”.
Another common theme was that there is a misconception that purchasing goods from a social enterprise implies that the product is inferior. This is an unfortunate cultural norm as it limits the willingness of purchasers to perform deals with social enterprises.
Buyers’ Procurement Practices
A common discussion at the conference was that a necessary condition to increasing social purchasing is to adjust the structure of the buyers’ contracts. One such option is to “unbundle” the contracts. This is in reference to breaking up large contracts into separate and smaller contracts, which would enable social enterprises to compete for part of the large contracts.
In addition to altering the size of the contracts, another key ingredient to advancing social purchasing is the use of Community Benefit Agreements (CBAs). However, while CBAs are important, it was noted that simply including CBAs into contracts is not sufficient in and of itself to increase social purchasing as there are other barriers that need to be addressed.
Capacity of Suppliers
It was identified that the capacity of social enterprises is, at times, a barrier to competing for contracts. For example, small organizations may find the procurement process to be complex and challenging to navigate. Therefore, it is important to ensure that social enterprises are aware of the steps involved in this process so they can compete for contracts.
In addition, it was also noted that some social enterprises need to develop the capacity to scale up to compete for some contracts.
The final recurring theme regarding the capacity of the suppliers was that simply having a social objective does not excuse an organization from providing a competitive and high quality product. Therefore, social enterprises need the capacity and expertise to compete with operations that do not include a social component to their production.
Awareness of Social Purchasing
There were a number of comments regarding the importance of increasing awareness of social purchasing amongst those not engaged, and ensuring that those involved are aware of others’ interested in this practice. For example, there was a common concern that buyers and sellers interested in social purchasing are not aware of each other, and because of this disconnect, deals fall through the cracks.
With respect to purchasers not engaged in social purchasing, it was noted that efforts to raise awareness amongst purchasers could be a useful mechanism to advance social purchasing. To address the issue surrounding a lack of awareness, new networks and communities could enable resources and information to be shared more efficiently.
In regard to networks, there was a discussion about the importance of innovative partnerships. As one presenter noted, we are in “the era of unlikely coalitions”. This is an interesting and encouraging observation as it suggests that the time is ripe for new types of relationships and networks to be formed, which will, amongst other things, expand social purchasing. The question is: which organizations will lead the way on this front?
Given the scale of procurement across the public and private sectors, social purchasing offers an opportunity to create significant social change. To help advance this practice an enabling environment for social purchasing will have to be laid.
This environment will be a product of:
- building the capacity of the suppliers,
- altering the policies of the purchasers,
- bridging knowledge gaps, and
- challenging purchasers, including the general public, to consider how they will vote with their dollars.
The time is ripe for social impact purchasing to take off in Canada. Who will step forward?
Photo credit: Demonstrating Value on Twitter: http://ow.ly/i/16GKx