Good deals that do good
From the December 2020 print edition
When buying goods and services, equipment for businesses or government, and on any construction and infrastructure projects, a social procurement approach is one that considers the interests of the community stakeholders. This approach includes social, ecological, environmental and economic development. Best value is achieved when we balance value-based interests along with pricing concerns.
When tendering a project with social procurement values, whether with a domestic or foreign contractor, it creates positive competitive tension in the market. Social procurement values ensure social impact in communities once the project begins. Social impact is a measurable change on social issues or outcomes through procurement. Social procurement is the transition from making goods deals, to making deals that do good.
Social procurement values have been around for a couple of decades but are receiving more attention due to their success. Every organization consumes goods and services and these transactions are the everyday means of commerce. Social procurement is a strategy to realize local economic benefits when contracting.
Labour is important in social impact outcomes. Individuals facing barriers, as one example, are often overlooked as a first choice for employment with for-profit organizations. This is understandable where peak efficiency is required to sustain profits. The result is many people facing employment barriers, such as individuals having disabilities, rely more on social services paid for by taxpayers.
Would your organization hire an ex-convict? However, Purpose Construction out of Winnipeg, does. As a social enterprise, Purpose Construction trains barriered individuals to qualify for construction work, pays them living wage rates, and helps them to return to full-time work – often in the private sector.
Business with a purpose
Social enterprises are social purpose businesses that generate value by providing goods and services, generally as a not-for-profit operation. Social enterprises provide work for people facing employment barriers. This can include skills development to prepare for a return to the workforce. Social enterprises work with government, private sector companies and with other social enterprises. Social enterprises are operated by business entrepreneurs.
The Purpose Construction example builds social capital. Buy Social Canada defines social capital as the “relationships and networks within and among community members.” With a shortage of skilled trades, Purpose Construction can build a pool of workers to meet demand without government subsidies.
An early and continuing success story in the social enterprise sector, is CleanStart Hoarding & Junk Removal CCC Inc. In the Vancouver lower mainland, CleanStart, in 2015, paid $233,000 in wages to its barriered employees. This resulted in a social return on investment (SROI) of $1 million per year in the local economy. In 2020, CleanStart will contribute $1.4 million. The SROI is based on a study by E&Y with Atira Property Management which shows that for every dollar paid to target employees, the return is more than $4 in social and economic development. When was the last time you got a four-to-one return on an investment?
The empirical study on the SROI demonstrated reduced reliance on social subsidies; reduced shelter costs; reduced criminal activities; taxes being paid back into community; increased local spending; increased employability; increased self-esteem; improved health and quality of life. Individuals move from dependency on social services to independent taxpayers.
Another company that uses social procurement as a business strategy is Chandos Construction. They are the first and largest B Corp certified commercial builder.
Chandos is a Canadian, employee-owned construction company operating in several Canadian cities. Their social procurement strategy embraces local employment; diversity; poverty reduction; eliminating social isolation; local purchasing; skills training; first source hiring and fair wages to underrepresented individuals. Chandos responds to tenders for major infrastructure projects, a very competitive sector. Their commitment to social procurement is another example of building social capital. Chandos hired several workers facing barriers full-time and enrolled them in the Red Seal training program for trades.
Purpose Construction, CleanStart and Chandos are great examples of social procurement in Canada. It takes the spending power of buyers to make this happen. Buyers must look beyond the lowest out-of-pocket cost and redefine the value proposition.
As we move into the post-Covid era, it’s even more important to ensure social enterprises and small- and medium-sized businesses can participate in government contracts. Government contracts are taxpayer paid. While we are engaged in a global economy, we concurrently need local economic diversity.
This implies not simply putting the bids on e-bidding platforms but using strategies to increase the number of bidders. One tool is the unbundling of large contracts. The theory has been to buy the most from least to get the lowest unit cost. This will always favour multi-national corporations with deeper pockets.
Unbundling could take a percentage of the requirements and ensure local participation, for example by targeting women-owned businesses or Indigenous contractors. The balance of the requirements goes to the lowest bidder.
Great pricing, no supply
We are dealing with oligopolistic markets where the largest suppliers tend to control the pricing and availability. When we reflect on the PPE shortage, we can attribute this in part to bundling the demand. Great pricing but no supply.
Trade agreements, international and domestic, provide for exceptions, exemptions and exclusions when dealing with social enterprises by federal, providincial and municipal governments. Further regional trade agreements provide for derogations for economic development strategies.
Community benefit agreements (CBA) are an extension of social procurement. A CBA is
between community, government and developers and ensures development projects enhance local social, environmental and economic opportunities. The Parq Casino in Vancouver is an example.
For the past two years, through Presentations Plus, I have been the procurement advisor on the Coastal Communities Social Procurement Initiative (CCSPI) on Vancouver Island. Along with Buy Social Canada, Scale Collaborative and the Vancouver Island Construction Association, we inform public officials, train public buyers and small businesses and social enterprises on social procurement strategies. This includes drafting bid document templates with social value language, focusing on increasing local opportunities and drafting policies. CCSPI began with six cities and towns and now has over 20 communities participating. It’s exciting to see the commitment from so many parties to common goal. The below table shows where procurement has focused and the transition to social procurement values.
It’s early for social procurement, but more and more progressive organizations are adopting this strategy because of the compelling business case it creates.
It’s about being vocal when making local the focal.