In the last two weeks I’ve been at two major social impact investing events, both of which were conducted in the language of investors, and both of which left me actively searching for the perspective of social purpose organisations. There’s a lot of discussion about what social purpose organisations need to do to get investment ready, but where’s the conversation about what investors need to do to get impact ready? On September 3rd, the second night of the SOCAP conference, I attended an event held by Echoing Green, who support young social entrepreneurs. One of the young entrepreneurs was attending SOCAP. Four of her friends excitedly asked her what it was like. She said “I don’t know. I’m still trying to figure out if it’s for me. I go to these sessions, but I don’t understand what they’re talking about.” I asked her what the issue was. She said the language and the concepts were so foreign to her that she struggled to find meaning in the proceedings. Only that morning, Sir Ronald Cohen had said, “that’s what impact investment is about: enabling social entrepreneurs whether they’re working through not-for-profits or for-profits, to raise the capital they need in order to improve the lives of others, or the environment”. How did we fail to communicate this to our target market? Continue reading
A better way of doing business
Social procurement involves additional social value being purchased alongside goods or services, such as the employment of long-term unemployed people. The concept of social procurement has been around in Australia for a few years, but it’s really gathered momentum in recent months and is fast becoming the standard, rather than alternative, way of purchasing. The September 2013 launch of Social Procurement Australasia marks a significant milestone, creating an umbrella-body over several organisations working in this area and provides support and resources to the wider community.
Three examples of social procurement are below:
- When the Western Sydney Parklands Trust tendered for a contractor to help control the spread of weeds, they included a selection criterion for social program. This was worth 20% of the total score. The Trust didn’t specify what the social program had to be, offering providers flexibility and ingenuity in what they suggested. The successful contractor was an indigenous employment social enterprise. The Trust understood and accepted that including social benefits may cost them more than a standard contract and had budgeted for this possibility. In a presentation to local procurement officers, they stated that they were pleasantly surprised by the final result and estimated that they were within 10% of a standard contract price. They’ve made a great video about this contract – watch it here.
- The Department of Human Service (DHS) uses social procurement to drive change. In one tender to clean the common areas of a social housing estate, the Department of Human Services included a specific clause in the tender, requiring the respondent employ 35% of the contract workforce from unemployed social housing tenants living on the estate. This, along with other contracts including security services for the estate, makes a significant difference to the proportion of people that are employed in the estate, increasing confidence, skill and employability of residents and providing more role models for children in the estate. Tendering this way does not preclude commercial organisations, but does influence them to enhance the social benefit of what they do.
- Another way social procurement can be achieved is by purchasing from social enterprises (businesses that trade for a social and/or environmental purpose). For example, City of Sydney purchases catering from Yaama Dhiyaan [highly recommended – delicious and generous!] which offers hospitality training to Indigenous and non-Indigenous unemployed people. While this is an example of direct tendering, selective tenders can also be let to a range of social enterprises and not-for-profit providers. The Social Enterprise Finder from Social Traders will help find social enterprises in Australia, in a similar way to the directory for the Buy Social campaign by Social Enterprise UK. Buying fairtrade will ensure a fair price is paid to overseas suppliers, as the National Australia Bank demonstrated with its nationwide switch to fairtrade coffee, tea, sugar and hot chocolate.
Promoting social value through legislation
“There is nothing in any of the Local, State or Federal laws, or the common law, which prevents or limits the ability of either Local or State Government to consider the social outcomes / benefits which might be gained from a particular tender as part of Government’s procurement processes. In fact, in a very real sense both Local and State procurement regulations require these types of outcomes / benefits to be considered in order to achieve the best value for money when assessing tenders.” (Social Procurement in NSW, p.24)
European procurement law is similarly open to the consideration of social outcomes in the assessment of value for money, however in practice non-financial outcomes were overlooked. In an effort to encourage commissioners to more consistently value social value, the Social Value Act has been introduced in the UK.
The Social Value Act
In 2012, the UK Government passed the Public Services (Social Value) Act 2012 which directs public authorities procuring goods or services to consider how their decision “might improve the economic, social and environmental well-being of the relevant area”.
The Social Value Act has been widely supported by the social sector and has empowered and encouraged social sector organisations to demonstrate their social and environmental impact when responding to tenders. It encourages the inclusion of social value in cost-benefit analyses, an area of confusion previously. Part of the implementation of this Act has been through social enterprises clearly articulating their social value in tender responses, thus educating procurement officers as to the type of evidence they could be considering.
What’s better? Both together!
The Social Value Act relies on respondents including and demonstrating social value, and leaves it to procurement officers to decide how to value this as they assess bids. Social procurement is more proactive and prescriptive in pursuing social outcomes. There is, however, a greater benefit to be realised by having both the legislation and the practice working together.
*For the purpose of this article, no distinction is drawn between procurement and commissioning, with both assumed to describe the entire purchasing process
*For anyone interested in what we can learn from the US, check out AbilityOne
Who Gives A Crap is a brilliant social enterprise. Three young guys have used crowdsourcing platform Indiegogo to successfully launch their toilet paper business and raise money to build toilets in developing nations.
A good example of a new business reducing risk to their initial investors through crowdfunding. They’d have a lot to prove if they were asking for millions of dollars, but for fifty bucks, a funny, believable video and a box of toilet paper will do.
It goes like this. If they raise more than $50,000 (which they’ve done in just over 50 hours) they’ll do a production run of their toilet paper and send packs to those who bought them on the site. They’ll donate half their profits to WaterAid to build toilets where there are none. If they raise over $100,000 they’ll go into business and stock the line in stores.
Why has it worked?
The guys have developed their own eco-friendly and attractively packaged toilet paper and a whole heap of hilarious toilet jokes. They’ve set up their indiegogo site with a really funny, effective, high-quality video about their project and have set a good range of options for giving/buying.
They’re selling a product we all value, and we’re all enjoying the way they’re selling it to us and that we’re making a social contribution at the same time!
Indiegogo began in 2008 as a crowdfunding platform for independent film makers. Each project sets a target amount to raise and contributes 4% to Indiegogo if they meet their target. Tax incentives are only available to US customers through Paypal. Projects on the site also include registered charities, people looking to fund their mother’s holiday, their child’s college tuition, medical expenses or small business.