Indigenous Procurement: Delivering Social Impact Through Purchasing

Oct 15
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Our purchasing decisions influence the way that supply chains develop.

Seeking the lowest price at all costs can result in supply chains with layers of hidden costs through damage to the environment and to the communities involved in that supply chain. However, there are great examples where buyers have changed supply chains in order to deliver positive social outcomes.

One example of this has been in coffee.

When enough consumers chose to buy Fair Trade coffee, roasters altered their supply chain to accommodate demand and in so doing raised the wage levels and working conditions of coffee farmers and the communities that they live in.

As demand for Fair Trade coffee increased, production became more efficient and price declined. Fair Trade coffee now provides good coffee at competitive market prices while generating positive social outcomes.

Whether you buy for government, business or simply yourself as an individual consumer you have the power to change supply chains to generate social impact.

Positive impact through purchasing

Marketplaces that deliver positive social impact are beginning to emerge in Australia and across the world. While the Fair Trade movement has led the way, we are now beginning to see conscious consumers, businesses and governments choosing to disrupt the way that they traditionally buy to incorporate social benefit into their supply chain.

In 2014, Social Traders published research into social procurement in Australia’s corporate sector.  The findings identified that the mining industry had embraced and mandated social procurement as a mechanism for delivering indigenous economic development in the communities where they operated. 

The South Australian Government has incorporated clauses into road construction contracts specifying that 20% of the workforce should come from indigenous communities, people re-skilling from the automotive industry and the long-term unemployed.

Both the NSW and Federal Government have set hard targets for contracts going to indigenous businesses.

Procurement spend across all levels of government in Australia alone equates to over $100 billion.  Consumer and corporate spending far outstrips Government procurement of goods and services – consumer spending alone is more than five times greater than government spending.

Put together this amounts to almost one trillion dollars of buying power that has the opportunity to deliver social benefit as well as providing required goods and services.

Purchasing to generate positive social impact through consumer spending together with public and private sector procurement, possibly represents the greatest untapped mechanism for social change in this country.

We need more public and private sector leadership to Buy Social

According to the Finding Australia’s Social Enterprise Sector (FASES) research, there are an estimated 20,000 social enterprises operating in Australia.

Social Traders estimates that approximately 2,000 of these social enterprises are committed to the creation of employment for disadvantaged groups and collectively create jobs for 35,000 Australians who were previously long-term unemployed or are at risk of unemployment.

Proactive government and corporate purchasing strategies designed to increase procurement from social enterprise and similar socially focused organisations would increase turnover and allow these enterprises to contribute greater social benefit to Australia, while of course still providing the required goods and services to the purchaser.

If over time government and business committed $10 billion (1-2% of their procurement budget) per annum in spending on social enterprise, this would create up to 150,000 social enterprise jobs, with 110,000 going to the long term unemployed and those at risk of unemployment. Even accounting for displacement of some existing workers we anticipate that over 50,000 more people could become economically active, simply by changing who we buy from. 

With 10% of Australians already buying from social enterprises and other organisations that generate positive social benefit, a shift towards socially conscience purchasing is already underway. The time is now ripe to increase the speed of this shift and magnify its potential.

A longer version of this article originally appeared on Social Traders.

Mark Daniels is speaking on ‘Embracing the rise of strategic procurement & supplier diversity’ at next week’s Implementing Indigenous Procurement Policy Conference. Book soon to secure your place!

Indigenous Procurement Policy

Submitted by Mark Daniels

Mark Daniels

Mark Daniels is Head of Strategy & Market Development at Social Traders.

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