Measuring More Than Money: Evaluating the Social Return on Public Procurement – Part 2

Social Impact Procurement

Welcome to Part 2 of our comprehensive exploration into the world of Public procurement.

If you’ve just joined us, Part 1 offered a foundational understanding of the shift towards incorporating social value in public procurement, the trends shaping this landscape, and the global perspectives driving Responsible Business Conduct.

We highly recommend reading Part 1 to gain a full appreciation of the context that has led us to this juncture. Now, we’re poised to delve into the heart of the matter: the challenges and opportunities inherent in social and public procurement. From grappling with the measurement of social impact to uncovering innovative strategies for balancing objectives, this part is an essential read for anyone looking to navigate the complexities of socially responsible purchasing.  

Challenges and Opportunities in Social Procurement

While social procurement offers immense potential for societal good, it’s not without its challenges.

Measuring Social Impact

One of the primary hurdles is measuring the social impact of procurement decisions.

Competing frameworks with varying scopes and priorities leave procurement teams, social enterprises, and communities grappling with a lack of consistency.  

  • Inconsistent reporting: Different metrics and methodologies make it difficult to compare results across different initiatives, hindering benchmarking and learning.
  • Confusion for stakeholders: With no clear standard, stakeholders struggle to understand the true impact of procurement decisions, diminishing trust and transparency.
  • Limited scalability: Without a common language, it’s challenging to replicate successful practices and scale up social procurement initiatives, ultimately limiting its potential for broader impact.

In the UK, for example, even with the Public Services (Social Value) Act encouraging social value considerations in public service commissioning since 2013, defining and measuring social value is still a significant challenge (Social Economy, SSIR.org). This difficulty arises from the varied nature of social outcomes, which are often more subjective and complex to quantify compared to financial metrics.

How do you quantify change?

Different measurement approaches are employed to capture social outcomes. These range from quantitative methods, which might involve tracking specific numbers like jobs created or training hours provided, to qualitative assessments, which might look at improvements in community well-being or social inclusion. However, these approaches have their strengths and weaknesses. Quantitative methods can offer concrete data but may not fully capture the nuanced impacts on community well-being, while qualitative methods can provide deeper insights but are often harder to standardize and compare across different initiatives.

Social outcomes often go beyond simple numbers. Measuring concepts like improved community well-being or increased social inclusion presents unique challenges:

  • Attribution: Isolating the impact of procurement from other contributing factors is tricky, making it difficult to definitively attribute positive change to specific decisions.
  • Subjectivity: Perceptions of social value can vary significantly across different stakeholders, making it difficult to find a universally agreed-upon metric.
  • Long-term horizons: Social change often takes time. Measuring the impact of procurement requires patience and consideration of long-term outcomes, not just immediate results.

Developing robust and consistent methods for measuring this impact is crucial for validating the effectiveness of social procurement strategies.

Balancing Objectives

Another challenge lies in balancing social objectives with economic efficiency. Finding suppliers that meet both social criteria and cost-effectiveness can be difficult, especially in sectors where socially responsible suppliers are scarce.

Imagine a construction project. You want to use local, minority-owned businesses for materials, but their prices might be slightly higher than a national supplier. This presents a classic trade-off: prioritising social impact over immediate cost savings. Similar challenges arise in many other sectors, like healthcare, where choosing a socially responsible waste disposal company might incur additional fees.

This requires a careful balancing act to ensure that social goals are met without compromising on quality or financial sustainability. 

However, these challenges are accompanied by significant opportunities.

Social procurement opens avenues for innovation, as suppliers are encouraged to develop new solutions that meet social objectives. It also fosters more inclusive economic growth by directing spending towards marginalised groups and local businesses. Furthermore, social procurement can lead to long-term societal benefits. Addressing social issues such as unemployment or inequality can contribute to more stable, prosperous communities. This, in turn, can lead to broader economic and social benefits, creating a virtuous cycle of growth and development.

The Procurement Profession’s Idea Book For 2024

1. Innovation in Supplier Solutions:

  • Encourage suppliers to develop products and services that address specific social challenges, like sustainable packaging or accessibility features.
  • Partner with universities and research institutions to co-develop innovative solutions.
  • Host hackathons or innovation challenges to incentivise supplier creativity.

2. Inclusive Economic Growth:

  • Set specific targets for spending with minority-owned businesses, women-led businesses, and local businesses.
  • Develop training and support programs to help marginalised groups participate in procurement.
  • Partner with community development organisations to identify and support qualified suppliers.

3. Development of Standardised Frameworks:

  • Collaborate with industry associations, NGOs, NFPs and governments to establish standard social value metrics and measurement methodologies.
  • Develop open-source tools and resources to facilitate standardised reporting and analysis.
  • Advocate for the adoption of standardised frameworks in procurement policies and regulations.

4. Adoption of Innovative Measurement Tools:

  • Explore the use of blockchain technology to track the social impact of procurement decisions throughout the supply chain.
  • Utilise data analytics to identify trends and patterns in social outcomes data.
  • Invest in training and capacity building for procurement professionals on using new measurement tools.

5. Prioritising Stakeholder Engagement:

  • Involve communities and beneficiaries in defining social procurement goals and priorities.
  • Develop mechanisms for ongoing feedback and consultation with stakeholders throughout the procurement process.
  • Share information about social procurement initiatives and their impact with stakeholders.

6. Continuous Monitoring and Evaluation:

7. Policy and Regulatory Support:

  • Advocate for government policies incentivising social procurement, such as tax breaks or grants.
  • Support the development of clear legal frameworks for social procurement practices.
  • Work with regulatory agencies to ensure social procurement initiatives comply with all relevant laws and regulations.

8. Looking Through the Long-Term Lens:

  • Consider the potential long-term benefits of social procurement, such as improved brand reputation, increased employee engagement, and reduced risk.
  • Develop business models that account for the long-term value of social impact.
  • Communicate the long-term benefits of social procurement to stakeholders to secure their buy-in.

9. Innovative Procurement Models:

  • Explore cooperative buying arrangements with other organisations to leverage collective buying power and negotiate better deals with socially responsible suppliers.
  • Develop outcome-based contracts that tie payments to the achievement of specific social outcomes.
  • Use social impact bonds to attract investors and scale up social procurement initiatives.

10. Transparency and Communication:

  • Clearly define social procurement goals and criteria for suppliers to understand your expectations.
  • Develop fair and transparent evaluation processes for selecting suppliers.
  • Communicate regularly with stakeholders about the progress of social procurement initiatives.

Future Directions

As awareness of social and environmental issues grows, so too will the demand for public procurement strategies that address these concerns. We can expect to see more sophisticated methods for measuring social impact, greater integration of social criteria in procurement policies, and more collaborative approaches involving various stakeholders.

The future of social procurement also lies in its scalability. As more organisations embrace these practices, their collective impact can lead to significant societal change. This could pave the way for a new norm in procurement – one where social value is a key consideration, alongside cost and quality.

In conclusion, social procurement challenges traditional notions of value and success, shifting the focus from mere financial gains to broader societal benefits. Organisations can contribute to a more equitable, sustainable, and prosperous world by embracing social procurement. It’s time for entities across the globe to recognise the potential of measuring more than money and to harness the power of procurement for the greater good.

References:

Australian Social Value Bank. (n.d.). Social procurement. Retrieved from https://asvb.com.au/social-impact-value/social-procurement/

AECOM. (n.d.). Delivering social value through public procurement. Retrieved from https://aecom.com/without-limits/article/delivering-social-value-through-public-procurement/

State Government of Victoria. (n.d.). Social procurement: A Victorian government approach. Retrieved from https://www.buyingfor.vic.gov.au/social-procurement-victorian-government-approach