Using a diverse range of suppliers can bring profit as well as innovation and competitive advantage to your organisation – along with benefits for local communities.
Milton Friedman, back in the 1970s, famously said that “the social responsibility of business is to increase its profits”. Whilst this may once have been the overarching focus of most PLCs, the lines between profit and social conscience are no longer so easily defined.
News travels fast and bad news travels at lightning speed; being a “responsible business” is too important to ignore. Employees, customers, suppliers and investors increasingly vote with their feet when it comes to dealing with businesses that aren’t doing enough, or have been exposed for doing the wrong thing.
The sell-in for social value shouldn’t just be about protecting an organisation’s reputation – there is significant business value that can be unlocked (as well as having a phenomenal impact on people’s lives) and this is the key to getting buy-in from your business. Being responsible doesn’t mean that you can’t increase profits or cut costs.
The Public Services (Social Value) Act 2012 put a legal obligation on the public sector to consider how to secure social value in contracts, so this has meant that the public sector is leading the way. The sell-in can be harder for the private sector as, along with many ethical and sustainability initiatives, CEOs will inevitably ask what’s in it for our shareholders?
Turkey hosts the most refugees in the world, with around three million registered refugees, a situation exacerbated by the ongoing Syrian conflict. It also has the lowest female workforce participation rate among the 36 OECD countries.
These facts were on the minds of the procurement team at telecomms giant Turkcell last year when it announced plans to outsource 50% of its call centre operations.
The contracts were awarded to a supplier in Istanbul and three newly created companies in rural cities that had among the lowest employment rates in the country.
Not only did this result in a cost-saving of 18.5% (equating to €5.1m over three years), but the three new suppliers are now the first or second largest employers in their regions. Over 950 new jobs have been created – the majority going to women – and the Istanbul supplier has created jobs for some Syrian refugees.
This also enabled Turkcell to deliver call services in Arabic, an important step when only 10% of arriving Syrians speak Turkish. Turkcell won a CIPS Supply Management Award in Europe for this case study.
However, projects need not be as large scale as this; in fact, I would advise to start small. Northumbrian Water Group, Overall Winners of CIPS Supply Management Awards 2018 started with an internal drive on training and education, making small changes to the way that they specify and redefined how procurement delivers value to the business.
The team has built up a culture of responsible procurement practices that give back to their local communities, engaging their 3,000 plus suppliers along with them. In under four years of implementing the project they have created 32 trainees and apprenticeships and over 300 students have visited their sites to learn more about careers in the sector.
But don’t just look to your large suppliers when seeking out social value. These issues are often intertwined so ensure you are also considering supplier diversity and the use of social enterprises when seeking social value.
Diverse supply chains not only bring innovative ideas and solutions to your business, they can also increase competitive advantage and market growth. Small minority-run organisations help to reduce socio-economic inequality and boost local economies which help to fund better communities.
When you don’t have the mandate of legislation such as the Social Value Act then how do you implement social value in your business?
These cannot just be procurement strategies, or issues that are important to our supply chains, they must link back to corporate goals and the commercial success of the organisation. Whether that is driving innovation or reaching out to new markets, the value is there for the taking.
Malcolm Harrison is group CEO of CIPS
Caring or cost? The price of social value