Inclusivity in Procurement
Inclusive procurement is becoming more important to both buyers and suppliers to ensure successful business. Find out what this means for you.
The procurement industry is quickly evolving beyond just buying and selling. Until recently, driving economic growth and confronting social equity haven’t necessarily gone hand-in-hand. The term ‘inclusive procurement’ was coined in 2019 by British non-profit organisation MSDUK, with an aim to ensure that all relevant, potential suppliers have an equal opportunity to compete for business. It particularly supports the use of minority-owned, and historically under-utilised groups such as Women; LGBTQ+; people with disabilities, led and owned businesses as suppliers.
Previously disadvantaged businesses
With 99.9% of UK businesses described as SMEs, procurement organisations such as CCS are striving to be inclusive of these organisations. SMEs were awarded only 25% of total contracts in 2012. Tellingly, 80% of large UK companies stated they weren’t planning to increase the number of trades they made with SMEs. Fast forward to the year 2019/20, and over 64% of suppliers on CCS agreements were micro (41%), small (15%), or medium (8%) enterprises, with £275 million spent directly with SMEs.
Diverse owned businesses are those that are at least 51% owned, managed and controlled by women, minorities, LGBT persons, or those with disabilities. In 2020, 30% of UK businesses were owned by women. However, despite being just under a third of the market, they received less than 1% of corporate government spend. The pandemic has also seen a record number of disabled people relying on entrepreneurial routes to work. With the rise of social value, inclusive procurement can help these businesses to succeed.
Ethnic-minority-led business make a £74bn annual contribution to the UK economy. MSDUK continue to battle minority discrimination in the UK with a suggestion that large businesses should ‘make public their annual spending on procurement from minority businesses and commit to establishing or enhancing their supplier-diversity programmes.’ They also argue government and public-sector bodies should take the lead in integrating supplier diversity into their procurement strategies. We are starting to see this with many tender and contracting processes in frameworks.
What inclusive procurement means for buyers
The most successful organisations know that creating diversity in their supply chains can unlock innovation and agility, and improve their ethical credentials. Diverse organisations are developing more innovative solutions, and as a buyer you could benefit from the value their entrepreneurial approaches bring. An organisation with a diverse supply chain is much more likely to be a truthful reflection of the customers it serves and the community it is situated in. Businesses that don’t take an inclusive approach to procurement could end up with a supply chain that cannot handle problem solving, presenting: inefficiencies, high costs, reactionary responses, lacking finesse and entrepreneurial spirit. In turn, embracing diversity opens up more opportunities for your organisation to grow!
Over 1000 multinational corporations now focus on sourcing from diverse-owned businesses – and they expect the same from their partners. Ensuring your procurement decisions are inclusive will allow your business to develop a competitive differentiator which includes the supply chain.
What inclusive procurement means for suppliers
Smaller or more diverse suppliers now have greater chance of being considered for contracts. However, social equity efforts have led to greater competition in the procurement field. The UK government actively encourage SMEs to bid for government contracts, and they continue to make changes to allow for greater inclusivity.
It is crucial businesses wishing to supply to the public sector adjust their practices. Social value and inclusivity were considered ‘nice-to-haves’ when applying to frameworks in the past. We are finding more and more framework adaptations are listing these as mandatory requirements now. With them being monitored and measured during a contracts delivery to ensure positive outcomes.
Inclusive procurement is a win-win from many perspectives. However, it is crucial that both buyers and suppliers step up to these developments to continue to be successful.