Social Enterprises and Procurement
With the rise of sustainable procurement, we look at how social enterprise procurement can help the public sector to further improve processes.
Social enterprises are commercially-run businesses with a guiding purpose to change the world for the better. They aim to make a profit in the same way that traditional businesses do, but often profits are reinvested back into the business or the local community. For this reason, they are a great asset to the public sector!
Why should Social Enterprises sell to the Public Sector?
The Chancellor of the Exchequer presented the UK Government’s 2022 Spring Statement on 23rd March. This document outlines the country’s economic state, and this year included plans to help people deal with rising fuel, energy and food costs. The Chancellor set out the need for more investment in people, ideas and capital – exactly what the UK’s social enterprises are so effective at delivering. Social enterprise procurement can be a vehicle for delivering this investment to many more communities.
The Social Value Act 2012 requires public services to consider wider social, economic and environmental issues. The biggest way of addressing these is via the money that they spend. Most public sector frameworks now require detail of social impact so that buyers can ensure they are procuring with ethical suppliers who can deliver positive social outcomes.
12,500 voluntary and community organisations and social enterprises (VCSEs) won public sector contracts between April 2016 and March 2020, according to the latest report from DCMS and Tussell. In total, these VCSEs earned £36 billion – 7% of the total public sector spend during this four-year period.
Health and social care is by far the biggest sector for VCSEs, with contracts awarded totalling £11.6bn in value. And there is plenty more where that came from! Selling to public sector bodies will allow social enterprises to reinvest far more into their purpose.
Why should Public Sector bodies procure from Social Enterprises?
When taking into account all stakeholders, the majority will likely firmly support sustainable actions. For example, employees are increasingly expecting their employer to have a purpose beyond profit. Making a positive contribution to communities boosts staff engagement and attracts the best talent.
Many organisations have a budget allocated to CSR or sustainability. Using the procurement function to engage with progressive suppliers is a great way to adhere to the expectations of CSR stakeholders whilst accelerating business.
Public sector bodies should also consider the expectations of business partners and clients, building customer demand and brand loyalty. Various social issues have placed a spotlight on the importance of facing the reality of a situation with compassion. The businesses that invest now in growing and showcasing their purpose will create stronger brand equity.
Procuring from a social enterprise will often make for a more secure business transaction and a better supplier-buyer relationship. The community-focused aspect of social enterprises would avoid various issues global supply chains bring with them. Three-quarters of identifiable VCSEs work only with authorities based in a single region (Tussell and DCMS, 2022). 57% of NHS and Local Government procurement spend with VSCEs goes to those based in the same region. This proportion is highest in London, where 72% of VCSE spending goes to London-based organisations.
What we expect going forward
The future for social enterprises looks bright. We predict procurement via these organisations will rise as the public sector recognises the substantial value they can bring. Whilst the rising focus on sustainability may be considered an expense, procurement offers a way to engage in social projects through costs that would have been incurred anyway. We hope the Government’s pledge to award a greater fraction of contracts to social enterprises will put this at the forefront of buyers’ minds, and cause more social enterprises to apply to frameworks.