social procurement

They may have been around for hundreds of years, but businesses driven by a social or environmental mission that operate for profit, now known as social enterprises, are having a moment.

Fuelled by passion and innovative ideas, social entrepreneurs are working to solve some of society’s most intractable problems – their way.

Helping them along is the Melbourne-based non-profit, Social Traders.

“Social Traders has played a significant role in the development of social enterprise in Australia, particularly in being instrumental in getting social enterprises recognised and on the radar,” says Social Traders CEO David Brookes.

When Social Traders launched the first Social Enterprise World Forum in Melbourne a decade ago, 500 people attended. In Christchurch this year, that figure swelled to 1,600.

In an article written by Jay Boolkin and published in Generosity in June 2016, the social entrepreneur noted that a Google search of the term “social enterprise” yielded 6.5 million results. Today that figure is more than 18.3 million.

The research report, Finding Australia’s Social Enterprise Sector 2016 (FASES), a collaboration between Social Traders and the Centre for Social Impact at Swinburne University of Technology, put the number of social enterprises in Australia at around 20,000, contributing approximately 2-3 per cent of Australia’s GDP and employing in the vicinity of 300,000 Australians. Those figures were acknowledged as conservative given they were based on secondary sources.

But while social enterprises are growing and the #socent crowd is fervid, for every Hireup, Vanguard Laundry Services and Thankyou, there are many more that struggle to make the money that allows them to do the good.

Problems accessing capital and markets, admittedly problems faced by all businesses, have been compounded by the lack of a framework within which social enterprises can operate as legitimate businesses that are recognised as vital components of our society.

“One of the missing links, and I’ve been saying this for some time,” says Brookes, “is that a lot of our work with social enterprises in creating social impact has been in a policy vacuum.”

Supportive policy can make the world of difference. Just look at the impact of the Federal Government’s Indigenous Procurement Policy. Under the policy, every Commonwealth portfolio must consider Indigenous businesses first when looking to procure goods or services valued from $80,000 to $200,000, and for all goods and services to be delivered in remote regions of Australia no matter the value.

The policy has been a resounding success. From launch on 1 July 2015 to 30 June 2017, 4,880 contracts were awarded to 956 Indigenous-owned businesses with a total value of $594 million. All Commonwealth portfolio areas have exceeded their Indigenous participation targets and the IPP has now set its sights on the private sector.

social procurement

“What we understand from our work with the public and private sector is that they do have an increasing desire to buy from social enterprises, but they do want to be satisfied that they are legitimate social enterprises,” says Social Traders CEO David Brookes.

Philanthropy has helped the social enterprise sector grow, with support steadily increasing over the past decade, and some foundations, such as the English Family Foundation, dedicated to driving change through partnerships with social enterprises.

Government support has been slower. The Victorian government was the first to dip its toes in the social enterprise pond, releasing Australia’s first statewide Social Enterprise Strategy in February this year. This is not surprising given that 25 per cent of our social entrepreneurs operate out of the state.

Brookes hopes other states and territories will soon realise that supporting social enterprises promotes stronger, more inclusive communities with little or no drain on government resources.

So with a more conducive policy environment and armed with FASES research report, Social Traders acted upon the advice they give to all budding social entrepreneurs: Have clarity of focus and be clear about what the problem is you are trying to solve.

For Social Traders that problem is creating a social enterprise ecosystem that is here for the long haul.

“Our research last year pointed to procurement as the single biggest opportunity for the growth of social enterprises in Australia,” says Brookes.

“For social enterprises to be successful as a business they have to generate revenue and to be able to generate revenue, they have to be successful in selling their goods or services to be able to create the impact they are set up to achieve.”

While Social Traders has always had a focus on procurement, over the coming months the organisation will narrow its focus to purely procurement.

Under the new model, Social Traders will identify social enterprise supply chain opportunities, match social enterprises to buyers, support buyers to implement and social enterprises to deliver on the contracts and help them report on the impact of social procurement.

A sticking point for both the public and private sector revolved around one thorny question: What is a social enterprise?

“What we understand from our work with the public and private sector is that they do have an increasing desire to buy from social enterprises, but they do want to be satisfied that they are legitimate social enterprises,” says Brookes.

Central to that question of legitimacy is how much profit can a social enterprise make (or more to the point keep) before it is no longer a social enterprise. Even the godfather of the modern social enterprise, Nobel laureate Muhammad Yunus, described this area as “hazy”.

Thankfully the view is a little clearer these days. Brookes says that a social enterprise must demonstrate that it’s a social or environmental mission-led business with a community benefit, that it trades to fulfil its mission and derives the majority of its revenue through trade, and that it reinvests most of its profit back into supporting its mission.

Enterprises that meet these criteria can become a Social Traders certified social enterprises and enjoy the legitimacy private and public buyers need.

The new Social Traders model will also bolster the sector by identifying opportunities, matching social enterprises to buyers, supporting them to deliver on contracts, and helping them report on impact.

“I think Social Traders has an important role to play in this area of brokering procurement deals and we have set some fairly ambitious but achievable targets.”

Currently there are 200 Social Traders certified social enterprises and 18 business and government buyer members. Brookes hopes to create a community of 95 buyers and 600 certified social enterprise suppliers over the next four years, which is forecast to facilitate $105 million in procurement spend and create 1,500 jobs for disadvantaged Australians.

“This is a significant change in strategy but it makes logical sense for us. As an organisation we do a lot of work around coaching and providing advice to social enterprises around their business planning and their strategy and a key to the success of all organisation is to be clear about your mission and be prepared to evolve your strategy as the market and policy environment changes,” says Brookes.

“That is exactly what Social Traders is looking to do with this new strategy.”

A Case Study in Social Procurement: Mates on the Move and Mirvac

How

In late 2016, Mirvac were looking for a certified social enterprise that could collect used coffee cups, paper towels and bin liners and deliver them to a waste recycling facility.

Social Traders had worked with Mates on the Move, a B2B commercial moving service social enterprise of Prisoners Aid Association of NSW, in 2015, providing support as they developed their business plan.

Social Traders approached Mates on the Move who were open to the opportunity to engage with Mirvac and this new business line. Through Social Traders sector knowledge and by providing this introduction, Mirvac engaged Mates on the Move to manage this waste transportation issue.

As of mid-2017, Mates on the Move has diverted just under five tons of waste from going to landfill.

About Mates on the Move

Mates on the Move has a program that helps the 12,000 men and women exiting NSW correctional centres every year by providing training and pathways to employment, including practical on-the-job experience at Mates on the Move’s own transport and logistics company.

A parolee is 2.5 times more likely to return to custody in the first three months following release, compared to 12-plus months. Helping parolees in the pivotal few months after release can reduce the rate recidivism and enhance rehabilitation

Social Impact

  • Two of the Mates on the Move program participants were sleeping in Martin Place and one had difficulty attending classes because he needed to keep his belongings secure in the daytime – his work boots bought with program funds were stolen.
  • Since November 2016, three graduates are now in full-time work.
  • For six graduates from the first program intake, the Cert III Warehouse Operations qualification was their first significant formal qualification.
  • Six of eight participants enrolled in the Cert III Warehouse Course attained the qualification – a 75% completion (20% is the norm for this type of program).

A Personal Story

Bill Galea has a job with Mates on the Move after doing a removalist course. When Bill was growing up, his dad told him you weren’t a man until you had been to jail.

“I never learnt how to read or write properly. When I was living on the streets I would try and teach myself to read the street signs. Now I know that going to jail is not what a man does. A real man is a person who can go to work every day and provide.”

For more information about Social Traders and social enterprises, head to the website.