Prioritising social value in supply chains

The pandemic and the increase in extreme weather events has exposed the fragility of our global supply chains. Meanwhile, new Government procurement policy means a consideration of social value is no longer an optional extra for business. Aoise Keogan Nooshabadi, FRSA, looks at the ethical, practical and economic benefits of buying and supplying closer to home

Never before has there been such scrutiny of how we buy goods and services. In the last couple of years, procurement has been in the news for the wrong reasons. We’ve seen paltry food packages from Government suppliers, money wasted on PPE provided by friends of Cabinet members, and lobbying controversies around politicians. In the private sector, the human suffering and environmental damage caused by big brands have become so regular we barely notice. Meanwhile the logistical weakness of private and public sector supply chains have been exposed by the pandemic, by Brexit and by bottlenecks in shipping (and the Ever Given getting wedged in the Suez Canal).

A new focus on sustainability and inclusion asks serious questions of the supply systems we rely on. With COP26 and Black Lives Matter, recent changes in legislation and a more ethically aware workforce and market, now is the time to prioritise social and environmental value in supply chains.

There has been good news. A change in Government procurement policy, including the Social Value Model, means when awarding £300 billion of contracts annually, central Government must evaluate the social value created. Suppliers to the Government are responding by spending more with social businesses (businesses who supply goods and services but also tackle social and environmental issues).

The commercial benefits are not limited to those affected by Government procurement policy. The pandemic, Black Lives Matter and COP26 were all tipping points, with companies forced to consider inequality and environmental sustainability. Being actively engaged in a social or environmental mission helps attract and keep the best talent. A survey by Escape The City found 89% of people wanted a career with a sense of purpose, up from 71% the year before. In research by Regenerate, 53% would favour brands doing good in the world. Initiatives that commit a business to engaging with a social or environmental mission are a big recruitment draw. Working with organisations creating a positive impact helps employees engaged with activities, such as mentoring, that reflect their values and develop their skills.

An ethically motivated workforce influences where a company’s money is spent. Using their spend to create social value is key to standing out to clients and building relationships with other businesses. Corporate Social Responsibility (CSR) has become integral to larger organisations. We see anti-racism and climate working groups becoming more prominent, and more jobs focused on sustainability and diversity. In 2020 Linkedin reported a 67% growth in diversity and inclusion employees in five years across Europe, the Middle East and Africa (EMEA). The UK employs almost twice as many D&I workers as any other country. These roles are increasingly determining businesses’ commercial activities too. The Hackett Group expects businesses in the UK and US to double their spend with ‘diverse suppliers’ by 2025 with nearly 30% of companies setting formal diversity spend goals. Companies are seeking out social businesses to work with, as they are a more diverse pool. Social Enterprise UK found that the social enterprise sector has a much higher percentage of women leaders and leaders from a ‘Black, Asian and Minority Ethnic Background’.

Many firms, especially those with a local focus, such as building firms, are looking to invest more in local communities. In the past, supply chains moved across the globe and away from the end user. Companies moved from higher tax, higher wage countries to those with low-cost suppliers. But as well as no longer according with the values of the market, this model has been shown to be unreliable. The pandemic closed supply chains overnight. International tensions, lack of shipping capacity and more extreme weather tested supply chains further. So companies have an incentive to invest closer to their end users. Initial costs may rise, but you have a more reliable supply chain, which is greener and invested in the communities of your customers and workforce. Again, social and community businesses can create tangible outcomes in their local areas. Often these businesses create more local jobs, lower barriers to employment and distribute profits to other local organisations.

It’s only the start. Many expect Social Value to embed further in central and local government and extend into the private sector. Young people entering the UK workforce are ever more diverse (the 2011 census showed ‘mixed ethnicities’ were the fastest growing ethnic group in the UK), more concerned about climate change and more ethically aware. Leaders in social value are already pulling ahead in their sectors. Company decision makers have a choice: join the leaders today or play catch up tomorrow.

Aoise Keogan Nooshabadi is the co-founder of Supply Change, which works with companies to create social value and sustainability through procurement