When Profit Meets Purpose

Doing business in a sustainable manner is currently on the agenda of every large corporation; however, sustainability is frequently decoupled from the day-to-day operations of the organization and positioned as a strategic initiative. What if an organization could have a positive impact on its community while simultaneously meeting its sustainability goals and running its core business?

This is where working with social enterprises can be a game-changer.

The rising importance of social enterprises

Historically, social enterprises have existed in a limbo between for-profit and non-profit organizations. However, there is a growing awareness of the critical role that such organizations play in strengthening a country’s economic and social pillars. According to a recent Siemens report, social enterprises can play an important role in the African job market by creating up to one million new jobs by 2030. Many social enterprises appear, feel, and even operate like traditional businesses on the surface. However, upon closer inspection, one can see that these organizations are supported by a strong social mission, with income generation serving a secondary role. This is the magic that distinguishes social enterprises from traditional businesses.

 Procurement meets the social enterprise

Typically, the most obvious route for a company to engage a social enterprise is through its CSR channels. This is not, however, the sole option. Every day, businesses buy goods and services worth thousands of Rands from a network of vendors. Many of these vendors might be classified as social entrepreneurs. Consider a supplier that operates as a small business, generating revenue through the sale of office supplies and then reinvesting the profits in social projects such as free youth training sessions. This results in a win-win situation: the need for office supplies is met in the local market, while the profit generated by the SME benefits neighbouring communities.

One organisation operating with such a business model is Cape Town based I Love Coffee (ILC); ILC is a Level 1, 100% Black Owned social enterprise working to improve access to employment for Deaf youth. ILC was started in 2016 in response to the understanding that approximately 2 million South Africans are Deaf or hard of hearing, yet South African Sign Language is not recognised as an official language. Deaf learners have the potential and right to be educated equally, however between 70 – 80% of Deaf adults will never find a job and are excluded from the economy.

To address this issue, ILC provides hospitality-specific training for deaf individuals with the goal of eventually training and employing more deaf people in in-house office café facilities. With less demand for office cafes in the post-pandemic era, ILC has reinvented its business model to include elements such as a Deaf youth training centre and directly sales of coffee beans.

SAP Africa is proud to have incorporated ILC into its internal supply chain by using ILC beans in all office coffee machines since December 2021. The concept of social enterprise underlies SAP’s very mission: to help the world run better and improve people’s lives. This ambition is formalised in what in what is known as 5 & 5 by ‘25, SAP’s public initiative to direct 5% of our addressable spend to social enterprises and 5% to diverse businesses by 2025.

Dream big, start small

By involving social enterprises, businesses have the potential to change the very foundation of society. However, organizations are frequently forced to navigate the complexities of a global procurement function, which may include limitations on the types of vendors that can be engaged as well as complex contracting requirements.

Obtaining data on current organizational spend and the existing vendor base is a good place to start. Following that, organizations can begin discussions to determine whether alternative suppliers who are also social enterprises can be added to the current network and/or whether existing suppliers can be encouraged to actively pursue social goals.

The importance of carefully considering the vendor network that surrounds an organization cannot be overstated. This is articulated in a poignant quote by Hilde Schwab, chair of the Schwab Foundation for Social Entrepreneurs, “Social entrepreneurs combine the mission, dedication and compassion to serve the most vulnerable and marginalised populations of society with business principles and the best techniques from the private sector.”

 

References

 

Study: “Social Enterprises As Job Creators in Africa” (siemens-stiftung.org)

Africa’s growth can benefit from social entrepreneurship (businesslive.co.za)