The tide is turning. Consumers are demanding more from businesses than just great products, and companies are increasingly seeking ways to meet their sustainability goals and create social value. While consumers want to know products are made with social responsibility in mind, with a positive impact on people and planet, companies are facing both internal drivers and external pressures to develop solid ESG strategies, contribute to the Sustainable Development Goals (SDGs), build local economies, and ensure compliance with emerging regulations.
Meeting the demands from all sides goes beyond traditional sourcing. It requires a strategic investment into goods and services – starting with upstream services such as procurement to core operations such as product development and sales to downstream distribution that includes the last mile – from businesses that serve the world’s most vulnerable people and ecosystems: social enterprises. These organizations prioritize social and environmental good alongside financial sustainability, creating jobs, empowering communities, and fostering responsibility.
Why now?
A recent report by Impact Europe, Sattva and SAP reveals a clear trend: 80% of businesses see social procurement as a solution to meeting their sustainability goals. This isn’t just about responding to consumer demand. Companies are recognizing the potential for innovation and growth through collaboration with social enterprises.
Take India, for example, a global leader with over two million social enterprises. Imagine the possibilities for integrating these businesses into supply chains, not just for social good, but for fresh perspectives and untapped talent.
However, there’s a “gap between intention and action,” as the report highlights. While many companies have adopted diverse sourcing practices, only half prioritize supporting local economies and a circular economy. This disconnect underscores the need for a deeper understanding of social procurement’s potential.
The good news is that the trend is moving in the right direction. The rise of social procurement aligns perfectly with the growing focus on environmental, social, and governance (ESG) targets.
For example, social procurement can directly address both the “S” and the “G” that sits at the heart of ESG by supporting small businesses. This is especially pertinent in India where the report has found that MSMEs form 29% of the GDP and more than 90% of businesses in India are micro and small. This focus on social responsibility not only has benefits for local communities, but also enhances a company’s reputation with investors, customers, and employees who value ethical practices.
The report has also revealed that within India there is a unique context for businesses to integrate small suppliers and businesses in larger supply chains which advances and supports inclusivity. Socially responsible suppliers are often open to innovation and able to adapt faster, leading to a more sustainable supply chain overall, and are much more likely to adopt fair labor practices ensuring ethical treatment of workers throughout the supply chain. This includes safe working conditions, living wages, and respect for worker rights.
By sourcing from businesses owned and operated by minorities, women, or people with disabilities, companies contribute to a more inclusive economy which expands opportunities for traditionally marginalized groups. Strong social practices have the potential to attract and retain employees leading to a more stable and resilient workforce. The benefits of prioritizing people and planet have never been greater.
In terms of SDGs, the report found that social procurement directly addresses 7 out of the 17 SDG goals – a massive stride forward in achieving a better and more sustainable future for all.
The power of collaboration
Social procurement is more than just a transaction. It’s about building partnerships that create a ripple effect of social impact.
A prime example is Even Cargo, India’s first all-female, last-mile e-commerce logistics provider. By partnering with social enterprises like Even Cargo, businesses can empower communities, create jobs, and drive progress toward a more equitable future. As Yogesh Kumar, Founder of Even Cargo said: “We believe jobs shouldn’t be decided based on gender.” As such, their comprehensive training program equips women with the skills they need to succeed in a traditionally male-dominated field, fostering financial independence and self-reliance.
However, Even Cargo’s journey wasn’t without challenges. Initially, they faced societal resistance to their innovative approach, but perseverance and recognition, including a positive feature in The New Yorker, led to a pivotal collaboration with Amazon. This partnership provided valuable employment opportunities for Even Cargo’s trained women.
Still, Kumar identified a critical bottleneck – the lack of mobile women in India’s workforce. This realization shone a spotlight on the need for a broader approach to social procurement, one that goes beyond simply hiring from a specific demographic. Even Cargo advocates for creating a more inclusive work environment across the board. This includes promoting gender-balanced warehouses, creating workspaces with amenities catering to both genders, and offering flexible working hours to support work-life balance, particularly for mothers.
Collaboration with social enterprises like Even Cargo offers numerous benefits to corporations. Leveraging their expertise allows us to improve our own diversity and inclusion strategies, creating a more holistic and equitable workplace culture.
Building a sustainable future
The future of social procurement is bright. To mitigate challenges and bolster opportunities for these partnerships, we formed a coalition at the Social Procurement Roundtable to activate the social procurement ecosystem in the country, foster collaboration and active involvement of key stakeholders, and advocate for policy changes that promote responsible business practices. These are all key priorities to that underpin SAP’s commitment to drive transformation and entrench sustainability to empower businesses to thrive in a rapidly changing world.
Businesses of all sizes can embrace social procurement. Intermediaries can play a crucial role in facilitating connections and educating companies on these opportunities. Long-term partnerships with social enterprises offer significant benefits for both parties. Let’s work together to build a more sustainable and equitable future where businesses are a force for good.
The author is Alexandra van der Ploeg, Head of Global Corporate Social Responsibility at SAP