Buying From Social Enterprises – Why Should Organisations Bother?

We recently featured the Buy Social initiative launched at number 11 Downing Street, in which a number of leading firms have pledged to support a goal for £1 billion to be spent with such organisations by 2020.  As we suggested then, whilst it is undoubtedly a "good cause", the challenge to big firms to buy more from social enterprises raises some challenging questions.

"Why should we bother and what's in it for us"? They are probably the most fundamental. Now one school of thought is that social enterprises should not be shown any favouritism and should simply compete on their merits. So the main task for buyers is to identify good social enterprises and give them a fair chance to put themselves forward for the work. That does mean opening up markets, supporting bidders who may not be familiar with complex tendering process, and making sure selection is not biased against smaller, newer or simply “different” firms. So merely supporitng in this manner is not a trivial matter.

But are there reasons that might make organisations be prepared to spend a little more than the "market price" and tilt that level playing field just a little maybe? Now we don't think anyone is saying that organisations should be prepared to pay a huge premium. But are there justifications that would enable buyers to build a business case that would allow a small premium to be paid to a social enterprise?

We might just say "well, supporting social enterprises is clearly a good thing for humanity / the wider community". However, it is not the task of individual managers to make that decision on behalf of the owners of their private sector organisation (or whatever governance is in place in the public sector). And if it comes to a Board talking to its shareholders about this, we would expect there to be something a little harder-edged than just the feel-good factor.

The most obvious justification is the potential positive feelings that such activities can create in the eyes of various stakeholder groups. That might be customers (whether consumers or other businesses) feeling more inclined to buy from a firm because of their values and principles, such as supporting social enterprise. It could be a tool to help position the organisation better with potential staff; particularly if there is a shortage of skills in a key area of relevance for the organisation.

The motivation might even be trying to impress the policy makers, politicians or regulators. We might (slightly cynically) argue that the banks are getting into this sort of thing for all those three reasons, with the desire to present themselves to governments in a better light given past misdemeanors certainly not a minor issue for them!

Those justifications can certainly be used to develop a business case that might make paying a little more for social enterprise products or services acceptable. But at the Procurious Big Ideas event the other day, I had a fascinating conversation with a procurement executive from Johnson & Johnson, one of the lead sponsors of the Buy Social initiative. He gave me another perspective on why he believes it is a positive step for the firm, but very specifically, why it is positive for the procurement function.

On that tantalizing note, we’ll leave it for today, but we will come back in part 2 and give you the explanation. We also hope to have a further chat with J&J, and give you more on how and why they are so supportive of the Buy Social programme.

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