25/07/2024
In Australia, there is increasing recognition of social procurement policy as a key economic lever for business and government to strategically deliver positive social and environmental outcomes.
Social procurement is when organisations use their buying power to generate social value above and beyond the value of the goods and services being procured. This includes purchasing goods and services from social-benefit suppliers such as Indigenous businesses, social enterprises, disability enterprises and more recently, women-owned businesses.
Existing government-led social procurement policy has proven to be a successful mechanism in driving spend with social-benefit suppliers. The Commonwealth Indigenous Procurement Policy (IPP) was established in 2015 to stimulate economic development and inclusion for Indigenous businesses.
The IPP has since generated more than $9.5 billion in spend with Indigenous businesses, with over 64,000 contracts awarded to more than 3900 Indigenous businesses. The success of the IPP has also catalysed adoption of Indigenous procurement policies at all levels of government and across private and non-profit sectors across Australia.
At a state level, the Victorian Government introduced a Social Procurement Framework (SPF) in 2018 that has since generated over $96m in spend with certified Indigenous businesses and over $68m with certified social enterprises in Victoria. The Victorian SPF has been a catalyst for social procurement activity across the state, driving demand from businesses and creating sustainable growth for social-benefit suppliers.
An example of this in action is the partnership between certified social enterprise SisterWorks, which creates employment for migrant women to build economic empowerment, and Yarra Trams, the operators of Melbourne’s tram network. In 2022, Yarra Trams engaged SisterWorks in a shared-value partnership. The aim for Yarra Trams was to maximise social-procurement opportunities and support its social-procurement maturity to deliver requirements under the Victorian SPF.
SisterWorks provides catering, supplies textiles for cleaning cloths and tram seat refurbishment and even upcycles tram-seat fabrics into official Yarra Trams merchandise. This partnership is creating employment pathways for SisterWorks employees with an interest in light rail careers. Currently, at least 833 hours of priority jobseeker employment is being created and more than four tonnes of waste are being diverted from landfill each year.
Social procurement is also gaining support at the federal level. The Australian Parliament House of Representatives Select Committee on Workforce Australia Employment Services released its final report in November 2023.
It recommended that “the Australian Government develop and implement a Commonwealth Social Procurement Framework to leverage Commonwealth spending on major projects and large service contracts” to bolster social impact and inclusive employment opportunities for long-term unemployed and disadvantaged jobseekers.
Following this, in March 2024, the Australian Parliament Standing Committee on Economics recommended the Government adopt social procurement in the Better Competition, Better Pricing report to promote economic dynamism, competition and business formation, and “use its spending power to generate both social and economic outcomes, creating a more inclusive and beneficial economy”.
There are various developments underway to enable social procurement policy at the Commonwealth level and across jurisdictions in Australia.
On 1 July, the Australian Government’s Environmentally Sustainable Procurement Policy came into effect, mandating:
- High value procurements in specific categories to consider environmental impacts with objectives around circularity (keeping resources in use for longer);
- Environmental sustainability (water efficiency, renewables, safe disposal of hazardous and other waste); and
- Climate (reducing greenhouse gas emissions and optimising energy efficiency).
The Parliament of New South Wales (NSW) Standing Committee on Social Issues inquiry into the procurement practices of state government agencies and its impact on the social development of the people of NSW is currently underway. It aims to understand the effectiveness of the state’s Procurement Policy Framework to maximise the involvement of all types of businesses and to ensure public funds are being used for the best outcomes for the people of NSW.
Overall, we’re seeing a growth in social procurement in Australia. Social Traders’ latest impact report revealed $843m of procurement spend between certified social enterprises and business/government members between FY2018-2023. The impact of this procurement translates into:
- 7439 jobs supported;
- 810,000 training hours delivered;
- 23,668 tonnes of waste diverted from landfill;
- $68.1m community goods and services delivered; and
- $10.3m charitable funds donated.
There is clear evidence that social procurement policy is effective as an economic lever for business and government to strategically deliver social and environmental outcomes. It’s imperative that the Australian Government continue on this path to broaden its view of value for money by developing a Commonwealth Social Procurement Framework. This will help set the policy conditions for the public and private sectors to align on the ‘Social’ in ESG.
By increasing purchasing from social-benefit suppliers such as certified social enterprises and Indigenous businesses, we hope as a nation we can unlock more business for good, creating a sustainable economy that’s fairer and more equitable for all.