Last year, one of the world’s leading social enterprise advocates singled out the Victorian Government as a global leader in social procurement. Was this simply because he was delivering his address in Melbourne, or was there something more significant going on? Mark Daniels believes it’s the latter.
Australia is turning its attention to imminent recession, the federal government is predicting 10% unemployment when JobKeeper comes to an end in September, and many economists believe there is little chance of returning to 5% unemployment before 2024. As governments consider what the back-to-work stimulus should look like, they will do so with one eye fixed firmly on preventing people who have lost jobs over the past three months from becoming long-term unemployed.
As the state and federal governments develop their stimulus packages, we need to consider how parts of these packages might be used to bring people at risk of long-term unemployment back into training and employment. If someone is unemployed for more than two years, studies show there is less than 25% likelihood they will ever work again. The faster we’re able to give those who face the greatest risk of long-term unemployment access to training and job opportunities, the more we’re likely to prevent entrenched unemployment.
In Victoria, there has been an innovative approach for addressing inequality and long-term unemployment that has been active for a number of years, which should play a significant role in the recovery from the COVID recession.
That solution is ‘social procurement’, through which governments commit to using their purchases of goods and services to generate positive social outcomes. Social procurement can be as simple as requiring that 3% of your project spend goes to social enterprises, Aboriginal businesses, or the employment of disadvantaged groups – a stipulation of Melbourne’s Level Crossing Removal Project – or buying car-washing services from businesses that employ people with disability – a strategy of VicRoads. Employment and training opportunities can be delivered by businesses employing people at risk, or by ‘social enterprises’ that support disadvantaged jobseekers through training and the creation of low-skilled, entry-level jobs.
In Australia, most of our state governments have been exploring social procurement for a number of years – particularly in major infrastructure projects. Victoria has been a standout in this regard, adopting a concerted whole-of-government approach which encourages impact outcomes across all major areas of government buying.
A framework for the future
The COVID pandemic was far from people’s minds when the Victorian Social Procurement Framework (SPF) was initially launched in April 2018. Finance Minister Robin Scott said the SPF’s buying power would enable the State Government to make a real difference to disadvantaged Victorians’ lives. “Whether it be creating job opportunities or skills-based training in areas of disadvantage, addressing structural and systemic inequalities, or delivering environmental benefits for local communities, government procurement can add value that all Victorians can share in,” he said.
While the SPF provides a framework for a procurement-led response to the looming COVID recession, it also represents a significant elevation of the role of procurement – from compliance and savings, right into the heart of government policy.
Most governments have adopted a form of social procurement related to a specific issue – such as the Federal Government’s Indigenous Procurement Policy, which was created to increase Indigenous employment and is now part of the Closing the Gap Strategy, encouraging several states to follow suit. Similarly, every state and federal government has built employment targets for targeted cohorts into major infrastructure projects.
Victoria has taken social procurement a step further than other governments by creating a ‘whole-of-government framework’ that applies to all 270 government entities, all procurements, and with a broad focus on social impact – allowing it to meet a range of different government objectives. Some of these projected outcomes are outlined in the following table.
By incorporating these diverse policy agendas within one procurement framework, it becomes easier for departments and staff to prioritise their focus on an area where they can have the greatest impact, or that has the greatest significance to their work.
For example, the Department of Health and Human Services (DHHS) prioritises employment for people with disability and disadvantaged Victorians and is developing more strategic approaches to enable this. The DHHS’s recent announcement of a $500 million commitment to new social housing and maintenance of existing stock is a great opportunity to ensure the very people housed by the Department are given an opportunity to work as a result of this spend.
Over the past 18 months, all seven Victorian Government departments and 270 government entities have developed their own social procurement strategies, incorporating the social and environmental areas they will prioritise, social procurement targets in relation to these areas, and an overall approach to the rollout and implementation of social procurement across their organisations.
The biggest change for buyers undertaking social procurement is change management. With the multitude of traditional rules around procurement, social procurement requires all these rules to be adhered to as well as a variety of additional requirements. The changes start at the planning process and run right through to contract management.
The Victorian Government has developed a variety of systemic changes to support the rollout of social procurement across its many agencies. These include:
Guidance and standard form documentation developed by the Department of Treasury and Finance (DTF), which can be used by every department in meeting their threshold requirements;
Regular social procurement events for public servants to attend;
Every public servant has access to a database of social enterprises and Aboriginal businesses, provided by Social Traders and Kinnaway (Aboriginal Chamber of Commerce) respectively;
A dedicated team has been established at DTF to implement, measure and report on the State’s SPF.
How are we travelling?
In November 2019, the Victorian Government released its first Social Procurement Framework Annual Report. The focus of the first year was to engage the 10 biggest buyers in government in the development and implementation strategy. The report provided the first record of spend with social enterprises and Aboriginal businesses, identifying that 2% of the addressable spend was with social enterprises and 0.5% with Aboriginal businesses.
It is reasonable to assume that most of this spend was not in response to the SPF, but rather these businesses were existing suppliers that were winning work through standard procurement processes. Most of the other social impacts are too difficult to get a baseline on and will be difficult to measure for DTF. This is one of the challenges of having such a diversity of impacts.
The Annual Report was notable for the format and testimony to the way that the SPF has brought procurement into the heart of policy – with eight Ministers providing personal testimonies committing themselves to the tenets and targets of social procurement.
“Clearly, from an international perspective, the Government of Victoria is leading the journey in social procurement. Through the building of partnerships across sectors and their support for a social enterprise ecosystem, they are leveraging greater value from their existing spend. They are using the marketplace to build healthier local communities.”
– David LePage, Managing Partner, Buy Social Canada, keynote speaker at the Social Traders Conference, August 2019
It was instructive that one of the world’s leading social enterprise advocates should single out the Victorian Government as a leader in social procurement when he delivered the keynote address at the 2019 Social Traders Conference in Melbourne last August.
As co-founder of the social enterprise certification program, Buy Social Canada, and a Director of both the Social Enterprise Council of Canada and the Social Enterprise World Forum, David LePage is renowned for speaking his mind. His professional credits include a portfolio of over 10,000 square feet of commercial properties in Vancouver’s Downtown Eastside geared to creating social and economic value for low-income residents.
LePage heralded the Victorian Government’s SPF as a breakthrough because it questions the prevailing wisdom that government procurement is a simply a tactical tool for savings to deploy elsewhere – but actually a highly efficient way of addressing inequality and disadvantage.
For an advocate and social enterprise sector intermediary like Social Traders, the SPF is the strongest demonstration yet of government commitment to social enterprise and its model of using the marketplace to deliver transformational social change.
Social enterprises don’t neatly fit into government policy because they are both businesses and a way of responding to disadvantage. This ‘dual purpose’ has made it hard for government to categorise and support social enterprises – and in the past they have often fallen through the cracks.
However, the Victorian Social Enterprise Strategy (2017) and the Victorian Social Procurement Framework (2018) both recognise the important role that social enterprises play, and have applied the most significant lever that government can bring to bear on any business: access to customers.
Procurement is a huge lever that government has significant control over. When it is used strategically, it has the capacity to be the greatest untapped tool for social impact. Social procurement and social enterprise are like two halves of a whole. Social enterprise is a business approach to the creation of positive externalities, and social procurement is the demand-side approach to the creation of positive externalities.
Foundations to build on
Victoria’s SPF has had a significant impact on Social Traders’ marketplace, which supports buyers to incorporate certified social enterprises into their supply chains. Over the 2018-19 financial year, the number of social enterprises certified by Social Traders increased from 97 to 166 – the largest annual growth in the company’s four years of operations.
Social Traders’ 80 current buyer members join for a range of motivations. However, almost 50% have indicated that they joined either directly or indirectly as a result of the SPF.
The Victorian Government’s support for social procurement provides social enterprises with the confidence that it will engage with them in ways that wouldn’t otherwise have been possible. As more social enterprises win government work, confidence in the policy grows and more social enterprises are certified, creating more social supply chain options for buyers, who increasingly view these options as a competitive advantage – leading to more work for social enterprises, and creating more social impact.
Over the past two financial years, more than $100 million has been spent by buyers with social enterprises in Social Traders’ marketplace. This has resulted in an estimated 750 jobs being created for disadvantaged jobseekers. It has also resulted in the provision of 220,000 hours of training (often to people not yet ready for work), $2 million being donated to community programs, and $8 million being provided in free or low-cost goods and services to disadvantaged communities. Social Traders believes that more than half of this spend was directly attributable to the actions of the Victorian Government.
The Victorian SPF is still in its formative stages, but it has enormous potential to become a game changer for the way procurement is done in Victoria. Never has there been a greater need for a game changer than now. The full power of the SPF applied to the COVID-19 recession would provide an opportunity to mobilise an estimated $16 billion in recurrent government spend and a further $14.2 billion in annual infrastructure spend, to ensure that those most at risk of long-term employment are engaged in training and employment.
By adopting more ambitious social procurement targets for individual government entities to create employment opportunities for long-term jobseekers, tens of thousands of people at risk of never working again could be given the opportunity to get back to work – and hundreds of millions of dollars of recurrent government spend on welfare could be avoided.
In Victoria, there is a serious opportunity – and a strategic imperative – for the State Government to create jobs by spending a portion of its planned ‘COVID recovery procurement’ with social enterprises – notably in areas of construction such as public housing, transport and schools infrastructure, where the government has already made a $2.7 billion commitment. Not only is it a far cheaper solution than employment programs because it uses existing government spend; it is also one of the easiest and quickest wins for the Government.
Could there be a more compelling argument for writing social procurement commitments into more government contracts?
Mark Daniels is Executive Director Operations at Social Traders, Australia’s leading organisation certifying social enterprises and connecting them with socially-conscious businesses and government agencies operating in their fields. For more information: https://www.socialtraders.com.au/