Changing Value: Industry Leadership for Social Procurement
Social procurement has had to overcome many hurdles to gain recognition from the finance and procurement professions.
The greatest ongoing barrier has been the requirement of buyers to adopt a broader concept of value that incorporates social impact created as well as the traditional levers of price and risk. While many organisations are not yet ready to embrace this broader concept of value, there are some that are embracing it and now include social requirements in many of their procurement processes. For this trend to continue strong leadership is required.
A recent example of the kind of leadership that can drive procurement change was demonstrated by the Federal Government introducing the Indigenous Procurement Policy (IPP). This policy mandates government departments to procure from Indigenous Businesses, and resulted in fast and widespread change to include Indigenous procurement in government tender processes.
While there hasn’t been commensurate leadership across all facets of social procurement, we are seeing signs that the broader adoption of social procurement is set to make big leaps in 2017 with the release of two significant documents; the new ISO Sustainable Procurement standard and the new ISCA Sustainability Impact tool.
ISO Standard 20400 Sustainable Procurement
The International Standards Organisation will release their first Sustainable Procurement Standard ISO 20400 in March 2017. ISO standards are developed in response to a need in the marketplace, the creation of ISO 20400 is recognition that industry is grappling with the best approach to sustainable procurement.
The ISO Standard has gone beyond the historically paired back version of sustainability (which has often-times been interchangeable with the term ‘environmental’) to put equal emphasis on environmental, social and economic outcomes. The document is designed to assist organisations in meeting their sustainability responsibilities by helping them to understand what the sustainability impacts and considerations are across the different aspects of procurement activity including policy, strategy, organisation, process and implementation.
The processes for the development of the standards are robust with 38 countries each running an ISO 20400 Committee (I am part of the Australian Committee) which then work together to develop consensus on the guidance.
ISCA Infrastructure Sustainability Tool
The Infrastructure Sustainability Council of Australia (ISCA) is a member based NFP peak industry body for advancing sustainable outcomes in infrastructure. The principle means for achieving their mission is through the Infrastructure Sustainability (IS) rating scheme. Since launching in 2012, over $80 billion in infrastructure and civil works projects or assets across Australia and NZ have either been certified or registered for an IS rating. The tool allows the buyer to identify the level of sustainability that they are seeking for the project and assists the supplier to understand the options available for meeting that requirement.
ISCA is currently developing version 1.2 of the IS rating scheme, which is set for release in June 2017 (I am part of the Social Procurement Advisory Group). The new rating tool also incorporates a broader definition of ‘sustainability’ which places equal weighting on social, environmental, economic and governance. Whilst environment and governance were prominent in the original IS rating tool, social and economic were not.
Why does this matter?
These two actions ensure that there is both a framework and a mandate (be it in one industry, at this point) for sustainable procurement.
ISO is the most recognised standards framework in the world so its development of a Sustainable Procurement Standard is critical step in embedding it in the mainstream. As a result of the broad buy-in to the development of the standard, when it is launched it will have stakeholder engagement in North America, South America, Europe, much of Asia and Oceania so it won’t just be a case of something that the progressive Northern Europeans do, it will have global resonance in the way that other ISO standards resonate.
The ISCA IS tool provides a manual for the implementation of sustainable procurement in infrastructure projects. It will ensure that in the coming decade, hundreds of billions of dollars of infrastructure development across Australia incorporate social procurement. The ISCA IS tool is where the social impact rubber hits the road.
As two influential organisations, ISO and ISCA’s approach will set a standard for other bodies and for government and industry. Their institutional endorsement ensures that social procurement will move in from the margins towards the mainstream.
Written by Mark Daniels, Head of Market and Sector Development, Social Traders