Tag Archives: social value impact

Dollars and Sense: What are we Really Saving?

It might have started with dollars and cents, but what should procurement really be saving now? It’s time to shift the dial.

Photo by Kat Yukawa on Unsplash

For years, procurement was stuck in the old ways of doing business. It was the role of the profession to beat down suppliers and the only consideration was cost, but the proponents of this methodology are fast becoming extinct as procurement undergoes a new evolution. While savings will always be an important element in what we do, the important question we now need to address is: what are really trying to save?

I’ve previously spoken about how strategic sourcing in procurement can help us to change the world, but it’s easy to believe that issues like modern slavery and environmental pollution are still beyond our reach. They’re buzz words or problems too big to solve, they’re issues that are unlikely to find a solution within a single career.

But that’s not true. Every day we’re seeing political mandates, new regulations and social pressures that are driving change at an unprecedented pace. However, the window for change to actually solve environmental issues is closing just as fast – meaning we can’t sit back and focus on cost alone if we’re really committed to making change.

Saving vs the Social Good

When we talk about optimising our supply chains, there will never be a time where cost doesn’t form part of the conversation. Even if you’re not solely focussed on cost-cutting measures, there needs to be the ability to invest in solutions that will drive positive outcomes in the years that follow – and that can’t come without the budget to back it up.

In fact, when we look at how much money we’re able to save through strategic sourcing for large multi-million dollar companies, compared with how much their net value can fluctuate on the stock market from day to day, the savings are actually negligible.

What we’re really able to do when we’re effectively reducing costs within our supply chain is reinvest that money back into the organisation. This macro-level approach to cost-saving lets you support the needs, beliefs or even employees of your company to help bring about changes that will actually have an impact. Whether you’re looking for widespread industry reform or to bolster your own company initiatives, cost will always join the conversation.

Saving and the Successful Supply Chain

At Source One, a Corcentric company, we counsel our customers to constantly be improving and optimising the way their companies develop relationship with suppliers. To get the best results and a positive, long-lasting supplier relationship, there needs to be an element of a partnership between procurement professionals and their supply chain.

Good supplier relationships help to create value for both sides of the agreement – whether it’s a new product, process or an improvement that can make everything more efficient. The key piece of supplier and vendor management that is often overlooked is the ability to be creative and innovative to help challenge the status quo.

We’ve seen that by following and developing procurement best practice, and encouraging our suppliers to think about the problem we’re trying to solve together, we can enable these things to have a bigger impact in a tangible and evident way.

What changes the way a company acts?

Not all companies are started with a social responsibility guidebook in place. The organisational stance on environmental, social or political issues usually develops with time and as such, there is rarely a budget set aside for supporting global issues. New regulations or social pressure can both have an impact on the way a company acts.

Its reaction to these pressures is either going to change the way the company is perceived – in market share or reputation – or it will change how the company will need to do business going forward.

For example, a new worldwide mandate will come into effect on 1 January 2020, where all ships and vessels operating anywhere in the world will be required to use fuel with a sulphur content of less than 0.5 per cent, compared with the current regulation of 3.5 per cent.

While those operating in the shipping industry can change to a cleaner type of fuel, they’ll now find these are more expensive due to increased worldwide demand, likewise they could utilise ‘scrubbers’ to essentially clean their current fuel source, but this will come with its own ongoing investment.

Those who don’t comply with these new regulations will face hefty fines – so no matter which solution each company implements we’re looking at $30 billion dollars worth of investment across the industry.

What We’re Really Saving

This type of regulation will fundamentally change how that company does business as they’ll now have to factor in the increased cost of fuel to operate once it comes into effect. This also presents an opportunity for procurement to support the ability for shipping companies to comply, which will present its own positive solutions to environmental issues, while also absorbing some of the cost or finding other ways to mitigate, diversity or reduce their exposure and help lead the way to a more sustainable future.

Procurement really can make a difference, but these outcomes are best achieved when they’re working with and are supported by our cost saving measures rather than being seen as the antithesis to an optimised supply chain. Sure, you can have one without the other, but by reinvesting in the future of the world around us we’ll find the best way forward.

Source One, a Corecentric company, were one of the key sponsors for the Big Ideas Summit Chicago 2019 and Diego was one of our great keynote speakers. If you want to catch up on Diego’s Big Ideas for procurement and saving the world, join the Summit’s group. Click here to join in and catch up now!

Successfully Procuring Social Value

If procurement is going to get serious about social value, then it needs to ensure that it is fully integrated into strategic plans.

Public spending through procurement practices and contracts can be shaped in a way that benefits both the economy and society – but too often this is not the case.

Since the implementation of the Public Services Social Value Act 2012, not enough has been done by commissioning organisations to ensure they are obtaining maximum social value from contracts.

What is Social Value?

Social value is a way of thinking about how scarce resources are allocated and used. It involves looking beyond the price of a contract, and prompts organisations to consider the collective benefits a contract could deliver.

Implementation shouldn’t be a trade off against cost or quality. It is possible to deliver a triple bottom line through procurement activity. A combination of three factors – social, environmental and financial – should improve the quality of delivery, which in turn will almost always result in an improvement in efficiency.

It’s essential that when commissioning services, organisations are focused on achieving the best value, as opposed to focusing solely on cost. The strategic power of social procurement can be extremely influential, particularly when decisions are aligned to a business strategy which supports an organisation’s wider corporate mission and values.

How can social value be achieved?

There are a number of ways to ensure that social value can be fully integrated as a part of procurement plans. The Public Services Act 2012 asks organisations to only consider it at the point of commissioning. However, to realise maximum benefits, social value should be considered past this point.

Fusion21 delivers procurement services for built assets to over 180 public sector members, and we ensure social value is delivered through our programmes by measuring the performance and delivery on contracts.

To date £56 million of social impact has been delivered, and over 2400 jobs have been created. Last year alone we achieved over £13 million of efficiency savings for our members.

So, at the point of commissioning, how can you ensure considering social value will make a difference? Including it within the award criteria, and assigning weighted sections as part of a supplier’s quality submission during a tender process, is one option.

Fusion21 attribute a proportion of a tender evaluation to social value – resulting in this having a direct impact on the final scoring. This approach ensures that social enterprises, SME’s and socially driven suppliers, stand a better chance of winning work through the procurement process.

It also provides an opportunity for organisations to demonstrate the added value they can deliver on a contract, and enables the commissioner to evaluate this based on project objectives.

Avoid Best Endeavours

Organisations should always avoid a ‘best endeavours’ approach to social value implementation within contracts. Instead, commissioners should stipulate how their objectives will be managed, and consider how performance will be evaluated. One way to do this includes asking successful bidders to produce SMART action plans, listing the outputs they can generate.

Once this is complete, social value performance should be integrated into standard contract management procedures.

Fusion21 also issues Regeneration and Local Economic Benefit Plans to every member who has commissioned a contract through us. These plans contain clear objectives and set targets – in addition to providing analysis and detailed progress reports.

By placing a financial figure on the value generated, our members can see the clear benefits of social value activity.

Finally, if social value can become engrained in a supplier’s contractual obligations, it is easier to ensure that goals will be met. At Fusion21, we put a contract in place between our member and supplier, which states an employment opportunity, must be created for every £500k of contract value.

It’s fair to say that procuring for social value needs to have a higher priority in the public sector – and to retain competitive advantage, suppliers should be considering their approach to delivering this.

Fusion21 is an award winning social enterprise who’ve gained national recognition for collaborative working with suppliers and members. We provide a wide range of procurement services and procurement frameworks for built assets that meet the unique requirements of public sector organisations.