Social procurement is often celebrated as a cornerstone of social enterprise success in Australia. What’s discussed far less is that it can also be a double-edged sword. When it works well, it can help build an impact organisation. When it doesn’t, it can destroy one, writes White Box COO Mark Daniels.
I have worked as a buyer (social procurer), a social enterprise supplier and an intermediary designed to support business and government to buy from social enterprises. I played a critical role in advocating for the Victorian Social Procurement Framework and was a co-founder of Social Traders. I am not a ‘Johnny-come-lately’ in this field.
I have always believed that social procurement is a key lever in taking social enterprises to scale. In theory, it tilts the contracting playing field towards social enterprise suppliers. More work, more profit, more scale, more impact.
But what I’ve grown to understand over the last decade is that social procurement can be a double-edged sword.
While social enterprises operate to deliver the greatest impact, corporates have different priorities. They make business decisions based on the best commercial outcomes for the organisation. This decision-making power has the potential to elevate social enterprises to new heights or derail social enterprises completely.
This is what the dark side of social procurement can look like in practice:
- Used to win bids, but not to deliver them.
Social enterprises are written into Tier 1 tender responses, often where there are weightings of up to 30% for social outcomes, but receive little to no actual work once the contract is secured.
- Built on promises that don’t hold.
Social enterprises start up or scale to meet a corporate need, based on the promise of ongoing work, only to discover that work is inconsistent, reduced, or stopped altogether. For early-stage organisations in particular, this can quickly create serious financial pressure.
- Framed as opportunity, driven by something else.
Social enterprises are positioned as the solution to a business problem, which is presented as a clear market opportunity (for example, a skills shortage in a regional area with the promise of ongoing demand). In practice, there are often deeper structural or commercial reasons that gap exists, making the opportunity far more fragile than it first appears.
Even where there is strong intent at a head office level, the reality of delivery can look very different. Decisions about suppliers are often made in the field, under commercial pressure, where social procurement commitments are harder to prioritise or enforce.
I’d be remiss not to acknowledge that responsibility for sustainable partnerships doesn’t sit with one party alone. Social enterprises need to do their own due diligence; ask hard questions, get clarity on what’s committed, and understand the risks of relying too heavily on a single buyer.
But this sits within a clear power imbalance. Social enterprises don’t set the terms of engagement, and they are often the ones who carry the consequences when those terms shift.
Where is the root of the problem then?
At its core, social procurement is about corporates using their purchasing power to help deliver real social outcomes. It’s about sharing value and risk in a way that strengthens communities. In practice, that is not always how it plays out.
There are two underlying issues.
1. There is a clear power imbalance between corporates and their supply chains. Social enterprises like other SMEs are often expected to carry a disproportionate share of the risk. Unlike other SMEs, they also carry the added cost of delivering a community benefit. This impact cost makes them less financially resilient, particularly when commitments aren’t honoured.
2. For many corporates, social procurement is still driven primarily by compliance. It’s treated as a requirement to be met, rather than a responsibility. The focus is on achieving contractual milestones as cheaply and easily as possible, rather than delivering the best social outcome for the customer or community. In that environment, social enterprises can be cycled in and out of supply chains with little regard for long-term impact, sustainability, or the damage caused when partnerships are short-lived.
Where does the solution sit?
Some corporates manage this better than others. They look at the opportunity; they consider the perspective of the social enterprise; and they understand the need to protect and nurture their suppliers. They are clear about the work required, and can be willing to amend some of their practices to accommodate the social enterprise - this might include building the capacity of the social enterprise, targeting contracts that are best suited to social procurement and in some instances even investing in the social enterprise.
If the intention of social procurement was in part to grow social enterprise and Indigenous business in Australia so they can deliver more impact, then good practice needs to be measured in more than jobs created. It should include retention of a social enterprise over the life of a contract and continuity of the social enterprise. This puts an onus of care on the Head Contractor.
Ultimately, we need cohesive organisational commitments with clear KPIs, job descriptions, internal training courses and rewards for corporate teams that are exemplars in this space.
But we are a long way from that at the moment. The field has very mixed maturity. Until that changes, social enterprises need to be aware that while social procurement has the potential to build organisations that deliver real and lasting impact, it can also undermine the very outcomes it is intended to achieve.
I would love to understand the views of corporates and social enterprises in relation to the issues raised in this piece. Is this your experience? Drop me a note.