Diversity, Equity and Inclusion can Contribute massively to the Social Pillar of ESG, and
Social Procurement
Makes a Difference
Should ‘S’ barely be numbers?
ESG, which stands for Environmental, Social and Corporate Governance, forms the main pillars of the framework of modern corporate sustainability policy. Internal corporate governance is formulated atop the two other problematic areas. Generally, the assessment of ESG implementation is supported by international standards of practices and regulations such as the United Nations (UN).
“While experts are getting to grips with the ‘E’ in ESG, the ‘S’ remains the most difficult pillar to analyse and incorporate into investment analysis – a key part of the data challenge...”
~ extracted from the Global ESG Survey 2019 of the BNP Paribas
The social pillar becomes the most challenging area. Internal human policies must be adapted habitually, while community engagement is not easy without in-depth exploration. Among all actions, Social Procurement and Supplier Diversity are much more unutilised than unattainable. The social pillar in ESG policies is depicted no longer by numbers.
ESG Policies
"Although 92% of S&P companies were reporting ESG metrics by the end of 2020, according to a 2020 BlackRock survey of clients, 53% of global respondents cited “poor quality or availability of ESG data and analytics” and another 33% cited “poor quality of sustainability investment reporting” as the two biggest barriers to adopting sustainable investing..."
~ extracted from Globally Consistent ESG Reporting by Deloitte
Companies or organisations around the world that adopt ESG strategies are as follows:
The Fundamentals of the Social Pillar – Diversity, Equity and Inclusion
Diversity, equity and inclusion (DE&I) can create shareholder value over the long run.
Affirmative investments by companies in DE&I outcomes can have a significant impact on reducing loss of talent and minimising risk to a company's reputation.
When employees feel included, they are more engaged, which has positive knock-on effects on productivity, morale, and trust.
Companies can foster a greater sense of safety and innovation by embracing a learning environment and an inclusive culture, ensuring that everyone in the organization can adapt to change, feel comfortable with failure or mistakes, and quickly identify new opportunities.
To be a good company to work with, one should commit to improving social equity, such as investing in underprivileged and underrepresented communities.
With the assistance of Big Data, investors would see how a company performs on broader diversity and inclusion measures, such as race, sexual orientation, age and disability.
By mining LinkedIn, investors can reveal possible internal problems, such as high staff turnover, which in turn can portray other issues such as competitiveness and staff treatment.
By analysing employee reviews on the employment platform Glassdoor, candidates are equally easy to gain a better understanding of the implementation of a company’s policy on diversity, equity and inclusion.
Employees are also increasingly prioritizing social factors such as belonging and inclusion as they choose whether to remain with their company or join a competing employer.
Social factors are becoming more significant in decision-making.
To improve workforce diversity, employment is surely a way, while social procurement can boost diversity further.
In its May 2020 report, McKinsey used the title "Diversity wins: How inclusion matters". This was the third time that "diversity" was used in the professional report column. An article on the topic details a survey on governance effectiveness.
McKinsey concluded that the "diversity and inclusion" policy has made the financial returns of enterprises far outweigh the costs, and proposed five major reasons, namely: 1) ensure the representation of diverse talent; 2) strengthen leadership accountability and capabilities for I&D; 3) enable equality of opportunity through fairness and transparency; 4) promote openness and tackle microaggressions; and 5) foster belonging through unequivocal support for multivariate diversity.
From the first report in 2005 to the second report in 2018, and then to the third report in 2020, McKinsey’s research and analysis on “diversity, equity, and inclusion” over the years have affirmed its impact on corporate governance and is the key to success.
Why social procurement?
Social Procurement is when a company uses its purchasing power to attain social goals or to generate social value above and beyond the value of the goods, services or construction being procured.
By sourcing from social benefit suppliers, the company can subsequently attain some basic goals of the Social pillar in ESG implementations:
Solidify the implementation of Diversity, Equity & Inclusion in line with, or even escalating, internal policy;
Promote diversity in the supply chain;
Secure sustainable supplies when procured from local sources;
Support social enterprises;
Support social innovative businesses that incorporate underprivileged or socially-disconnected people;
Create additional social value for businesses; and
Build trust with customers and other stakeholders.
What is Social Procurement?
“The rationale for social procurement is deceptively simple: provide social value with the money spent by a city. Social procurement represents the choice by an organization to embed the achievement of social values into their procurement practices…
If the primary procurement goal of an organization is to reward contracts to the lowest bidder, then this goal is readily and continually achieved. However, if the goal of procurement is to support city-wide initiatives a city’s purchasing can be used to support other city goals. Two decades ago procurement was entirely focused on economic factors and market efficiency. Over the past twenty years, environmental sustainability has increasingly become more relevant in procurement practices. The next step in the evolution of what is valued in procurement is social impact…”
~ extracted from Social Procurement Framework of the City of Vancouver, December 2017
Procurement refers to all business processes related to sourcing activities to obtain goods, services and constructions.
It covers the entire life cycle from identification of needs to the end of a service contract or end of useful life and subsequent disposal of the asset.
Besides, it includes the organizational and governance framework that underpins the procurement function. Procurement excludes storage management and logistics, which are part of the broader topic of supply chain management.
The direct perspective of Social Procurement is that a company purchases goods or services from a "social benefit supplier". The company can directly deliver social and/or sustainable outcomes by sourcing from social benefit suppliers.
Types of Social Procurement
Three Common Practices of Social Procurement are:
Supplier Diversity involves establishing a range of suppliers in the procurement process, including those from disadvantaged and underprivileged categories. Companies can create new opportunities for traditionally disadvantaged groups while creating new opportunities for themselves.
Green Procurement necessitates sourcing products and services that are made in an environmentally sustainable means. This can embrace products and services produced using renewable energy or made from materials from sustainable resources.
Ethical Procurement is to source products and services made according to ethical standards such as fair labour standards.
Basic Goals of Social Procurement
The following basic goals of Social Procurement have been identified as priorities within companies:
Provide opportunities for people with disabilities;
Support social enterprises and social value businesses;
Increase involvement of local suppliers;
Promote diversity in the supply chain;
Support SMEs; and
Support social innovation.
General Benefits from Social Procurement
All benefits and impacts of Social Procurement to businesses are:
Create real, meaningful change in businesses;
Create additional value for businesses;
Create new opportunities and drive positive outcomes;
Build relationships with suppliers and vendors that are committed to ethical practices and sustainability;
Build trust with customers and other stakeholders;
Gain an edge over their competitors;
Access new markets and new sources of competitive advantage;
Reduce their environmental footprint; and
Reduce their use of resources and reduce their environmental impact.
Why Supplier Diversity?
McKinsey published an article titled "Expand diversity among your suppliers–and add value to your organization" in May 2022, proposing that supplier diversity is good for the economic benefits, working with minority- and women-owned businesses (MWBEs) creates value, and many other points of view.
"Increasing the diversity of suppliers has become more urgent at a time when social issues strongly influence business growth. Sixty-four per cent of millennials say they won’t work for companies that perform poorly on corporate social responsibility..."
~ extracted from McKinsey's Insights in Operations
Accenture published a document titled "Five reasons why You should prioritize supplier diversity as part of your sourcing strategy" in 2020. The five reasons are: (1) to improve supplier competitiveness, (2) to boost innovation, (3) to heighten the perception of impact, (4) to attract and retain top talent, and (5) to provide positive social impact.
"But many companies with Supplier Diversity Programs historically have treated them like 'check the box' or non-essential programs, which are often deprioritized when things get tough..."
~ extracted from Accenture’s Insights on sustainability
Harvard Business Review published the article "Why you need a supplier diversity program" in August 2020. They interviewed multiple companies and organizations for diversity, analyzed media reports and corporate reports, and It was discussed that “Supplier Diversity and Social Procurement” policies can contribute to the social economy and corporate benefits.
"The 'feel-good' factor associated with diversity programs can also burnish a brand. In a 2019 study for Coca-Cola, Hootology, itself a diverse supplier, found that the individuals who were aware of Coca-Cola’s supplier diversity initiatives were 45% more likely to perceive the brand as valuing diversity, 25% were more likely to think favourably about the brand, and 49% were more likely to use Coca-Cola products..."
~ extracted from an article by Harvard Business Review
International organization, WeConnect, released the 2021 ranking of the world's top 10 companies that attach great importance to “Supplier Diversity and Social Procurement” policies:
In addition, we can easily find the “Supplier Diversity and Social Procurement” policies of other large international companies:
Social Benefits from Supplier Diversity
One of the Common Practices of Social Procurement is Supplier Diversity. A company can purchase goods or services from a "social benefit supplier" once. Establishing a long-term relationship with the social benefit supplier would be the best for their sustainable development.
Social benefit is the positive impact on people, communities or society generated by the practice of Social Procurement. Social benefits from Supplier Diversity might include:
Promote a more diverse and inclusive workforce;
Create training and employment opportunities for the underprivileged;
Helping people participate in their communities and the economy;
Address complex local challenges such as intergenerational unemployment, communal disconnection and the decline of economic activities in local communities;
Encourage local economic development and growth; and
Involve SMEs and social benefit suppliers and give them the same opportunities as other businesses.
Social Enterprises Become Key Partners for Businesses
“Corporations by partnering with Social Enterprises can direct significant spending into a positive impact, generate business value, and change people's lives in the process.”
~ extracted from Sopact’s perspectives
Common characteristics of Social Enterprises that make them the key partners for businesses are:
Provide economic or social activities for local communities;
Stay in touch with stakeholders;
Innovative business practices by incorporating people (from local or global) that are underprivileged or socially-disconnected; and
Create social values.
Intermediate
SEE Mark
We are an award-winning social enterprise engaging designers with disabilities
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Our Vision
Conform a true inclusion – socially, culturally & commercially.
Our Mission
Map out career paths for designers with disabilities; not just create entry points.
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Social aim
Nurture PoDs’ (covert) visual strengths and aesthetics, helping them to be prepared for the workforce.
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Sustainable development is the primary policy. Our profit distribution is about the profit-sharing model of social enterprises in the UK (CIC).
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Diversity, Equity & Inclusion
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Uncommon Initiatives
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“Strength lies in differences, not in similarities.”
— Stephen Richards Covey