Leveraging procurement to support social enterprises and create social impacts

Abstraksi

Social enterprise sector in Indonesia has been growing rapidly, but it is not without its challenges. In a recent study, one out of five social enterprises noted poor cash flow as one main barrier to growth. This can be caused by a combination of different factors, including limited market access or lack of visibility which results in low sales. Social procurement could be a solution to address these issues by exposing social enterprises to potential procurement opportunities. Social procurement basically redefines the concept of “value-for-money” in conventional procurement. On top of getting the best price and quality, it also seeks to create social value, like providing employment opportunities for people with disabilities, from the products and services purchased. Some common approaches include purchasing directly from social enterprises or requiring existing suppliers to incorporate social enterprise suppliers in their supply chain. In Indonesia, public procurement has taken a step closer towards sustainable development by introducing sustainable procurement principle in the Presidential Regulation Number 16/2018 concerning Public Procurement. While this move deserves appreciation, the idea of social procurement should not be confused with sustainable procurement. The former uses positive screens by deliberately asking how we can create social value through procurement, whereas the latter still uses predominantly negative screens. Some countries, including Australia, have applied social procurement along with their sustainable procurement practices both in government and private sector and have reported some social benefits achieved. In 2012, for example, the Toowoomba Regional Council created 40 jobs for people with disabilities by awarding their $2 million waste management contract to Ability Enterprises, a social enterprise who has a mission to provide employment for people with socioeconomic disadvantages. This contract helped Ability Enterprises receive revenue while maintaining their social impact on society. Indonesia can consider applying this to support the growth of social enterprises, by improving their cash flow, while achieving its sustainable development goals, particularly increased inclusive and sustainable employment opportunities. Initial steps include developing policies and procedures in place as well as a clear communication plan to raise internal awareness and avoid common misconceptions about social procurement. It is best to start with some pilots and trials before officially rolling out and scaling up to demonstrate evidence of benefits while identifying best practices. In the medium term, the government should prepare tender readiness of social enterprises as suppliers by holding information sessions and delivering capacity building training. This should include the capability to measure and demonstrate their impacts, of which government or independent auditor can qualify.