Social value spotlight turns on the supply chain - what you need to do

Achilles Tom Grand

Alongside that flurry of activity with Balfour Beatty, Carillion’s Philip Green, in his role as Government CSR adviser, has been turning his attention to UK company performance on social value. Tom Grand, regional director of supply chain risk manager Achilles assesses the implications.

It is easy to imagine the mad scramble unfolding across UK PLC, after the Prime Minister’s corporate social responsibility advisor, Philip Green, in June asked 50 of the UK’s biggest businesses to reveal how their suppliers are helping to deliver ‘social value’.

The public sector, and most of its main suppliers, had already implemented initiatives to address the Social Value Act 2012 - such as apprenticeship schemes, using small and medium sized enterprises (SMEs), donating to charity or giving staff days off to volunteer. They realised that ‘value’ is no longer just about price vs quality and time; it’s about giving something back to local communities. 

But private sector suppliers? According to our research at Achilles, around 40% of large businesses don’t even know who their suppliers are, let alone whether these companies offer social value. And in the ever-changing world of corporate social responsibility), what should social value even involve?

 Meanwhile, there are five million small and medium-sized businesses (99 per cent of UK businesses), no doubt dreading the prospect of filling in yet more forms; this time about whether they use apprentices or whether they’ve donated to a local charity in the last year. 

Philip Green is quite right that all UK businesses should ‘do their bit’ to help deliver social benefits for the UK at a time of great economic uncertainty.  Making a profit and being truly sustainable are not mutually exclusive; in fact they’re naturally compatible.

But for this initiative to work, businesses must take four separate steps – set up a proper system for managing information about their suppliers, adopt a collaborative approach to gathering information, map supply chains to find out the identity of all their suppliers and set a clear vision of what they want to achieve.

1. Get a proper system in place for managing information about suppliers

A major train operating company First Great Western, outsourced the management of its supplier assurance to us at Achilles – a global supply chain risk management company.  With a bank of up-to-date supplier records, First Great Western and Achilles were then able to easily contact 1,439 active suppliers, asking them to reveal details about their own internal apprenticeships schemes, and fulfil the needs of the train operator’s customers.

 Kevin Bartlett, Head of Procurement at First Great Western, says: “We now have the data and information to understand our supply chain. For example, we now know that of our 1500 suppliers, 65% are SMEs. Without that basic data, where would you start focusing your efforts?”

“Social value is now beginning to re-define ‘value for money.’ It used to be about quality, cost and time. It’s now about all of those things as well as social value.

 “We are beginning to understand how we can incorporate social value into our procurement and tender evaluation strategies. If it’s important to our customers, then it’s important to us. And if it’s important to us, it must be important to our supply chain.”

However, not all companies would be able to replicate First Great Western’s approach. Research shows that 40 per cent of large UK businesses do not know who their suppliers are.* Compounding the issue, information is stored on multiple databases or pieces of paper, which becomes out of date almost as soon as it’s filed.

If firms are required to ask thousands of SMEs for additional information, they need to have in place the correct infrastructure on which to gather and store it.

2. Work collaboratively

At this stage, Social Value seems to revolve around apprenticeships, charity donations, use of SMEs and local workers, and giving staff time off to do voluntary work.

If most companies’ requirements are broadly the same, then why not pull together the questions into a single form for SME suppliers to reduce the administrative burden.

This already happens, for instance in Achilles BuildingConfidence – a pre-qualification and accreditation community used by 19 buying organisations and 1,500 suppliers in the construction industry. They have agreed one form with standardised industry requirements on business critical areas, such as compliance and health and safety. In addition, in the three highest levels of its audit programme, there is a ‘Social and Ethical’ questionnaire, with information required on the use of apprenticeships and local labourers. It means suppliers need only respond once to be eligible to work with 19 buyers.

Working collaboratively reduces the cost of managing supplier information by 50%. Industries should be looking to apply the same efficiencies and smart thinking to social value – which is becoming as important as other key procurement criteria.

3. Map the supply chain

The latest development of the Social Value Act is focused on gaining insight from SMEs, which are traditionally found in lower tiers of the supply chain; particularly in complex, high risk industries such as construction.

These companies are often subcontracted by a supplier in the first or second tier and are many steps removed from the original buyer.

To really gain a complete picture, businesses must ‘map’ their supply chains to gain visibility of providers through all the tiers. The easiest way to do this is by sending automated invitations requesting information to suppliers in the lower tiers. With a complete picture of who all the suppliers are, buying organisations can then question suppliers about social value activity to make the process more efficient. 

As First Great Western’s Kevin Bartlett says: “There are some potential tensions there. Some SMEs will be much better placed to provide apprenticeships than others. At this stage, industries have just started out on a ‘fact finding’ exercise. We’re not expecting smaller businesses to be outstanding in terms of social value at this stage, but for those who are, this is a real chance to shine out from the competition.”

4. Set a clear vision

It’s a bold step to apply social value right down through the supply chain. But what happens once the information is gathered? According to Kevin Bartlett: “Our customer wants to know about social value, so we’re finding out the information, but the natural next step is to ask why. How will this affect procurement in future? What do we want to achieve from there?

“There is a big piece of work to be done in terms of what social value means and what strategy we need to adopt to implement it.”

What is the Social Value Act?

The Act, for the first time, places a duty on public bodies to consider social value ahead of a procurement. The Act applies to the provision of services, or the provision of services together with the purchase or hire of goods or the carrying out of works.

The wording of the Act states that... 

The authority must consider—
(a)how what is proposed to be procured might improve the economic, social and environmental well-being of the relevant area, and
(b)how, in conducting the process of procurement, it might act with a view to securing that improvement.