Procurement and Social Value: Balancing Social, Economic, and Environmental Factors

We know procurement extends far beyond the simple acquisition of goods and services. As champions of the industry, we understand the true value of a strong procurement function.

Procurement has evolved into a strategic function that can drive significant change within business and the wider social, economic, and environmental world to deliver benefits and add value from a unique standpoint.

This article explores the intrinsic link between procurement and social value while also touching on The Procurement Act. The Procurement Act has been delayed to February 2025, find out more here

Understanding Procurement and Social Value

Procurement traditionally focuses on obtaining goods and services at the best possible price and adding the most value. However, modern procurement practices are increasingly recognising the importance of ESG. Social value in procurement refers to the broader impact that purchasing decisions can have on society, economy, environment. This approach aligns procurement practices with the principles of sustainable development and corporate social responsibility.

Social Factors in Procurement

Incorporating social factors into procurement involves considering how purchasing decisions can positively impact communities and improve quality of life. This can be achieved through various means:

  1. Supporting Local Communities: Procurement strategies can prioritise sourcing from local suppliers, thereby boosting local economies and creating jobs. By doing so, organisations can contribute to community development and foster a sense of local pride and investment.
  2. Promoting Fair Labour Practices: Ensuring that suppliers adhere to fair labour practices and provide safe working conditions is crucial. This not only protects workers’ rights but also promotes ethical business practices across the supply chain.
  3. Encouraging Diversity and Inclusion: Procurement can be used as a tool to promote diversity and inclusion by engaging with suppliers that are owned by women, minorities, or other underrepresented groups. This helps in building a more equitable society and can bring diverse perspectives and innovations to the supply chain.
  4. Enhancing Social Enterprises: Social enterprises, which prioritise social objectives alongside financial performance, can be supported through targeted procurement policies. This helps in scaling their impact and driving positive social change.

Economic Factors in Procurement

Economic considerations remain at the core of procurement, but they are now being viewed through a broader lens to include long-term value creation rather than short-term cost savings:

  1. Stimulating Innovation: By engaging with suppliers and encouraging innovative solutions, procurement can drive advancements that improve efficiency and reduce costs. This can lead to economic growth and enhance competitive advantage.
  2. Supporting SMEs: Small and medium-sized enterprises play a vital role in economic development. Procurement strategies that include SMEs can help in diversifying the supplier base, fostering competition, and driving economic resilience.
  3. Long-Term Contracts and Partnerships: Building long-term relationships with suppliers can lead to more stable and predictable supply chains, which can benefit both the buying organisation and the suppliers economically.

Environmental Factors in Procurement

Environmental sustainability is a critical aspect of modern procurement practices. Organisations are increasingly recognising their role in minimising environmental impact through responsible procurement:

  1. Sustainable Sourcing: This involves selecting suppliers that use environmentally friendly practices, such as green manufacturing, sustainable farming or responsible mining. This can massively reduce the environmental footprint of the supply chain.
  2. Green Procurement: Also known as environmentally preferable purchasing, green procurement focuses on acquiring products and services that have a lesser effect on human health and the environment. This includes products that are recyclable, energy-efficient, or made from sustainable materials.
  3. Reducing Carbon Footprint: Organisation can reduce their carbon footprint by considering the environmental impact of transportation and logistics. This can involve choosing suppliers closer to production sites or optimising transportation routes to reduce emissions.
  4. Circular Economy: Procurement strategies can support the principles of a circular economy by prioritising products that can be reused, refurbished, or recycled. This reduces waste and promotes resource efficiency.

Integrating Social, Economic, and Environmental Factors

The integration of social, economic, and environmental factors in procurement requires a holistic and strategic approach. Here are some steps organisations can take:

  1. Develop Comprehensive Policies: Organisations should develop procurement policies that explicitly include social, economic, and environmental criteria. These policies should align with the organisation’s broader goals and values.
  2. Stakeholder Engagement: Engaging with stakeholders, including suppliers, customers, and the community, is essential to understand their needs and expectations. This can help in designing procurement strategies that deliver maximum social value.
  3. Training and Awareness: Educating procurement professionals about the importance of social value and providing them with the tools and knowledge to implement sustainable practices is crucial.
  4. Performance Measurement: Establishing metrics and indicators to measure the impact of procurement decisions on social, economic, and environmental outcomes is necessary for continuous improvement.
  5. Collaboration and Partnerships: Collaboration with other organisations, industry groups, and government agencies can amplify the impact of procurement initiatives and drive broader systemic change.

The Future of Social Value in the Procurement Act

The Procurement Act is something which is widely discussed, and social value is integral to this. The Social Value Act requires public bodies, and public adjacent companies, to consider how the services they are procuring can improve social, economic, and environmental well-being which this article has just discussed. Whilst some social value criteria may benefit people all over the world (eg. carbon reduction, ethical supply chains), social value mostly refers to benefits that can be directly felt closer to home.

Social Value has been increasing in importance & gathering momentum in the UK and it is great to see that people in procurement are welcoming it. These Acts came into action following the UK’s exit from the EU but it seems as though other countries are also following suit with other countries seeing the importance of including social value in procurement. With countries such as Australia and Canada including social value in their procurement legislation. 

The upcoming Procurement Act is set to re-shape the way the public sector approach purchasing decisions, emphasising social value alongside economic considerations.


📞 Ready to Explore? If you’re curious about how the Procurement Act will affect your Procurement function, we’d love to hear from you.

Book a consultation and discuss the upcoming challenges facing your business:

Emily Denney | Industrial Expert, Interim Management

Lauren Bell | Public Sector Expert, Interim Management

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