The Volkswagen emissions scandal has brought issues of corporate responsibility firmly back into the public eye. It appears to be the latest example of how corporate governance can break down spectacularly, and trust has evaporated in a previously well-regarded corporation. In order to rebuild the brand and reputation of the company, Volkswagen’s new management will need to look beyond the external reactions from regulators and other likely litigators, and pay attention to the internal factors within Volkswagen that inform, nourish or diminish corporate responsibility.
Our Social Business Partnership venture works with large companies to help them build a more responsible and ‘impactful’ supply chain, so that society benefits from their day-to-day purchasing activity. We are currently engaged with companies across a wide range of industries (including construction, utilities, facilities management, FMCGs and financial services). In these discussions, it is clear that traction is only really achieved when both external ‘legislative’ drivers and internal ‘values’ drivers come together.
Social Business Partnership introduces corporate procurement teams to high-quality social enterprises, which generate social value as well as delivering many of the goods and services that large businesses need. We call this social value procurement, and it is a way for companies to hard-wire a positive social impact into their core business activities.
A recurring theme in our discussions is ‘trust’. Companies want high-trust relationships with customers, employees, investors and other stakeholders, and businesses, just like other institutions, need to adopt trust-building behaviours. Textbooks tell us trust is built up over time, and transparency and openness are central to its development. Specifically, transparency in the supply chain is one way companies feel they can improve the value of their brand and build or rebuild trust with customers.
We also note that successful buyer-supplier relationships are not only long term in nature, but also strengthened by shared long-term values. This is where social value procurement can strengthen corporate values. A good example of this is a contract we brokered between Johnson & Johnson and Blue Sky, a social enterprise which helps to tackle the growing rate of re-offending by providing ex-offenders with paid work, training and mentoring. Johnson & Johnson’s Credo, dating back to 1943, underlines the company’s commitment to communities, and these values inform the company’s current programme of using its spend to improve the life chances of people who face barriers to the job market.
Putting these thoughts into practice can have a disproportionately beneficial effect, not only in the business itself, but also creating positive relationships with customers, employees and the wider community.
External incentives for corporate responsibility typically take the form of legislation and regulation. In the case of social value procurement, the most important driver is the Public Services (Social Value) Act 2012 – which is increasingly pertinent for businesses which work predominately with the public sector. The Act requires public sector commissioners to consider how their procurement decisions “might improve the economic, social and environmental well-being of the relevant area”, and private sector providers to central government, local government, housing associations and the like are increasingly asked to show how they can help their public sector customer to deliver social value.
In our experience, this legislation alone is not enough to transform either corporate behaviour or procurement practices. While it is proving to be a very useful nudge in opening up opportunities for social value creation in corporate supply chains, it can’t (and shouldn’t) force change. If this ‘nudge’ is not backed up by the sort of internal factors and values discussed above, then corporates’ engagement with social enterprises will be little more than a box-ticking exercise in a cynical effort to secure the next contract. But it is wrong to write off the Act. We have seen many successful partnerships blossom where the companies were already considering how to work for the good of the wider community, and then found the Social Value Act gave them that extra reason to take action.
Get in touch with us at firstname.lastname@example.org or on 020 7922 7747 to discuss how your day-to-day purchasing decisions can bring added benefits to your company and to the community.