Tips on Responsible Procurement

The idea of responsible procurement has not been popularized in Hong Kong yet. Usually, only large enterprises have such relevant procurement policies. In order to improve the public's understanding of responsible procurement, we have published “Responsible Procurement News” quarterly to provide tips and primary direction on responsible procurement. The news can help enterprises to put responsible procurement into practice.

1. How does responsible procurement help with fulfilling social responsibility?
2. What kind of goods or services can enterprises obtain from social enterprises?
3. What are the types of responsible procurement?
4. Does it count as social procurement if only social impact is included in the scoring criteria of procurement?
5. Can social enterprise handle large number of orders?
6. How to ensure that the SE products or services meet the requirement of corporates?
7. What are the preparations before practicing responsible procurement?
8. How to measure the social impact of SEs during the bidding process?
9. Is there any follow-up work after signing a procurement contract with social enterprise(s)?
10. Is there any guideline or template about responsible procurement?

How does responsible procurement help with fulfilling social responsibility?

A social enterprise, generally speaking, is a business that targets at a specific social mission. It attempts to solve social problems by commercial means. Maximising profit for the shareholders is not its primary target, while its profit will be principally re-invested in the business to create wider social impact.  Therefore, responsible procurement can support a sustainable operation of the social enterprises. Thereby achieving diverse social goals and missions.

What kind of goods or services can enterprises obtain from social enterprises?

According to a survey conducted by our center, over 50% of the interviewees (company/ organization) think social enterprises cannot provide goods or services they need. Therefore, they will not consider social enterprises when it comes to procurement.

In fact, other than gifts services, social enterprise can also provide services like office & building cleaning, moving & relocation, designing & production, packaging, performing, accounting& auditing, and also vocational training and team building.  These kinds of services are suitable for different companies.

Companies can use the online search engine of SE Directory to know more about the content and the variety of goods and services, thus consider procuring from social enterprises. Through filtering categories of “Business Nature” , “Social Missions” or typing keywords, available enterprises and their information will immediately list.

What are the types of responsible procurement?

Responsible procurement can generally be divided into two categories: environmental and social.

With the increasing awareness of environmental protection in the society, many companies have formulated a series of environmental protection procurement guidelines that require all departments to take environmental factors into consideration when purchasing, so as to reduce the impact on the environment. Thanks to the support from different sectors, the rapid development of environmental procurement has become one of the development policies of various enterprises.

In addition to environmental factors, corporates usually take price, quality, or reputation of suppliers into consideration during procurement. However, social impact is rarely included. The concept of social procurement thus focuses on social factors by considering the social value created by the suppliers’ goods or services, such as employment for the disabled, empowerment of disadvantaged groups and encouragement of Fair Trade practices etc., so that each consumption can exert its social impact and enhance the social value of the company.

Does it count as social procurement if only social impact is included in the scoring criteria of procurement?

The practice of social procurement is extensive. Companies may start by changing the procurement guidelines and gradually reform related policies and systems, so as to act in accordance to social procurement and fulfill their social responsibilities.

Changing the procurement scoring criteria is the basis of social procurement. Corporates may improve their chances of winning the bid by adding "Social Impact" to their procurement scoring criteria, or by increasing the weighting of the score.

Having the corresponding corporate policies is an integral part of fully implementing social procurement. Corporates may formulate a set of company policies that adheres to social procurement, such as including the entire bidding process and follow-up work in procurement policies, ensuring coordination and communication among various departments, and even providing employees with education on related concepts.

If your company has no experience in implementing social procurement, we suggest that your company first update the procurement scoring standards to include social impact in procurement considerations, so as to implement social procurement and shoulder social responsibility.

Can social enterprise handle large number of orders?

The scale of SEs is generally smaller than large-scale suppliers. Their manpower and resources may not fully meet the requirements of corporates, thus corporates usually lack the confidence to appoint SEs as the vendor of large number of orders.

However, allowing joint-tendering may help lessen corporates’ concerns. By taking advantage of the flexible nature of SEs, several SEs can combine their resources and share the production processes to reduce their respective burdens. For example, if a company needs souvenirs for its event, the order can be jointly contracted by multiple SEs, ranging from idea design, test production, post-processing and packaging, delivery and distribution, etc. Such an arrangement allows SEs to play to their strengths and provide the company with high-quality products and services.

On the other hand, corporate may consider splitting orders during procurement. It not only reduces the burden on individual SEs, but also makes it easier for SEs easier to fulfil corporates' needs. Taking catering services for large-scale events as an example, companies can split orders into different food categories, such as snacks, Chinese and Western food, patties or fruits. SEs are then invited to tender, which gives the small and medium-sized SEs valuable bidding experience.

To promote the products and services of SEs and encourage the business sector to implement responsible procurement, there are some platforms that provide one-stop services to support corporates in purchasing from a variety of SEs, simplifying administrative procedures. You are also welcomed to search for the SEs targeting corporate customers by entering the keyword "Corporate Procurement" into the SE Directory search engine on SEBC website. The SEs will be listed instantly.

How to ensure that the SE products or services meet the requirement of corporates?

According to a survey conducted by SEBC last year, more than 90% of the companies or organizations surveyed believe that the quality of products and services is one of the most important purchasing considerations. So how can enterprises ensure SE products or services meet their requirements?

SEs are usually small in scale and most of them have little experience in bidding. In addition to requiring SEs to submit documents of proof, such as past customer records or portfolios, we suggest companies to conduct on-site or virtual visit for tender evaluation, so as to gain a deeper understanding towards the tenderer.

Reliance on the review of tender application form alone is insufficient if one wishes to conduct a thorough tender evaluation. Through site visit (both online and offline), corporates can fully grasp the production process and sanitary conditions of SEs. The corporates may also take the opportunity to communicate with employees or customers face-to-face and be acquainted with the social impact of SEs through such dialogues. On top of ensuring that the hardware of SE meets tender requirements, site visits allows corporates to have a good grasp of SE's social mission, and help them choose suppliers with similar values.

Although SEs' services may be constrained by their limited scale, it is precisely because of their small size that allows them to be more flexible than large-scale vendor. SEs may supply tailor-made products and services according to corporates’ unique requirements, such as souvenirs, holiday gift boxes, corporate training activities, etc. As most SEs are willing to provide customized services, the process of negotiation and decision-making is relatively simple and straightforward, which gives both parties more time to prepare for other matters related to products or services.

What are the preparations before practicing responsible procurement?

The first step of the responsible procurement process is to invite SEs to bid or include SEs in the supplier list. Among different SEs, how to select suitable suppliers? After collecting the information of the potential bidders, are there any preparations?

Some corporates will formulate Vision, Mission and Value (VMV) to lay the corporate’s foundation and targets as well as support the long-term development. Procurement personnel can first understand the VMV or the annual development direction of their own company, and then invite SEs with the same social value to participate in tenders or include SEs in the supplier list. For example, corporate with the VMV of the “sustainable development” concept can actively be in touch with and collaborate with SEs that promote the same concept, implementing sustainable development through procurement.

SEBC also recommends corporates for organising pre-tender briefing sessions in order to introduce bidding content to potential bidders, including contract content, evaluation criteria, bidding requirements, or other precautions. As each corporate has different interpretations on related concepts such as “social impact”, corporates may take this opportunity to explain the details and measurement methods. Thus, SEs can have a good grasp of the social mission and scoring criteria that corporates expect to achieve, so as to prepare a tender that meets the requirement.

Since 2007, SEBC compiles Social Enterprise Directory (SE Directory) every year, which enables public access to social enterprise information in Hong Kong. It has long been serving as an important reference material for advocating responsible consumption across government departments, public organizations, corporations as well as schools. Corporates can search for SEs by using SE Directory online search engine and mobile apps (iOS and Android) with the filter of “Business Nature”, “Districts”, “Social Mission” or keywords to access SEs’ contact information and introduction, so as to invite the potential SEs to participate in tenders or include them in the supplier list.

How to measure the social impact of SEs during the bidding process?

There is no specific measurement criteria and method for “social impact”. Corporates may formulate their own criteria and proportions according to the nature of different contracts. Taking massage service contracts as an example, corporates can measure SEs’ social impact by setting the employee number, type, hourly wages, and reemployment of disadvantaged groups as indicator, and determining the proportion of scores based on the importance of each indicator.

In addition, corporates may also request SEs to provide business examples in the bid documents with proofs, such as media reports, data analysis, etc., to explain how the past experience could exert influence and fulfill their social mission, to help corporates measuring the social impact of SEs.

Some SEs will conduct a Social Impact Assessment (SIA) for their projects, using systematic research means to comprehensively analyse project’s value and benefits to the community. During the bidding process, corporates may refer to SEs’ SIA report (if any) to understand the project’s effectiveness and the its social impact on the community.

Is there any follow-up work after signing a procurement contract with social enterprise(s)?

Procuring from SE is not the end of responsible procurement. To ensure that the SE suppliers achieve the expected social mission, corporates should conduct contract management and keep reviewing the social impact of the SEs.

SEBC suggests that procurement personnel liaise with SE suppliers regularly, to make sure they meet their own commitment to society as corporate expects. If the situation is not as ideal, the procurement personnel may have a discussion on countermeasure with SEs, so as to maximize the social impact from such procurement contract.

Besides, some corporates may set Key Performance Indicators (KPI) for the procurement contract to project social outcome measurement. The procurement personnel may request SE suppliers to submit reports on a regular basis to follow up their progress in completing KPIs. Taking SE providing blind massage services as an example, "Number of Visually Impaired Masseurs Employed" can be set as a KPI to evaluate the social objective (employment for disadvantaged groups) achieved by the SE supplier through its supply chain; from the report, procurement personnel can also understand the social impact and synergies generated by such procurement contract.

Is there any guideline or template about responsible procurement?

There is no guideline or template about responsible procurement in Hong Kong. To enable companies to take the first step in formulating responsible procurement policies, companies may refer to the "Responsible Procurement Scoring Criteria" recommended by SEBC (see the table below). Both adding “Social Impact” into selection criteria and increasing the weighting of the score “Social Impact” can enhance the chance of SEs to win the bid.

With the aim of comprehensively evaluating the social impact brought by the tenders from production or provision of services, there are two main aspects in "Responsible Procurement Scoring Criteria" – Environmental Protection and Caring for the Society. Suggested scoring criteria are as follows (Companies may change the scoring items based on their needs).

The contents of the resources not only cover all stages of the procurement process, case studies can also be found, so that the procurement personnel can take experiences from other corporates as reference. If you would like to get the resources, you may access to the websites below.Responsible procurement is well-developed overseas. In some countries, government departments and organisations advocate responsible procurement and compile guidelines and templates for corporates. Since there is no established structure for responsible procurement, these parties have launched some frameworks, covering "planning and implementation" as well as "assessment and contract management". Practical advices are included in those resources in order to guide decision-makers and procurement personnel to integrate the concept of responsible procurement into routine procedures.

Buying for Victoria: Social Procurement Framework and Guides
Buy Social Canada: A Guide to Social Procurement
The Social Enterprise Coalition and the New Economics Foundation: More for your money – a guide to procuring from social enterprise