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Social enterprises

Government public procurement legislation should ‘explicitly ensure’ that calls for tender favour enterprises that pursue social and environmental goals, says new report issued at World Economic Forum in Davos co-authored by Dr Helen Haugh of Cambridge Judge Business School.

Helen Haugh and colleague.

A new report issued today (22 January) at the World Economic Forum in Davos, co-authored by Dr Helen Haugh of Cambridge Judge Business School, calls for government public procurement legislation to  “explicitly ensure” that calls for tender are designed to advantage social enterprises that pursue social and environmental goals.

“Public procurement is a powerful tool to drive better business practices, comprising 12 per cent of GDP across OECD countries,” says the report. “An increasing number of public authorities are introducing Fair Trade and sustainability criteria in their calls for tenders. However, this is not enough. Government procurement legislation should explicitly ensure that calls for tenders are designed to advantage social enterprises, whether by requiring ethical certification, shaping weighting criteria for tender documents or by showing flexibility when it comes to quantities and lead times.”

The report – entitled “Creating the new economy: business models that put people and planet first” – draws on earlier research co-authored by Helen Haugh that focused on key business models deployed by Fair Trade Enterprises that allow these firms to prioritise social and environmental goals. Helen is Senior Lecturer in Community Enterprise and Research Director of the Cambridge Centre for Social Innovation at Cambridge Judge.

The report includes specific recommendations for policymakers, businesses and investors in the context of “stakeholder capitalism”, which is the focus of this week’s 50th Annual Meeting of the World Economic Forum in Davos, Switzerland.

“The new economy is already here,” says Roopa Mehta, president of the Geneva-based World Fair Trade Organization, announcing the new report. “Fair Trade Enterprises are joining forces with the broader social enterprise movement and others to demonstrate that business can truly put people and planet first. We all need to embrace this revolution in business.”

The report highlights that Fair Trade Enterprises reinvest 92 per cent of all profits in their social mission, that 52 per cent of Fair Trade Enterprises are led by women, and that 85 per cent of Fair Trade Enterprises report that they actively sacrifice financial goals to pursue social or environmental goals while retaining commercial viability.

The report is co-authored by Bob Doherty of the University of York, Helen Haugh of Cambridge Judge Business School, Erinch Sahan of the World Fair Trade Organization, and Tom Wills of Traidcraft Exchange.

The report calls on policymakers to back social finance initiatives that support Fair Trade Enterprises and to encourage greater market access for such businesses by supporting awareness-raising campaigns with consumers, in addition to adjusting public procurement policies so they favour such enterprises.

The report’s recommendations for business include support for suppliers to transform their business model, for example by going through the World Fair Trade Organization Guarantee System; to adapt purchasing politics to accommodate the distinctive characteristics of social enterprises; and to report the impact of ethical supply chains on producers and communities “to create an expectation of ethical practice.”

For investors, the report calls for development of specific investment funds for Fair Trade Enterprises along with social finance bonds and crowdfunding that embrace patient investment; mentoring and support of Fair Trade Enterprises through the investment application process and beyond; and impact reporting of social enterprise investment fund performance.

The report includes case studies of many such enterprises, including Swiss importer Gebana, the Beautiful Coffee foundation in Korea, alternative trading company EZA of Austria, home fragrance firm Maroma of India, and Finland-based basket company Mifumo, whose products are made by more than 600 artisans in Kenya.

“Fair Trade Enterprises present a viable and desirable alternative model of doing business,” the report concludes. “In many cases, they have emerged as a response to the needs of producers and communities, rather than the needs of the market. They are more likely to empower women, create livelihoods for marginalised communities, tackle inequality, protect the local environment and remain commercially resilient than a standard, profit-primacy business.

“It is time for policy-makers, investors and business leaders to foster these models around the world.”