Guidance note: Access to Markets

Access to public and private markets is a key policy lever for enhancing social enterprise development and growth. Through public procurement, the public sector can buy goods and services from social enterprises that deliver social and environmental value. In this way, public procurement becomes a vehicle to meet social, environmental or economic objectives, such as reintegration of long-term unemployed into labour markets, and/or social- and work integration of people from vulnerable groups. Governments thus strategically choose to procure goods or services from social enterprises that have expertise in delivering the required social and/or environmental benefit.

Although the public sector offers a significant market potential for social enterprises, some of them seek opportunities to scale-up their impact by entering private markets and expanding their customerbase. At the same time, traditional firms are increasingly interested in contributing to social and environmental outcomes on top of their economic performance. Over the last decade, a shift has occurred from traditional corporate social responsibility (CSR) to embedding social and environmental considerations as part of core business activities. Therefore, companies seek to establish commercial partnerships with social enterprises, integrating them in their supply chains. What is more, apart from business-to-business (B2B) commercial relationships, social enterprises provide their products and services directly to individual consumers, whether from disadvantaged groups or not. This is important as a growing number of consumers, particularly so-called “millennials”, increasingly demand sustainably produced goods and services, and expect that large firms have a positive impact on society as well.

At European level, within the framework of the 2020 Strategy for Smart, Sustainable and Inclusive Growth, three 2014 Procurement Directives demonstrate a strong commitment for using public contracts for broader social and environmental outcomes¹. These directives offer a wide array of opportunities for including social considerations, along with environmental and innovation aspects, in the award of public contracts, and can help to create momentum in public procurement from social enterprises.

Policy levers for supporting access to markets:

• Make the inclusion of social and/or environmental considerations in public procurement a priority for public sector entities, and help the implementation and monitoring of the 2014 EU Procurement Directives.
• Develop support activities and material, such as training programmes and technical guides, which help social enterprises to access procurement markets.
• Develop the skills among procurement officials (private and public) to evaluate the tender proposals from social enterprises, and tackle misconceptions regarding the goods and services provided by social enterprises (e.g. that they are more costly or of lower quality compared to other firms).
• Encourage the dissemination of good practices of commercial partnerships and/or opportunities between social enterprises and firms.

Pitfalls to Avoid

• Use exclusively the “lowest-price only” mind-set in public procurement.
• Insufficient control of bidding offers against green/social “washing” (i.e. offers without a real integration project or social and/or environmental considerations).

_{¹ 2014/23/EU (The Concessions Directive),  2014/24/EU (The Public Sector Directive),  2014/25/EU (The Utilities Sector Directive).}

Guidance per assessment statement

Why is it important?

Technology opens up new avenues for social enterprises to access both public and private markets, and even helps create new marketplaces. Online platforms, for instance, represent a new form of marketplace. Public authorities and firms can use these platforms in order to purchase goods and/or services produced by social enterprises. For instance, purchasing officials can advertise and post their procurement needs online and search for social enterprises as possible suppliers. In the same spirit, in Canada they have taken one step further by developing a “social purchasing decision platform”, which is an online stakeholder collaboration and engagement tool for social purchasing, including policy design, criteria selection, and supplier bid review.

Technology can also be part of the actual goods and services that social enterprises offer, like for example speech recognition programmes based on computer-generated simulation of human speech, which allow deaf or hard-of-hearing people to make phone calls, or innovative types of wheelchairs that can be driven without the use of hands. By capitalising on technology, social enterprises can thus disrupt traditional business models and create new market opportunities. What is more, through technology social enterprises that do not depend on proximity to offer their goods and services can reach beyond their local geographic area (e.g. internationally) and thus enter new markets.

In order to score high, in your context:

• There are social enterprises that offer their products/services by using new technologies, such as online market places or tools which help matching supply and demand.
• There are social enterprises that use new technologies to develop new products/services in order to diversify their activities and penetrate new markets.
• There are social enterprises that use new technologies to offer their products/ services internationally.

In order to score high, in your context:

• Public procurement is used as a means to achieve social and/or environmental objectives.
• National legislation enables the use of social and/or environmental considerations, as in line with the Directive 2014/24/EU on public procurement.
• Public authorities use social clauses in their procurement.
• Public authorities use reserved contracts in their procurement.

Procurement can be a powerful tool to achieve social and environmental outcomes, which can be visible in the medium- to long-run. However, social and environmental considerations have not yet been fully mainstreamed in public procurement, partly because budget officials and administrators often view procurement from a “lowest price only” perspective. In addition, public authorities may not have a clear understanding of what a social enterprise is. There is hence a twofold challenge for governments here: to trigger a shift in mind-set regarding the use of procurement for social and/or environmental goals, and to raise awareness of the benefits from working with social enterprises in this endeavour.

Even when public authorities embrace a culture of sustainable procurement (i.e. to pursue social and/or environmental goals) and recognise the potential of social enterprises in this regard, they struggle to define concretely what “socially or environmentally preferable” goods or services are, and how to evaluate these during a tender process. For example, budget officials and administrators may not have the required skills or guidelines to allow them to proceed effectively. Therefore, the development of whole-of-government procurement guidance materials can serve to encourage and facilitate government departments and agencies to include social and/or environmental considerations in the procurement process, thus opening up opportunities for social enterprises. Moreover, the provision of technical support and training to budget officers and administrators can help them to develop the necessary skills for incorporating social and/or environmental considerations into public procurement and to evaluate such tender proposals. For instance in Scotland, within the framework of its Procurement Reform Act (2014), a Procurement Guidance Note that provides detailed information for each tender stage has been developed.

Another option is to organise workshops and exchange good practices between administrations. For example, the European network “Procura” brings together European public authorities and regions to stimulate knowledge sharing. Similarly, in France, the “Réseau Grand Ouest” (RGO) is a large network of public authorities from the west of France comprised of specific working groups that meet regularly to exchange good practices and case studies regarding tender criteria, market activities, and monitoring, measurement and reporting methods.

In order to score high, in your context:

• Capacity building and dedicated training is provided to enhance the skills of civil servants.
• Technical guides are available at all government levels.
• There is a platform for dialogue between public authorities, the social enterprise community, and procurement experts.

Why is it important?

Social enterprises, similarly to SMEs, often struggle to respond to calls for tenders due to barriers related to capacity constraints, lack of skills for navigating administrative procedures, or simply poor information regarding such market opportunities.

In order to tackle social enterprises’ capacity constraints when it comes to large tenders, public authorities could divide contracts in smaller lots in order to make requirements more attainable, particularly in sectors where social enterprises may have a significant role to play. For instance in the UK, although the Social Value Act applies to services contracts above the thresholds in the 2014 EU procurement directives, guidance from the central government advises authorities to apply the Act more widely and for smaller contracts. This is also the policy in Plymouth Council which applies social value considerations and helps social enterprises to respond to any contract above GBP 5,000.

Providing dedicated technical guides and supporting documents related to the administrative steps needed to respond to calls for tenders, as well as specialised training programmes and networks for sharing good practices, can facilitate participation by social enterprises. Public authorities can also take steps to better inform social enterprises about where tenders are advertised, how the procurement process works, and what tender documentation is needed. To this end, some good options can be to organise open days or “meet the buyer” events. Finally, since tender documentation requirements can be very heavy and bureaucratic, these may need to be streamlined and simplified. Public authorities can also consider extending the time period for submission of expressions of interest and tenders. This can be very helpful for social enterprises struggling with capacity constraints.

In order to score high, in your context:

• Dedicated training and support programmes are available to help social enterprises participate in calls for tender.
• Formal technical guidance documents are available and easy to understand.

Why is it important?

Access to private markets is crucial for social enterprises as it can open a wider customer-base to them comprised both of firms and individuals. Firms can create market opportunities for social enterprises by integrating them in their business activities as they recognise the opportunity to leverage even a small amount of their spending to achieve social and/or environmental goals and generate greater impact compared to traditional corporate social responsibility initiatives (CSR). At the same time, social enterprises can be valuable partners as they can spur innovation within the firm and enable the employees of the firm to feel that they serve a wider purpose through their work. This is particularly important for the millennial employees, who seek opportunities to engage with “good causes” while reinforcing positive associations between their employer firm’s activities and social impact³.

Moreover, by joining forces with social enterprises firms signal that they are different than others by attaching ethical, social or environmental values to their goods and/or services and comply with relevant standards. Last but not least, individuals who select to consume sustainably by buying goods and/or services from social enterprises are using their purchasing power to support social enterprises and their mission. This allows social enterprises to penetrate the market and engage directly with citizens as consumers.

In order to score high, in your context:

• Social enterprises establish commercial partnerships with private firms.
• Social enterprises bid for contracts with firms.
• Social enterprises participate in networks and activities of the larger business community.
• Social enterprises produce services/goods for consumers.

_{³ For more information this please see: Deloitte, (2017), The Millennial Survey: Apprehensive Millennials: Seeking Stability and Opportunities in an Uncertain World} 

Why is it important?

Despite the fact that there are increasing opportunities for social enterprises to enter private markets, support in this endeavour remains important. Social enterprises may lack visibility, and thus firms or consumers may not be aware of the benefits from partnering with, or buying from, social enterprises. Demonstrating the added value of social enterprises can build a better understanding of the important role they can play in solving social, environmental, and economic issues, while making them more visible in private markets.

The development of recognition schemes can help identify social enterprises and build the confidence among buyers and consumers. The use of marks and labels can help in this direction. Another option can be the creation of directories to help identifying social enterprises as potential suppliers. Finally, dedicated campaigns that raise awareness can stimulate the demand for the goods and services produced by social enterprises both by firms and individuals. For instance, since the launch of Social Saturday - an annual campaign held since 2014 in October in the UK that aims to inspire consumers to buy from social enterprises - awareness of social enterprises among the general public has risen from 37% to 51% (see further good practice examples below).

In order to score high, in your context:

• Campaigns encourage other firms to involve social enterprises in their supply chain.
• Campaigns encourage consumers to buy goods and/or services produced by social enterprises.
• There are recognition/certification schemes to help identify social enterprises.
• Firms collaborate with social enterprises within their CSR framework.