Today’s supply chains need to be more than efficient and reliable. Increasingly, they must meet a growing range of environmental and social targets – and the pressure is on companies to show that they do.
An estimated 70% of a large organisations’ sustainability impact comes from its supply chain. Plus, Scope 3 emissions are on average 5.5 times higher than a company’s direct emissions, according to CDP.
Meanwhile, growing societal focus on gender, social, and racial injustice, plus legislation, including modern slavery acts and EU guidance on forced labour, have increased the focus on the governance required to manage the huge network of service suppliers attached to buildings.
It means firms are starting to take a closer interest in the operations of those they do business with.
“A large portion of JLL’s spend is managed with our supply partners,” says Ben Price, supplier diversity lead – APAC, JLL. “Given the significant spend in property and real estate, many organisations see this as a good opportunity to create positive impact in the communities they are doing business in.”
This includes creating business opportunities for social enterprises and smaller businesses from diverse backgrounds, whether through ethnicity, gender, sexual orientation, disability or veteran status, Price adds.
Embedding good practice
JLL’s social value research shows that half of all organisations are already engaged in responsible procurement practices. Furthermore, 62% say they now have a social value strategy that addresses responsible procurement.
The UN defines sustainable procurement as making sure that products and services bought are as sustainable as possible, with the lowest environmental impact and the most positive social results.
“Embracing social value expectations offers competitive advantage. Companies that ignore changing stakeholder attitudes risk missing out on talent and valuable business,” says Hannah Dwyer, head of Work Dynamics research, EMEA, JLL.
Governments are setting the example with social procurement policies such as Australia’s Commonwealth Indigenous Procurement Policy. This sets targets for the amount of work awarded to Indigenous businesses as well as provides opportunities for them to bid for contracts before they go to the open market.
The Victorian government’s social procurement framework has objectives to create opportunities for Aboriginal people, people with disability, and for disadvantaged people, as well as providing for women’s equality and safety.
Scaling the impact
JLL’s research found 48% of respondents already partner with local suppliers to create positive community benefits, while 36% currently track and report their supply chain/third parties’ impact on social value.
With large global organisations managing procurement budgets of billions of dollars, the impact of creating a more socially balanced supply chain landscape is significant.
“There’s an opportunity to generate lasting benefit by building relationships with small and diverse businesses from historically under-represented groups,” says Janette McCormick, global head of product sourcing and category management, JLL.
In Australia, there were 1.55 million microbusinesses with less than 19 employees in 2022 – a 10% increase on the previous year.
With larger suppliers, there’s potential to create wider impact on communities by committing to upskilling initiatives such as apprenticeship programs and language training.
Spending with intent
One company aiming to make a difference is global office supplies firm, Lyreco. The company uses its Lyreco Goodness Microbusiness Support Programme to back ambitious small firms that align with its sustainability criteria. Lyreco provides expert advice, access to markets and faster payment terms.
“It’s vital that small independents have access to working capital,” explains McCormick. “Offering shorter payment terms helped one of our female-owned suppliers grow her business by 10%. Now she can pay her team on time, employ them for more days each month and hire new contractors.”
As part of its contract with the Australian government, JLL has committed to providing opportunities for small-to-medium-sized enterprises as well as Indigenous businesses as a means of raising the level of social infrastructure. The organisation has been exceeding its targets. For example, between July 2021 and June 2022, JLL surpassed its target for small-to-medium-sized enterprises by 15% and for Indigenous businesses by 10%.
Leading by example
Partnering with advocacy groups such as Supply Nation, Social Traders, WEConnect International, and the Veteran Community Business Chamber, is another way that mature companies can support a diverse range of firms along their own ESG journeys.
Participating in external events, such as those organised by WEConnect, which champions women-owned businesses, or organising supplier engagement sessions, helps share best practice and creates space for conversations that drive the sustainability agenda.
It’s just part of the way that the built environment is increasingly acting as a vehicle for investors and organisations to maximise their return on sustainability efforts.
Firms are now expected to show proof of progress towards their corporate commitments, but they can’t get there on their own, says Dwyer. “Driving material change requires strategically partnering with the supply chain and helping all businesses act responsibly to deliver long term sustainable results.”
Though there is always a balance between delivering sustainable and social values and demonstrating savings to clients.
“Social procurement needs to be woven into tenders at the beginning with deliberate measures in place to ensure diverse businesses have the opportunity to participate and encourage ‘value for money’ over cost down,” Price says.
