Incremental steps can lead to big changes

Housing sector supply chains are worth billions and hold significant potential to drive greater social and environmental impact, not just through the way the money is spent but in the business culture that buying power could help to create. As the Community Impact Partnership (CIP) considers its future direction, we’re taking a deep dive to look at where there are opportunities for social businesses to compete and potentially gain a greater market share within Housing Association (HA) supply chains, together with the role CIP could play in helping to unlock them.

A lot has been written and debated about the barriers to ‘social enterprise’ accessing supply chains on the scale of housing associations and the public sector; visibility, track record, scale, access to capital, procurement policy etc. It’s a complex picture.

The size and nature of the supply chains in question are again, extremely complex and closely regulated. Procurement teams are often under pressure to achieve greater value for money from tight budgets, at the same time finding suppliers who can deliver efficiently and effectively without delay. Social value is a consideration but rarely one of the top priorities in most tenders. That said, a lot of senior procurement managers want to increase the number of social businesses within their supply chains but finding the right mechanisms to do so within the parameters of regulated sector procurement rules can be a challenge.

On the other side, social enterprises tend to be small-medium size businesses, many have little or no track record in delivering contracts of this nature and may struggle to access tender opportunities. That’s not to say they wouldn’t be well placed to supply goods and services to public sector and housing bodies, they often lack the scale and capacity they need to be competitive. From a financing perspective, most have limited access to the capital they are likely to need to maintain a strong growth trajectory. The capital they can access (including the previous CIP fund and wider social investment market) isn’t necessarily right for the stage they are at and generally, will only support limited growth over a short timeframe. Having to go out looking for the next round of ‘new’ investment every 3-5 years takes up a lot of time and eats up limited resources.

In 2018 the ‘Hidden Revolution’ report from Social Enterprise UK looked at the scale of social enterprise. It estimated there were 100,000 social enterprises, employing 2m people (5% of the UK workforce) and worth £60bn, or 3%, to UK GDP. The report called on the Government to take greater notice of the social enterprise sector and back its growth. The first measure identified was “Using public sector procurement policy to support social enterprise through strengthening the Social Value Act”.

Progress has been made, the Social Value Act has been strengthened and following Brexit, the Government has issued new policy guidance that aims to facilitate greater access to contracts for VCSE organisations. But. Are these steps going to be enough to create the kind of momentum needed to drive material changes across such vast supply chains? On their own, we think no. A complex multifaceted problem, needs a (long-term) multifaceted solution.

CIP is a partnership of four of the largest Housing Association’s (HA’s) in the UK. We launched our first social investment fund in 2018, offering simple loans with some grant alongside up to a value of £150k. The partnership had big ambition from the start, including using investment and non-financial business support to help increase the number of social enterprises in the supply chains of the partners. The fund was an opportunity to learn for the four partners, a first incremental step into the world of social investment and an expansion of the range of resources the HA’s had available to support enterprise within their communities.

As the CIP Investment Manager, it was the scale of the ambition that attracted me to the role but from day one, I worried if the investment tools and resources we had available were going to be sufficient to help us achieve those ambitions. Unfortunately, they fell short. That’s not to say we haven’t made some good progress; we’ve supported some inspiring enterprises and have gained a lot of learning, but we haven’t got to the place we hoped to when it comes to the supply chain piece.

In early 2020 we were starting to think about the future direction of CIP and what potential steps we might take to move closer to the supply chain ambition. When Covid-19 took hold and the landscape shifted so dramatically we decided to accelerate some of this thinking and made the decision to close our first fund two years earlier than planned. We felt on its own, the fund couldn’t provide us the scope we needed to pivot and respond to changing needs. As part of this accelerated thinking we’re now considering what a future strategy for CIP should look like.

Which leads us back to where we started – what role can CIP play in helping to unlock opportunities for social businesses within housing sector supply chains? Well, we don’t know (yet) but as part of our strategy development we’re undertaking an intensive research project, working with HACT, Renaisi and Supply Change, to help us find out.

As social purpose businesses, it’s incumbent on all HA’s to make best use of their assets to achieve, and further, their mission and values. Currently, we believe most HA’s are under-utilising their supply chains from an impact perspective and are not maximising the potential environmental and social impact that could be gained from operations and commercial spend.

Embedding an “impact lens” (or an approach to impact) in the commercial and financial operations of HAs is challenging but could help to achieve sustainable change. The buying power of HA’s is huge but there are currently only a very small number of suppliers identified as purpose-driven enterprises. Increasing the market share (by value and number) would drive greater impact directly through HA’s spend and the ensuing multipliers; supporting a more inclusive economy, greater social value through purchasing and reinvestment to further social mission.

CIP strongly believes there is a role for enterprise, investment, innovation and collaboration to help tackle the challenge of increasing the level of impact achieved through supply chain spend. This will ultimately need a long-term approach, but for now, CIP needs to identify an incremental ‘next’ step.

If you represent a housing association, social enterprise or social investment vehicle in England and would like to find out more about the research CIP is currently undertaking or would like to potentially participate, please get in touch [email protected]

Jules Tompkins

CIP Investment Manager