We saw a significant development in the UK public sector application of “social value” recently, with the Cabinet Office issuing guidance on how all central government contracting decisions should take those wider factors into account when selecting suppliers.
Now private sector telecoms giant Vodafone has announced that its selection decisions will take into account a potential supplier’s commitment to tackling climate change and addressing other social, environmental and economic issues. It is a significant step, particularly as the firm says it expects to allocate 20% of the “marks” within the selection process to these factors, making this something that all firms bidding to work with Vodafone will have to take seriously.
“From October 2020, a supplier’s ‘purpose’ will account for 20% of the evaluation criteria for a ‘Request For Quotation’ (RFQ) to provide Vodafone with products or services” according to the statement.
"We want Vodafone's supply chain partners to be aligned with and support our desire to build a resilient, sustainable and inclusive digital society," said Vodafone Group CFO Margherita Della Valle.
As well as looking at environmental performance and commitment, suppliers will be expected to demonstrate policies supporting diversity in the workplace and fair treatment of minorities – and even that they have women in senior management positions. Where relevant to the contract, health and safety issues will also be examined and scored.
We’ve said in previous articles that buyers must be careful not to make life more difficult for smaller suppliers and potential suppliers (SMEs) – these wider requirements can introduce new barriers to entry for smaller firms. But Vodafone is also helping SMEs to compete for contracts against larger firms by introducing positive scoring for that group of suppliers if they commit to introducing policies that align with Vodafone's sustainability and diversity goals.
There is also a new ‘Innovation Fast Lane' scheme to help with cashflow for small, innovative technology start-ups, simplifying contracting and enabling faster payment terms that guarantee payment within 21 days from receipt of invoice
Vodafone is clearly positioning itself as a leader in the sustainable business and procurement with purpose fields. It recently announced that it will be running its European network on 100% renewable electricity by July 2021 - four years earlier than planned. The move, across 11 European markets, means that power will come solely from wind, solar or hydro sources. And last year, the company committed to purchasing all electricity from renewable sources and halving its environmental footprint by 2025, as well as supporting the circular economy concept by reusing, reselling or recycling 100% of its network waste.
Vodafone has annual revenues of over €40 billion euros, so its third party spend is likely to be well over €20 billion. Seeing a firm of that size embrace these principles is encouraging, and undoubtedly adds momentum to the procurement with purpose trends we increasingly see. The devil will be in the implementation detail, as always, but this is very good news.