Impact Sourcing: Ending Poverty Through Procurement

Authors

• Peder Michael Pruzan-Jorgensen

  Former Senior Vice President, BSR

• Sara Enright

  Former Director, BSR

The newly adopted 2030 Agenda for Sustainable Development, which includes 17 Sustainable Development Goals, stresses the roles that employment and decent work can play in ending poverty and ensuring inclusive economic growth. The private sector is explicitly included in the sustainable development agenda as a key actor in ending poverty—but in BSR’s experience, business is unsure about what role to play. However, business holds a powerful lever for alleviating poverty and fighting social exclusion: the procurement of products and services in global supply chains.

Today, in Johannesburg, South Africa, BSR helped launch the Global Impact Sourcing Coalition, which envisions all people in the world having the opportunity to obtain productive employment and decent work, a requirement for ending poverty for all. With funding from The Rockefeller Foundation and support from BSR, the coalition is comprised of companies—buyers and providers of services—that have joined forces to create jobs for those most in need through the power of procurement.  

The coalition will seek to build more inclusive global supply chains by advancing wide-scale adoption of impact sourcing, a business practice where companies direct their procurement of products and services to suppliers that recruit and employ workers from vulnerable groups of society, such as long-term unemployed youth, people with disabilities, or particular ethnic groups.

Impact sourcing is not philanthropy; it is a business practice that seeks to maximize societal and business outcomes.

Research shows that companies in global supply chains such as call centers and other types of business process outsourcing (BPO) benefit from intentionally hiring and training employees from vulnerable backgrounds. In 2014, research conducted on 60 BPO providers by Everest Group on behalf of The Rockefeller Foundation showed that companies that hire employees from vulnerable backgrounds enjoy 15-40 percent lower attrition rates compared to those that hire traditional BPO employees. In addition, the research showed higher employee engagement rates and quality on par with traditional providers. Across South Africa, India, Kenya, and the Philippines, Everest Group reported that fully loaded operating costs were between 4-40 percent lower for companies that engaged in impact sourcing compared to traditional BPO services (depending on the country).

The value of impact sourcing is reinforced by significant positive social outcomes. Everest Group’s research shows that incomes increase by 40-200 percent and that family members and communities also benefit. Further, impact sourcing provides an opportunity for employees to learn transferable skills that serve as a springboard for future job opportunities, long-term career advancement, and increased remuneration over time.

The launch—which took place in Johannesburg to celebrate the work that The Rockefeller Foundation and its partners have led to advance impact sourcing in the region—marks the start of an effort to raise awareness, increase ambition levels among global companies, and lead a movement to scale impact sourcing around the world. The evidence suggests significant opportunities for scale, as impact sourcing can be directly embedded into existing procurement processes to encourage inclusive employment across entire supply chains. In 2014, employment in the information technology business process management industry in the Philippines passed 1 million, the equivalent of 1 percent of the population.

Participating companies recognize that wider uptake of this inclusive hiring practice will require a concerted—and collaborative—effort to develop an agreed standard, tools for integrating impact sourcing into procurement practices, greater capacity among service providers, more conducive regulatory frameworks, and a strong evidence base for social and business impact. BSR will now work with Global Impact Sourcing Coalition members to place these building blocks, which will develop more inclusive and resilient supply chains—and we invite companies from across the world to join this movement.

To learn more, please email gisc@bsr.org, and visit our website at gisc.bsr.org.