Measuring Economic and Social Capital Impact from Enterprise and Supplier Development Programs
Consumers want to know where their food comes from and that it’s been grown ethically and responsibly. Farmers and food producers want to farm responsibly and ensure that their employees are adequately skilled and empowered. In addition, these farmers contribute to local economic & social development. Retailers wants to ensure traceability within the procurement process from a supply chain that is sustainable.
Our client has invested in a supplier development program to ensure the future sustainability of their suppliers. Through an enterprise and supplier development program, issues such as resource management, sustainable farming practices, and empowerment of farm workers and their families are resolved.
Additionally, as part of the company’s social responsibility they also contribute to the social and community development programs of their farmers or suppliers.
Globally companies are expected to report on the direct and indirect impact of their operations. (Sustainability and Integrated Reporting). They’re also expected to report on the additional capital or value they’ve created in the geographic locations where they operate.
Being sustainable has become a competitive advantage for retailers as well as a business imperative. Creating shared value, contributing to social capital and making their supply chains more sustainable are material aspects for global retailers. In a context where natural resources are impacted by climate change, ensuring food security is a major issue for our client.
The retailer wanted to:
- Measure the impact of their enterprise and supplier development programs
- Measure the impact of their local social investment and community development programs
- Report transparently on their social, economic and environmental impact and the additional capital & value created through their various sustainability and shared value strategies.
What we did
There were various aspects to this assignment which included impact design, impact management and impact reporting.
- A global performance management framework was required. Because there were three aspects to be measured—the enterprise and supplier development interventions, community and social development program interventions, overarching performance management framework. Three specific Theories of Change and logic model frameworks were developed.
- The frameworks had to be supported by relevant quantitative and qualitative indicators that had to be measured consistently so that data could be collected from all suppliers. For this to happen, monitoring and evaluation processes had to be developed, implemented and measured over a 12-month period. Once the data was collected, it could be analysed.
- To measure and verify the impact, stakeholders had to be interviewed and site visits had to be conducted.
- After the data was analysed and verified it could be triangulated. Benchmarking and comparisons could be drawn.
- An impact report was delivered that clearly indicated the total impact of the supplier and enterprise development programs, as well as the impact of the social and community investment programs across geographic locations. In addition, the total return on investment, (being the value created by the investments) was determined, calculated and reported on.
- Specific recommendations were made to enhance future impact measurement and management activities. Enhanced data collection & reporting, and both qualitative and quantitative additional indicators were also identified.
The impact and return on investment
The impact assessment confirmed:
- By procuring from more sustainable suppliers, there is direct, positive and economic impact generated for both the retailer and its suppliers.
- Farming practices became much more sustainable. Water and energy consumption decreased while production increased.
- Additionally, the indirect impact of the enterprise development interventions included: increased job creation, skills development and an increased quality of life for the farmers and their employees.
- Furthermore, because of the social and community development programs, indirect impact included: Increased social cohesion in local communities, increased access to education and health care services.
- Unintended positive impact included an extended impact value chain. It was found that once empowered and more sustainable, the farmers shared their new knowledge with other farmers. As such, the entire ecosystem within specific geographic locations was impacted positively.
- Furthermore, the fact that the effectiveness of internal performance management practices improved meant that external reporting also improved. Not only has this contributed to the improved reputation of the retailer, but stakeholder relations between the retailer and their suppliers also improved. The fact that their produce was of a higher and improved quality also meant that costs were reduced.
- The value and return on investment of the shared value strategy contributed to enhanced economic, environmental and social capital for the retailer, its supply chain, its customers and its communities.