‘…businesses are now starting to say, “We want to create positive externalities from everything we do”…’

Episodes of The Wire come to mind as Mark Daniels talks the confronting situation he was confronted with in the public housing towers of Fitzroy, in inner-northern Melbourne. Blood and faeces around the estate, a $300M heroin trade, and junkies laying about in the common laundry areas. It seems that the reputation these facilities had in the late 1990s and early 2000s was not unjustified.

Four days of back-to-back sensationalised headlines in Melbourne’s tabloid newspaper, The Herald-Sun, brought the issue to an acute head and a knee-jerk reaction by the State Government of the time quickly materialised. Measures introduced included 24/7 security personal, swipe-card only access for all tenants, and community development initiatives. Together they showed the public that something was happening to try to fix the problem, and these measures did in fact stabilise some of the acute issues. But it could not change the fact that the role models of the estate, those who were driving the BMWs and Mercedes, those who would give tenants well-paid no experience necessary jobs, were the on-site drug dealers. New role models and employment opportunities were needed if deeper, systemic change was to be made.

It was around this time that Mark and his team started thinking about $6M they spent on site at the estate each year. This money was spent on contracts for essential services like gardening and cleaning, and at the time all of this money was walking off site with private enterprises. What could the benefits be if they were able redirected a small percentage of these funds to employing some of the unemployed who currently lived on the estate?

They decided to issue a tender for cleaning, and included a clause stipulating that 35% of the workforce of the successful bidder had to come from the unemployed of the estate. While all involved had their doubts about the success of this approach, 15 jobs were immediately created upon the granting of this tender, taking the unemployment rate from 95% to 92%, and only one staff member was lost during the first year of operation.

After this great success the experiment was expanded, and part two involved working to create a social enterprise with the Brotherhood of St Lawrence to take over the estate’s day time security contract. Doing this meant that long-term unemployed tenants could be trained and employed as the concierge for each of the residential towers.

This was also hugely successful, breaking the cycle of long-term unemployment for these tenants and after 12 months of employment enabling 80% of them to gain jobs in the open labour market. There were also amazing benefits for the whole estate, including a drop in occupancy turnover from 25% to 10%, moving from have 125 vacant occupancies to a 6 year waiting list, and reducing unemployment on the estate from 95% to 81%. Employment was now the norm, and those with a job replaced drug dealers as the estate role models.

It is a success story not many know about. For many Melbournians, including myself who had previously never set foot onto a public housing estate, the stigma summarised in those Herald-Sun headlines remains as truth in our collective memory. But this small change in procurement policy has brought about previously unimaginable and lasting change to this place.

In itself this is a remarkable story, one Mark could rest on for the rest of his career. Instead of resting, however, he is using this story as a pivotal example in his quest to change the way organisations think about the dry topic of procurement. Mark terms this next wave of procurement ‘Social Procurement‘ – previous waves have been used to drive cost savings, environmental impacts, and strategic objectives within organisations. What if this $500B tool was used to drive social value as well?

On the back of this question Social Traders was formed in 2008, with the mission to help start new social enterprises, to build the capability of existing social enterprises, and to help connect social enterprises and corporates through social procurement.

Mark sees procurement as the latent, untapped tool of social change, observing that the conversation is changing in Australia, and predicting that in the next 5-10 years social procurement will become the norm. Some of the organisations Mark sees already making good use of social procurement include:

• Rio Tinto, who in 2012 spent $1B with local indigenous businesses;
• Australia Post who have 16 social enterprise in their supply chain; and
• Transfield who have 15 social enterprises in their supply chain.

Social enterprises are in a unique position to employ those who are not yet seen as employable by the open market. Using a social enterprise and creating jobs for the long-term unemployed has wide-reaching ripple effects for these people, their immediate families and community, and society more broadly. But there are also benefits for the organisations that make use of social procurement, including attracting and retaining staff, brand building, and integrating social impact into the DNA of the organisation.

Understandably Mark can’t think beyond social procurement when he thinks about areas of disruption he would like to be part of in the future. However he does see that social impact bonds and the revised National Disability Insurance Scheme are two related areas of change that could bring about interesting positive innovation.

I hope you enjoy my conversation with Mark and get as excited as I did about the potential benefits social procurement could bring to us all.

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