SAP has pledged to allocate 5 per cent of its addressable procurement spending to social enterprises and diverse businesses by 2025, and is urging its 440,000 customers to join it.
Under the “5 & 5 by ‘25” initiative announced this week the German software giant will spend five per cent of addressable procurement spend with social enterprises and five per cent with diverse businesses by 2025.
The non-binding initiative means more than $80 million of SAP spend could be diverted to smaller businesses and businesses led by women.
“Every company in every industry needs to procure,” said SAP SAP Executive Board member Adaire Fox-Martin.
“We all need soap in our washrooms, landscaping for our offices, food and drink in our cafeterias, marketing services, office supplies, and even pest control. These and many more are all products and services provided by social enterprises and diverse businesses. This is money we are spending anyway. Why not spend it with suppliers who are delivering social impact as well?”
The commitment will impact all SAP’s global markets, but will initially be focused on Australia, the UK and Canada.
Addressable procurement spend is the share of a company’s procurement budget that can be allocated to social or diverse enterprises.
SAP classifies a social enterprise as one which is founded and governed on the basis of a clear social or environmental mission, and which reinvest the majority of their profit back into this mission. Diverse businesses are ones at least 51 per cent owned and operated by traditionally underrepresented or underserved groups, including women, ethic minorities and indigenous people.
SAP says based on early pilots it estimates it could direct up to AUD$82.5 million of its global addressable spend per year to social enterprises and diverse suppliers by 2025.
In Australia, SAP says the meeting commitment would translate to more than $1 million each year going to social and diverse enterprises. If the ASX200 followed SAP’s lead it would total around $730 million, according to SAP.
The company is also expanding its partnerships with social enterprise interest organisations, including Social Traders in Australia.
Mark Daniels, Executive Director, Social Traders said, “This pledge is one of the largest of its kind in the world and demonstrates a huge public commitment to social procurement. Our research estimates that for every AUD$1,000,000 spent on social procurement, 7.5 jobs are created for disadvantaged Australians. By encouraging other organisations to participate in this initiative, SAP Australia will help drive enormous change.”