Towards strategic municipal CSR procurement in Europe: lessons and inspiration from URBACT

The topic of linking public procurement and Corporate Social Responsibility (CSR) becomes ever more important for cities when challenges are increasing and public resources are limited. So how can city leaders actively use strategic procurement to encourage businesses to fulfil their social and environmental responsibilities? Dr. Steffen Wetzstein, Lead Expert for the URBACT CITIES4CSR network, shares recent experiences from URBACT cities…

Linking up strategic municipal procurement and Corporate Social Responsibility

The link between strategic municipal procurement and Corporate Social Responsibility (CSR) may seem complex. On the one hand, city governments are under pressure to procure important goods, services and works in the name of the public good, and on the other hand, CSR is about businesses donating and contributing to worthwhile ‘beyond-profit’ causes in return for publicity and marketing gains. But can city leaders actively and effectively use procurement processes and practices to make businesses fulfil their social and environmental responsibilities? And could this direct influence made our world a better place after all?

The answers to those questions are a resounding YES! Procurement can directly boost CSR outcomes by municipalities telling their local enterprises not just what they need, but how they want it to be made, delivered, built and implemented. This dual added value has not just inspired our URBACT Lead Partner team in Milan (IT), but really constitutes a great opportunity to both supporting our communities and saving our planet. But the idea is spreading slowly. Too many obstacles need tackling, ranging from unawareness, prioritisation issues and lacking competencies to legal constraints, missing management capacities and under-developed monitoring practices. Untapped potential everywhere!

But there is hope for change, because the European urban procurement communities and CSR communities have recently started to link up. Well-known experts representing these networks – Matthew Baqueriza-Jackson as Lead Expert behind the URBACT networks Procure and Making Spend Matter, and Valentina Schippers-Opejko on behalf of the EU Urban Agenda Partnership on Innovative and Responsible Public Procurement – have been sharing their experience and wisdom with URBACT cities. They both joined meetings with the 10 city partners in our URBACT CITIES4CSR network, the first ever URBACT network building municipal capacity for promoting urban CSR ecosystems and practices.

This article asks what – after two and a half years of dedicated URBACT project work – is the local state-of-play regarding municipal procurement, what has been achieved so far, and what kind of barriers had to be overcome.

Lessons from our URBACT partner cities

1. Budaörs, Hungary: room for advancing local practice
Two institutional procurement frameworks shape local decisions in Budaörs. There is the national Public Procurement Act that applies to purchases of goods/services above HUF 15 000 000 (about EUR 40 000), and construction investment above HUF 50 000 000 (about EUR 132 000). Decisions under this act are slow, heavily regulated, and come with a significant administrative burden. In contrast, the municipality's own management rules come into effect for purchases below the abovementioned thresholds. These are more flexible, perceived as transparent, accompanied by less administrative burden and enable faster operational processing. The current municipal management regulations are considered sufficient.

For its URBACT Small Scale Action – tree planting and ‘green’ public awareness and education – the current procurement framework was considered adequate. Less satisfying, however, is the fact that the municipality currently does not give any consideration, preference or advantage to companies that have demonstrated good CSR practices. Part of the problem is that there is no useful administrative system in place to meaningfully compare and evaluate companies’ CSR activities.

2. Nantes, France: successfully linking CSR and SDGs

For long-term CSR-directed procurement decisions, Nantes builds on three strategies. First, general social and environmental criteria are initially being determined to select companies during calls for tenders. Second, a responsible purchasing plan incorporating social and environmental aspects will be widely communicated to inform companies of expectations to be met. Third, and as indeed required by French and European law, social and environmental criteria will have to be adapted to fit into more specific and relevant purchasing families, such as building and public works, provision of services and so forth.

Nantes’ Small Scale Action, a digital observatory monitoring businesses’ performance concerning progress on achieving Sustainable Development Goals (SDGs), is currently being assembled utilising best practice procurement. Despite being below the necessary threshold, it was decided to proceed as a call for tender precisely to allow the promotion of good practices. Broad digital advertising was followed by constructing an objective analysis grid that besides social and environmental criteria also incorporated competency aspects, quality dimensions, costs and deadlines. Finally, the assessment of the offers from potential service providers was assigned to selected URBACT Local Group (ULG) members in the name of openness and transparency.

3. Guimarães, Portugal: learning to be alert and flexible

The ULG in Guimarães seeks to build and run a digital platform that will connect the well-established economic development and social development networks. The almost autonomous operating municipality-managed platform is to become a modern, efficient and responsive digital mechanism to link organisations representing social and community needs with businesses that have vital resources to offer in response. Overall the project has progressed quite well, having attracted an initial municipal financial commitment of EUR 18 000 and reached its current advanced testing and feedback phase.

Yet, three lessons had to be learned along the way. First, keep your options open concerning your supplier. Early on, the project team noticed feedback issues and failed deadlines with their preferred supplier, and were eventually forced to work with an alternative organisation. Second, in the teams’ own words “one must have a political champion, for every project, and must try to stay ahead of the political changes”. Having unexpectedly lost their project champion, the Councillor for Economic Development, officers eventually had to convince the Mayor directly, but lost four weeks into the process. Third, project management has to try to keep ahead of the game by anticipating and responding swiftly and adequately to almost unavoidable delays triggered by the fiddly specificities of procurement procedures. Luckily, a dedicated administrative department successfully helped to navigate those tricky roadblocks.

4. Vratsa, Bulgaria: taking risk more seriously

The municipality of Vratsa stated that the internal rules for managing the procurement cycle are prescribed by the Public Procurement Law. While this process is perceived as clear and smooth, the local project team problematised the inflation risks stemming from the long time lag between calculating project costs, and implementation time. Inflation – surely a vexing and pressing future topic globally – leads to budget inadequacies and, consequently a lack of participants and unabsorbed funds because of insufficient financial resources.

Reflections, recommendations and potential actions

CITIES4CSR case studies highlight at least three key lessons regarding effective municipal CSR-directed procurement.

1. Rigid and bureaucratic national procurement frameworks may hinder CSR-directed goal setting and implementation. Effective lobbying for more flexible national laws may help to innovate.
2. Local-level project management capacities need to match vision and aspiration, including adequate legal competencies and solid administrative skills. Awareness-raising, targeted training and good practice dissemination may improve this situation.
3. Politics both enables and restricts innovative approaches to embedding local economic, social and environmental considerations in procurement. So changes in political leadership may cause the biggest risk. Strategically anticipating and skillfully navigating these risks may prove essential.  

Our divergent findings on how CSR-mediated municipal procurement has progressed locally reinforce one of Matthew Baqueriza-Jackson’s primary messages: partners should take their time when using procurement to realise CSR outcomes, because it takes strategic foresight and incremental implementation to change the state-of-play. Our partner lessons also underscore a second of his messages: that any evolution of procurement activities requires inclusion of a range of stakeholders, including politicians, strategists, technical staff, procurement officers and contract managers. We may actually require a well-functioning CSR procurement capacity system across municipal departments.

Clearly, strategic municipal procurement and CSR capacity building belong together. Procurement is potentially a powerful tool to directly influence CSR-mediated actions, practices and outcomes. Municipalities really are in the driver seat. Boldly and creatively confronting key barriers promise two inter-related outcomes. Guimarães (PT) illustrates how we may aspire to achieve a local win-win between business/economic and social/community stakeholders in terms of responding to needs quickly, competently and effectively. Let’s call this ‘small win-win’. Yet, if we look to Nantes (FR), we can aim even higher. Eyes could be set at a ‘big win-win’ by aligning our collective urban practices with reaching our global Sustainable Development Goals.

This article demonstrated the value of thinking and doing municipal CSR capacity building, and strategic municipal procurement, together. So mutual engagement, co-learning and shared capacity building should be intensified in challenging post-pandemic years. Improved two-way communication would be a starter and a more conceptually grounded debate desirable. Common initiatives may produce powerful shared messages to stakeholders and the wider public – perhaps already at our planned CITIES4CSR outreach event in Brussels on 30 June and 1 July 2022! Longitudinal and strategic project formats both locally and transnationally should be the ultimate goal. Let us unlock together the potential of strategic procurement for much needed social and environmental progress now!

Find out more about URBACT’s support to towns and cities looking for better ways to buy goods and services – with articles, practical advice, and a free online course on strategic procurement: URBACT strategic procurement Knowledge Hub.