Invest in social procurement to reduce supply chain disruptions – Schwab Foundation for Social Entrepreneurship at World Economic Forum 2025
Data published by Schwab Foundation for Social Entrepreneurship during Davos 2025 shows supply chain disruptions are increasing around the world, but can be mitigated by buying from social enterprises.
Strikes, unsafe working conditions and protests are having a larger negative impact on supply chains than environmental disruptions, but can be mitigated by companies investing in social procurement.
Those are the findings of the State of Social Procurement 2025 report, published on Monday 20 January by the Schwab Foundation for Social Entrepreneurship, during the World Economic Forum annual meeting in Davos.
Analysis of 150,000 events causing disruptions to supply chains – like worker strikes, earthquakes or sanctions on suppliers – from January 2023 to October 2024 by Austrian technology company Prewave show such disruptions are becoming more frequent. Over 6,000 took place in October 2024 alone, the highest number in nearly two years.
Of those disruptions, 19% were driven by social issues such as strikes, protests, or disputes. In comparison, 13% of supply chain disruptions were caused by environmental incidents like floods, landslides and storms.
The data sends a clear message: people and their well-being must come first
These social supply chain disruptions are a symptom of deeper issues which can be addressed by social procurement, says the report. It recommends buying products from social enterprises which deliver fair labour practices and reinvest in local economies to build resilience into supply chains.
The report says: “Building resilience means investing in fair treatment of workers, supporting local communities and listening to the signals these disruptions provide. The data sends a clear message: people and their well-being must come first.”
The business case for social procurement
Currently, FTSE 100 companies’ spending on goods and services from external suppliers averages US5bn. The State of Social Procurement 2025 highlights the potential impact this money could make through social procurement, particularly in comparison with the US$12m those same companies typically allocate to their corporate social responsibility budgets.
As well as mitigating supply chain pressures, the report says social procurement brings benefits to a business including increasing the brand’s reputation with customers and employee retention.
Sourcing from social enterprises enables businesses to address vulnerabilities related to a lack of transparency in value chains, thanks to the developing maturity of the social enterprise sector, including new verification mechanisms and platforms which help companies to easily find suitable social enterprise suppliers.
Euclid’s European Social Enterprise Monitor, also published during Davos, surveyed 3,938 social enterprises and found at least 72% provide goods or services to one or more private companies and at least 56% sell to one or more types of public procurement customer.
Regulation and resolutions driving social procurement
Intensifying regulations which mandate companies to embed non-financial objectives into procurement practices, for example, the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), are driving an increase in social procurement. The State of Social Procurement 2025 emphasises how extraterritorial laws can foster ethical, sustainable practices that bridge local contexts and international norms.
But, as Pioneers Post has reported, concerns have been raised regarding extraterritorial laws and the challenges they pose for SMEs in the Global South. Critics suggest regulations like the CSDDD could cause Global South suppliers to fall out of global value chains because they don’t have the resources to implement and report on human rights and environmental standards set by the Global North.
In a session at Davos titled Social Innovation in Action on Wednesday 22 January, Daniel Nowack, head of social innovation for the Schwab Foundation and the World Economic Forum, highlighted that 2024 saw the adoption of a number of strategies to support the social and solidarity economy, including by the UN General Assembly and the African Union.
Nicola Galombik (pictured), executive director of private investment group Yellowwoods, who was named one of the Schwab Foundation’s innovators of the year in 2020 for her work driving corporate social and environmental impact, spoke in the same session. She emphasised that creating positive social impact required collaboration between the private and public sectors.
Speaking about Yellowwoods’ work to increase entry points into the economy for young people in South Africa, she said: “It’s not something that is happening organically in the market…There needs to be a very deliberate and concerted process to make corporate organisations focus on their social value creation.”
Top image: (L to R) Raj Kumar, president and editor-in-chief, Devex, Nicola Galombik, executive director, Yellowwoods, Parks Tau, South African minister of trade, industry and competition and Barbara Frei, executive vice-president and chief executive officer, Industrial Automation, Schneider Electric, speaking about social procurement and the wider role of the social and solidarity economy at the Social Innovation in Action session at the World Economic Forum annual meeting 2025. Credit: WEF
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