Do current ESD practices work?

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The Enterprise and Supplier Development (ESD) element of the revised BBBEE Codes has made it clear that providing only financial and non-financial support to small suppliers and SMMEs is no longer sufficient.

Considering the imperative that the ESD element places on strategically engaging with suppliers, Christa Bonnet, founding member and Chief Executive Officer (CEO) of The Difference Makers, has found a worrying level of ‘missing’ knowledge among organisations and BEE specialists alike.

I have worked with well-known incubators, and accessed reports, proposals and presentations from various well-known incubators, ESD and supply chain consultants. From a strategic point of view, the following is lacking:

  • Lack of an in-depth understanding of how ESD fits into the supply chain.
  • Many organisations, consultants, specialists and practitioners try to plot enterprise development practices on supplier development, which cannot succeed sustainably if one does not understand strategic sourcing language and how ESD, as a consolidated construct, fits into total cost of ownership (TCO).
  • Lack of an in-depth understanding and capabilities of how to make ESD within the strategic sourcing and sustainability functions a return-on-investment (ROI), social return-on-investment (SROI) and sustainability imperative.
  • Lack of an in-depth understanding of how to mine the value chain within the organisation and the value chain of its stakeholders (both internal and external) in alignment with these imperatives.
  • Lack of an integrated approach illustrating the compound impact of access to market for SMMEs and bigger suppliers through an integrated value chain approach.

Some of the pitfalls in terms of current ESD practices include it being largely scorecard-driven by companies who have been hit hard by the Amended Codes; having a focus on form over substance; and a lack of strategic intent or alignment with the core business strategies.

The latter leads in many cases to ESD being seen as a challenge or burden to the organisation from a holistic view-point, and in the process is disposed of or outsourced in the least disruptive manner to the core business.

In order to present a sustainable solution, some of the skills needed to implement ESD differently are critical thinking, curiosity, systems thinking and an understanding of results-based accounting, project management and strategic sourcing methodologies.

Having had discussions with CPOs, ESD practitioners, consultants, incubators, agents and SMMEs, the same approach and solutions (with a differentiator here and there) are found across the ESD industry.

Ask the difficult questions

If we remove the fluff and glitter from the current programmes and solutions, two questions arise:

1.  Of the millions that are allocated to these projects, how much actually reaches the SMMEs and is used to their benefit?

2.  What are the sustainable impacts of the money spent, measured on a ROI and SROI level?

I have seen some of the answers myself. Sadly, once the superficial answers have been tested and removed - what comes out as true benefits to the intended beneficiaries are not always a pretty picture.

They are important questions and they must be answered in terms of outcomes – but the answers will most likely not to be liked by some who do not understand the workings of RBA and SROI methodologies in terms of ESD and sustainability.

Audit

I always recommend an independent SROI audit prior to making such strategic decisions and on an annual ongoing basis to ensure that the majority of the funds spent are for the the benefit of the intended SMMEs and not third party service providers.

When silo thinking has been shifted to an integrated approach between all business imperatives then the path from “as is” to the “to be” becomes a practical reality. Then a paradigm shift takes place on a fundamental level to leapfrog from compliance into a sustainable and wired business thinking to ensure a sustainable transformation of the supplier base.

In closing, some critical imperatives that must be taken into consideration as change drivers include management support, sufficient capacity and capabilities in the team driving the ESD focus within supply chain, bespoke levels of internal and external stakeholder communication, efficient and supportive processes and systems, monitoring and evaluation, business partnerships and funding mechanisms.

For more information contact Christa on christa@thedifferencemakers.org.za

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