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Local Purchasing Powerhouses = Localism 2.0
Vicki Pozzebon and Alan Webber
There’s a new conversation, a new set of practices and a new vocabulary in the evolving effort to support local economies: Anchor institutions. Local procurement. Procurement policies. Impact investing.
What do these terms mean? And how do they represent the next stage of economic development that’s focused on producing better outcomes for local businesses and communities?
Anchor institutions are corporations, hospitals, universities and government agencies that are the largest job providers, biggest purchasers of goods and services in a community. These are the institutions that buy everything from food for their own cafeterias to cleaning services to uniforms to large-scale construction projects. They buy office supplies and contract with tech companies for IT support. They employ thousands of people in our cities and towns.
Their procurement policies are the guidelines they use to make decisions about purchasing. For instance, a city governmental department might have a policy to request a minimum of three bids for a project or a policy to source a certain percentage of its goods from local businesses within a specified geographic area.
Local procurement is the policy choice to make purchases from local businesses, manufacturers, contractors, and vendors within a specified geographic area. It is the conscious decision to buy as much as possible from local businesses. An anchor institution that sources its food locally and spends just 10 percent of its budget on local products can put millions of dollars directly back into the community because those dollars are multiplied up to four times.
Impact investing is a term now being used by foundations, government agencies and banks that refers to how they take their own investment portfolios and invest in stocks, funds, or lending to businesses or social enterprises that are aligned with their own mission or serve a social mission to do good for the community.
All of these terms tied together can be a force for good in a city; they can have an enormous impact in a community for economic development—creating even more jobs by helping start or grow other businesses, circulating more funds, growing local tax bases, and simply growing local economies. Think of it this way: “Buy Local” campaigns and educating consumers about the power of shopping local was Localism 1.0. Leveraging anchor institutions as local purchasing powerhouses is Localism 2.0.
These anchor institutions are massive markets. But they need to make significant changes in order to harness their own purchasing power.
They have built-in purchasing, accounting and legal departments. Often these departments don’t talk to each other. Purchasing decides to change policies but doesn’t inform Accounting, and therefore invoices aren’t paid because a vendor “isn’t in the system.” If you’ve ever been a vendor to a large institution you probably know how this story goes.
Here are some things anchor institutions are doing—and could do even better—to make lasting impact now. These improvements can tie their purchasing power to impact investing to become a real force for economic good:
· Look at local food as a way to help grow the local food system. This seems like an absolute no-brainer to most of us working in this system. However, it’s not as easy as it sounds. Current suppliers who roll up to the deliver dock don’t know which local food companies have the capacity to grow more produce or create more items. Purchasing staff often ask the sales reps from these big companies for lists of local products. But what they’re usually given is a list of stock items made by a large manufacturer from two states away. There is a better way. But it requires engaging in conversations at every level of the supply side of the chain. Which leads to the next point.
· Making policy changes is a great start, but they can’t just make a policy change to source local food. That will never take hold. Employees need training to understand the impact of local sourcing. Provide training and resources for staff to implement the sourcing of local products: directories, guides, trade shows. Let them find the products. They need to know the how, where, and why to source local goods and services in order to buy into the idea and commit to making it happen.
· Assess the local market. If the purchasing department can’t find an item, find out why. What could be done to make this product available? Which leads to the next point about impact investing.
· Does your company/institution have the resources to invest in a new business or manufacturer that will make the sought-after product? Once the gap in the supply chain has been identified, now what? Talk to local economic development staff or incubators or entrepreneurial networks or investing people who might have knowledge about those who could do this work or start up a business if investment money were on the table. This is impact investing—putting money into a fund or directly into a new business that can serve the whole system or fill a gap in the system. Those impact dollars will create jobs and put money into local tax coffers.
· Forming a large buyers’ group together, anchor institutions can leverage their buying power to activate the supply side of the local system. In the food sector, we’ve seen examples of this in San Diego, Calf., where nearly a dozen hospitals pooled their investment resources to purchase from local farmers and food processing companies. Then they went beyond that: They invested in the growth of those companies in order to be able to source from them directly, providing loans for greenhouses so more acreage of local food could be grown for the hospital market.
· Identify the areas that anchors could purchase—office supplies, janitorial supplies; IT services; printing; food—not just fresh fruits and vegetables. There are dozens of categories of purchasing where local products or vendors could be substituted.
With budgets in the millions, large corporations and anchor institutions are the best way forward for immediate investments into local economies. Shifting just a portion of those purchasing dollars to local businesses, vendors and products will amount to millions of dollars injected into local economies and hundreds of new jobs.
Vicki Pozzebon is the owner of Prospera Partners, a consulting firm that designs local economy networks, systems and developmental plans for businesses, nonprofit organizations and government agencies that put communities first. She is a skilled facilitator, public speaker and blogger about all things local. www.vickipozzebon.com
Entrepreneur and author Alan Webber, founder of One New Mexico, ran as a candidate for the Democratic nomination for governor of New Mexico in 2014. www.onenewmexico.com
YellCast and SANTA FE Hispanic Chamber’s ‘Live Local and Prosper’ Pledge
YellCast (yellCast.com) is a new online open marketplace that aims to democratize commerce by bringing business back to local economies. Through Internet and mobile devices, YellCast’s platform smoothly connects buyers and sellers by delivering local search results that allow users to connect and communicate. The conversational commerce engine allows users to control their personal data without being constantly tracked, subjected to a constant stream of ads or receive results dominated by big companies.
YellCast and the Santa Fe Hispanic Chamber of Commerce, along with the Santa Fe Chamber of Commerce, the Santa Fe Green Chamber, Santa Fe Area Homebuilders, Hutton Broadcasting, MIX Santa Fe, Youthworks, Green Fire Times and others, have teamed up to promote a “Live Local and Prosper” pledge to foster a vibrant local economy, ensure a strong tax base and grow a prosperous future. The pledge (https://yellcast.com/pledge.php) asks people—especially during the holiday season—to buy goods and services locally, whenever possible, for both personal and business matters; celebrate local businesses, make an extra effort to support members of the community, and encourage others to do the same.
The service is free to end-users. Businesses and services pay a small fee to respond to customer requests. YellCast’s head of community development is Kate Noble, who spent a decade doing economic development work for the City of Santa Fe.
About the author
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