Read time: 7 mins
Based on Expectations, Economics, and Externalities of the Indigenous Business Sector by Christian Eva, Jessica Harris, Kerry Bodle, Dennis Foley, Nina Nichols and Boyd Hunter, published December 2023.
The Indigenous business sector is in high demand, in part because it produces significant social value while also delivering economically. It’s a terrific success story, but there’s a cost to delivering that social benefit. According to new ANU evidence, Indigenous entrepreneurs invest significant time, money, risk, labour, and expertise to positively impact their communities – and this investment is undervalued by clients in the public and private sectors.
Read time: 7 mins
Based on Expectations, Economics, and Externalities of the Indigenous Business Sector by Christian Eva, Jessica Harris, Kerry Bodle, Dennis Foley, Nina Nichols and Boyd Hunter, published December 2023.
1
Demand for Indigenous-led businesses has risen steadily in recent years, partly driven by government procurement goals and corporate social responsibility trends.
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According to evidence collected by ANU, public and private sector clients are undervaluing the social impact of these businesses, and Indigenous entrepreneurs are bearing the costs associated with that.
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Policymakers should consider amendments to Australia’s Indigenous Procurement Policy that properly value social impact, such as bid adjustments for Indigenous businesses.
Indigenous businesses perform well economically, but also play a critical social role. They employ many Indigenous Australians and are at the forefront of achieving self-determination for Indigenous communities.
With the Indigenous Procurement Policy (IPP) in place across government, and businesses implementing corporate social responsibility plans, the sector is facing high demand.
But it’s not all good news.
Indigenous business owners told ANU researchers about the costs they absorb to ensure they deliver a social impact for their communities.
For example, Indigenous businesses that are passionate about creating employment pathways for employees with a limited education or work experience need to invest in supporting and training their staff. Sometimes, this involves developing financial literacy, helping provide and facilitate healthcare, providing meals, providing culturally responsive workplace practice, providing transport to work, redesigning job descriptions to suit the individual, or purchasing necessary equipment and training certificates.
But these additional costs aren’t being recognised in contracts. As participants told researchers:
“We allocate money to hardship funds. We pay our staff really well. We do all these great things, right? Then when you go into a business situation where you’re tendering against a non-Indigenous business for work, the client comes back and says, ‘You’re five per cent dearer, why?’”
“It definitely brings down your profit margins and that, because you’ve got higher expenses when it comes to on cost for new staff.”
They also said that as Indigenous owners, they’re expected to create social outcomes beyond what’s expected from other businesses.
“In a tender, we are expected to talk about innovations, but if we go in there with this great new technology system around cleaning your building, you’ll say ‘Stop right there, we want to hear about what innovations you’re gonna bring in the Indigenous space because we’ve got all these targets we’ve committed to and we’re gonna give you the contract if you help us get those targets’ … It’s absolutely insane.”
Owners and managers also reported insensitive interactions with government procurement staff.
“[The client said] ‘You’ll get the Indigenous headcount covered for us, won’t you? Cause we wanna hit some KPIs on that.’ It’s like, okay, well here’s an idea. Why don’t you get off your lazy arses and do it yourself?”
The findings show that in their current form, IPP targets are reducing Indigenous businesses’ value solely on how the business can help clients achieve a narrow set of metrics, especially for volume and size of contracts. A business’ status as Indigenous is too often seen as more important to potential clients than its specific expertise and capacities.
Finally, participants noted that while they had many great clients, the persistent finding was that paternalistic attitudes are rife in procurement.
“We still get asked quite often to deliver presentations and they don’t have a budget. That’s quite insulting. And they think that cause you’re Aboriginal, then you should do this… Like they’re doing us the favour.”
The research noted that in Canada, bid adjustments are available for procuring work from Indigenous-owned businesses. This allows entrepreneurs to take on the cost of their social impact while remaining competitive in a tender process with non-Indigenous businesses.
According to the experts, a similar approach in Australia could better account for social value than the current system.
"A business’s status as Indigenous is too often seen as more important to potential clients than its specific expertise and capacities."
