When an organization decides to develop a shared service center (SSC), a decision needs to be made on what type of SSC is suitable. Whether it is a captive, outsourced, or hybrid model, any organization’s shared service journey will be altered by this choice.
Looking to business process outsourcing (BPO), utilizing a third-party provider to manage an SSC can assist businesses looking for expertise, innovative technologies, and cost efficiency. However, this model does not only benefit the organization. In fact, utilizing BPO can have a positive impact on the workers and their wider community.
So, in the spirit of the season of giving, here is how your organization can give back through ethical outsourcing.
What is ethical outsourcing in business?
Ethical outsourcing, also referred to as impact sourcing or socially responsible outsourcing, is the practice of employing disadvantaged individuals in BPO centers.
Traditional BPO centers are found in urban areas and deploy high-end functions, such as analytics or software operations. In contrast, ethical outsourcing is more common in rural centers and often allows vulnerable communities to seek employment through more accessible tasks. These roles can range from data entry to microwork. However, as the impact sourcing industry develops, some centers offer wider work such as customer service and IT assistance.
Economic Development
SSON Research & Analytics’ data tool, the Shared Services & BPO Atlas, highlights that within the SSON community, there are 3,099 BPO centers worldwide. 623 of these centers are in India and 378 are in the Philippines, making these two countries the most popular BPO destinations.
As two English-speaking nations, both countries are being utilized for their talent pool and lower labor costs. This has resulted in outsourcing centres bolstering the economy, whilst combating unemployment and providing opportunities for developing communities. For example, the BPO industry contributes approximately $30 billion to the Philippine economy annually.
Ethical outsourcing is a strong solution to poverty alleviation as it can create countless jobs for those living in poorer socioeconomic areas. However, it is a growing industry and much less established than traditional BPO. As of May 2022, the number of impact sourcing employees globally was listed at just 350,000.
ESG
Environmental, social, and governance (ESG) compliance has been a concern for organizations since its inception in 2006. However, considering the climate crisis and the aftershocks of the COVID-19 pandemic, ESG regulations are steadily becoming a priority for businesses.
A common way organization can support the environmental element of ESG is through reducing their carbon footprint. Most organizations that offer outsourcing services are more efficient with their materials, such as through remote work models, streamlined processes and consolidated resources.
Beyond this, ethical outsourcing supports the often overlooked “S” in ESG. Organizations can interact with the social element of ESG through diversity, community engagement, and employee well-being, which ethical outsourcing encompasses. Besides the previously mentioned economic development, ethical outsourcing can have direct benefits for impact workers. These include increased salaries, upskilling opportunities, and training.
As more businesses are putting ESG frameworks at the forefront of their minds, as shown through the 52% of SSO/GBS that are responsible for supporting their enterprise’s ESG, ethical outsourcing may be the next step for many organizations utilizing BPO.
Business Benefits of Ethical Outsourcing
However, it is important to note that this model of outsourcing is mutually beneficial for both workers and businesses.
Comparing ethical outsourcing to traditional BPO, organizations often have even greater cost savings. A key benefit of BPO is lower labor costs, however outsourcing in more rural areas for lower-skilled functions invites further reduced costs. This can be seen in India, where impact sourcing centers generate 35%-40% more savings than traditional BPO centers.
It has been shown that ethical outsourcing is a reliable work model, as providing opportunities for disadvantaged communities results in lower attrition. The motivation of impact workers often allows them to deliver similar levels of expertise to standard BPO workers. Despite usually requiring a longer period of training, hiring impact workers can lower hiring and training costs due to a common ambition.
Finally, ethical outsourcing taps into a largely unused talent pool. Impact workers are usually from areas with higher levels of unemployment, so office jobs are widely sought after.
This festive season, organizations can increase their impact by adopting ethical outsourcing. This practice creates job opportunities in rural areas and contributes to economic development. Beyond this, ethical outsourcing aligns with ESG compliance, such as environmental concerns and diversity. Choosing ethical outsourcing not only fulfils corporate social responsibility but also yields business benefits. This includes cost savings, a reliable and untapped workforce, and lower attrition.
Ethical outsourcing could be seen as a win-win solution that embodies the spirit of giving during the holiday season and throughout the year.