Companies can support the local community by sourcing products and services from local businesses, targeting their hiring practices on the recruitment of local people, or tailoring and delivering their goods and services to local markets. This helps keep economic resources within the local area, creates local jobs and prosperity, and improves quality of life for all.
This is a strategy that is available to international companies, national chains and local entrepreneurs. It can be achieved in various ways, depending on the business and the type of activity. A local social enterprise may locate its entire value chain within one community, whereas a multinational corporation may support and build up local economies by concentrating large sections of value chains in particular geographical areas. For instance a supermarket may support the local economy by sourcing products sold in each of its stores from farms within a certain radius of each store.
The local multiplier effect means that when money is spent on goods and services within a local community, most of it remains in circulation within that community, usually in the form of money spent on other local products, inputs and services, and on staff wages. Generally, money used on goods and services that are not produced locally will immediately leave the locality or region. Some campaigners claim national chains, such as supermarkets, siphon as much as 95 per cent of their takings out of the locality. Therefore, by maximising the amount of the company’s value chain taking place within a local area, the organisation can preserve the amount of money kept within the local economy, enabling communities to benefit and become more prosperous, and ultimately more able to buy locally produced products and services.
A diverse local economy, providing secure employment and producing a range of goods, will be more resilient, self-reliant and sustainable. Consequently, local sourcing and hiring can be particularly important in invigorating economically depressed or vulnerable areas such as inner city neighbourhoods or rural communities. Sourcing locally may also help promote social cohesion, improve the quality of life for local people, promote customer loyalty, reduce the cost and environmental impact of transportation, and strengthen a company's relationships within the community.
However, all businesses must balance their necessary considerations of cost, quality and convenience with their ability to support the local economy. An evaluation of both benefits and drawbacks will inevitably show that certain activities are not feasible locally. Further, the desire to focus locally may conflict with other values and aspirations of a company. For example, sometimes the local choice isn't the best environmental one - tomatoes grown under the hot sun of Southern Europe, even when air-freighted to market, may have a lower carbon footprint than those grown in an artificially heated, poly-tunnel environment in Northern Europe.
Understanding these trade offs and finding the appropriate balance is an essential foundation on which businesses develop strategies and practices for supporting local economies.