If your business is involved in public procurement – whether it’s with central government and its agencies, the NHS, or local authorities – you need to be on top of social value.
If you’re new to the topic of social value or if you’re looking to find out more, read on. Here are ten things that every business needs to know about social value.
#1 What Social Value Is
Social Value UK defines it as “the quantification of the relative importance that people place on the changes they experience in their lives”.
That means social value is the sum total of all the positive effects deriving from an activity, project, or intervention of any kind – beyond the direct economic impact that a project has (ie the income/revenue it generates minus the cost of completing it). For example:
- Indirect economic benefits – eg money recirculating through local supply chains, the upskilling of workforces, job creation
- Environmental benefits – eg reductions in carbon emissions, the restoration of natural environments and preservation of biodiversity
- Wellbeing benefits – eg measures to support the physical and mental health of workforces and communities, providing well-paid, meaningful work
- Social benefits – eg provision of communal amenities like libraries, playgrounds, and community spaces, support for and involvement with community groups
#2 Social Value Is Not CSR Or ESG
Social value is focused on beneficial outcomes generated in connection with specific projects.
Corporate Social Responsibility (CSR) and Environmental, Social, and Governance (ESG) tend to be:
- Focused more on policies and commitments – that is, what organisations say they will do, as against measuring what they actually achieve
- Geared towards compliance and eliminating the negative effects of business activities, rather than the creation of positive benefits
While there is a lot of crossover between these concepts in practice, they have very different histories and emphases.
#3 Social Value Has A Long History
Social value really hit the headlines in January 2021, when a new Procurement Policy Note (PPN 06/20) came into force, making it mandatory for certain authorities to give social value weight of at least 10% when awarding contracts.
However, it has in fact been part of the language of public procurement since at least 2010, when the Private Member’s Bill that later became the Public Services (Social Value) Act 2012 was introduced.
In the early years, attempts were made to quantify what would eventually become social value through frameworks like Social Return on Investment (SROI). Back in 2012, Social Value UK defined SROI as “a system of accounting for all of the social and environmental value of your activities”.
Since then, practice and guidance have developed – most notably with the 2020’s Social Value Model – culminating in the comprehensible, highly quantified monetisation frameworks that social value practitioners use today.
#4 Metrics Form The Heart Of Social Value
Measurement and quantification are central to social value, as you would expect of something that is focused on outcomes rather than inputs or efforts.
But what should be measured?
“Social Value” lends itself to a very broad interpretation. It can often leave people feeling overwhelmed at the prospect of having to quantify “all the positive effects deriving from an activity.”
What counts? And what doesn’t count? And how can you compare different kinds of value?
Well, unfortunately there are no definitive answers to those questions. The closest we get is the list of 52 metrics included in the Social Value Model as examples.
But because social value is so context-specific (that is, because value created depends a great deal on the nature of the project it’s being created by), those should be mainly viewed as guidelines.
And the Social Value Model is only mandated in cases covered by PPN06/20. Local authorities, for example, have been using their own definitions for years – adding to the confusion around how Social Value should actually be measured.
#5 Social Value Isn’t Just About Monetisation
It’s only natural for there to be confusion and even disagreement about how you could measure the value of – say – a public library, a course of careers guidance, or the recirculation of money spent within a local economy.
But some people argue that it is possible in principle and in practice to boil down all social value gains to monetary equivalents. Some frameworks for measuring social value attempt to do this.
The problem with this is that it sometimes leads to questionable leaps of logic in attempting to provide a solid rationale for assigning the cash value given.
For example, how would you go about assigning a cash value to the benefits of mothers returning to work after maternity leave? Or to care leavers enhancing their employment prospects through targeted training?
A monetisation framework for social value is only as valuable as the robustness of the data and evidence that underpin its metrics.
Therefore, it’s vital to check that and to demand transparency about how metrics are generated when assessing which framework is best for you.
#6 The Procurement Act Won’t Solve The Social Value Measurement Question
At the time of writing (February 2023), the government is opposing efforts to enshrine any wording around “social value” in its Procurement Bill.
But that may not matter, thanks to another change in terminology.
The new Bill will change the basis for evaluating bids from “Most Economically Advantageous Tender” (MEAT), as set out in the Public Contracts Regulations 2015, to “Most Advantageous Tender” (MAT).
That indicates that contracting bodies may have further leeway to award contracts on the basis of positive externalities, like social value outcomes.
#7 Social Value Can Help You Win New Business
When putting out tenders for public contracts, authorities frequently refer to policy objectives they want to see realised that go beyond the scope of the contract in question. The Social Value Model, for example, spells these out in the form of Model Awards Criteria (MACs).
In the case of central government and NHS procurement, PPN06/20 says that a minimum weighting of 10% has to be given to these social value goals – but it’s not uncommon for higher weightings to be given.
And many bodies that aren’t bound by PPN06/20 use social value to assess bids. In early 2022, for example, Liverpool City Council announced that all large contracts it put out would include requirements for social value commitments.
That weighting gives businesses an opportunity to stand out from the competition by focusing on the social value they can add.
Our recent blog series breaks down how to win a competitive advantage through social value:
- By setting a strategy
- By engaging and communicating with your workforce and affected communities
- By capturing data and reporting on outcomes
We have also homed in on each of the Social Value Model’s five Themes in another blog series to help businesses identify where they can make a difference:
#8 SMEs Can Harness Social Value Too
There is a common misconception that awarding public contracts on social value grounds gives an unfair advantage to big companies that can afford to throw money around on side-projects.
But that’s a myth.
Several MACs in the Social Value Model ascribe value to involving more and more diverse SMEs in the public sector supply chain. For example:
- Covid-19 recovery
- MAC 1.3 – “Supporting organisations and business to recover”
- Tackling economic inequality – under:
- MAC 2.1 – “Create opportunities for entrepreneurship and help new organisations to grow, supporting economic growth and business creation”
- MAC 3.1 – “Create a diverse supply chain to deliver the contract including new businesses and entrepreneurs, start-ups, SMEs, VCSEs and mutuals”
That is, contracting authorities have to give due weight to bids from such organisations – because it is government policy to ensure that they are fairly represented in public procurement decisions.
#9 Companies That Ignore Social Value May Be Left Behind
Contractors that neglect social and environmental considerations don’t just miss out on a potential differentiator and opportunity to compete on grounds beyond just price.
It can also lead to their exclusion from certain competitions. For example, another planning policy guidance note – PPN 06/21 – forbids companies without published Carbon Reduction Plans from bidding on contracts covered by PPN 06/20.
#10 The Impact Evaluation Standard Is The Most Robust Social Value Measurement Framework
While there are several social value monetisation frameworks on the market, the only one that was designed from the outset to align with the Social Value Model is the Impact Evaluation Standard (IES).
Unlike some other standards, the IES bases its metrics on robust, public data. If an outcome cannot be given a meaningful proxy value that stands up to scrutiny, the IES does not monetise it.
If you’re interesting finding out more about the IES or about Thrive – the only software platform that is accredited to use the IES – get in touch. We’d love to talk to you!