Two major business risks in social value to mitigate

Social value as an umbrella concept for social, environmental and economic value is strongly shaping the private sector and how business is done. Companies have an interest to become more sustainable for various reasons – each reason equally important to the future success of these organisations. Some of the reasons include sustainable procurement regulations favouring those government contractors with robust social value agendas, investors investing in companies with proven sustainable practices, the best workforce choosing to work in companies with proven sustainable legacy and consumers wishing to buy from ethical players. This mega trend is not only creating opportunities, but also huge business risks if social value is not taken seriously.

(1) Tender related social value delivery and evidence of impact

Social Value and its increasingly growing role in global government procurement gives a huge opportunity for companies and VCSEs to win more business from government organisations. Those taking social value seriously are the future contract winners.

Mandatory social value regulation in the UK procurement has put a large burden on company communication, CSR and sales departments as the winning bids are drafted with the best social value plans.  Bid writers and teams involved in social value delivery are carrying a huge responsibility to formulate plans and implement them as part of the contractual agreement. Since the PPN 06/20 came to an effect in January 2021, the Central Government and hundreds of local authorities have seen both success and failure in social value. Some companies have already lost their contracts due to overpromising, but it is also anticipated that eventually also competitors will start to monitor whether the social value was delivered or not by winning contractors. Some contracts are significant in value and it is of interests to those who lost them to see that decisions were made fairly and results are monitored.

(2) ESG reporting and transparency

Companies wish to benchmark their overall sustainability and governance with annual CSR/ESG reporting and many are leaning on putting monetised values for these activities. Case studies on impact are presented in favourable light with many times focusing on outputs rather than verified outcomes. It is understandable that numbers are easy to understand and can quickly give a simplified idea of where an organisation stands in terms of sustainability.

As there is no global framework for measurement nor reporting on social value, practices and tools to report vary a lot. It is in the discretion of each reporting provider what kind of data was used to build datasets and calculations based on them. The first big  global ‘greenwashing’ law suits are already in place, and  in no time undoubtedly also ‘social washing’ cases will arise. Global academic studies have proven that companies who demonstrate to be sustainable can raise their long term value between 4-11%. This means, that investors are paying more for their shares than peer companies, consumers favour their products and these companies attract the best talent and partners. If the CSR/ESG claims in numbers hold no tangible evidence and recognise clearly only those elements of environmental and social value that are delivered above the minimum legislative requirements, there is a huge over claiming risk that a company is taking.

Both risks above can be mitigated by clear strategy on social and environmental value where the goodwill and commercial attraction is built on transparent added value which can be proven with evidence. This requires companies to commit to not only to their internal company community but to the wellbeing they generate in their close communities and their supply chain through partnerships.

You can read more about social value management and get more practical guidance from our recent Social Value Management Handbook. Find out more and get your copy here.

You can also read our recent article for Open Access Government, a leading policy publication, about the three key principles for impactful social value here.

whatimpact’s inherent mission is to help reduce the cost of social value planning, every day delivery and reporting, so more could be put into societal and environmental good. We advice companies to carefully think, whether to hire employees and consultants to manually find local community engagement partners and write social impact reports, all of which could be managed with well-through-through tech like ours. We also advice companies to really focus on keeping their social value delivery promises and providing validated impact data as evidence, as ‘greenwashing’ and ‘socialwashing’ can put a company in a very serious position financially, legally and reputationally.

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