How to measure social value

A new procurement tool will help buyers and suppliers – in a wide range of organisations – to embed social value in their processes

“If you look at the terminology alone – social return on investment, social value, social dividends, social capital – it’s a morass of terminological inexactitude which drives many businesses bonkers.”

So said Jonathon Porritt, director of sustainability non-profit Forum for the Future, at the Social Value Conference in Birmingham in November.

Since the Social Value Act came into force in 2013, public sector bodies have been obliged to think about how to secure wider social outcomes from tenders. But the policy, despite good intentions, has left buyers concerned about increased contract costs and scratching their heads about how to define and measure social outcomes. Suppliers, too, have been wondering how best to meet these new requirements.

In response, the Social Value Portal (SVP) launched the National TOMs Framework – which stands for themes, outcomes and measures – to provide a minimum reporting standard that translates social outcomes into a monetary value.

“It provides a robust, transparent and defensible solution for assessing and awarding tenders,” said Agnese Mizia, head of research at SVP and one of the framework’s architects.

For example, one full time job opportunity for someone with a disability is worth £12,769.68 in savings. This includes a reduction in benefits paid, an increase in earnings for the individual and savings for the NHS.

Every tonne of CO2 saved from transport is worth £64.66, according to the Department of Business, Energy and Industrial Strategy. An hour of volunteer time is worth £14.43.

Guy Battle, CEO of SVP, thinks the public sector can leverage an additional 20% of value from every contract, creating £15bn added value across the sector. This would almost cover the £15.7bn shortfall in public sector spend that Battle expects to see by 2020. The challenge is to get both the public sector and suppliers to embrace the concept.

Porritt offered a solution: “The government just needs to mandate the embedding of social value into all procurement… When it wants to, it can do it, so why doesn’t it?”

CEO of Trafford Council Theresa Grant said that until then, councils have the power to mandate social value into their own spend themselves. Start with what you control, she said. “You’ll find that providers, suppliers and contractors are really responsive. They’ve woken up to this agenda, and want to help.”

Under competition rules, buyers can’t objectively prefer a local organisation because it’s local, Julian Blake, of Bates Wells Braithwaite LLP said, but “you can secure a local organisation because it’s the best”.

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