For love AND money: you can add social value without adding cost © Getty Images
For love AND money: you can add social value without adding cost © Getty Images

Caring or cost? The price of social value

Rebecca Ellinor Tyler is former editor of Supply Management
22 February 2019

As social value becomes a requirement of all Whitehall contracts, SM talks to organisations that give back without spending more.

“The foremost thing you need to do is to wake up in the morning, stretch your arms, take in a deep breath, and remind yourself that today you’re not going to save the world, but today you’re going to focus on saving one small, discrete, very clearly defined part of it.”

That remark, by leading conservation biologist George Schaller, inspired American clothing company Patagonia’s attempt to ensure that what’s good for its business is good for society. In the US, it’s called ‘conscious business’. In the UK, it’s ‘social value’, a topic that is preoccupying many procurement leaders, especially in the public sector.

To hard pressed procurement chiefs in local government, the emphasis on the need to factor social value into the way they buy goods and services must seem, with budgetary pressures mounting, about as attainable as squaring the circle.

Last autumn’s announcement that the revenue support grant – the main source of central government funding for local services – will be cut by 36% over the next year caps a decade of budget cuts. The Local Government Association (LGA) says these services now face a £3.9bn funding black hole in England, as pressure on them rises. “Local authorities call it the ‘graph of doom’,” says Charlie Wigglesworth, deputy CEO of Social Enterprise UK (SEUK). “Demand for services is going up, yet budgets are going down.” 

Private sector businesses are also feeling the crunch, with limited growth predicted up to April, according to the CBI, and prospects thereafter clouded by uncertainty over Brexit. 

As grim as this all sounds, a growing number of organisations are looking to buy the same quality of goods and services at the same price, while getting suppliers to help make one small, discrete part of the world a better place. They are doing so by giving weight to the delivery of ‘social value’ in tenders, inserting clauses into contracts and using social enterprise suppliers that do something for the public or greater good.

“Everyone in the public sector with a budget to spend should be looking to maximise its impact, and social value is key to this,” says Peter Schofield, procurement hub programme manager at the Association of Greater Manchester Authorities.

As the Patagonia example shows, it is not just the public sector that sees the sense of this approach. “Ultimately, the more people and organisations engage with social value, the more society as a whole will thrive,” says Su Pickerill, group community investment manager at Wates Group, one of the largest family-owned construction, property services and development businesses in the UK.

“It takes effort to change how you do things but it’s about making your money go further. The commercial service or product has to come first but if you can additionally generate positive impact in your community, why wouldn’t you? It’s not an and/or – it’s an and/and.”

Progress report

Public sector organisations have been legally obliged to consider how to secure social, economic and environmental benefits through commissioning since the Public Services (Social Value) Act came into force on 31 January 2013.

To accelerate progress, last summer Cabinet Office minister David Lidington announced plans to expand the Act’s powers to force central departments to “ensure all major procurements explicitly evaluate social value where appropriate, rather than just consider it”.

By this summer, Whitehall buyers will be required to take social value into account in their contracts. A direct response to the Carillion debacle, the ministerial initiative was designed to start “restoring trust between government, industry and the public”. Lidington also pledged to train all 4,000 of the government’s commercial buyers in how to take account of social value and procure successfully from social enterprises.

Many organisations welcomed such news. In 2017, when former MP Chris White, the author of the Public Services (Social Value) Act, reviewed progress he estimated that £25bn of public procurement spend had been ‘shaped’ by the new law, out of an annual public sector spend of £268bn.

Tina Holland, programme manager for procurement at the LGA, says its recent snapshot survey found the bigger, higher spending councils – which are more likely to have a dedicated procurement department – generally considered themselves “mature” at implementing social value. Smaller, district level councils viewed themselves as “developing” in maturity – legally compliant but only taking ad hoc steps in market engagement.

In 2016, SEUK found that local authorities were roughly equally split between those who were “embracing” or “adopting” social value, those “complying” with the Act and “bystanders” who were not even considering it. SEUK intends to update these findings with some qualitative research at its State of Social Value summit in March. 

Wigglesworth says momentum is gathering behind this agenda in some parts of the country, with SEUK finding procurement teams are more likely to take the lead now, rather than getting involved at the request of a boss or CSR.

Procurement needs to lead as some organisations are hanging back because of common misconceptions. Contrary to popular myths, including social value in contracts does not flout any laws (if you’re careful), is not necessarily difficult or costly (especially after you’ve done it once) and can include discussions with suppliers before the procurement process starts (as long as you do not favour certain suppliers or types of suppliers and are open to anyone). The other factor – a particular concern in the public sector post-Carillion – is the need to minimise financial risk.

Measuring impact

Guy Battle, CEO at the Social Value Portal, which helps organisations to measure and manage the social value they generate, believes there is a long way to go – particularly in the private sector. Yet he says he has witnessed an exponential increase in interest over the past year as organisations get to grips with the measurement of social value.

Battle is referring to the national Themes Outcomes and Measures (TOMS) framework, developed over 18 months in consultation with more than 40 public and private sector organisations, to assess social value’s bottom-line impact. The framework consists of five key themes: local jobs and skills, the growth of local businesses, community benefits, environmental protection and innovation.

This freely available toolkit aims to provide a minimum reporting standard to help buyers measure and justify social value outcomes in their contracts. Such measurements and targets only work if attentive contract management ensures they are actually delivered.

Elsewhere, housing associations have adopted their own tools. Laura Faulkner, director of supply chain management at Nationwide Building Society, has created her own scorecard; while others, including Wates, have been helped by such organisations as the New Economics Foundation to calculate the social return on investment.

Jeremy Willis, UK director of procurement at PwC, says it has worked with SEUK to quantify the impact of its deals with social enterprise suppliers: “In most instances it is quite straightforward to measure the primary impact – more revenue means more jobs created, food waste prevented, life skills taught or mental health issues supported. Secondary impacts are sometimes harder to quantify, such as the flow-down positive impact on social services or local economies.”

Karl Poulsen, CPO at insurance business LV, says it calculates the number of lives it has helped transform. Working with just one supplier had helped 800 people. This was done, Poulsen points out, “not by throwing margin away, just being smarter”.

And it helps raise the business profile, he adds: “We realised that promoting social value through procurement could really play at helping LV show a difference in the marketplace.”

Battle agrees that social value and strong commercial decisions can complement one another: “We’ve seen no price escalation at all, but for those achieving social value they are getting an average of 23%, so for every £1 spent they’re getting £1.23 of value.”

Not only is it a case of what gets measured gets done, but these figures can help drive change, persuade doubters, ease decision-making and provide evidence if a supplier mounts a legal challenge.

SEUK has established the Buy Social Corporate Challenge to raise awareness of social value in the private sector. It has set a £1bn target to be spent by the UK private sector with social enterprises over five years. It has 16 partners so far, but would need around 30 signatories to be actively taking up the call to achieve its ambition. The Social Value Taskforce – a network of public and private sector organisations – is also trying to encourage companies to initiate constructive change. 

Wates Group is certainly convinced that its social value programme is good for the business – as well as for society. “We have a real sense of wanting business to be a force for good and to leave a positive legacy in the communities we work in,” says Pickerill.

The company’s Building Futures programme, a two-week pre-employment programme for unemployed adults set up in 2006, is a case in point. Job-seekers visit active construction sites, acquire key skills and gain an industry-recognised certificate that could help them find work.

More than two out of three of the 1,500 who have completed the programme to date are either in work or undergoing further training. The New Economics Foundation consultants calculated that for every £1 invested in Building Futures, a £1.83 social return on investment was achieved – a figure that includes reducing the number of individuals who need benefit support. 

Success has made Wates more ambitious. “We’ve set a target of £20m of trading with social enterprises by 2020 and we’re up to about £17m to date,” says Pickerill. Using social enterprise suppliers is helping to connect disadvantaged groups – those with physical or mental health issues, long-term unemployed and ex-offenders – to the labour market.

“We see that as a straightforward, powerful way of creating social value. With squeezed budgets and services in the public sector, having social value written in when commissioning can help with those gaps.”

It is also helping attract and retain talent, says Pickerill, as well as win new business: “We want people to be proud of the company they work for, and 60% of young people want to work for a business with purpose. It dovetails with what we want to do and it definitely stacks up commercially. We’re starting to see significant social value weightings for social value in public sector tenders.” 

As social value featured heavily in two tenders Wates won recently – as framework contractor for the renovation of buildings on Parliament’s Northern Estate and as lead contractor for Major Works UK on the Scape Group’s National Construction Framework for the public sector – it was essential for success.

Pickerill says: “I would certainly say ‘do it’ as it makes a lot of sense – it helps to make you an attractive company to work for; it diversifies your supply chain, encouraging innovation and helps smaller organisations get involved in this post-Carillion world.” 

Get started

  • Success relies on leadership – be it yours, or from the top. Take ownership and take others with you on the journey 
  • Start small, with easy, non-business-critical wins to test it out 
  • Commissioners are typically giving social value a 5-10% weighting in tenders. Some have gone as high as 30%. Beware, if you ask for too much too quickly you might prompt a price rise
  • If you are looking to work with social enterprise suppliers, see if any can replace current providers or help existing suppliers set up their own social enterprise 
  • Look at sectors where social enterprise suppliers are well-represented, such as printing, cleaning, venue hire, stationery
  • Be aware that while the range can be large, few presently have the capacity to deal nationally with big corporates
  • Ensure you carry out due diligence, but be aware smaller businesses may need more support upfront – clearer communication and less onerous demands – to win the business
  • Make sure you do not fall foul of competition law by taking up available training and seeking out information, and ensure lawyers in your organisation are up to speed
  • Collaborate with your large tier-one suppliers on potential social enterprise sub-contractors
  • Embrace innovation
  • Publicise success stories
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