Why local procurement doesn’t generate social value August 2020

Whether or not you agree with the title statement will depend on whether you align to an ‘inputs’ or ‘outputs/outcomes-based’ approach to measuring and managing social value.

Social value can be understood as the “relative importance that people place on economic, environmental and social changes they experience in their lives”.

Since the Public Services (Social Value) Act came into force in 2013, public bodies in England and Wales have been required to consider how the services they commission and procure might improve the economic, social and environmental wellbeing of the area they are affecting. In recent years, growing pressure from public and client expectations in relation to responsible business practices has furthered the need for businesses across all industries to understand and manage how their activities impact local people and communities in short and long-term contexts.

Where it’s come from

Historically, a business’ impact in relation to social value could be understood through an ‘inputs’-based approach. That is, by simply measuring resources, financial and in kind, that are necessary for a company to do an activity. Companies could exemplify their contribution and would report on these resource investments: X amount of money spent in the local area, X number of hours spent volunteering, X number of donations made to certain charities. This related closely to the Corporate Social Responsibility agenda.

These activities are important and undoubtedly affect (both positively and negatively) social value, but they are inherently limited as a tool for measurement. We cannot tell, simply from understanding the resource invested by a business or stakeholder, the change that said input has generated for affected people.

To understand the change, you need to be able to measure and manage the outputs and outcomes of your activities in relation to social value:

• Inputs: The resource(s) a business invests into an activity
• Outputs: the quantitative summary of an activity
• Outcomes: changes that stakeholders experience as a result of an activity

(Reference: Standard on Applying Principle 2: Understand what changes, Social Value International)

Inputs vs Outcomes

Input, output and outcome impacts are not equal in the world of social value.

Input measures are the easiest to identify but the least meaningful (i.e. tell you least about change). Outcome measures are the opposite – they are the hardest to identify but the most meaningful in terms of understanding change. With effort, it is possible to determine outcomes, and there are a number of social value banks that can now be used to provide support with this (e.g. HACT value bank and the Common Social Impact Framework for Rail).

So, what is good practice?

Social value good practice is to measure and report outcomes as far as possible, with outputs as second choice, and inputs last. In fact, there are lines of thought that certain input measures should not be classed as social value at all.

For example, let’s say you, as a business, invests £100,000 with a local supplier. We all know that it is good to use local procurement in terms of sustainable procurement principles. However, in social value terms, the investment of £100,000 in that local business can be argued to not inherently have a direct value. How? Well, the value comes from how that money is used, or the change it creates for people and communities. If the £100,000 was used to pay the CEO a big bonus, then you are less likely to have generated much value than if that same investment was used to create three new apprenticeship roles for local individuals from priority groups. The input in this instance (£100,000) is the same and is a financial benefit: but the social value comes in how the input affects people.

Understanding change is paramount

When trying to understand change, it is important to note that it is virtually impossible to understand all the changes that people are experiencing because of your activity. People’s lives are complicated, and experience is subjective – not everyone feels, acts and thinks in the same way. However, by talking to people and the communities you work in (informed by learning from value banks), you can start to uncover the most valuable and readily experienced changes, allowing you to better understand where your business is generating value, and then how best to optimise this.

If you would like to know more about social value measurement and performance management, please contact james@actionsustainability.com to see how we can help you.

Further reading:

• Maximising social value procurement: Catherine Manning; Social Value UK
• Standard on Applying Principle 2: Understand what changes, Social Value International