Every day, human activities both create and destroy value on our planet; they change the world around us. Looking through a commercial lens, we see organizations and investors do business with clear financial goals in mind that are reflected in their business model, decision-making processes, and the way they operate. These decisions have a snowball effect that results in both positive and negative changes in our lives. In recent years, more and more organizations have begun to realize just how much this avalanche of decisions of theirs affects the world and have thus moved to adopt a set of complementary non-financial goals that better guide decision-making by embracing the concepts of Corporate Sustainability. 

This new approach aims to create long-term value by implementing business strategies and decisions that can contribute positively to the organization’s environmental, social, and economic impacts on stakeholders and the community. 

Over the past decades, different concepts have been evolving to integrate sustainability into corporate business to shift their goals from the traditional profit-maximization into creating more value of the overall impact on stakeholders. Corporate Social Responsibility (CSR) and Environmental Social, Governance (ESG) are two of the most familiar concepts of corporate sustainability. Evaluating these changes and accounting for them in a business will help organizations make better decisions and contribute positively to the different stakeholders’ social, environmental, and economic sides experiences of the various stakeholders. 

A recent trend in Social Value observes that many organizations consider the social value of their operations and how they are directly and indirectly being impacted by different entities moderating how to evaluate, measure, and report social value. The pursuit of well-being and good living is an integral part of human existence, and Social Value is the difference an organization or project can make to the community they are operating within. For example, a company produces affordable fabric from recycled clothes, which contributes positively to the local environment where the company operates. However, it has been understood that the company follows unethical practices in manufacturing which is negatively impacting the people living in the surrounding area. Such practices contribute negatively to the organization’s overall social value, and there are specific geographical locations where governments take action against such practices by suspending company operations.

The recognition of social value is on the rise year after year, and many governments have taken bold steps in enforcing it as part of specific investment activities. For example, the UK Cabinet Office launched the Social Value Act in 2012, intending to require all public authorities to consider all public services contracts’ economic, social, and environmental well-being. 

 Accounting for social values looks at the overall change experienced by people. It includes qualitative, quantitative, and comparative information and environmental changes concerning how they affect people’s lives.

Why is Social Value Significant?

Social value plays a vital role in shifting society from the limited focus to maximizing financial matters and considering social, environmental, and economic values. In addition, it significantly helps in reducing inequality and ecological degradation as fast as possible. It’s the enabler to extend organizations accountability beyond financial returns to consider social and economic returns (gains or losses)

According to the Social Value International Framework, seven main principles will enable organizations to identify and account for social value. 

Identify Stakeholders 

Based on the scope of the activity, stakeholders need to be identified and involved in the analysis to understand how the planned activity will affect them and change their lives, whether positively or negatively. As an example, the development of a new main road will require involving the relevant authorities and the residents around the area to understand how this development will affect all stakeholders.

Understanding what changes

Based on the mapping of stakeholders, it’s essential to understand all the different types of changes that will be experienced by the stakeholders, supported with clear evidence that can prove the change. For example, the residents of the surrounding neighborhoods of the road project might have a different change experience as some might benefit from the road while others will extend their commute time. The process must capture all of the changes.

Value the outcomes that matter

Not all changes have the same value or weight of impact. Therefore, it is vital to make decisions based on detailed analysis and evidence to value the stakeholders and the changes they expect to experience. The valuation will focus on the relevance and importance of these changes so that the ones with the highest impact to be considered further are materialized.

Include what is material

It’s not the most straightforward step out of the seven, but identifying which changes or outcomes will be included or excluded is critical to analyze the social value accurately. This can be achieved by an assurance mechanism in evaluating the changes experienced by the stakeholders. Some of the changes identified might lack enough evidence to enable it to materialize, or a particular stakeholder will experience the exact change regardless of precedence or suspension of the activity. After several evaluation and assurance steps, such outcomes can be excluded to include the changes and outcomes that will help identify the social value more accurately.

Do not overclaim

By claiming only what the activity is responsible for in creating as an additional value. This will enable all involved to understand better how to contribute to the activity’s social value positively.

Be transparent

To achieve transparency, accountability decisions must be supported with documentation about stakeholders, outcomes, indicators, sources and methods of information collection, different scenarios considered, and the communication of results to stakeholders. Reporting changes of the planned activity due to the analysis will strengthen the reliability of information identified and the calculated social value.

Verify the results

As with any reporting framework, independent assurance of the findings is important to evaluate decisions made through the process to verify that the accountability of social value has been to a reasonable level.

How to calculate Social Return On Investment?

Understanding how the social impact related costs and their benefits are necessary for investment decisions, and a key factor that has been on the rise recently is how to measure the Social Return On Investment. SROI is a framework for measuring and accounting for costs and benefits the organizations have on society to improve well-being and contribute positively to the environment. SROI is beneficial to corporations because it can improve program management through better planning and evaluation. SROI can be calculated evaluative based on actual outcomes that have already occurred or forecasted to ensure that the investment will achieve its intended results.

In simple words, SROI = Social Value Created / Investment Input over some time, where social value is an investment in establishing a local manufacturing process for building material in a developing country that will enable employing XYZ of people. The SROI then gets calculated to show a ratio that, for example, for every 1$ invested in this project, the investors are generating 3$ in social value based on the positive impact they are bringing to the economy and society where they are located.

Opinion – Can we use the UN SDGs to report on social value?

 The UN SDGs are based on global issues that are important to everyone. Using them as guides will help achieve the goals set globally and account for a certain level of social value. However, taking this into a more localized approach and following the above principles will enable any organization to account for the social value that impacts the first tier of stakeholders whose lives will change based on the organization’s activities. The accountability will be of more value to the local community than reporting on UN SDGs.

What can Alpin provide?

Our Corporate Sustainability experts are entirely capable of supporting developers and investors to run social value that will enable them to make better investment decisions—resulting in a positive contribution to the environment and society. In addition, we can support establishing corporate-wide policies that will help with better annual sustainability reports.