Although Social Value is gaining traction in the real estate sector, it is still an evolving concept, particularly outside the UK. This is especially true in understanding what Social Value looks like in reality and what’s expected in terms of measurement, evaluation and reporting.
Social Value describes the value an organisation creates for individuals, communities and society as a whole. In the UK, it has become standard practice for most organisations since the Public Services (Social Value) Act came into force in 2012.
On a global level, the UN’s Sustainable Development Goals provide a good proxy.
Social Value initiatives include offering apprenticeships and training programmes, donating staff hours for volunteering, committing to sustainable procurement practices, buying and employing locally, and reducing carbon emissions.
What Social Value means in practice is, of course, likely to change from one job or project to the next, as different communities will have different needs. For example, seeking suppliers that can provide training for local people makes sense in areas where unemployment is high.
Social Value should be viewed as an essential tool to build stronger relationships with local communities. From a property’s available facilities to its contracted services, to mentoring programmes and mental health provision, there is a huge variety of opportunities to improve a building’s standing within the local area.
Stages of an asset's lifecycle
Buildings can have a positive impact on their communities and environment, from planning and construction through to operation – delivering more than just a return on investment. Even demolition has a part to play in unlocking Social Value from an asset.
After almost a decade of working with our members on their Social Value strategies, I would estimate that:
- 20% of an asset’s Social Value comes from the construction phase, primarily through jobs created, local spending, how the tier 1 contractor engages with the local supply chain, and embodied carbon saved.
- 20% is delivered through how the building is managed: using local suppliers for services such as security and maintenance, working with local charities, ensuring the supply chain engages with the local community, and managing on-site renewables.
- 60% of the Social Value delivered by a building is generated by the occupier’s engagement with the local community. This can be through initiatives such as volunteering, offering employment opportunities to those furthest from the job market or introducing decarbonisation initiatives.
Capturing and reporting these opportunities makes a significant contribution to a successful planning application. Planning authorities really want to know how the building will engage with, and contribute to, the local community. It is also vital for investors, who want to understand the broader contribution an asset will make and how that will ultimately deliver value for the building.
Measuring and reporting
Consistency, transparency and alignment are the future for the measurement of Social Value in real estate. Several different methods are currently in use, each with their own purpose.
Calculating the social return on investment (SROI) is often used to demonstrate financial viability. The methodology requires on-site engagement with the beneficiaries, who are asked to value each activity or input. SROI is the ancestor of all Social Value systems and is usually used in one-off assessments. This is because it can be a real challenge in terms of time and cost. More importantly, it does not allow for comparison between buildings and locations.
Another option involves considering qualitative and quantitative factors, which is particularly useful when comparing different Social Value initiatives (for instance, staff hours donated for volunteering, job creation and decarbonisation projects).
An example of this method is the Real Estate Social Value index (RESVI), which has already been adopted by well-known operators such as Unibail-Rodamco-Westfield and Landsec.
Consisting of two halves – a qualitative review (part 1) and a quantitative assessment (part 2) – it has recently been accepted by the Global Real Estate Sustainability Benchmark (GRESB) to provide full-points certification for the global real estate assessment. The solution also involves valuing outcomes, but this is done using a cost-benefit analysis and values the contributions from a societal rather than an individual’s point of view.
While this approach is not as detailed as SROI, it is quicker and less resource intensive. Planning authorities can also use it to understand the financial benefits to their budgets. Most importantly, it can be applied across a whole real estate portfolio, thus offering a comparison of each asset’s performance – something that quite obviously appeals to investors.
Avoiding 'value washing'
Reporting inflated or even self-managed results has the potential to expose a company to reputational damage that could have long-lasting repercussions.
This is why it’s important to have a clear plan in place for how to capture, measure and report on social value thoroughly, accurately and with absolute transparency.
We are seeing a rise in demand for – and reliance on – our measurement framework, the Social Value TOM System™, which stands for Themes, Outcomes and Measures. The system is fully transparent, and because the data is validated by a third party, it adds a layer of protection against any accusations of greenwashing and social washing.
Where profit is measured in standard accounting terms, Social Value is measured by actions, with a monetary Social Value attributed to it. In the UK, employing someone who has been long- term unemployed saves money for the government in benefit payments and provides income to the individual, who will then be able to spend in the local economy.
Unlocking Social Value
One of our members, Unibail-Rodamco-Westfield (URW) has been using the TOM System and RESVI to analyse, monitor and amplify Social Value across two of its key assets, the Westfield London and Westfield Stratford City shopping centres, for a number of years.
Taking Westfield London as an example:
- In 2022, it delivered a remarkable £12,936,856 in Social Value – a notable increase from £11,482,779 in 2021.
- The top contributor to this success in the supply chain was cleaning services provider Grosvenor Services, at £10,204,754. The top Social Value theme for Westfield London was ‘jobs’, which amounted to £11,440,332.
The final figure also accounted for:
- 271 annual salaries to local residents
- 47 weeks of internships and apprenticeships
- £223,524 worth of space provided to local community and charity groups
- A 9% increase in full-time annual salaries for local employees from 2021
- Mental health support for nearly 300 people
- Over 50 hours of volunteering by supply chain partners
- Over 3,000 miles of travel completed with electric vehicles, bringing the miles saved to 54,000.
The Landsec model
Another Social Value trailblazer, Landsec has worked with us since 2018 and has now developed an end-to-end collaboration model for embedding Social Value throughout the development life cycle.
To ensure that all activities are set up to generate measurably positive impacts, Landsec created its three pillars of sustainable development:
- Build well: Creating, operating and investing in low-carbon, restorative places while transitioning to net zero, and supporting customers to do the same.
- Live well: Supporting communities to thrive, enhancing well-being and building places where shoppers are happy and workers productive.
- Act well: Continuous evolution and a commitment to driving sustainability across all activities.
The company has gone on to show what a people- and community-centric ethos can achieve. This ethos is exemplified in Landsec Futures, a £20m fund that aims to deliver around £200m of Social Value by 2030. Targets include helping more than 30,000 people from underrepresented socio-economic backgrounds into long- term employment and increasing the diversity of talent throughout the industry and within Landsec.
The bottom line
Everyone stands to benefit when an asset has actively contributed to building a flourishing local community. The workforce is more resilient, which leads to a booming local economy, increased land prices and a rise in the asset’s value, thus forming a virtuous circle.
Being able to show the Social Value return that a new development or portfolio will bring, as well as the financial return, is what builds a prosperous and successful asset from the outset.
This article originally appeared in Real Asset Insight in May/June 2024.
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