Procurement accounts for vast amounts of economic activity around the world. In fact, in 2021-22, gross spending on public sector procurement equalled £379 billion in the UK alone. It’s no surprise, then, that the impact of procurement decisions on society, local economies, and the environment are coming under more and more scrutiny.
But while the will to drive sustainable procurement is growing, many buyers still lack the means to measure, manage, and improve the sustainability of their supply chains. Moreover, those bidding for work often struggle to demonstrate that they can meet evolving requirements.
Our CEO Guy Battle recently spoke on The Procurement Show about the game changing potential of Social Value when it comes to driving sustainability in procurement. As former Lead Partner for Sustainability Services at Deloitte, Founder of the Sustainable Business Partnership, and Co-Chair of the Public Sector Chapter of the Sustainable Procurement Pledge in the UK, Guy brings a unique cross-sector perspective to this topic.
Read on for the highlights of his discussion with hosts Jonathan O’Brien and Paul Philpott.
What is Social Value and why does it matter?
Jonathan O’Brien: Welcome to the show, Guy.
We’ve often talked about ‘sustainable procurement’. But in the public sector, the terminology shifts and becomes about ‘Social Value’. So, what exactly is Social Value?
Guy Battle: Social Value is defined by the Public Services (Social Value) Act 2012 as a triple bottom line issue. Like sustainability, it’s about social, economic, and environmental impact. But the Act’s focus on people and society is what really expands the conversation and highlights the differences between sustainable procurement and Social Value. It puts society at the front and centre of all decision-making.
We’re not just talking about people and planet; we’re talking about people, place and planet.
Jonathan: In the private sector, there are various drivers toward sustainable solutions, from legislation, to cost reduction, to genuine desire to do good. Is there a similar dynamic in the public sector?
Guy: It’s inevitable that there are layers of motivations. But the starting point has to be your key stakeholders: in the public sector, these are communities and citizens. The public sector is there to spend our money, and we want it spent in a way that benefits society.
Of course, making savings matters – for instance, finding a cheaper service. But what if the business winning that contract could give opportunities to young people struggling to find work, helping to solve anti-social behaviour problems? Here we see a different, much broader transaction of value.
I find that when it comes to Social Value or sustainability, the private sector tends to focus on two angles:
- Risk mitigation and reputation protection
- Cost savings
I think cost-savings are currently the key driver. While this matters in the public sector too, value is more important there – long-term social, economic, and environmental value.
Getting specific: How to measure Social Value in procurement
Paul Philpott: Data will be an important part of this. How can organisations measure Social Value across the supply chain? How can they put a value on things that help communities or improve quality of life? How do you decide which activities are most important?
Guy: The key question is ‘how can you measure Social Value and put a number on it?’ That’s a question we get asked all the time. It’s taken me 30 years to answer it.
When I worked in construction, we cracked the environmental piece, but struggled to define the social side. It wasn’t until I left Deloitte around the time of the Social Value Act that I came up with the methodology we now call the Social Value TOM System. It stands for Themes, Outcomes, and Measures, and it’s the basis of our work at Social Value Portal.
It came out of the many conversations I was having with public sector and local government organisations around the country, about how they were applying the Social Value Act. They had been told to embed social value into procurement decisions. But how were they supposed to decide between different bidders? It clearly had to be more than subjective.
So, we came up with an objective way of measuring Social Value, building it around five themes:
- Work: Supporting organisations to promote local skills and employment.
- Economy: Enabling the growth of responsible regional businesses.
- Community: Creating healthier, safer, and more resilient communities.
- Planet: Decarbonising and safeguarding our planet.
- Innovation: Promoting social innovations.
Within each theme, we have a series of outcomes: for instance, more jobs for those furthest from the job market. We then have a series of measures, with each broken down into units, like the number of jobs created for people in long-term unemployment. Finally, we assign a value to each.
Those values are fiscal savings to the Treasury. Giving a job to someone in long-term unemployment is a direct saving for the benefits system. But on top of that, the individual will now have more money to spend locally, bringing value to the economy.
The role of Social Value in fighting ‘greenwashing’
Paul: I imagine some organisations simply put a spin on their activities, without actually doing anything impactful. Is that right?
Guy: Absolutely right. Within the world of sustainability, we’re always fighting the dangers of ‘greenwashing’. This is a really important issue. That’s why the numbers we use come from published government databases. They represent real savings.
We also insist on evidence. When organisations use our portal to manage procurements and measure Social Value, they cannot make a claim without providing proof. We’re making the public pound go further, which means that our shareholders are the public, and we have to be accountable to them.
One step further: Social Value across the supply chain
Jonathan: Of course, the companies delivering Social Value have their own suppliers. How do they begin to measure what’s happening in their supply chains? And is the supply base ready for it?
Guy: Social Value requirements sometimes come as a bit of a shock to suppliers. Having said that, any large organisation working with the public sector now needs a Social Value offering, because the weightings for Social Value in public sector contracts are only going up. If you don’t have a Social Value strategy, you aren’t going to win work with the public sector – it’s as simple as that.
Many tier one suppliers are now starting to cascade these requirements down to the tier two or tier three suppliers they hire. The tier one supplier only does a portion of the work; the bottom of the iceberg is the rest of the supply chain. A company that’s bidding for work needs to capture all the Social Value within that chain.
Paul: Where’s the evidence that we can drive change in the supply chain that truly delivers Social Value?
Guy: The TOM System is essentially our theory of change. We have done enough studies to conclude that a specific input and output will be very likely to deliver a particular impact. We know that if five ex-offenders are hired, it benefits five households in specific ways.
The TOM System focuses on these inputs and the outputs, enabling us to measure the concrete actions organisations are taking. The methods we use come from fundamental, primary studies, but we have adapted them to make it simpler for organisations to ensure that what they are doing will have a real impact.
How Social Value is transforming the private sector
Businesses aren’t there to destroy the planet or communities – they want to support communities and make money doing it.
– Guy Battle, CEO. Social Value Portal
Jonathan: Who is leading the way right now when it comes to Social Value, the public sector or the private sector?
Guy: Initially, the public sector was leading the way. After all, they essentially told the private sector that they would not work with suppliers that didn’t meet the requisite standards. That was the stick. The carrot was the potential to get more work if you could show that you were delivering Social Value.
But while the private sector initially might have seen this as ‘red tape’, the natural good manner and honesty of most businesses has come through. They aren’t there to destroy the planet or communities – they want to support communities and make money doing it.
So, we’re now seeing the private sector start to lead, and doing even more than the public sector thought it could ask for. Procurement is ultimately a partnership between buyer and supplier. Where it works well, there’s no contractual argument: both sides get what they want.
Why Social Value is for everyone
Paul: How can smaller companies begin to drive Social Value?
Guy: Let’s say a business is turning over £500,000, or £250,000 per year.
Does it have a strategy to hire local people? Does it offer a training scheme or apprenticeships? Does the business allow its employees to volunteer? Does it collect donations for the local food bank? When the computers are beyond their working life for the company, does the company recycle them for charities?
This is all Social Value, whether you’re big or small.
What the future holds for Social Value and sustainable procurement
Jonathan: It feels like we’re witnessing the emergence of a new economic model, wherein businesses regard people and the planet as valuable assets, along with profit. Is that fair to say?
Guy: Yes. Many of our customers come to us because their investors are saying: “We want returns, but we also want to know what impact you’re having on society. We want to know about your social return on our investment.”
I can see the green shoots of the revolution – it’s definitely coming. It’s now about changing the conversation so it’s not all about monetary return. It’s about returns for people, planet, and place.
Three key takeaways
Paul: What are the three main things you want listeners to remember from this conversation?
Guy: Firstly, think beyond risk and environmental sustainability – consider social and community contributions.
Secondly, if you are a big business making a procurement decision, don’t just decide based on cost. Factor broader Social Value into that decision.
Third, prioritise transparency. Hold yourself to account and set targets. At Social Value Portal, we have declared that between now and end of 2025, we are going to unlock £100 billion worth of Social Value. Every business should be thinking about how to deliver Social Value. Be bold and be transparent.
We’re researching the biggest challenges and success factors when it comes to delivering Social Value. Help us build the movement by taking part in our survey – you’ll get the chance to win a £500 donation to a charity of your choice!