Searching for the business case
Most organisations are accustomed to justifying decisions over business activities with a ‘business case’ as they seem to offer a definitive conclusion about business activities. That applies not only to businesses but also to the public sector and the third sector.
But our society, within which all organisations operate, is demanding more than ever. It no longer enough to deliver a service or product and simply make money. Now it is also important to ask whether in doing so, society as a whole has benefited sufficiently. Or even perhaps whether the positive consequences of delivering the goods is justified by the negative consequences that may accompany them.
So how does an organisation find out whether it is doing its part to justify its licence to operate?
Moving to social case
Instead of a business case, organisations need to build a Social Case and that involves looking at all its activities from mainstream operations to community activities and determining what the social consequences may be. And here ‘social’ includes environmental and the wider economic effects.
There are a lot of challenges to doing this credibly. One challenge is to figure out where to draw the line. How far down towards the customer should you include the consequences? And how far back up the supply chain? Human rights abuses in the supply chain are ever more prominent in the public eye and so the boundary must be drawn with care.
It is also necessary to determine which stakeholders (and which of the organisation’s impacts on them) should be included. Staff, customers and shareholders will no doubt be given priority, as will beneficiaries of community projects.
The wider case
But what about suppliers? And non-customers – perhaps the financially excluded? You might think that granting a social licence to operate on the basis of reasoned evidence is the sort of thing that governments – whether local or central – should be doing.
Indeed that is what they used to do in many areas – and in some areas they still do: think of water or communications, which are highly regulated. But in most cases governments have not only contracted out the business of delivering (social) services but in reality also the business of working out what the social justification for doing them may be.
The Act to follow
The Social Value Act makes this explicit. The Act gives public authorities permission and encouragement to take into account the wider impacts on society of the services they buy during the formal procurement process. And it may well be extended to cover products and development as well in due course.
In the longer term it is likely that constructing a social case will not just be about businesses justifying their role in society to the public but will also be about how public authorities themselves justify their own role. And it is quite possible that a procurement decision that didn’t attempt to take account the wider social consequences of the commission could be challenged successfully in court.
So the assessment of social value is likely to become established in the public sector. And we should remember that the public sector represents about 40% of the total economy. It is therefore very possible that the entire economy will eventually be expected to assess its social value and account for its impact.
Might as well make an early start!
Written by Adrian Henriques
Adrian is a social auditor and author of ‘Corporate Impact: measuring and managing your social footprint’.