Social value: moving forward

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Social value: moving forward

Written by Kevin Robbie | 29th April 2024

There is a greater buzz around the concept of social value than usual. In the past few years the growth of social value teams or practitioners within business and government has rivalled the growth of social impact practitioners and teams in the for-purpose sector. Businesses have also started to develop social value targets to sit alongside their commitment to net zero, with the for-purpose sector now starting to grapple with this issue in their impact measurement.

The recent Green Building Council of Australia Social Value Discussion Paper has brought a sharper focus to this issue for business. Alongside this Social Value International (SVI) is developing their approach and understanding based on two decades of practice. Here we unpack the key concepts and outline five key actions that businesses can take to understand the social value they are creating.

Our social value experience and expertise

From its inception a decade ago, Think Impact has been at the forefront of developments in social value and social valuation. We are experienced social impact measurement practitioners who have moved into the ‘more than measurement’ space with the deliberate decision to focus on supporting organisations from every sector to manage for better impact. See the article Managing for better impact on the Asian Impact Management Review website (free subscription required) to find out why we think this shift is so crucial.

Our team has deep expertise in social valuation with nearly half the team qualified as Social Return on Investment (SROI) practitioners – three at advanced level who are on the assurance panel for Social Value International (SVI) and one of only two qualified SROI trainers in Australia. Two of our Directors were also involved in the start-up of the Social Impact Measurement Network Australia (SIMNA). Members of our team started their journey in SROI in the early 2000s – so we’ve been watching with interest the growing buzz around social valuation, here and internationally.

Market changes and trends

Central to this increasing buzz in Australia is the recently launched Green Building Council Australia (GBCA) Social value in the built environment discussion paper. One of our team recently presented at the GBCA’s Transform 2024 conference. The focus this has brought on social value is to be welcomed and we hope the discussion paper opens up a wider conversation within Australia about how not only business, but government and the for-purpose sectors, can increase social value.

But this social value paper doesn’t sit in isolation. Swirling around are a few other key trends driving this conversation:

  • The interest in SROI as a measurement and social valuation approach has been sustained over the past decade and is growing (refer to this article by Unmesh Sheth). We’ve seen this within our own practice through both training enquiries but also practical projects.
  • There is better understanding within government of the need to move beyond traditional cost–benefit analysis to more fully embrace wider stakeholder engagement to understand the social value created. We’ve recently seen this practically demonstrated in the interest in the VACCHO evaluation of the culture and kinship program. Ideally, it would be great to see understanding of social value being one of the key strands of the Government’s national wellbeing framework.
  • Some organisations are now setting social value targets and measuring their progress towards achieving these targets. Leaders include Lendlease, Stockland and Australian Unity. Industry research we recently undertook for another company showed an increased interest in this, with a target being seen as a great benchmark for driving change within a business.
  • Within Social Value International (the peak social valuation body operating in over 30 countries) there has been a process of reflection on the learning from around two decades of social valuation practice which is leading to evolution of the methodologies. Alongside this SVI is working with organisations at an international level to support improved decision making based on the new social valuation principle of ‘be responsive’.
  • The growth of impact-weighted accounts that is being driven by new organisations such as the International Foundation for Valuing Impacts who are advocating for a new type of accounting, impact accounting – which will allow corporates and investors to translate their social and environmental impact into the language of currency in order to improve decision making.
  • A growing focus in companies on understanding the ‘S’ in ESG (Environmental, Social, Governance). Companies have established practices to communicate their performance in key environmental or governance areas but have grappled with how to communicate their social impact or social value. This area now has more focus.
  • A growing consumer trend to call out inauthentic representations of social value which poses increased risks for companies who are not authentic. A quick search of the internet will cast up quite a few examples of where this has occurred!

What is social value?

Some recent conversations have led us to believe there is still confusion regarding terminology. This is getting in the way of having the more important discussions around how to drive optimisation of social value. Below we define social value and related terms.

While the term may be used interchangeably with social impact there is nuance and no agreed definition. Think Impact use the following definitions:

Social impact is the effect on people, communities or the environment that happens as a result of an action, an activity, a project, a program or policy.
Social value is the importance people place on the social and environmental wellbeing of people, communities or places.

Whilst we recognise there is a growing sense that social value relates to ‘people’ or the ‘wellbeing of people’, our view is that it is hard to distinguish between people, the wellbeing of their community and ultimately the planet we all live on.

We also recognise that this is a continually evolving space and the following diagram encapsulates some of the blurred lines that exist.

Alongside the blurred lines, it is also useful to recognise there are overlap in some key areas. For example, when carrying out a cost–benefit analysis one can consider areas such as financial value (the importance people place on changes in their personal finances) or fiscal value (the importance people place on changes to public finances). But when using approaches such as SROI, both areas of value sit firmly in the social value camp.

In addition, there is also growing understanding around the importance of ‘country’ in as having both environmental and social value for First Nations peoples. With recognition that lots of social valuation work has also traditionally included environmental value within the overall valuation.

Social valuation is the process of using financial proxies to monetise social impact. This allows social impact to be communicated in financial terms.

Understanding the social value you are creating

With the growing focus on the ‘S’ in ESG, what are the steps a business can take to begin to understand the social value that they are creating? We use the following framework.

This framework allows us to look at the types of activities a company may be engaged in across a range of dimensions (from ‘operations’ to ‘community’) at different levels. These levels take in key considerations such as wellbeing, diversity and inclusion (D&I) and the Sustainable Development Goals (SDGs). The aim of the framework is to support more integrated reporting.

Utilising the framework, we’ve identified five key actions that a company can take.

1. Mapping

The first step is usually mapping the activities taking place within the different dimensions and at different levels. Often organisations have a wide range of activities happening, in different departments or with different people responsible for them. The mapping assists in providing a structure to organise activities within a social value context.

2. Motivation

Once mapped, it is usually necessary to understand the different motivations that existed to commence the activities. We’ve found that some activities relate to agreed strategies, whereas other activities can have historical, or even idiosyncratic reasons for being carried out. We’ve also experienced the situation where there is no clear strategy driving the social value activities, so the motivation is unclear. Being clear on the motivation behind each activity assists with other steps in the process.

3. Measuring

To understand the social value being created it is critical to start measuring the social impact of the activities. There are a wide range of existing impact measurement tools and approaches, our experience is that organisations need to tailor their measurement approach to their circumstances. Often it is a case of not ‘biting off more that you can chew’, so measurement should start in a manageable fashion and build up over time.

4. Make known

Once measurement has happened, the next step is reporting on your impact. This is the final building block for impact measurement. Transparent reporting of impact engages stakeholders and provides a platform for continuous improvement. Many companies already produce ESG or sustainability reports, so an obvious way forward is to integrate your impact reporting into this – an ESG+ report.

5. Make decisions

The final step is about managing for better impact so you can optimise the social value you are creating. This involves making decisions around what type of social value you want to create and using the data to have a more impact-led approach to this.

Consider social valuation

One consideration when working through the above steps is whether your company wants to go down the route of social valuation. It isn’t necessary but can be a very useful way of communicating your social impact.

There are a range of tools such as Social Return on Investment (SROI) or Social Value Modelling that can assist.

Social Return on Investment (SROI) is a framework for accounting for value. It adheres to the SVI principles of social valuation and provides you with a ratio to illustrate the social value that will or has been achieved in relation to the investment that was required.
Social value modelling is a lighter touch approach that follows the SVI principles but does not apply them with the same depth of rigour and uses established banks of financial proxies to produce a figure for social value created.

Moving forward, understanding the social value your business creates will become increasingly important. Measurement of this social value provides a way to communicate the 'S' in your ESG performance alongside developing a more integrated reporting approach.