As the focus on Social Value increases both in public and private sector procurement, questions often arise, is this just ESG?
The simple answer is no but both are intrinsically linked but with distinct differences.
So, what is Social Value? Public procurement policies and legislation define three key aspects of social value as:
– economic (e.g. employment or apprenticeship/training opportunities),
– social (e.g. activities that promote cohesive communities) and
– environmental (e.g. efforts in reducing carbon emissions)
In the floating offshore wind contracts recently announced by The Crown Estate, delivering social value is a key element which is designed to deliver lasting benefit to the South West and connected regions. Therefore, the many participants who will be hoping to support these major infrastructure investments in the region need to consider how they can deliver and develop social value.
ESG, on the other hand, is Environmental, Social and Governance. It is a collective term for a business’s impact on the environment and society as well as ensuring the robustness and transparency of its governance in terms of company leadership, policies, internal controls and how this comes together when considering the needs of stakeholders.
While ESG can be used to determine investment decisions it is inherently strategic for businesses. It’s not just a compliance exercise; it’s a fundamental approach to long-term value creation and risk management. Incorporating ESG considerations into a company’s overall strategy helps ensure its sustainability, in all senses, and success in the long run. ESG is a foundation stone for any well managed and operated business which is seeking to succeed.
Governance, the G in ESG, should consider the operational risks and opportunities, the policies to implement and the strategic direction of the organisation. Both governance and leadership sets the culture of an organisation and the key deliverables, such as sustainable financial performance, resource sustainability and responsible engagement within the community and across the wider stakeholders. Good corporate governance from an ESG perspective is, in many respects, the starting point for delivering social value.
The strategy setting process is where social value needs to be considered. It should not be seen as a quick round of charitable giving or a beach clean but something which delivers real results requiring a long-term strategic overview alongside a plan which will take time to implement and achieve. There may be some “quick wins” in the short term, but these should be part of the wider long-term strategy to deliver lasting change and benefit to the community and the environment in which an organisation operates.
From an organisational perspective, successful social value initiatives typically enhance the ‘S’ in ESG and may also support the ‘E’. They can ultimately provide competitive advantage and differentiation with social value becoming an increasingly important element of tender considerations and scoring.
At a practical level, to ensure the lasting impact of a social value strategy, an organisation needs to proactively engage with its stakeholders, and most importantly, its supply chain participants. Typically, there will also be engagement with related stakeholders in the community such as education, training centres and charities focussed on issues affecting the regional community. This engagement helps to communicate the longer term aims.
While the leadership or governance team in an organisation may set out the ESG strategy to include social value, there is no single formula or format that determines what a social value initiative needs to contain and each programme will be tailored to the size of the organisation, its impact, available resources and its overall objectives.
In summary, well planned, successful social value propositions, working through the value chain have the ability to build both commercial and community partnerships which stand the test of time, improving working relationships, with positive environmental benefits, often leading to economic benefits for all parties.
ESG Benchmark Group and its associated sustainability consultancy, Asesoria Group, are well placed to support organisations seeking to development both ESG and Social Value propositions and strategies. The companies offer a range of solutions from benchmarking performance against global standards through to fully managed solutions around Science Based Target Initiatives, Supply Chain management and Social Value programmes.
