The new social value measures present an opportunity for bigger picture thinking on the role of business in society
Thousands of suppliers to central government, ranging from FTSE 100 listed multinational companies to small businesses, will need to set out how they will deliver social value through the services they provide, following new measures announced by the government. While many may be tempted to take a tick-box approach, Lexington's Head of Responsible Business Alice Wood argues there is an opportunity for businesses to demonstrate innovation and creativity, which will not only help the UK recover from the pandemic but help them win more business with the public sector in the years to come.
What has the government announced?
The government announced new measures to deliver value to society through public procurement. While local authority commissioners have been required to consider how they can secure wider social benefits through procurement since the introduction of the Social Value Act in 2012, central government has so far had no such obligation. With the introduction of the new measures, all government departments will use a new social value model to assess and score suppliers on the wider positive benefits they bring by delivering the contract.
What does this mean for business?
From January, all businesses seeking to win government contracts will now have to explain how they will deliver the government’s social value priorities. All bids will contain a minimum 10% social value weighting and the government plans to set out when it might be appropriate to set a minimum requirement for social value such that failure to achieve that score results in a “fail”. This means that many large businesses will have to upskill their teams quickly. But designing and delivering social value strategies is unfamiliar territory and will require not just a good grasp of the new evaluation model but a deeper understanding of how to effect positive social impact through the services they are delivering. This is not an easy task.
As many in the charity sector will attest, interventions that look good on paper can be difficult to implement or have unintended consequences in the real world. While a company may win a tender based on what look like good ideas, the government will also be monitoring outcomes. Over the next few years, companies that consistently fail to deliver will gain a reputation for not designing and executing interventions well. This could lose them business in the longer term.
Where should businesses start if they want to succeed at social value?
While the government has said it will provide guidance for suppliers, as well as materials for sector bodies to train their members, there is some bigger picture thinking that businesses can begin to do now, which will help set them up for the future.
- Shift from thinking about limiting negative impact to widening positive impact
For decades, businesses have thought the challenge was to limit the negative impact they have on society and the environment. How to eliminate pollution, child labour, bribery and corruption from their business and supply chain are questions that are discussed frequently in the boardroom as executives consider the impact on their share price or reputation if a scandal were to occur. How to widen positive impact is not frequently discussed, as success in business is usually measured by the health of the bottom line. Social value, however, requires a business to think differently. It requires companies to consider how they can serve a societal need through the goods and services they deliver, and how they deliver them. Taking a purpose-led approach, thinking through how the business can use its unique skills and strengths to solve problems for people and planet, is key to developing social value strategies that will deliver a high social return on investment.
- Shift from thinking about the customer to the beneficiary
Large businesses selling their goods and services to the government understandably spend a great deal of time engaging with their customers. While the general public may never directly use some of the goods and services being procured, from IT software to aircraft carriers, the public is always the ultimate beneficiary. With this new focus on social value, companies will need to give even greater attention to what the public needs. A multi-national brand can never fully understand the needs of every local community. So businesses will need to think carefully about how they can foster new partnerships with organisations who do understand these needs and actively co-design services with stakeholders and the local community to ensure they meet them.
- Consider following in the government’s footsteps
Large companies have enormous power to effect positive environmental and social change through their supply chains. Some progressive companies have already set themselves targets for incorporating more SMEs and VCSEs in their supply chains. Johnson & Johnson, for example, set up its Supplier Diversity Programme in 1998, and is now spending over one billion dollars annually with small businesses and diverse-owned suppliers. In the UK, Social Enterprise UK’s Buy Social Corporate Challenge has seen £65 million spent with social enterprises over the last three years, leading to the creation of over 600 jobs and over £5m reinvested into social missions. SAP, one of the corporate partners involved, is making it even easier for organisations to find and do business with certified social enterprises on Ariba® Network, the digital procurement portal where more than £2 trillion in business-to-business commerce is conducted annually. By following in the government’s footsteps, businesses can use their everyday procurement spend to transform lives and contribute to a more inclusive and sustainable economy.
Alice Wood is a Director and Head of Lexington’s Responsible Business practice.