Social value: a sustainability buzzword without a meaning?

This year's buzzwords are social value and social impact. Despite being buzzwords, and meaning much the same thing, there is an important question behind them: what contribution to society do community projects, investments and mainstream businesses make? The appeal of measuring this social value (or impact) is that economic valuation techniques can be used and therefore hard answers can be given.

A further part of the burgeoning popularity of social value and impact is the recent Social Value Act. This requires public sector organisations to think about the social value that can be generated through buying services - and gives permission to take that into account in procurement decisions. It has generated a lot of interest across the UK, from those providing services to local councils in particular. Demonstrating social value is seen as a way of distinguishing yourself from the competition. What's more, councils are gradually extending the act to the procurement of goods as well as services.

Another driver will be the forthcoming release of guidelines from the working group on impact measurement, which is part of the Social Impact Investment Taskforce set up by the G8 in 2013. The guidelines set out a good practice approach to the area.

However there are many practical obstacles to producing an assessment of the social value or impact of a project - it is a new area and can present a lot of technical challenges. One of these, which is scarcely addressed in either the Social Value Act or the guidelines, is the issue of additionality. Additionality is all about the marginal difference a project makes, and what value it adds. For example, if you want to work out whether a carbon saving project is worthwhile, you need to guage what would have happened in its absence. Similarly, in a social value context, to assess community projects or the difference that a particular socially-minded investment is making, it is relevant to ask the question: what difference is the project making compared to an alternative project? Or what would have happened if the project didn't take place?

The evaluation of marginal impact relies on the intention to make a positive differential impact in the first place. But there is another question that can be asked: what is the total or absolute impact of a company or project? Not just the impact of the change it makes, but the full range of impacts for which the company or project can be held responsible. This does not depend on trying to do good, and may be applicable to any kind of activity.

Clearly companies have impacts that go way beyond the special purpose community projects they may set up. Think about the carbon emissions from a factory for example, or the human rights consequences of major infrastructure projects in Africa. Their effects are very real and there is no reason why their overall impact should not also be assessed. It is a very important question to ask of any business. But in this case it is of little use to ask the question as to the marginal difference they make. Given they are operating in a market context, there will always be another company that could have done the same job, so the marginal impact will be negligible. Needless to say, the social value that flows from mainstream companies completely dwarfs that of their community projects. Therefore companies like Unilever and those in the property, construction and waste sectors, are measuring and reporting their gross value added (ie the total value of goods and services produced) in an effort to be more attractive to their clients or the public.

That's not the end of the challenges facing social impact. There are also technical issues about the handling of impacts that have no market price, such as health and safety. But these are common to both the marginal and absolute approaches. In the end, of course, both are necessary: they do different jobs, answering different questions. What is needed is some clarity of purpose. As a starting point, it would be good if those championing these techniques came clean on the question to which social value is the answer.

Adrian Henriques is visiting professor of accountability and CSR at Middlesex University, and a social auditor. He blogs at www.henriques.info and tweets at @adrianhenriques.

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