Leveraging the Social Value Act to improve ESG performance
The Public Services (Social Value) Act 2012, more commonly known as the Social Value Act, became law in 2012. It requires public authorities to consider the social and environmental impact of their procurement processes. This has in turn encouraged providers to embrace a broader perspective on value creation by evaluating the social and environmental outcomes of their activities and not just the financial ones.
The Act is a powerful tool to drive the integration of environment, social, and governance (ESG) principles into organisations’ operations. In 2018, the government defined social value through a series of priority themes and policy outcomes, and these overlap with ESG concepts. Currently, the themes are: Covid-19 recovery, tackling economic inequality, fighting climate change, equal opportunity, and wellbeing. While managing ESG is a risk-based assessment to mitigate likely negative impacts to an organisation, the Act drives organisations to create positive social value in line with the five themes. The net result in both cases can align neatly with the mission of purpose-driven nonprofits.
Adopting the Act helps foster more meaningful engagement with stakeholders. By considering social and environmental factors alongside financial ones, organisations can better understand the expectations and needs of their service users, employees, funders, and communities. Engaging stakeholders builds trust, enhances transparency, and helps align strategies with societal goals. This inclusive approach not only improves decision-making but also contributes to more sustainable development and long-term financial success.
The requirements of the Act and the discipline of reporting on ESG create a potential advantage for nonprofits. By upping their ESG game, they can score more highly on the Act’s themes, and make sure that they are not left behind when it comes to winning bids. Various independent funders also now have a range of ESG-type expectations on how their grantees should behave, whether by demonstrating good governance through safeguarding policies or developing strategies to reach net zero carbon emissions by 2030. Nonprofits should already be creating a positive environmental or social impact, but it can be much harder to quantify and articulate what that social impact actually is.
The Act provides one framework for nonprofits to enhance their ESG performance. By considering social and environmental factors alongside financial considerations, organisations can promote stakeholder engagement, enhance their reputation, drive innovation, and improve operational efficiency. Embracing the Act can be a good model for all nonprofit organisations to build a more sustainable and resilient future while contributing to the wellbeing of society at large.
At Moore Kingston Smith, our ESG team can help you to measure your environmental, social and governance impact and advise you on ways that you can demonstrably improve in all three areas.
If you would like to learn more about reporting on and improving your ESG credentials, get in touch with Jeremy Read, ESG Partner.