Jan 26, 2023
In this episode, Molly Galloway, Sustainable Investment Associate at Foresight Group discusses the importance of engaging, enabling and empowering people and organisations to work together in the pursuit of social, economic and environmental wellbeing with Guy Battle, CEO of Social Value Portal.
Key Takeaways include:
Guy Battle is the Chief Executive of Social Value Portal – an online solution that allows organisations to measure and manage the contribution that their organisation and supply chain makes to society.
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Molly [00:00:04] Welcome to Foresight Sustainability Podcast, a series that explores the sustainability themes that will play a crucial part in shaping our world in the current period of accelerated change. In this series, we will be sitting down with industry experts to explore some of the major developments in sustainability-related fields and consider the challenges facing businesses in a new decade of climate action. With these sessions, we aim to inform and promote dialogue around the mainstreaming of sustainability. I'm your host, Molly Galloway, I'm a Sustainable Investment Associate in the infrastructure team at Foresight Group, an Infrastructure and Private Equity Investment Manager. Today I'm joined by Guy Battle. Guy is the Chief Executive of the Social Value Portal, an online solution that allows organisations to measure and manage the contribution that their organisation and supply chain makes to society. Welcome Guy, would you like to begin by introducing yourself?
Guy [00:00:57] Good afternoon, everybody. Or good morning. My name is Guy Battle, I am the Chief Executive of the Social Value Portal.
Molly [00:01:05] Great. Thank you for that. Let's jump right into it then with our first question. So the topic of this podcast is social value, but what do we actually mean by the term social value and what's the difference between social value and the social aspect of ESG, which stands for environmental, social and governance, or sustainability?
Guy [00:01:26] There's a lot of jargon, alphabet soup of terms and terminologies and acronyms. So, you got ESG, as you mentioned, environmental, social governance, we've got sustainability, we've got social value, we've got social impact, we've got CSR, which stands for corporate social responsibility. There's so much jargon in this space, but I will try and explain where social value sits in it in simple terms. So if you imagine sustainability as being the overarching definition, overarching term, and that kind of comes from the Brundtland report way back in 1987, that defined sustainability as the social, economic and environmental well-being or impact, if you like. So the first takeaway from all of this is that social value and everything else is all about three elements - social, economic and environment. Within that, you've then got ESG, and ESG grew from a sort of investor analyst, and really ESG is all about risk analysis. What risk sits in your supply chain or in a business you might be investing in with respect to environmental, social and the governance side of things? Next to that, we have social values. So if ESG is about the risk or the downside, social value is all about the upside. So what value does a organisation create or an asset create in terms of social, environmental and economic value created? And that's where social value sits. Now we have the other term, which is social impact, and that is more about the long-term impact. So we have the value created over the short term and then we have the impact created over the longer term by an asset or by a business for society. And within all of that, we've got CSR, corporate social responsibility, which is a kind of subset of social value. So a business that is embracing social value as a way of doing its business will have a CSR program. It'll be thinking about what additional activities can it deliver to the communities that deliver sort of value locally.
Molly [00:03:29] Great. Thank you for that. I think within the sustainability space, there are so many different terms and acronyms that get thrown around, so it's really useful just to clarify the differences there. And I think the key point that I took away was that ESG is sort of more about risk mitigation, whereas social value is specifically about the additional value created in terms of social, economic and environmental impacts.
Guy [00:03:50] Yeah, that is correct. And it's probably worth just noting, Molly, that there is a piece of legislation because what you might some of your listeners might ask is how come we're all talking about social value? It seems to have come from nowhere. And I would agree it sort of has sort of emerged from nowhere. And the reason is that out of all the terms that I've mentioned, the only term that has a piece of legislation sitting behind it is social value and it's called the Public Services Social Value Act, and it was published in 2012. It became law, if you like, implementable in January 2013. And it is a piece of legislation that's specifically aimed at the public sector and requires them to consider social value in all of their procurement decision making. And as a result of that over the past ten years, it's ten years old now. That term social value has sort of started out in the public sector, but leeched into the private sector where they want to win work with local government and central government. And so they're having to address it now in sort of meaningful terms.
Molly [00:04:53] Thank you. That's really interesting. And as the Chief Executive of the Social Value Portal, could you tell us a bit more about what the Social Value Portal is and what its purpose is, and how the Social Value Act sort of plays into that as well.
Guy [00:05:07] Yes. So we were set up on the back of the Social Value Act and specifically we've developed an online platform that helps organisations measure their social value. So when you go to an organisation, you ask it, you know, what's your purpose? And prove to me the social good that you do? Well, that's what our business does. We can help measure that. But what's important about the measurement framework that we developed is that it also allows organisations to put a pound sign on it. So we talk about the wider social, environmental and economic benefits, but then we say it is worth X pounds to society. And so that's the big step that we've moved or developed as a business. And if the business is, or the platform is all about helping organisations measure, manage and also report social value. But within that the platform is also used extensively by both government and also private sector organisations to manage their supply chains, so in procurement . So we help manage the procurement process and so people bid through our platform for work or an organisation wanting to maximise the value created by its supply chain might manage its supply chain through the portal as well. And that kind of cuts to our purpose. So our purpose is to maximise social value through all the customers that we are working with, and taking that number, I've set the business a big audacious goal. Call it our bag, big, audacious goal. And it's to unlock £100 billion worth of social value by the end of 2025. We've so far, Molly, delivered £14.5 billion. We are - we've still got a long way to go, but we have started, which is great.
Molly [00:06:47] Wow, some big goals there, but I'm sure achievable. So could you tell us a little bit more about, I assume you're talking about the national comms framework there. Could you tell us a little bit more about it perhaps, and sort of how you maybe might expect it to be used in practice? Maybe an example and you mentioned sort of public and private. Which sort of industry does it apply to?
Guy [00:07:10] So, yeah, the National TOMs. So we developed the framework, the National Social Value Measurement framework, and it's called the National TOMs because it's structured around a series of themes, outcomes and measures. And there were five themes, the five themes being jobs and skills or creating jobs and skills, the second theme being support for regional or local business. The third theme being supporting our communities, the fourth theme being protecting, regenerating our environment, and the fifth theme being promoting social innovation. Within those themes, we have a series of outcomes. So for instance, outcomes might be more jobs for those who are disadvantaged, or it might be action taken on climate change, or it might be more support for communities. So those are kind of objectives, outcomes. And then of course, what we're trying to do is we need to measure it and put a value to it. So following that more jobs theme for disadvantaged people, different cohorts might be given new opportunities. So long term unemployed people, young people coming out of care, could also be offenders who want to rehabilitate, so we'll count the number of offenders, for instance. And then we will put a value to that to society. So we pick up the fiscal saving to government and the economic benefit. The fact that this individual is no longer committing an offence, they are no longer a burden on our courts and our prison system and they have money to spend in the community. So we then put a value to that in sort of pounds, shillings and pence, and all of that creates this National TOMs. And so an organisation use the National TOMs almost like a menu. So it looks down the list and it's a prescribed list and it says, okay, what are we doing? And then it counts what they're doing and then you put a value to it and all that sort of is logged into the portal. Now that framework then, the National TOMs, is used in many different ways, it's integrated into the portal, so you can use it for procurement. So the public sector in the first instance will say we've got a contract award that's £1,000,000 and we want to award it for waste management, let's say. And so you'll get four organisations bidding for waste management, they'll bid their price in, they'll bid their technical approach in, then they have to by law, submit a social value statement and that's worth a minimum of 10%, in some cases 20% of the overall score. And so they use the TOMs and say we'll do five of those, ten of them, twenty of those, whatever it is, and that will form part of the score. And then that is used as part of the way of assessing which organisation to employ. And so from a procurement perspective, Molly, we are agnostic in terms of industry. We are just trying to get the maximum out of the bidders, if you like, and so yes, we've done waste management contracts, we've done buildings. We've even done grave digging, believe it or not. I mean we are just, we don't mind. So, what additional value can the grave digger bring? And it might be around their environmental credentials, for instance, or they might be doing an apprenticeship. So any business can do that. And so that started with the public sector and it's agnostic to sector. But now, of course, it's being picked up by the private sector who are saying, look, we want to maximise the value we're creating for society and they might be doing that because they're trying to bid for work with the public sector, but they might just be doing it because it's the right thing to do and proves their purpose. And so we're seeing that a lot of large organisations are now embedding it into their own decision making. So for instance, we're working with Roche, who one of our sort of big customers and how do we help them in their supply chain, deliver more social value through the jobs they create in local, or perhaps they're using local businesses to deliver some of the services, You know, in some of those local businesses might be social enterprises or voluntary organisations or do that people volunteer in the community or do they provide expert time to the community? And so we pick up all these elements and put a value to it so we can then measure that social value. Now the additional thing that's important about the National TOMs is that it's been endorsed by government, in particular local government, and is probably the most widely used framework that's out there, certainly in the UK.
Molly [00:11:17] That's fantastic. I think lots of the challenges sort of surrounding social value and the integration of it are probably data related. You know, how do we connect and measure, how do we know which data to sort of focus on. And that's why having a framework like the National TOMs that sort of allows you to actually quantify your social value add, in a way that people can sort of put into context and actually understand as well is sort of so important. And it gives those people making the decisions, the tools that they actually, they need to decide how to allocate resources in a more sustainable and impactful way. So I think it's a really fantastic resource.
Guy [00:11:55] Yeah, that's right. I mean, it has such great success and and what's important about it is that it is repeatable. And what I mean by that is that you can compare what one organisation is doing against another organisations against another organisation. So that means we can create benchmarks. So we have a benchmarking tool. So we've probably measured something like 6,000 or 7,000 individual projects that are being delivered by companies at the moment, and we've got 250, 300 members on the portal. And so we can compare how they're performing against each other by sector, and by year, and by project. And so what this really means is that if you can measure something, you can manage it, and then you can improve what you're doing. And that I think, it cuts to the core of what we're all about in our business.
Molly [00:12:43] Absolutely. And quite often we think of social value being sort of most relevant at the local community level. So sort of local employees, local suppliers. In your opinion, do you think this is true or is it equally as important at regional and national levels as well?
Guy [00:13:01] So I think it's really important to recognise or remember where social value is delivered and lands. So, ultimately, social value is all about people, and so it is always in a place and that place is always local to someone, right? So it's always, you know, whether it's in Dundee or it's in Cleethorpes or it's all the way down in St Austell, in Cornwall. You know, there might be a regional strategy for Cornwall that's being dictated by Cornwall County Council, but it is always delivered in a place and there might be likewise a national approach. So for instance, HS2, national piece of infrastructure, we've done some work for them on social value and whilst it's national money paying for a piece of national infrastructure, it is delivering social value and jobs for people all the way up. It's the length of it. And so I think that it's always important to remember that social value's about people and it lands somewhere and whilst you can have a national strategy for it, you always have to focus on how to maximise it for communities. And what's really important is two words we must remember that we do with are not do to. And what I mean by that, it's fine saying, look, we want to support communities, but don't tell me I'm going to do to communities. I'm just going to give them some social value. Let's ask them what they want and make sure that we maximise the benefit and make sure it's something that is real and needed in that place.
Molly [00:14:26] Yeah, that makes complete sense. And thinking about at the broader level, the EU has recently shelved that proposed social taxonomy, which was the planned classification of economic activities that contribute to the EU's social goals. And its aim was to provide guidelines for investors, businesses and regulators about what is and is not sustainable from a social perspective. Could you tell us your thoughts on why it's been paused, any sort of implications that might arise from this and whether you think it potentially could be picked back up again at some point in the future?
Guy [00:15:02] So it's disappointing it's been paused, without a shadow of a doubt. And if you read around it, then they're saying it's been paused because they think measuring it's too complex. And all I can say is I wish they'd spoken to us first, because that's what we do. We measure it. And it is true that the S in ESG has the reputation of being difficult to measure and complex. But, you know, we've been doing it now since 2015 and we have rafts and rafts of data. And so we know that it's not complex and that it can be done and you can break it down. And I think probably they just tackled it at the wrong level. And what is difficult around the social piece is to measure impact and remember the, right up front of this conversation, I spoke the difference between value and impact. So value is what's delivered there and then, it's hard numbers, it's fiscal saving, it's economic benefit, it's the additional money someone might have in their pocket to spend or the value money you spend with the charity or whatever. If you then want to understand the longer term impact of investing in that charity over three, four, five years time, then that is harder to do. It takes time. So I think probably what they did is just try and expand their envelope of measurement just into, with time, to too long, they should have just kept it more to the inputs and the outputs that can be created rather than the long term benefit, because that just makes it much more difficult and I can understand why they retreated from it. Does it matter? Well, yes, it does sort of matter to investment community, because I think the key reason for these taxonomies was to avoid the greenwashing or the, you know, just the investors pretending they were to do this stuff, but not really following through. So it does actually matter. And I do think that investors shouldn't be claiming social impact unless they have a proper way of measuring it and reporting it and improving performance over a period of time. And I think that's fundamental. And if that is not done, then there's a real chance, unfortunate chance of the whole investment community around ESG and impact being undermined. So we must get there. Having said all of that, what's interesting is that there is EU procurement regulation that exists already that effectively covers social value, otherwise the Social Value act in this country couldn't have been delivered because when it was done, we were part of the European Union. And so that does exist. It just doesn't cover investment. So there are frameworks, or there is a knowledge out that we can use. So I do think it's going to come back. It just seems inevitable. We're doing the green stuff. Let's not forget people. I mean, it's really important.
Molly [00:17:42] Absolutely. And it's great to hear that there are sort of potential other sort of initiatives or regulations that will help to promote and sort of drive forward social considerations. And over the last few years, we've sort of seen ESG as a whole shift from being something that, you know, just a few are aware of to being sort of very much mainstream. And historically, the focus has tended to be purely on the environmental side. But is the sort of social aspect, or the S in ESG, becoming sort of more prevalent? I think I already know the answer to this, but I guess more more to the point, is it at the point that it needs to be or is there more to be done?
Guy [00:18:16] Yeah. So what's interesting is I don't know if any of your listeners picked this up, but at Davos, Larry Fink, some of you will know Larry Fink, CEO of BlackRock, and he, for the past few years, he's been putting this environmental message out there. And I understand and read a little bit of it, is that he was given a really, really hard time at Davos over this. And because, you know, everyone's saying you can't go for net zero, it's going to be too costly. There's a whole sort of issue around investment. And funny enough, I think the S avoids all of that because the S is all about people. And so even if you were to go to some of the most sceptical places in America and you were to say, look, let's not call it ESG, let's just call it, why don't we call it America first? Why don't we say we're going to focus on businesses that are local, that are creating local jobs, that are supporting local businesses? How about that? Is that a problem? And they'll go no, that's what MAGA's all about, isn't it? So, you know, I think what's really interesting that everyone's got really, this whole climate thing, is everyone sees numbers and cost associated. But the people piece, I think is, I think it's a relatively simple thing to do. We just have to get on and do it. So I think it is important to your question, Molly, I think we've got momentum going and let's really, you know, whilst everyone has their eyes on the climate bit and arguing over that, let's get people into the equation. Let's get all our investors, let's get any business, let's get all the buyers thinking about the S in ESG and really making that happen. And, you know, obviously the TOMs is one way. There are other options out there to do the measurement, of course. But the TOMs we know, are a really good way of understanding and measuring. And it's simple. And what's important is not, does it cost money? And I think what a lot of businesses will be surprised about is that they're probably doing a lot of this stuff anyway. They're probably thinking about apprenticeships or graduate schemes. And I bet, you know, most businesses they're volunteering time, dedicate it, allowed for their people. You know, so it's just a matter of just putting this into practice and measuring it and doing more.
Molly [00:20:25] Yeah, absolutely. And like you say, it's exactly why the National TOMs was created. And how do you think awareness and sort of the importance of creating and measuring social value can be driven forward? Because it seems like sort of that's the next big thing that needs to happen. It needs to continue to be really put at the forefront of considerations.
Speaker 2 [00:20:42] Yeah, so I think it's all about the money. So money needs to be more demanding. And so let's think who has the money? So the simple one that's already happening is public sector money. So that's our taxes, right? So any public sector organisation spending money needs to demand more from their supply chain, and that's happening through the Social Value Act, right? We then have investors who are putting money into businesses or infrastructure or whatever it might be. They should be asking for a social report. Tell us what the social impact is. Tell us not only the long term, but also tell us about the social value you're creating through how this money is being developed. That's not different. So obviously, when you're investing into renewables, right, you might be investing into wind generation. So the social value piece doesn't pick up the energy saving or the carbon reduction that comes out of the turbine. That's about the longer term impact. What it picks up is how are those turbines made and how are they maintained? What comes out of how that investment is managed? And that's the longer term social value or the social value that I think organisations need to be thinking about and investors need to be asking about. And then it all goes all the way down to us. Most of us hopefully are thinking about pensions and we should be asking all of our pension managers, pension funds, about what good our money is doing. Yes, of course we want a rate of return, but actually we - I think we can expect and demand a social return on our investment. And if we can make social return on investment become just part of the way investors think about how their money's being used, then we can begin to shift this dramatically. Won't happen overnight, but that then will bring the S in ESG right to the forefront. And so ultimately we'll be able to judge investments, not only on their financial return on investment, but also their social return on investment, which is the place we need to get to.
Molly [00:22:46] Absolutely. I completely agree with you there. And there have been instances where the roll out of sustainability initiatives in other countries have sort of failed or not gone as well as hoped because they haven't been culturally sensitive. And we know that obviously different cultures and different demographics will have a big impact on how social value is defined and measured. So, with this in mind, are there equivalent international organisations building similar frameworks to the National TOMs, which is, to my understanding, sort of more UK focussed?
Guy [00:23:20] Soon to be global, Molly. So yes, the National TOMs, at the moment are UK focussed. We ought to be calling the UK TOMs. This year, we're developing the Global TOMs, so we are developing a framework that will allow any organisation anywhere in the world to measure the social value they are creating in any territory, in any region. Now what's interesting about this is that we are discovering that there are some universal outcomes, that it doesn't matter where you are in the world that remain constant. So for instance, back to what I mentioned earlier, jobs for those who are furthest from the job market, disadvantaged. Okay. Now I don't care where you are in the world, if you're a business and you're operating responsibly, you're going to be interested in that issue. How can I help an organisation? How can I help my community do that? Now, it happens in the UK. We define that as disabled people, ex-offenders, children coming out of care, and long term unemployed, and mothers coming back to work after a period of time out. If you were to go to Canada, they would be talking about, yes, ex-offenders, but actually they'll be talking about indigenous people. If you went to Australia, they'd be talking about Aboriginal people. But the definition of disadvantaged people is the same. It's just defined as a measure slightly differently. And so I think this is where the culture needs to come in. And so the Global TOMs is all about developing a sort of overarching framework made up of universal outcomes that can be interpreted in different territories and in different places within each territory, because we must reflect the cultural differences. And indeed the different needs of each area. We kind of get this anyway in the UK, in as much that what's useful and needed in London, in Southwark, actually is quite different to what's useful and needed in Manchester. And so whilst the language is the same, the needs need to be nuanced to reflect, also the measures need to be nuanced, to reflect the needs. I think it's a bit more the nuancing as you go global, but I do think there's a way of doing this and as far as I'm aware, I don't think anyone else - this is where the UK's leading. I think there's nowhere else that has the social value act. And you know, we are one of those leading organisations who've got the framework out there. So I think we've got a real opportunity, as you know, UK, to go out there and set the standard.
Molly [00:25:47] And is the aspiration for the National TOMs then within the UK to sort of go that one step further and produce a value separately for Manchester and London, for example.
Guy [00:25:58] We already have that in the UK. And so it's interesting, let's take - I've mentioned offenders quite a few times. So when we look at the value created, the fiscal saving, you have to take into account the probability that that individual will not re-offend, because that's part of the value, because you can't just take an average, you've got to take probability because plainly some people will re-offend. So you can't just take the full saving to the courts, for instance, or the police because some people go back to re-offend. The percentage probability of re-offending is different in Newcastle, Manchester and London. And so we already take that into account as it happens. As you start going globally, then those will change again. So we need to find a way of having proxies or values that reflect local conditions.
Molly [00:26:49] That make sense. And there's absolutely no doubt that having one global standardised framework will sort of be incredibly helpful for those looking to benchmark and for those looking to sort of develop their overall approach to social value. And I think that probably draws us about to a close. Thank you for such an interesting and educational conversation. It's been fantastic having you on the podcast Guy.
Guy [00:27:11] My pleasure Molly. Thank you.