Accurate Social Value Calculation – Quality Must be Key

In the decade since the Social Value Act came into force, calculating the amount of social value generated by a project has become an increasingly important metric when it comes to judging success. However, with varying approaches, understanding levels and requirements we have to ask: has the true power of social value been lost along the line?

At Loop, we believe that the inaccuracy and current lack of robustness in calculation means that often the wrong story is being told when it comes to social value. Our Principal economist, Ken Chalk, explores why quality is the key to accurate social value calculation.

10 years is a short time in the construction industry, with people and organisations sitting at every part of the maturity curve in terms of the understanding and implementation of social value. This also means there is a wide variety of approaches, focuses and processes, which is precisely what is leading to a warped understanding of what a ‘good’ level of social value generated really looks like.

In the race to create the ‘best’ figures, an element of accuracy has given way to over-claiming. In some cases, the numbers quoted cannot be comparable with the actual value delivered to the people and communities around a project.

Just as the industry talks about ‘best value’ versus ‘lowest cost’ in relation to projects, we must apply the same mindset to ensure accurate social value. If we don’t, it could undermine the very powerful communication tool that monetisation can provide – with an increasing risk of stakeholders seeing it as ‘greenwashing’ or ‘impact-washing’ instead of something of actionable value.

Accepting the reality

Alongside the optics of how a culture of inaccuracy looks both inside and outside the industry, there is an inherent issue of inaccuracy undermining the very purpose of applying a monetary value to social value in the first place.

Monetisation can translate something incredibly difficult to both quantify and communicate into a like-for-like unit that people from any specialism can understand. There are inherent complexities of calculating social value that are always going to lead to a figure being subject to a certain level of estimation, but the purpose of monetisation was for it to be as accurate and representative as possible.

Although new methodologies and data have led to improvements in recent years, there are still significant issues in calculating accurate social value – and there is a need to face the reality that there is no having your cake and eating it too.

There are a great many benefits to monetising social value, but if you choose to, this must come with an acceptance of the complexities and processes that come with it. The industry must demand proper economist-driven approaches like our own, including Cost Benefit Analysis (CBA). If the measurement framework being chosen isn’t reguarly updating, it should set red flags flying.

An inaccurate approach to social value also has serious consequences for decision-making. Simply put, if figures are not robust enough, poor decisions will be made.

Large values may look good written down, the reality is that the actual impact on people and communities – the reason social value requirements exist – will end up being less than if more accuracy was applied to figures in some cases.

A turning point 

Recognising the need for more accurate social value calculations will take a high level of introspective and self-awareness across the industry. A more robust, quality-driven approach to accurate calculation is going to result in changes being seen in the monetary figures – and we have to collective recognise that the highest or the lowest values can be called inherently ‘best’ because of metric-to-metric variation and how social value actually works.

There will be an issue with the industry time-lag that comes with everyone meeting the pace of change, with those choosing to work with the most accurate social value numbers in tenders risking being evaluated against those using less robust figures.

This can be avoided, however, through a concerted, industry-wide effort to educate on accurate social value calculation – and how to communicate it. As already highlighted, social value is not a straightforward thing to calculate and quantify – for example, how do you translate someone’s mental health to a sole monetary figure?

The guidance of experts – like ourselves at Loop – is needed to understand the field and its fluidity. Procurement frameworks also need to get on board with this fluidity, making sure they are truly integrating social value into their processes from day one – and that they are using regularly updated and accurate figures in the process.

It’s not quite the wild west out there on the social value plains, but the inherent complexities of calculations mean there will also be evolution – and we will never get to the point of a fully standardised, codified method for all.

Scrutiny and understanding of what accurate social value looks like from stakeholders is only going to increase over time. There is plenty of evidence out there about overclaiming. Everyone knows that it simply isn’t okay to do anymore. Organisations need to be bold in forging change, getting on the right path with the right tools and methods, and making that their point of difference for accurate social value.

Find out how Loop’s social value software and consultancy services can help you accurately report your social value.