Build Back Better – Journal – Social Value Exchange

What’s happened to the Environment Bill?

The (abridged) story so far…

The good news is that after multiple delays the Environment Bill was granted Royal Assent and passed into law in November 2021. As it’s no longer a bill, it is now called the Environment Act (2021).

The Act was created in response to Brexit, to fill the legislative void around environmental protections and has been developed with the intention of establishing Britain as a world leader in environmental protection. There’s real commitment to this goal in the Act, which mandates the Secretary of State (which currently is Priti Patel) to review global environmental legislation every two years and see how Britain measures up.

The Environment Act creates the legislative framework for legally binding environmental targets and standards to be created. It does contain some deadlines within it, but most of these will be created in the next couple of years. The Act means that, as far as possible, future governments will be held accountable for reaching the future targets set in the next couple of years.

Targets, you say…

In some ways ‘targets’ is a misleading word, as they’re actually legal deadlines. They involve compliance with an objectively measurable standard, by a certain date. (A hypothetical example would be to ban all types of non-recyclable plastics by the end of 2039.) Targets will be set by a parliamentary process called an ‘affirmative procedure’.

The responsibility for creating them lies with the Secretary of State, who does have the power to adjust them up or down, although there are controls around how this can be done.

What will the targets include?

At least one target for the areas of air quality, biodiversity, water and resource efficiency / waste reduction must be created by 31st October 2022. These targets will have a deadline of at least 15 years in the future (2037). In addition targets for PM2.5 and species abundance must be set. The species abundance target deadline will be before the end of the decade and the PM2.5 target is open-ended in terms of the deadline.

It isn’t clear exactly what the targets for the main four environmental themes will be, though there are indications on their direction from policy makers working on them, ahead of a public consultation in February 2022.

Air quality is ‘the single most significant environmental public health concern’. The targets will likely include reducing the annual mean level of fine particulate matter (PM2.5) in ambient air (as required by the Environment Bill) and in the long-term, reducing population exposure to PM2.5.

Resource efficiency and waste targets will support the transition to a circular economy. The targets will help increase resource productivity and reduce the volume of ‘residual’ waste we generate.

Biodiversity loss is closely linked to climate change. The targets will help improve the quality of habitat on land, including freshwater and coastal sites, improve the quality of our marine habitat, improve the overall status of species populations on land and in freshwaters, and finally, restore and create wildlife-rich habitat outside protected sites through appropriate management.

Water quality impacts the health of natural ecosystems and waste water must be carefully managed. The targets will help reduce pollution from agriculture, in particular phosphorus and nitrate; reduce pollution from wastewater, in particular phosphorus and nitrate; and reduce water demand.

More information can be found here.

The environment will be considered in policy making

The Environment Act requires environmental impact to be considered in policy making via a set of five environmental principles. This applies to all areas of government except for Treasury, Defence and Wales. A final statement on these Principles is due following a consultation last summer.

How will public and private sector organisations be held accountable?

Interim targets will be created via Environmental Improvement Plans (EIPs). These Plans will include annual reports to parliament from the Secretary of State and a review of whether the environment has improved in the given area over the 5 year period the EIP applies for.

The Office for Environmental Protection (OEP) is being set up to monitor progress and receive complaints about compliance issues, with the power to resolve them or pass them onto the High Court.

The OEP represents an increase in government attention towards climate change issues over time and follows the creation of:

The Climate Change Committee, an independent statutory body – not a regulatory body – set up under the Climate Change Act (2008) to advise on emissions targets and carbon budgets, assess the UK’s climate risk, etc.
The Environmental Audit Committee, a parliamentary select committee set up in 1997, which holds the government accountable for its environmental impact via reports and inquiries.

Where does net-zero come in?
The legislative path to reaching Net-Zero is really worthy of another blog. The UK government already has a legally binding net-zero target, as the first major economy to commit in law to reach net-zero relative to 1990 levels by 2050. In summer 2021 a target was set to cut emissions by 78% by 2035 compared to 1990 levels. Ahead of COP26, the Net Zero Strategy (October 2021) set out the policy initiatives in support of net-zero. Current targets applying to net-zero also include no new petrol and diesel cars from 2030, fully renewable electricity by 2035 and a green tax on gas bills by 2030.

More Sunday musings… on Brexit.

A few weeks ago I watched a short video of Dr Adam Posen talking about Brexit. If you haven’t seen it and want to, here’s the link. Posen is an American economist, President of the Peterson Institute for International Economics and spent 3 years on the Monetary Policy Committe of the Bank of England.

Posen sets up what he sees as the economic risks of Brexit – throwing up barriers to trade with our biggest partner by far (over twice as big as the US), the risk to the City of London as a financial centre, the ending of the role of the UK as an entry point to the EU for non EU member economies and the problems of not being in the Single Market as opposed to a customs union.

He asks, rhetorically, what might be perceived as weaknesses in the EU economy versus the UK economy to warrant our decision to leave – on an economic basis? He cites over-regulation, an excessive welfare state, demographic decline and the problems with the Euro.

Posen argues most of these things don’t apply to the UK. We have the least regulated labour market in the EU, the smallest welfare state and the demographic issue was being alleviated by economic migrants from eastern Europe. And, of course, the UK was not a member of the Single Currency.

In short: if the UK was to stay in the EU, none of that would change.

By his analysis, we’re removing perceived over-regulation in other areas versus everything else that were never material issues in the first place. ‘There is no economic upside,’ according to Posen.

Is it worth our ‘sovereignty’, then? It seems to me there is a nuance to European integration lost on some who think, actually, it is.

Ireland isn’t going to unify any time soon. Neither are Czechia and Slovakia, nor Flanders and the Netherlands. They might in 50 years, if attitudes have changed. The point of the Good Friday Agreement and the European Union more broadly is they don’t have to unify. And if you can walk across a border – to work, to meet friends or to go shopping – the urgency of unification and separatism fades. But more and more, people are being forced to choose which side to be on.

Sovereign are working with the Social Value Exchange to leverage up to £50m of procurement spend to maximise Social Value, with local community projects at the heart of the process. This is our project page, with the latest news, resources and ways to stay in touch.

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Use these resources

Here is the recording of the presentation by the Sovereign and Social Value Exchange team in early November 2020.

Here is a link to the slides from that presentation.

Here is a link to the animation and the testimonials from community beneficiaries of the Social Value Exchange used in the presentation.

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In his book ‘The Brand Innovation Manifesto’, John Grant talks about, ‘busting the trade-off in your market’…

‘It is almost a law of market development that breakthrough ideas come from overcoming a former trade-off: luxury made affordable and accessible; home convenience meals that taste like a restaurant; fast cars with good fuel economy.’

Grant goes on to say this is less about messaging and more about, ‘product inventions that really deliver — like the original Golf GTi being affordable but very fast’ (putting aside the issue of carbon emissions, just to illustrate the point).

In context of Social Value and the challenge of creating additional community benefits without seeing government contract values going up, ‘sharing economy principles’ are pivotal to busting this trade-off.

Applying sharing economy principles to Social Value

The principles that govern much of the technology in the ‘Sharing Economy’ can be boiled down to:

Tapping into existing capacity

Using technology to finding the optimal match between those that have spare capacity and those that need it.

Air BnB — rooms. Uber — taxis. Social Value Exchange — capacity building resources for communities.

We’d recommend Peers Inc by Robin Chase, ZipCar co-founder, for an excellent account of how these principles and the businesses that have best applied them (warts and all).

Our view is that sufficient numbers of government suppliers will have resources that are not being used and that could be put to more productive use by community organisations.

Meeting rooms. Staff sitting on the bench. Existing CSR budgets.

The Social Value Exchange drives suppliers to find these resources within their organisations and to put it to more productive uses in local community organisations. And the more suppliers share, the more government contracts they can win. And that is what drives them — the chance of winning more government contracts.

We’re pushing at an open door – most government suppliers have long standing commitments to community investment. We’re simply supporting them by creating a simple user journey and a great user experience.

Plus we’re enabling them from a business perspective — using our platform suppliers can create a direct link between existing CSR (and, by logical extension, their marketing budgets) and sales. This means suppliers can model the return on investment of CSR and marketing spend — squaring that circle and making CSR a genuine and tangible part of business strategy, because it has become a financial strategy.

Build Back Better

Government needs to use the Social Value Act to support its partner better: but what is Social Value and why is it so important to public service delivery?

We all want to see local communities come together to solve local issues. During good times and bad, local people are at their best when they are working, or celebrating, together. A strong local community is an end in itself.

But voluntary and community sector organisations, the invisible infrastructure in our local communities, are also partners with government in the delivery of local public services.

Because of population growth and demographics, government is struggling to meet the demand for quality local public services. The voluntary, community and social enterprise sector, or VCSE, often picks up the slack.

The elderly who are isolated and lonely. Those who have recently arrived in the UK and have no support around them. Vulnerable children and young adults who haven’t been lucky enough to have benefited from a stable family unit. Giving them a supporting hand, helping them engage with the wider world, working with them so they can, in turn, contribute to their local community. This is what your local VCSE does, with little fanfare, day in, day out.

For government the VCSE deals with local problems. Before they become intractable. Before they become an expensive. Before they snowball and land in the lap of government.

This is the ‘preventative agenda’ — a bulwark of government policies across a number of recent administrations. And it’s why the VCSE is such a fundamental part of public service delivery in the 21st century.

And it’s not just demographics and population growth that have created this pressure on public services: local government is in a double bind. An increase in demand for local services has come at a time when budgets have experienced historic cuts. Things are getting worse… to quote Kevin Mitchell, ‘crisis is on the edge of a bell curve and some of the most talented people in local government and the VCS are working round the clock to keep that crisis at bay.’

And, of course, there is now the cost to local government of the response to the Covid-19 pandemic.

But for many, the crisis is already here. It’s a rare week when we don’t hear about the NHS being in crisis. Or a council under serious financial pressure. Or the police unable to deal with rising youth crime.

This is why our customers in local government are so interested in Social Value.

What is Social Value?

The Social Value Act is the legislation that allows government to ask their suppliers to give something back to the geographic areas in which suppliers are delivering services, goods or works on behalf of the government. It’s relatively new — dating from 2013, and woefully underused.

Each year, government spends hundreds of billions of pounds on private sector suppliers. During the government buying process, government is able to ask suppliers to submit proposals as part of a competitive bidding process. Proposals to win contracts are evaluated in terms of price and quality and, following the legislation coming into effect, Social Value.

That’s right — the government now has the legal basis to ask suppliers to support their local communities. And many suppliers have a corporate social responsibility strategy and budgets, so government is pushing at an open door…

When we came across the Social Value Act we saw an opportunity. We saw straightaway that a marketplace approach could work. We were inspired by ‘sharing economy’ businesses — whose marketplaces use tech and data to create matches between those who have excess capacity and those that need it. Have a look at Nesta’s ShareLab programme for some examples (including the Social Value Exchange) of how ‘sharing economy’ principles are being applied to create positive social impact.

The Social Value Exchange matches supplier resource with community projects

We match up community organisations with suppliers in the procurement process, creating a win-win-win for community, supplier and government. We’re working with some of the most high profile councils in the UK and some of the biggest housing associations. We’re helping government spend its money in a way that puts something back into our local communities, that supports thriving, connected and strong communities, and that could potentially improve the quality of life for millions of people across the UK who need our help.

This blog was written in partnership with Impact Reporting.

The Social Value Act (2012) is about empowering contracting authorities in public procurement, to compel suppliers to deliver local social, environmental and economic benefits in addition to what it is they have been asked to supply in the core specification of the tender.

The Social Value Act is currently limited to bodies operating within the public sector, from housing providers, local government, the NHS and construction. Increasingly, public contracting authorities are giving significant weighting to Social Value in tenders. For example, Manchester City Council now apply a weighting of 20% in contracts and many other public bodies are following suit. Such a high weighting may be counter-productive, but it certainly indicates that Social Value is increasingly a determining factor in the success of a tender proposal.

As Social Value becomes consistently embedded in government policy, organisations have the opportunity to strengthen their social responsibility and win contracts in return. The idea is to reward those doing good.

Due to the growing relevance of Social Value for a larger cohort of industries, we partnered with Impact Reporting to produce some hints and tips to consider when applying public sector construction contracts.

1. Recognise your key offering.

Social Value requirements are often led and defined by the contracting authority. Before you commit to a public tender, identify how you can meet, or go beyond the expectations of the contract. More often than not, organisations are delivering Social Value even if they are not aware of it.

So, here are a few things to think about when refining your offer:

What does your organisation have in terms of spare capacity it can put to use?
Can you use your existing expertise to create change?
Reflect on what you doing already. If you’re already employing local people, say so. If you already create apprenticeships, let the authority know!

Other initiatives such as workshops, spare resources and investment grants can go a long way to build strong relationships with the communities you’re working in and create positive outcomes, in a way that is cost efficient.

2. Think big, and work backwards.

Tailor your Social Value to high priority issues in the local area — if you’re working for a local council, reference their commissioning outcomes or community development plans. You’ll maximise the impact of your resources by addressing evidenced areas of need. For example, if youth unemployment is high, can you provide job start programmes?

You can save yourself work and add value by partnering with local organisations you can support to deliver those outcomes. Be creative about this — you don’t have to stick within the limits stipulated in the bid. For example, If you are building a hospital and mental health is a high priority issue in the local area, could you provide resources and expertise to address that need? Remember the local Voluntary Community and Social Enterprise sector (VCSE) are the experts when it comes to creating local social impact, so it would be misguided not to take advantage of that expertise.

Consortium bids are an attractive solution here. Legally, contracting authorities are obliged to allow consortium applications. They are expected to be weighted as importantly as traditional bids. Consortium bids are noted to be advantageous as they promote the inclusion of SMEs in larger contracts — which are often seen to be out-of-reach for the smaller business person. This engages local business more deeply, inspiring them to be passionate about community development plans. What’s more, it improves the delivery of Social Value as more apprenticeships, for example, can be supported.

Be realistic with what you promise. Social Value is often contractually binding and you have a duty to deliver — and reap the benefits (or face the consequences).

3. Be willing to ask questions and seek out knowledge.

The scope of Social Value is very broad and can be brought into all stages during the lifecycle of a construction project. UK Green Building Council provide useful outcomes that can be used to demonstrate Social Value during a tender, centring in on the themes of: jobs and economic growth; health, wellbeing and the environment; and strength of community. These can be extended upon to address other Corporate Social Responsibility topics including diversity and representation.

Articles and reports like this can assist you in understanding what others are doing and applying strong principles within your organisation. Similarly, networking at events can open up discussions about consortium bids and learn from the experience of others in person.

4. Report and evidence.

This is all about understanding how you are going to prove that you have delivered, or are delivering, on your contractual obligations.

Plan out your delivery timescales and how you’ll evidence Social Value over the lifetime of the contract. Will you offer an extra level of detail or impact assessment? Will you carry out impact assessments like Social Return On Investment (SROI) or report qualitatively? Reporting on your Social Value needn’t be a laborious chore to be completed on an annual basis. Do not leave it to the last minute — think proactively, not retrospectively.

Narratives, real-life stories and case studies should not be underestimated. They can particularly insightful when married alongside your financial impact, but are informative in their own right. A collection of these data sets will allow you to thoroughly inform your contractor about your impact more richly.

5. Think about how you are going to sustain your Social Value, post-contract.

Evaluate and learn from your previous Social Value projects, even if the tender proposal was unsuccessful. By creating framework of good practice in your organisation around Social Value, and making it part of the way you operate you’ll be setting yourself in good stead for future business.

While each application for tender will need to be bespoke to the specifications of the contract, you will be able to demonstrate the success of your previous outcomes, and it’s long-term influence on the current bid. There will be elements of Social Value that overlap, particularly if you are applying for similar types of contracts. You should utilise your experience and leverage this exposure to Social Value to add credibility to your new bid.