Building Social Impact: Demonstrating SROI Under the Public Services (Social Value) Act 2012 in public procurement
The drive for Social Return on Investment (SROI) is central to responsible business practices. The Public Services (Social Value) Act (commonly referred to as the Social Value Act) came into force in 2013 and requires those who commission public services to think about how they can also secure wider social, economic and environmental benefits. In June 2018, UK central government announced it would go further and explicitly evaluate social value when awarding most major contracts. Government departments will be expected to report on the social impact of their major contracts.
This means navigating Crown Commercial Services procurement notes, understanding and demonstrating Social Return on Investment (SROI) is not just a legal requirement but a strategic move. This article explores the practical aspects of demonstrating SROI under the Social Value Act 2012, offering insights into the significance of transparency and accountability.
SROI Calculations in Practice
Define Social Value Metrics: Begin by identifying the social value metrics relevant to your consulting services. This may include metrics such as job creation, skills development, community engagement, and environmental sustainability. Clearly outline the metrics that align with the goals of the Act.
Quantify Social Impact: Collect data on the social impact of your construction and facilities management services. This could involve tracking the number of jobs created, the level of community involvement, and any positive environmental practices resulting from your projects. Quantify these impacts using tangible metrics whenever possible.
Assign Financial Values: Attach financial values to the social impacts identified. While some impacts may be straightforward to assign monetary values, others might require estimation or qualitative assessment. The aim is to translate the social value into a common currency for easier comparison.
Calculate SROI: Utilise the SROI formula to calculate the ratio of social value created to the investment made: SROI = (SocialValueCreated - InvestmentCost) / InvestmentCost x 100
Transparent Reporting: Present your SROI calculations transparently in reports. Clearly communicate the methodology used, assumptions made, and the data sources utilized. This not only demonstrates compliance with the Act but also builds trust with stakeholders.
SROI Equations - A Step-by-Step Practical Guide
Now, let's break down the SROI equation into a practical guide:
SROI = (SocialValueCreated - InvestmentCost) / InvestmentCost x 100
Identify Social Value Metrics (SVM): Determine the key social value metrics relevant to your consulting services. This could include metrics such as SVM = Job Creation + Skills Development + Community Engagement + Environmental Sustainability.
Quantify Social Impact (SI): Collect data on the social impact of your consulting services. Express this impact numerically, for example, SI = 100 jobs created + 200 community engagement hours + 20 environmental initiatives.
Assign Financial Values (FV): Attach financial values to the social impacts identified. For example, FV = £1,000 per job created + £10 per community engagement hour + £100 per environmental initiative.
Calculate SROI: Substitute the values into the SROI formula:SROI = (SI x FV - InvestmentCost) / InvestmentCost x 100
Interpretation: The resulting SROI value, expressed as a percentage, indicates the return on the social investment made. Positive values demonstrate a net positive impact, while negative values suggest a need for further analysis or adjustment in social initiatives.
By following this step-by-step guide, you can leverage SROI as a powerful tool for showcasing the real, measurable, and positive social impact of their services.