What is Social Value in Business?

Social value is the value that stakeholders experience through changes in their lives.

Some, but not all of this value is captured in market prices. So how can social enterprises demonstrate the social value they are creating? The Principles of Social Value provide the basic building blocks for anyone who wants to make decisions that take a wider definition of value into account, in order to increase equality, improve wellbeing and increase environmental sustainability.

The Principles can help a social entrepreneur craft their account of social value: a story about the changes experienced by people. This account includes qualitative, quantitative and comparative information and also includes environmental changes in relation to how they affect people’s lives.

The Seven Principles of Social Value:

1. Involve stakeholders: Decide what gets measured and how this is measured and valued in an account of social value by involving stakeholders.
2. Understand what changes: Articulate how change is created and evaluate this through evidence gathered, recognising positive and negative changes as well as those that are intended and unintended.
3. Value the outcomes that matter: Making decisions about allocating resources between different options needs to recognise the values of stakeholders. Value refers to the relative importance of different outcomes. It is informed by stakeholders’ preferences.
4. Only include what is material: Determine what information and evidence must be included in the accounts to give a true and fair picture, such that stakeholders can draw reasonable conclusions about impact.
5. Do not over-claim: Only claim the value that activities are responsible for creating.
6. Be transparent: Demonstrate the basis on which the analysis may be considered accurate and honest, and show that it will be reported to and discussed with stakeholders.
7. Verify the result: Ensure appropriate independent assurance.

The Principles have been drawn from concepts underlying social accounting and audit, sustainability reporting, cost benefit analysis, financial accounting, and evaluation practice. By applying the Principles, it is possible to create a consistent and credible account for the value that is being created or destroyed. The outcomes, and the measures and values of outcomes, can remain specific to the context, activity, and the stakeholders involved.

Adopting the Principles will sometimes be challenging as they are designed to make invisible value visible. Social value is often invisible because it relates to outcomes experienced by people who have little or no power in decision making. Applying the Principles will help make organisations more accountable for what happens as a result of their work, and this means being accountable for more than whether the organisation has achieved its objectives.