Social value legislation in the UK: What it means for businesses and its global implications

In recent years, the UK has solidified its position as a leader in embedding social value into public sector decision-making. The Social Value Act, initially introduced in 2012 and strengthened in 2021, requires organisations bidding for public contracts to demonstrate their contributions to social, economic, and environmental well-being.

With the UK government committing to evaluating social value as a mandatory part of awarding contracts, this legislation has far-reaching implications for businesses of all sizes.

But what does this mean for businesses? Who is affected, and how should they respond? Moreover, how might this approach shape global corporate practices in the future? This blog unpacks the Social Value Act, its impact on businesses, and the potential for its influence to spread internationally.

What is the Social Value Legislation in the UK?

The Social Value Act (formally the Public Services (Social Value) Act 2012) requires public sector bodies in England to consider how the services they commission and procure might improve the economic, social, and environmental well-being of the area. While initially applied inconsistently, the 2021 update formalised its use across all public procurement processes.

Key updates include:

• Mandatory Social Value Weighting: Social value must account for at least 10% of the scoring criteria in tender evaluations, with some contracts weighting it as high as 30%.

• Standardised Evaluation Themes: Government guidance introduced clear themes such as COVID-19 recovery, tackling economic inequality, fighting climate change, and promoting well-being and diversity.

• Broader Application: The Act now covers a wider range of public sector bodies, affecting local councils, NHS trusts, and central government agencies.

Who Does It Affect?

1. Businesses Bidding for Public Contracts
   Any organisation seeking to win public sector contracts must now demonstrate tangible commitments to social value. This affects industries ranging from construction and transport to IT and healthcare.

2. Supply Chains
   Large contractors are increasingly passing social value expectations down to their suppliers, requiring smaller businesses to align with these principles. For SMEs, this presents both a challenge and an opportunity to differentiate themselves.

3. Social Enterprises and Charities
   Organisations with a purpose-driven model are naturally aligned with social value objectives, giving them a competitive edge in public procurement.

What Businesses Need to Do

To remain competitive in a social value-driven procurement landscape, businesses must adapt their operations and strategies. Here’s how:

1. Understand the Metrics
   Familiarise yourself with the government’s Social Value Model, which outlines evaluation criteria across five key themes:

   • COVID-19 recovery

   • Tackling economic inequality

   • Fighting climate change

   • Equal opportunity

   • Well-being and health

2. Incorporate Social Value into Core Strategy
   Social value can’t be an afterthought. Businesses should embed it into their operations, aligning their practices with broader societal goals. For example:

   • Offer apprenticeships or training schemes to tackle unemployment.

   • Reduce carbon emissions through sustainable practices and supply chain management.

   • Champion diversity, equity, and inclusion in hiring and leadership.

3. Measure and Report Impact
   Demonstrating social value requires data. Businesses must track and quantify their contributions, using tools such as the National TOMs (Themes, Outcomes, and Measures) framework. This includes:

   • Job creation statistics.

   • Environmental impact assessments.

   • Community engagement metrics.

4. Collaborate with Local Communities
   Partnering with community groups or charities can amplify a company’s social impact. For example, a construction firm might work with local organisations to offer skills training or renovate community spaces.

Potential Challenges for Businesses

While the Social Value Act creates opportunities, it also presents challenges, particularly for SMEs or businesses unfamiliar with social value practices:

• Resource Constraints: Smaller organisations may struggle to allocate time and money to track and report on social value.

• Navigating Bureaucracy: Understanding and meeting public procurement requirements can be complex.

• Competing with Larger Firms: Companies with more resources may have an advantage in meeting higher social value thresholds.

However, these challenges can be mitigated through strategic planning, partnerships, and investment in sustainability and social initiatives.

How Other Countries May Follow Suit

The UK is not alone in its push to embed social value into procurement. Similar frameworks are emerging globally, indicating a broader trend:

1. Australia:
   Governments in Australia have introduced social procurement policies, such as Victoria’s Social Procurement Framework, which prioritises employment for disadvantaged groups and environmental sustainability in public contracts.

2. Canada:
   Canada’s Community Benefits Agreements require infrastructure projects to provide economic opportunities to marginalised groups, including Indigenous communities.

3. European Union:
   EU public procurement rules encourage member states to consider environmental and social factors in awarding contracts, particularly regarding sustainable development goals (SDGs).

4. United States:
   Although less formalised, initiatives like the Biden administration’s focus on climate-resilient infrastructure and diversity in federal procurement mirror social value principles.

For multinational corporations, these developments highlight the importance of adopting global best practices in social value reporting and execution.

Implications for Global Corporates

For global corporations, the rise of social value legislation underscores the need to adopt a proactive approach to sustainability and social impact. Companies operating across multiple jurisdictions must:

• Align with Local Regulations: Tailor social value strategies to meet the specific requirements of each market.

• Adopt Global Standards: Use frameworks like the UN’s Sustainable Development Goals (SDGs) to create a unified approach to social value.

• Invest in Transparency: Develop systems to measure, report, and communicate social impact across all operations.

Final Thoughts: The Business Case for Social Value

The Social Value Act is more than a regulatory requirement – it’s a catalyst for businesses to rethink their role in society. By embedding social value into their operations, companies can unlock new opportunities, strengthen relationships with stakeholders, and future-proof their brands in an increasingly purpose-driven world.

For businesses, the question isn’t whether to embrace social value, but how to lead the way.