Accounting for greater social value in the UK

Social value. Just two words but few phrases possess more potential to transform how we live, work and are governed. While there is no single, all-encompassing definition, it comes down to understanding and managing the impacts of a project, organisation or policy on society as a whole. It’s not just about money but more about taking into account factors such as the environment and the well being of individuals and communities. Once these are measured and analysed, then decision-making is strengthened and better outcomes should follow.

Jeremy Nicholls is in no doubt of its importance. The chief executive of Social Value UK (SVUK), he believes that a greater focus on the social and environmental impact of an organisation’s activities will not only result in an increase in equality, but will help the environment too. “The way that society generally accounts for value is no longer fit for purpose,” he says firmly. “It needs to take into account much more than just financial value, but changing this won’t happen overnight.”

More than money

SVUK is a membership organisation for individuals, organisations and companies that support principles and standards in accounting for social and environmental value. Theirs is a coming together of like-minded people and groups who believe that social value should be measured from the perspective of those affected by an organisation’s work. To do so, however, requires generally accepted accounting principles that can be used to account for and manage the social, economic and environmental outcomes created by an activity or organisation.

“We believe that you need some standards and principles – standards on social value, like a global standard for social accounting,” explains Nicholls. “If globally accepted principles exist, then we can focus on getting better at applying them. They will help organisations and individuals – whatever sector they operate in – understand and communicate the social value that their work creates, clearly and consistently. But this has to be a bottom-up approach with lots of people doing it and sharing it. Consequently, some kind of assurance process is needed to make sure it is good enough and this process should generate information that can be used for decision-making.”

Statute limitations?

Recent legislation in the UK has helped move this issue to the fore. For example, The Public Services (Social Value) Act which came into force on 31 January 2013 requires public bodies to consider how the services they commission and procure might improve the economic, social and environmental wellbeing of the area. And later that year, reforms that aimed to simplify and strengthen companies’ non-financial reports were also unveiled. Under these changes, companies’ annual reports would have to include additional information on human rights issues, gender representation across the company and disclosures on greenhouse gas emissions.

“In the end, this is a public policy issue,” says Nicholls. “The fact that companies produce accounts which then get audited is a public policy requirement and the accounting profession has really been built up on the back of this legal obligation. Since 2013, all businesses have to report on their social and environmental issues, in enough detail for the user of the accounts – like shareholders, for example – to understand what’s going on. But there is no guidance on what you have to include and no requirement for it to be audited. Unfortunately, this means that the user of those accounts is not left with a totally clear picture.”

Moving the dial

For Nicholls, sustained progress on this issue will only come if genuine standardisation occurs – not only in the UK but internationally too. “If we don’t get some kind of standardisation around the world then we will never see the type of change we are aiming for,” he concedes. “There are lots of impacts that need measuring and in different ways – that’s clearly true – and we should leave this as much as possible to the businesses on the ground and their discussions with stakeholders about what they should measure and how. But the frameworks for what you should be accountable for are very thin few on the ground. So we need to push this agenda.”

Another priority is bringing together more stakeholders from across different sectors and environments. Despite the day-to-day differences they face in terms of their businesses and priorities, Nicholls maintains that on this agenda they have much in common. “We need to get better at getting cross-sectoral conversations going, because a lot of the time people are talking about the same thing but using slightly different language,” he says. “This includes corporate, public sector and not-for-profit and we want to convene discussions by getting them all in a room together as much as we can.”

These similarities, though, underpin his enduring optimism that real progress is in sight. “The growing cross-sector recognition that there needs to be movement on this issue makes me positive about the future,” he says. “We believe anyone can start to account for their social value, regardless of the size of the organisation or the amount of resources they have available. A world where there is a broader definition of value will change decision-making for the better, leading in turn to a stronger impact including reduced inequality and greater environmental protection. This is the real bottom line – not just a set of financial figures.”

 

FURTHER READING

  • Bringing finance to the fore. CIPFA International Chairman Ian Ball tells us about delivering radical reform in his native New Zealand and the enduring importance of new international public-sector accounting standards.
  • Making numbers count. Doug Beal explains how big data can support smart decision-making in government