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The Role of Social Value in Supply Chains

31 Jul 2024

In recent years, social value has gained significant traction in supply chain management. This shift is largely due to changes in procurement legislation, which now places greater emphasis on broader societal benefits. In this article, we explore the evolving role of social value for supply chains and how it can help create powerful partnerships for good. 

Understanding Social Value 

Social value refers to an organisation’s positive impact on society, beyond profit margins. This could include environmental sustainability, community engagement, and ethical practices. Traditionally, procurement decisions were primarily based on cost-effectiveness, known as the “Most Economically Advantageous Tender” (MEAT). However, the new Procurement Act of 2023 (effective from Autumn 2024) in the UK increases the alignment between company goals with societal impact. 

The Procurement Act 2023 

The Procurement Act 2023 represents a shift that recognises the importance of social value. Here are the key aspects: 

• Most Advantageous Tender (MAT) - The Act introduces the concept of the “Most Advantageous Tender.” Buyers (the procurement professionals responsible for making purchasing decisions within an organisation) must now consider not only financial factors but also wider societal benefits. This includes evaluating how a contract contributes to social, environmental, and economic wellbeing.  
• Early embedding of Social Value - Social value should be embedded from the start of the project. Buyers should set clear expectations regarding social value in planning and during market engagement.  
• Beyond compliance - The Act encourages a shift from compliance to proactive contribution. Suppliers are now evaluated not only on their ability to meet contractual obligations but also on their commitment to social value. [source] 

What does this mean for Supply Chains?  

1. Supplier selection: Buyers now consider a supplier’s (organisations that provide goods, services, or materials) social value proposition alongside cost and quality. Suppliers that demonstrate commitment to sustainability, diversity, and community wellbeing gain a competitive edge. 
2. Collaboration and transparency: Supply chains must collaborate transparently to achieve social value goals. This involves sharing best practices, tracking performance, and addressing any gaps. 
3. Risk mitigation: Social value practices help reduce reputational risks. When supply chains prioritise ethical sourcing, fair labour practices, and environmental mindfulness, they build a positive reputation in their marketplaces and with their customers. 

Best practice  

By implementing best practice into the standard running of supply chain management and procurement, companies will create a more sustainable, efficient, and socially responsible business model that not only enhances their brand reputation but also contributes to societal good. Here’s a few companies setting some great examples: 
 

• Ethical practices: Outdoor clothing brand, Patagonia, is known for its commitment to ethical standards, such as being a member of the Fair Labour Association, using sustainable materials and being transparent about its supply chain process.  
• Low carbon emissions: Supply chains generate around 60% of all carbon emissions globally [source], so, targeting this will help reduce its impact. Leading health technology company, Philips, achieved carbon neutral in their global operations in 2020, as well as sourcing 100% of its electricity from renewable sources. Their website details six steps that help them decarbonise their supply chain. [source] 
• Collaboration with non-profits: Working with these groups can enhance social value as organisations will better understand the local community and can ensure, and discover ways, that the supply chain impacts them positively. Ingeus’ supply chain is 43.7% voluntary organisations. A company setting a great example of this is Unilever. Collaborating with smallholder farmers and local suppliers to improve their livelihoods and with local communities to improve access to clean water, sanitation, and hygiene. [Source] 
• Sustainable sourcing: Focusing on obtaining materials and products in a way that is environmentally friendly, socially responsible, and economically viable. [source] IKEA sources materials like wood and cotton from sustainable sources and are committed to reducing its carbon footprint. 

To learn more ways of integrating social value in supply chain, visit Social Value International, Social Value Portal, and Business In The Community for useful resources. 

Social value is no longer an optional add-on; it is integral to supply chain functions. Changes in procurement legislation have elevated its importance, and companies must adapt by aligning corporate goals with social value to have positive impacts on society, the environment, and stakeholder relationships.