Social value: Having good intentions is not enough, experts say
CPAs can help an organization build its social-value strategy and measure its impact (Getty Images/mapodile)
As the social pillar of environmental, social and governance (ESG) action continues to capture more attention among investors and other stakeholders, there is also a growing awareness of the need for organizations to “walk the talk” through concrete actions.
“Social value is not just about making a donation to a charity or attending a fundraiser or holding an auction," explains Davinder Valeri, CPA, director, strategy, risk and performance, at CPA Canada. “It’s about engaging in activities that add value to the people who work at the organization and to the community in which the organization operates.”
Here are some concrete ways for organizations to develop a social-value mindset—and how CPAs can help in the process.
ASKING THE RIGHT QUESTIONS
As explained in CPA Canada’s recent publication, The Rise of the Social Pillar: An Introduction to the ‘S’ in ESG, the social pillar of ESG encompasses everything from diversity and inclusion to human rights, health and safety, security, ethics and Indigenous reconciliation.
According to Valeri, there are a number of questions related to these areas that an organization can and should ask itself. These include:
- How does your organization treat its people? Do they want to come to work every day?
- What social factors are most important to the organization, investors and broader stakeholder groups (e.g., local communities in which they operate, supply chains)?
- How important are mental health issues to your organization? How about diversity, equity and inclusion?
- Are you aware of the interdependencies between different social issues and the need for balance? (For example, you might be doing well in one area and be missing out on another.)
- Are you a part of the community around you? Are you benefitting it?
Valeri adds that it’s important to consider the wider impacts of an organization’s products. “Imagine you have a fast-food restaurant. The place is spotless. You have reduced the amount of plastic you use. But have you thought about the garbage bins a block or two away, where some of the waste likely ends up?”
When it comes to assessing social factors, Valeri points out that CPAs have a role to play, even if it requires a shift in mindset. “CPAs are good at measuring things quantitatively, such as manufacturing or financial capital,” she says. “But it’s still a challenge to measure social impact qualitatively. Still, we need to think about the impact of an organization’s actions because, in the long run, this impact will be quantifiable and of interest to stakeholders.”
ADOPTING A STRATEGY: THE VANCOUVER EXAMPLE
Once it has determined the social issues that are relevant to its particular situation, an organization can implement a suitable strategy.
For example, since 2019, the City of Vancouver has been implementing a new social procurement framework for its supply chain processes. According to Patrice Impey, chief financial officer and general manager of finance, risk, and supply chain management for the city, this has been a multi-stage process.
Setting a goal: The new social procurement framework is focused on enhancing community health and well-being by advancing reconciliation, inclusion, equity and diversity by elevating populations that had historically been underrepresented in its procurements, says Impey. “For example, we identified social enterprises that employed people from underrepresented populations as well as organizations that demonstrated leadership in areas such as employment equity. We also reviewed our base of contracts and identified goods or services that were good candidates for diverse suppliers to participate.”
Taking action: The city uses a variety of approaches when awarding contracts, says Impey. “For small contracts, we invite suppliers we have identified as being diverse or social businesses to bid. For larger contracts, we determine a specific evaluation weighting for sustainability requirements and inform larger vendors of the city's diversity goals and expectations, and ask them about their own diversity and employee equity policies.”
Impey adds that for major contracts, the city sometimes asks large suppliers to subcontract with smaller, diverse suppliers who would not have had the scale or capacity to bid on their own.
Measuring and evaluating: Impey points out that the city has set ambitious goals and tracks who is applying for government contracts to see if they identify themselves as diversely owned, controlled or certified or if they have advanced employment equity. This provides the city with information to measuring and reporting on who is receiving contracts, she says.
As Valeri points out, the measurement phase is a key area where CPAs can add value. “CPAs can not only help build the strategy and talk about the risks and opportunities, but they can help with performance—measuring the strategy’s impact,” she says.
Adapting is a key part of successful strategizing. For example, since Vancouver was one of the first organizations to implement social procurement, there was some initial confusion and sometimes learning curve among vendors and suppliers who had to adjust to the city’s needs, says Impey.
Even so, she says that since 2019, vendors have moved quickly to align their operations to the city’s values, and staff members have been “remarkably supportive and enthusiastic” about incorporating diversity into the city’s procurements.
Impey is already looking forward to the results. "Our goal is that by 2023, 50 per cent of Vancouver’s contracts in terms of number and value will be awarded to diverse suppliers. While there are still many opportunities to work more with some underrepresented populations—we are pleased to report that we are getting closer every year to this ambitious goal.”
And, just as Vancouver is successfully moving toward its target, Valeri is confident that CPAs will influence and inform decision-making by continuing to develop the right tools and methods to properly address issues relating to social, natural and human capital.
“Today, organizations need more than a vision about social issues,” she says. “They need to back up their intentions with concrete action. And CPAs can be instrumental in ensuring they deliver on their promises.”
THE SOCIAL PILLAR AND CPAs
Find out why the social pillar of ESG issues is growing in importance and how CPAs can make their mark in this area. Learn how they can lead ESG initiatives and integrate them into strategies that create long-term value. Finally, dive into the A4S Essential Guide: Social and Human Capital Accounting.