As social impact organisations stir our conscience, where does your organisation stand?

The shifting landscape: towards a ‘social value economy’

"The modern economy and traditional corporate structures have, until recently, been designed to ‘do well’ but not necessarily to ‘do good.’ That’s changing. Organizations are maturing and increasingly view their role, at least in part, as an active ingredient for repairing our world. Through our counsel with leading organizations and our commitment to multiple ‘bottom lines,’ we’re proud to be part of this essential and positive shift."

Kathryn Young
Managing Partner, Canada

• The first global social enterprise census has been published by Social Enterprise UK and the British Council, an international organisation for cultural relations and educational opportunities, revealing “one of the largest movements of our time” in the shape of an estimated 11 million social enterprises – businesses driven by a social or environmental purpose.
• There is no leader or figurehead for social enterprise; instead, Francois Bonnici, head of social innovation at the World Economic Forum who wrote the foreword to the census, says it is driven by people “developing the kind of companies we need in the 21^st Century”. These companies are promoting the concept of social value across the corporate landscape, with social and environmental issues no longer the preserve of the social impact sector.
• PwC defines ‘social value’ as “the impact an organisation has on society. It considers the economy, environment and people as one ecosystem which needs to thrive together”.
• While social value was born in the public sector, it is now gaining traction in the private sector. A Bain & Co. survey shows out of 300 global cross sector CEOs, 85 percent view social issues as urgent concerns for their business; 60 percent say its primary role is either to create “positive outcomes for society” or “balance the needs of all stakeholders.” The moral obligation of corporate social responsibility (CSR) has morphed into a charter for enterprise, with social value at its heart.
• Moreover, social value has been passed into legislation in the UK, with the Public Services (Social Value) Act 2012 and Procurement Act 2023 designed to create a ‘social value economy’.
• Building on this, the ‘Social Value 2032 Roadmap’ is an innovative programme led by Social Enterprise UK, in partnership with global companies Jacobs, PwC, Shaw Trust, Siemens and SUEZ recycling and recovery UK. The programme aims to make social value cover all public procurement, worth around £400 billion¹, and influence spending in the largest private companies, accounting for 20 percent of UK GDP.
• Other countries such as the Republic of Ireland, Canada and Australia are moving towards embedding social value into procurement legislation.

 

"Social impact organizations demand an inclusive, holistic style of leadership. Their leaders have learned to master the complex balance between financial returns and social and environmental benefits. These leaders go beyond simply sparking change; they serve as role models for the broader economy, which is undergoing a profound shift toward a value-based model that creates benefits not only for shareholders, but also for customers, employees, society, and the environment as a whole."

Christian Watts
Managing Partner, Switzerland

 

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The need for social value drives convergence

• Social value has become synonymous with corporate sustainability. “The companies that lead on social issues, such as DEI and socially responsible supply chain practices, don’t view these efforts solely as risk mitigation,” said Karthik Venkataraman, a partner in Bain’s Diversity, Equity, & Inclusion practice. “It’s the opposite, in fact. The leaders in this space have found ways to directly tie their social efforts to the commercial logic of their businesses, opening new opportunities for value creation by better serving all of their stakeholders. They see a symbiotic relationship between the concepts of ‘doing well’ and ‘doing good.’”
• How do we quantify the commercial element of social value? In a first-of-its-kind data review, The World Economic Forum’s (WEF) State of Social Enterprise report estimates there are 10 million social enterprises globally, generating approximately US$2 trillion in annual revenue and creating nearly 200 million jobs. This is close to the global apparel industry, valued at US$1.79 trillion² and almost twice the size of the US$1.01 trillion³ advertising industry.
• In a volatile political and economic environment, people – employees, consumers, stakeholders and fragile communities – are looking to the public, private and third (NGO, voluntary, not-for-profit and civil) sectors to address the crises and challenges they face. The language is therefore evolving. Phrases such as ‘socially conscious leader,’ ‘purpose-driven growth,’ ‘cause marketing,’ and ‘people-first transformation’ reflect increasing recognition of the need to rebalance profit, people and planet.
• Convergence between non-profit and for-profit organisations is therefore driving a new vision for social value and the kind of leaders who can drive this change.  For-profit organisations are rebalancing their approach to profit, people, and planet, driven by climate emergency, the UN’s sustainable development goals and shifting attitudes among shareholders and stakeholders. On the other hand, non-profit leaders are seeking more personal accountability.
• The greatest of these shifting attitudes is the desire among employees, particularly in Western societies, to work in organisations that have a broader sense of purpose: providing social value to employees, customers and the global population, many of whom, it is felt, face unacceptable levels of social and economic inequality.
• Convergence is therefore also driven by need. In emerging markets, the private sector is filling gaps in infrastructure and society, meeting social needs through private enterprise, while social enterprise is showing the private sector how to become more purpose/socially driven.
• Read more on the topic: 
  Social Enterprise UK/ and British Council: More in common – the global state of social enterprise
  Pioneers Post: 11 million social enterprises worldwide
  Bain Report: Making Business Do Better for Everyone
  World Economic Forum/Schwab Foundation/Bertelsmann Foundation: State of Social Enterprise
  Social Enterprise UK: Social Value 2032 – Creating a Social Value Economy

 

“There is a convergence happening: top-performing enterprises in both the not-for-profit and for-profit sectors have much to learn from each other’s best practices. Supporters of not-for-profits increasingly expect more commercial discipline in decision-making and resource deployment. Meanwhile, for-profit stakeholders are calling for a balance that integrates traditional performance metrics with investments that benefit society at large. For both sectors, this convergence points to a balanced, sustainable approach to advancing all enterprises.”

Craig Stevens
Managing Partner, United States 

 

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ESG backlash and a new path to sustainability

• Environmental, Social and Governance goals – typically the 17 sustainable development goals adopted by UN Member States, together with net zero ambitions – were a catalyst for non-profits and for-profits alike, with societal benefits at the core.
• However, the associated pace and extent of change proved rather startling for some stakeholders, employees and consumers, leading to push back, evidenced in investor, leadership and buying decisions. A balance is beginning to emerge, helped by a more thoughtful and measured operational and communications strategy.
• The term ESG cast a wide net with accountability based on a subjective interpretation of priorities for each company or investment house. This led to a plethora of solutions: from ESG committees at board level, to inclusion in various teams ranging from health & safety to finance to HR. Various reports and research studies show the focus primarily on climate and biodiversity; EDI (equity, diversity and inclusion); and human rights, indigenous reconciliation and community relationship.
• Aspirational goals took little account of the practicalities however, while myopic algorithms exacerbated the lived experience in a new environment led by ESG initiatives. Politicisation and weaponisation among political parties, campaigners and fervent advocates did not help.
• One of the starkest initiatives was around the Social element, in the form of EDI. In focusing on minority populations, efforts towards equity and inclusion had unintended consequences, with ‘incumbent groups’ feeling either penalised or marginalised. Diversity initiatives were significantly adjusted due to legally risky and potentially discriminatory practices.
• As organisations struggled to tread a careful line with EDI, a study among asset owners and managers by Canadian ESG consulting firm Millani reveals a distinct drop off in attention to EDI as a priority for investors; 51 percent of study respondents mentioned it in 2022, compared to just 16 percent in 2024. This, in an environment where shareholders cashed out more than US8 billion from sustainable funds in 2023 in favour of higher returns elsewhere. 
• Despite general pushback on ESG in numerous markets, particularly in North America and Europe, Environmental factors remain strong, shifting the focus from Social-based initiatives (EDI) to Environment-based initiatives. According to Moody’s, green and sustainable bond issuance reached US$281 billion in Q1 2024, up 36 percent from US$207 billion in Q4 2023. Drivers are primarily the achievement of net zero for scope 1 and 2 emissions, and renewable energy generation. The net zero focus is based on alignment between what the bond market is interested in and fund investment goals, with green bonds distinctive in being tied to specific projects, while sustainable bonds are tied to more holistic ESG strategies.
• Nicholas Tatlow, a managing director at Morgan Stanley states in ESG Dive, “Our new thesis is that sustainable investing is absolutely around to grow for the medium and long term”. Despite noting pushback on ESG, Morgan Stanley’s view is that it has only had a “pretty modest impact on the overall ESG fund flows”.
• Organisations continue to push forward on ESG initiatives. However, in light of growing knowledge and wariness around an acronym that could be described today as a blunt instrument, those at the forefront talk more broadly about ‘sustainability’ as a strategic foundation, integrated into all aspects of the business.
• Read more on the topic: 
  Investment Executive: The shift in ESG priorities
  ESG Dive: Sustainable investing positioned for ‘secular growth’ despite ESG pushback
  WSJ: Wall Street’s ESG craze is fading

 

"We can no longer do business as we once did. The shift toward a social value economy acknowledges that long-term success depends not only on profit but also on societal well-being and environmental impact. This movement, from the early ideas of ‘People, Planet, Profit’ to today’s focus on social value, reflects a deeper understanding of how organizations impact the world. Emerging markets, where companies often fill institutional gaps left by governments, hold immense potential for those who embrace this shift. Organizations that proactively integrate social, environmental, and ethical standards are better positioned to navigate global complexities and achieve sustainable growth, building resilience as they balance purpose with profit."

Farah Esmail
Partner, East Africa

 

¹ According to UK Government Public Spending Statistics
² and ³ Statista