Demystifying social value in the water sector

Water companies have “considerable latitude to leverage their expertise” to address social issues in a holistic manner. Yet unlike financial or tangible assets, social value is something which can be often challenging to quantify. Writing for Utility Week Michelle Baker, social value lead, infrastructure at Atkins, explores how the water industry needs to demystify social value along the way to proving, and improving, its impact.

Throughout the history of our species, water and community have been inseparably intertwined. And though our water infrastructure is now largely invisible to most day-to-day lives, those ties still bind.

Our water companies have extensive reach as large regional employers, investors, and landowners. They possess intimate knowledge of local challenges and opportunities, interwoven as they are with communities. That means they have considerable latitude to leverage their expertise, infrastructure, and resources to address social issues in a holistic manner, collaborating with stakeholders to drive sustainable change.

However, unlike financial returns or tangible assets, social value is often challenging to quantify. The inherent complexities of measuring and attributing social outcomes to specific interventions make it difficult to provide concrete evidence of the value created over the long-term. Lack of standardised methodologies for measurement further hampers comparability and benchmarking of social impact across the industry. Often, therefore, social value in projects can be diluted, or is limited to generic provision of local employment opportunities, such as apprenticeships.

It doesn’t have to be this way. Other industries, such as highways and rail, are showing how to set out new frameworks for nurturing, monitoring, and sustaining social impact. Meanwhile, in the public sector, public procurement notice 06/20 (PPN06/20) is driving a vision of integrating tangible measurements of social value into procurement. Though it’s still early days, the direction of change is clear, and increasingly expectations, from regulators, investors and customers, are recognising and accelerating that shift.

Breaking the ice

That’s a step change from how social value used to be seen – as abstract, aspirational or rhetorical. Some of the long-term benefits of social value can be hard to demonstrate, or tally with traditional financial reporting mechanisms. The effects of investments in education, for example, may take decades to materialise fully, and are part of a complex web of factors. Additionally, social value extends beyond the direct beneficiaries of water services, encompassing broader societal benefits such as environmental conservation and economic growth. However, difficult doesn’t mean impossible. With comprehensive frameworks and robust measurement tools, we can capture and evaluate these complex interdependencies.

Moreover, where historically the industry’s primary drivers were economic efficiency and regulatory compliance, mindsets are rapidly evolving to encompass a wider outlook that places value on our society too. That’s generating pressure to identify areas of improvement, refine social investment strategies and allocate resources more effectively to deliver broader outcomes. But we’re also recognising how accessible social value can be. It can appear in myriad ways, from linking in with local health and wellbeing initiatives to promote active travel or boost access to green space, to providing local employment and helping build a platform for thriving communities. That offers a wealth of opportunities to make a difference.

A rising tide lifts all boats

Positive social impacts will benefit water companies, to boot. By enhancing transparency and accountability, companies can quantify and report social commitments, evidence the positive legacy outcomes, and help to build trust within the communities they serve. And by aligning their efforts with local stakeholders, companies can ensure that social investments are tailored to community needs, have a lasting impact and create real value in a time where affordability is already stretched. For water companies, that’s a golden opportunity to fulfil their duty to their customers, and rebuild their reputations as custodians of the community.

At the same time, water companies are facing the same worsening skills shortage as the rest of the infrastructure sector. To attract the multidisciplinary skills they need to manage water in a changing, challenging and competitive landscape, targeted, tangible social impact will attract talent, and help organisations stand out from the crowd. As the skill sets required to manage modern water systems continue to diversify into important new areas, such as digital technology and nature-based solutions, that pressure will only grow. Yet by developing forward-thinking social strategies now, companies can lead this evolving space.

Adding measurable social value into business cases will also strengthen them at a time when there is growing scrutiny over infrastructure spending. This will be particularly acute for water, as both an everyday resource and tightly-regulated critical national infrastructure. Greater depth and breadth of impact, strategies to enhance co-benefits, and evidence-based measures that match the needs of local areas; these and more will increasingly be expected by regulators. Schemes deploying advanced reporting frameworks, meanwhile, to facilitate impact assessment at scale and show a return on investment across different forms of capital, will gradually become business as usual.

Ripple effect

However, these have been uncharted waters for our industry, so we must be focused in our approaches. Even small steps, such as greater emphasis on social value in early stakeholder engagement, can realise real benefits for improving the quality of local engagement, and lead to more relevant outcomes. That, in turn, will drive better collaboration, with communities, local authorities and the third sector, allowing water companies to play a critical role in connecting people to face challenges together.

As we face huge societal shifts in the coming decades, from climate change to digitalisation, there is a growing need to align social value with our decision-making. If we can recognise and monitor multiple capitals, we can better understand impacts and dependencies, develop line of sight to real value, and get the most out of investment decisions. For too long, social capital has been an auxiliary, awkward priority. But thanks to developments in quantitative and qualitative reporting, we’re entering a new era of the possible. For water companies, that’s an opportunity to shape a brighter future for their communities – and for themselves.