How to Solve 3 Common Sustainability Gaps We Found In Companies

Both European and UK governments are beginning to increase requirements on the private sector to not only monitor, but also prevent potential and actual environmental & human rights risks, representing an increase in negative duties (meaning “an obligation not to cause harm”). This is demonstrated best in developments like the recent EU Corporate Sustainability Due Diligence Directive and German Supply Chain Act legislations that mandate companies within threshold to establish due diligence mechanisms to prevent risks. Looking more locally, the UK Government has established its Social Value Model which is included in public sector tender specifications. This represents a positive duty (meaning “a moral obligation to benefit or aid others”) on businesses bidding into the public sector to drive advances in climate action, local economy growth, lessening of inequalities, and wellbeing of the workforce and communities.

How Has Value Match Been Helping?

Over the last 12 months, Value Match has been using its Social Impact & Improvement Model (SIIM) Assessment to help businesses of all sizes and sectors identify what gaps they have in their operations and governance when it comes to sustainability. The SIIM Assessment is a tool that looks at a business’ policies, processes, and governance around sustainable practice, in context of its size and sector to ensure that the assessment arrives at proportionate feedback. Using this model, we conduct an assessment of the business across six areas of sustainability:

1. Environment & Carbon Management
2. Human Rights & Labour Standards
3. Equality, Diversity & Inclusion
4. Resource Use & Circular Economy
5. Social Value Delivery
6. Health & Wellbeing

Taking account of a business’ goals too, the model provides clear action steps and insights into what areas need to be prioritised in order to maintain competitiveness in sustainability and to future-proof practices ahead of further legislative changes.

What Have We Discovered?

Across our assessments on businesses of many different sizes, regional contexts, goals, focuses on private/public sector, and sectors of operation, these are the common gaps we’ve found and what we believe businesses should be focusing on to address them:

1. No carbon footprint baseline established

While not all businesses lacked a carbon footprint baseline, we found that some businesses that are either serving or wanting to serve the public sector in the UK lack this form of environmental impact assessment. Increasingly, the UK public sector is pushing the requirement for their suppliers to have carbon reduction plans as per the PPN 06/21 standard, in which a carbon baseline is a part of that planning document.

The creation of a carbon footprint baseline is critical to understanding where your organisation’s impact is at now, and contributes to a carbon reduction plan. The PPN 06/21 carbon reduction plan is a great way to identify where your business has impact and where efficiencies/reductions can be achieved across areas like:

• Direct emissions like fuel usage in vehicles (Scope 1)
• Indirect emissions like energy & gas for buildings & offices (Scope 2)
• Upstream and downstream emissions like employee commuting, business travel, wasted generated in operations, emissions from suppliers, and emissions from distribution (Scope 3)

Creation of a plan by this standard is best practice and ensures your operations are working toward a policy of Net Zero by 2050 at the latest. Value Match can support with this.

2. No social value strategy in place

Social value previously was quite difficult to define, however, the UK Government Social Value Model has provided 5 themes to outline what social value is in the UK:

1. COVID-19 recovery: Helping local communities and economies recover from the effects of the pandemic through jobs, re-training, and community support.
2. Tackling economic inequality: Developing the skill levels of the current and future workforce, driving uptake in high growth sectors with skills shortages, and narrowing inequalities between UK communities/regions.
3. Fighting climate change: Encouraging environmental stewardship through making resource use more efficient and protecting and improving green spaces.
4. Equal opportunity: Reducing inequalities through supporting those with disabilities into employment, providing good quality work regardless of sector or location, and combatting modern slavery risks in communities and supply chains.
5. Wellbeing: Protecting and promoting mental wellbeing among employees and encouraging positive integration between local communities and private & public sector organisations.

All businesses, while having some activity that addressed social value in some way, did not have an overarching strategy directly mapped to the above 5 themes. This is a missed opportunity and gap, given that all public sector procurements must have a minimum 10% weighting afforded to social value considerations.

Developing a sustainability & social value strategy will enable your organisation to identify what areas of sustainability it can have a strong impact on. Not only that, but since human rights, community rights, and the environment are all interlinked, building that overarching strategy will also allow for a more well-rounded and cohesive approach to be developed to address multiple sustainability issues, rather than having them compete with each other. All effective and impactful initiatives need leadership from the governance level to be properly sustained and supported. This is also something that Value Match are working with organisations to implement.

3. Uncoordinated sustainability delivery through procurement

Many of the businesses we evaluated had no overarching sustainability objectives which they mandated suppliers to deliver through contracts. For those that did manage to deliver sustainability objectives, these were mainly to do with adherence to supplier codes of conduct; perhaps a few sustainability initiatives were delivered as part of a contract.

While its understandable that small- and medium- sized enterprises (SMEs) may not have the spending power to dictate certain outcomes, larger organisations that may be key suppliers in public sector contracts should be considering this in their supplier relationships. While sustainability initiatives and goals can be largely dependent on a client’s requirements, procurements internal to your business could be leveraged to deliver on sustainability as a standard requirement. This is why identifying which impact areas are important to your business, through a carbon reduction plan and a social value strategy, are critical to having a guided approach delivered through supply chains.

The reason that it is crucial to ensure delivery of sustainability initiatives through procurement and mandated through contracts is because there is increasing legislative pressure to have oversight over the impacts of your supply chains (as shown in the EU and German legislations). Similar legislation is already being debated in the UK Government in May 2024. Furthermore, larger organisations have a responsibility to use the influence and financial power they have, to drive private sector practice in the needed direction. There’s no time to dawdle and dally. For every 0.1C increase in global average temperatures, 140 million people’s homes become less survivable.

Case Study

Value Match recently helped a global engineering, construction, and project management client facing these challenges:

• While ad-hoc social value initiatives were delivered on projects, there was no overarching consistent strategy to guide initiatives more broadly, which also made gathering impact data challenging.
• The client’s sustainability department is a small function, with other functions not fully understanding the breadth of social value.
• The client had not established their social value baseline and benchmarking needed to be undertaken.

As a result, the client’s bid teams were often challenged in provided data and evidence to support social value requirements in tender responses.

Using Value Match’s SIIM Assessment, key gaps and recommendations were identified around the client’s internal procurements lacking standardised sustainability outcomes as part of contracts. From this, we identified the client’s need to develop a Social Value Policy directly mapped to the UK Government Social Value Model to home in on what outcomes were important to tender for moving forward. Beyond the recommendations, the report has served as a tool in raising awareness of social value areas internally and in persuading executive leadership staff. Development and rollout of this new policy is ongoing for the next 12 months to ensure consistent delivery of social value.

Takeaway Points

For businesses of all sizes to achieve meaningful impact that is relevant to their context, size, and sector of operation, they need to:

• Identify where and what their environmental & social impacts are.
• Develop a strategy identifying important impact areas and how to address them in a cohesive manner.
• Deliver these strategic outcomes through procurements, train staff to carry this out, and to encourage supply chains to follow suit.

Through Value Match’s carbon reduction plan, SIIM Assessment, policy development, and training offerings, we are happy to provide the support needed to help you on this journey.