In this environment of increased demand and stuttering supply chains, Australia’s Mining & Energy sector is contributing significant economic value to society. Western Australia exported $4.9 billion worth of battery lithium in 2021-22, up from $928 million in 2020-21. The forecast record $6 billion budget surplus in 2022-23 is largely a result of royalties generated from the current boom in iron ore prices.
Savvy to the potential of the private sector to generate so much more than profit for the benefit of society, Australians demand more than tax revenue as a benchmark of social performance. Accordingly, the Mining & Energy sector is growing increasingly sophisticated in its ability to assess and manage the social impacts of their operations.
Yet social impact assessment and management is only the first step toward achieving stellar social performance. Truly impactful social performance involves more than simply mitigating and managing a company’s potential negative social impacts. It also requires investment in generating, measuring and communicating social value.
What is social value?
Social value is a contested field because it combines two phenomena that are, in many ways, diametrically opposed in nature: the ‘social’ which is a complex flow of resources, values, ethics, relationships and power, all of which are not easily quantifiable and ‘value’, which is commonly perceived as an easily quantifiable measure of financial worth.
As with any contested field, definitions abound. However, one commonly accepted definition of social value is:
“Social value is the quantification of the relative importance that people place on the changes they experience in their lives.” (Social Value UK)
According to this definition, social value is not necessarily best expressed as a financial value. Rather, a statistical representation of people’s perceptions of social change would be more appropriate. For example, “Eighty per cent of people thought that the company’s sponsorship of and participation in local rodeos increased social cohesion.”
How do you create social value?
In the Mining & Energy sector, social value is created over the entire life of a project, as a result of a company’s activities. These activities might be integral to core business operation (such as training and employment, or product and process innovation), or conducted because of social investments in the wider community.
The former is often referred to as ‘reach in’ social investment or ‘shared value’, the latter as ‘reach out’ social investment. Examples of reach out social investment include sponsorship of local sporting or cultural organisations, funding the provision of community and social services, or providing built community infrastructure such as schools, libraries or playgrounds.
While many companies have sophisticated strategies for social value generation through reach in and/or reach out social investment, existing processes and practices for reporting on social value rely largely on qualitative assessment. While qualitative research offers invaluable insights that cannot always be achieved through quantitative research methods, it can be difficult to communicate social value to stakeholders without simplifying it through quantification.
How, then, do we measure and quantify the social aspects of a project?
The challenges of measuring social value
In the Mining & Energy sector, measuring social value is about understanding the difference made in people’s lives as a result of a company’s activities. However, quantified social value is often measured by the financial sum of the resources invested, rather than the outcomes of those investments.
Measuring the resources invested in generating social change is relatively simple. The number of employee hours spent in volunteering activities is, for example, easily quantified using the employee’s hourly rate of pay. The value of ethical and socially responsible procurement contracts might be represented as social value generated in a company’s supply chain.
Take a more complex example – a $3 million social investment expenditure in building and staffing an early childhood centre in a remote community. This is likewise relatively simple to quantify in dollar terms if one takes social value to be the financial value of the investment ($3 million). However, a more robust effort to measure social value might predict the statistical increase in high school graduation rates in 15 years’ time following on from that centre. Publicly available data can be used to project the savings in the public health system due to more positive health outcomes of graduates who may not otherwise have graduated, and increased income tax revenue due to increased workforce participation. The value of public savings plus public revenue is then presented as the assumed social value generated.
All these examples could be construed as social greenwashing - particularly if the assumptions that underpin the measurements are not clearly articulated and reported on. The early childhood example is akin to claiming a business case is realising profits. None of the examples investigate people’s own perceived experiences and priorities about the changes in their lives. Social value is about subjective perception so, without clarity around how people are subjectively experiencing change, it is difficult to justify placing a dollar value on that change.
Further, in all the examples above, the chain of causation between investment (in employee time, procurement, infrastructure build) and outcomes was not rigorously established through scientific methods. Fast forward fifteen years: were the increased high school completion rates really a result of the early childhood centre? Or were they the result of the Aboriginal-led psychological service which opened down the road from the local high school?
Scientific methods offer us a way of answering these questions. However, these methods can be both costly and time-consuming.
Take the example of social impact bonds (known as social benefit bonds in Australia), a form of social impact investment lauded for its ability to bring scientific rigor to the measurement of social value. Many social impact bonds measure the outcomes of social services using Randomised Control Trials (RCTs), a clinical method of research involving human experiment. Not only are RCTs ethically questionable as a form of social service evaluation, but the cost of evaluating in this manner is intensely disproportionate to the value of the investment. For the $7 million contracted to fund social services delivery in one of Australia’s early social impact bonds, $4 million in (largely pro bono) professional time was spent to create and measure the social performance indicators of the contract.
Existing frameworks and standards
Efforts to minimise cost and time expenditure in measuring social value through standardisation frameworks – particularly those frameworks which attempt to equate a quantified social change with a financial value, such as Social Return on Investment (SROI) – are rarely transferrable outside of the geographical, social, and political context for which those frameworks are created. This is especially so where such frameworks are created for European and UK contexts, and therefore sit uncomfortably atop the vast landscape of rural, remote and Indigenous communities in which our Australian Mining & Energy sector largely operates.
Humans are not as immutable as the minerals we mine: change in the human world is both intensely contextual and, in our modern information age, dizzyingly rapid. We need frameworks for measuring social value which can cope with the particularities of both time and place.
There is an array of global standards and frameworks which provide principles that companies can use to build social performance strategies and programs which create social value. Such frameworks include the International Council of Mining and Metals (ICMM) ESG standards and Social and Economic Reporting Framework, International Finance Corporation (IFC) Performance Standards and the International Sustainability Standards Board (ISSB) Sustainability Disclosure Standards, as well as higher-level principles such as the United Nations Sustainable Development Goals (UNSDGs). However, these frameworks do not provide tools for the measurement or reporting of social value, only guidance as to the ESG topics and activities which might produce social value and, in some cases, the indicators of social value which may need to be measured and reported on.
With the proliferation of frameworks and standards has come an element of overwhelm, leading many to put the measurement of social value into their too-hard basket. However, it need not be so.
The solution to measuring social value
In between greenwashing and randomised control trials is a multi-disciplinary spectrum of methods to measure social value. Along this spectrum lie trade-offs between cost, efficiency, generalisability and context-relevance. At WSP, we have decades of experience in applying a range of pragmatic research and evaluation methods to track and measure social value from baseline through to impact. With careful assessment of a company’s available resources and aims, we can find the best methods to suit a company’s purpose and build a social value measurement tool which achieves that purpose.
Yet, the true key to an effective social value measurement tool is not one particular method or another, but adaptive ability.
Adaptive ability means that the measurement framework can be changed when necessary. It generates continuous learning in the company whose social value performance is being measured.
Adaptive ability comes partly from the way social value reporting is conducted. Are the point-in-time measures of social value communicated in a timely and easy to digest manner? Are they communicated to the right people – internal and external stakeholders who can use their influence and resources to continue and expand the generation of social value? Are they explained in the context of the wider complex system in which outcomes and measurement are taking place?
Crafting an adaptive measurement tool offers so much more than numbers to pop into a company’s annual ESG report. Adaptive tools are the hallmark of a learning organisation – those that foster innovation and problem solving, have a strong sense of community and operate with greater efficiency.
When social value measurement tools are crafted with a company’s existing learning processes in mind, it reduces the administrative burden of reporting. Staff can then focus on delivering social value.
The science behind adaptive ability
Ideas of adaptive ability and learning organisations come from the term ‘complexity science’.
Complexity science branched from studies of complex adaptive systems in the physical sciences, including biology, chemistry and physics.
Application of these studies to the human world have given rise to diverse schools of thought. Consequently, complexity science does not refer to an uncontested body of evidence as to how human complex adaptive systems work. Instead, it typically refers to the non-linearity and unpredictability of human and ecological systems, and a diverse set of ideas, theories, approaches and methods for coping with that non-linearity and unpredictability.
Despite this diversity, most complexity science approaches emphasise adaptive ability as imperative for organisational survival and goal achievement. Adaptive ability is the capacity to constantly innovate and change in response to changing circumstances. Contractual and evaluative tools and processes which acknowledge non-linearity and operationalise adaptive ability – including social value measurement tools – are fundamental to realising financially sustainable solutions to complex social and organisational challenges.
At WSP, our expert Communities & Social Performance team of social scientists, economists, evaluators, community engagement specialists and business strategists are adept at constructing adaptive social value measurement tools for companies across all sectors, in particular Mining & Energy. As one of the world’s leading engineering professional services consulting firms, WSP brings together approximately 4,500 talented people across 14 offices in Australia, of which a quarter are in the Mining & Energy sector. Our technical experts design and provide strategic advice on sustainable solutions and engineer Future ReadyTM projects that help societies grow for lifetimes to come.
The way forward
Measuring social value in Australia is more important than ever before. The challenges of measuring social value can be overcome, with the right minds intent on crafting an adaptive social value measurement tool suited to the aims, resources and context of a company and its particular projects.
About the author
Dr. Ali Mollinger-Sahba is a Senior Consultant with WSP’s Communities and Social Performance Team in Perth, Western Australia. She holds a Ph.D. on the topic of social impact investment from the University of Western Australia Business School and is a member of the Australian Evaluation Society and the International Association for Impact Assessment.