CEO Report – June 2021

SVI have always supported a principle-based approach to accounting for value and until very recently this was based on seven principles. I am delighted to confirm that after much discussion we have made the decision to introduce an eighth principle. The Principles of Social Value are the foundations of our work and so this decision was not taken lightly. I am grateful for the members who have proposed this significant development and grateful to you all for your feedback and comments on the forthcoming guidance and standard that will soon be out for consultation with our members.

So, the new principle will be called Be Responsive. Specifically, this principle is about the need for organisations to respond to what they are told by the people whose lives they affect (SVI have always used the term stakeholders – “rights-holders” is emerging as a similar expression).

Responding means making changes to an organisations goods or services, their strategies and even their business models in order to increase the net positive value they are creating for those people.

We must work together to ensure the equitable distribution of wealth, opportunity, and power in our society.
Nelson Mandela

Responsiveness has always implicitly been at the heart of SVIs work. Our vision is of a world with reduced inequality and improved wellbeing (of people and planet). To achieve this vision we have a mission to change the way the world accounts for value. Accounting being the means for better decision making; decisions that create more value for all stakeholders materially affected by activities.

Since 2008, we have been working with members, expanding the definition of value (going beyond financial value to include aspects of wellbeing that are not explicitly traded in markets i.e. changes in our social connections, our sense of agency and overall subjective wellbeing etc). We have been developing a practice of accounting that incorporates the value created for multiple stakeholders.

Where financial accounting focuses on the value created for the organisation (which translates into value created for the owners of that organisation), the Principles of Social Value culminating in an SROI analysis incorporates value creation (and destruction) for all stakeholders materially affected. This provides a set of information that can and should lead to decisions about optimising value for all of these groups of people.

So, whilst this eighth principle feels like a big leap and is taking us into new territory, it is arguably just making SVI’s approach more explicitly linked to our purpose which is to help organisations make better decisions about optimising value for all stakeholders.

SVI’s approach has always felt somewhat at odds with many of the approaches to impact measurement where impact is something that needs to be measured “rigorously”, “objectively” or “scientifically” without a primary focus on generating lots of insights to inform a range of continuous improvement decisions. We have coined the phrase “enough precision for the decision” to make the point that we don’t need (and won’t get) absolute precision but what we can get, and need, is data that is good enough to optimise value.

SVI’s approach has always been likened to a ‘continuous improvement’ practice. The principles, although designed for accounting, are often used by practitioners as design principles. And most recently, SVI’s approach has found strong alignment with the work of the UNDP’s Impact Management Practice Standards where the emphasis is on understanding the trade-offs we are all making and using meaningful stakeholder engagement to inform decision making that increases our contribution to the SDGs.

So, whilst our seven principles are a necessary condition for collecting data that can provide an endless number of insights that can lead to these decisions, they are not sufficient. In the absence of an organisation being held to account by the people whose lives it changes, the information can be filed away, generating no insights. Even if ideas for increasing value emerge, they can be ignored. Even if changes are made, they can be made at a very slow rate.

Which is why it has been necessary to introduce an eighth principle, one that will have significant consequences for our work. The emphasis shifts to the number of insights and the rate at which decisions are made to increase value. Decisions are generally a choice between past experience and an uncertain future and so the fixation on rigour will have to shift to a fixation on risk, on the risk that the decision was not the best choice, and to a fixation on the rate at which decisions are made.

Principle eight completes the framework in the sense that organisations are given more of an explicit guidance and licence to use the appropriate level of data for a range of different decisions. It increases accountability because it encourages more action and collaboration with those affected. Lastly, but by no means least it creates a framework that supports long term value creation for multiple stakeholders.

Kind regards,
Ben