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In recent years, there has been a marked shift in the debate on socially responsible business. At one time “social responsibility” meant setting aside a proportion of pre-tax profit for good causes as a kind of public relations tax. Yet the political fall out from the financial crisis and the rise of ethical consumerism and sustainable investment have blown this view out of the water.

Instead, new ideas such as “shared value business models”, “impact investing” and “triple bottom lines” look at the whole organisation. These ideas go to the heart of understanding the overall social value of a business by looking at how a business applies its core assets – its people, brand, products, supply chain and capital – through its business model to generate value for society and its shareholders.

Companies that can effectively demonstrate social value stand to benefit commercially. New rules brought in under The Social Value Act 2012 mandate that all public sector commissioners must now incorporate social value into their decision-making process. The opportunities for businesses that show they can deliver social value, as well as providing a needed service, are potentially huge. But how do you determine social value?

Here at the Community Development Foundation we’ve been at the heart of the community development agenda for 50 years, and believe that understanding social value starts where it is most tangibly felt: in communities that have an actual or potential stake in a company’s business. This is where the impacts of a business – employment, investment, and local development – are most clearly visible and most vigorously appraised.

Efforts to develop universal metrics are important, but we see the key question for companies as, less a question of ‘how much social value?’, but more: ‘how are we defining social value and who’s involved with us in doing that?’

It is the quality of a company’s relationship with its community stakeholders, and its methods of community engagement, that really determine whether or not a company’s activities generate social value.

London has many inspiring examples. Take Poke, a small company using its expertise and connections in the digital sector to set up a Tech City apprenticeship scheme. At Poke they bridge the gap between the dynamism of Tech City and the lives of young people in East London. Looking at where things go wrong provides useful learning too. The development industry has some of the closest interaction with communities and perhaps the keenest appreciation of the business case for demonstrating social value. Yet there are many examples of how even the best laid out social value plans can completely miss the needs of the local community when the community has not been part of generating that plan.

Communities and businesses share huge areas of common interest – but without effective community engagement this risks being squandered. We’ve developed Love Your Community, a quality mark in community engagement that recognises companies with robust community engagement approaches. Because for companies to demonstrate social value, they need to show how that value has been defined and created in partnership with communities. Working with communities is not always easy, but the rewards for companies that invest in high quality community relationships have never been better. Businesses must leverage their core assets – their people, products, brand, and supply chain relationships – through their business models to maximise social and financial value but communities provide a key test of whether they are doing this right.

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This article was originally published in the Summer 2014 edition of London Loves Business.