The Protocol is flexible and therefore will be applicable regardless of the method or classification framework that is used to identify social capital issues.
To undertake this step, users of the Protocol should:
- Map relevant social capital issues across the value chain, using whichever terminology or external framework is most relevant to them;
- Categorize social capital issues by type; and
- Prioritize importance to the company’s stakeholders.
Mapping issues across the value chain (although sometimes challenging due to data availability) is important because it provides companies with a full view of their direct and indirect social capital issues from initial design of a product or service and raw material sourcing through to the end of life. Classifying these issues as positive and negative, and as impacts and dependencies, adds another level of credibility to the analysis. Issues are likely to vary in importance at each stage of the value chain and between different projects or locations, so mapping them can also help prioritize issues for each stage of the value chain and for the company as a whole.
Box 2: Social Capital Issues
A key concept we introduce in the first stage of the Protocol is that of ‘social capital issues’. The Protocol uses this term to describe categories or themes of issue, which may include both social capital impacts and/or dependencies.
A challenge that is faced in the social capital field is the plethora of different ways to classify social impacts or dependencies. This is no surprise given the variety and importance of social impacts or dependencies that are relevant for businesses in different contexts. But it can make it difficult for companies to select which classification framework to use when deciding what impacts or dependencies are most material for them and, in reality, the answer is likely to be different depending on the context it faces. It is not the Protocol’s intention to set out a new classification here, or to try to reconcile the classifications that are widely accepted at this time (something which is likely to be both time consuming and, ultimately, open to debate).
Instead, in Steps 1, 2 and 3 of the Protocol, companies are advised to consider their own ‘social capital issues’. These may be social topics or themes that a business has already identified itself; they may be taken from existing national priorities or other external classification frameworks; or, for some companies, they may already be specifically defined social capital impacts or dependencies. This allows users of the Protocol to identify which social issues are most material to them using whichever language or classification frameworks are most familiar. Once issues have been chosen, the company can continue with more detailed identification of specific social capital impacts or dependencies that the assessment will measure and value.
Map social issues along the value chain
When looking for lists of potential social issues to be mapped along the value chain, there are a number of external frameworks companies can use as references.
Three such frameworks, recognized by the UN and national governments, are highlighted below by way of example:
- UN Universal Declaration of Human Rights (UDHR) - proclaimed by the United Nations General Assembly in 1948, and forming the basis for international human rights law, these 30 articles lay out a common standard of achievement for all people and nations.13
- The UN Guiding Principles for Business and Human Rights (UNGPs), launched in 2011, further explain how these rights are applicable to business and can be put into practice by companies;14
- The UN Guiding Principles Reporting Framework, launched by RAFI in 2015, use the UNGPs along with the ILO’s Declaration on Fundamental Principles and Rights at Work to summarize 32 “internationally recognized human rights.15
- ILO Tripartite Declaration of Principles Concerning Multinational Enterprises - developed and adopted by governments, employers and workers from around the world, the MNE Declaration provides direct guidance to enterprises on social policy and inclusive, responsible and sustainable workplace practices.16
- The Sustainable Development Goals - ratified by all 193 UN member states in September 2015, these 17 global goals, and associated 169 targets, provide an aspirational model for international development to which business can align and contribute.17
These documents can be thought of as outlining both fundamental baselines for social performance which must be met, as well as aspirational targets which companies can help to achieve, capturing significant business opportunities in the process.
Not every company will start in the same place on this step. Depending on the company’s perspective and level of current maturity with regards to integrating sustainability into core business functions, some companies will refer to, build on and validate existing lists of social capital issues such as:
- Corporate materiality analysis: Companies may already have conducted a materiality analysis as part of their social or sustainability strategy development or reporting. These may be informed by external guidance on identifying types of stakeholders and social issues, such as those contained within the Guidelines for Social Life Cycle Assessment of Products18 and the Handbook for Product Social Impact Assessment.19 Work can draw from such lists to map and rank the relevance of the issues across the value chain.
- Industry-specific priorities: Companies can also draw on industry or sector-wide mappings of issues. As an example, Table 2 is a mapping conducted by the chemicals sector as part of the development of guidelines on social lifecycle metrics for chemical products, where 25 topics were identified and mapped against three key stakeholder groups.20 This work in turn drew on guidance from initiatives such as the Guidelines for Social Life Cycle Assessment of Products. Figure 7 highlights social issues along the forests value chain, identified by WBCSD’s Forestry Solutions Group.21
- National priorities: National development plans (e.g. the South African government’s National Development Plan 2030)22, national action plans on business and human rights, or national sustainable development strategies.
- Local priorities: Community action plans, municipal strategic plans.
Categorize social capital issues by type
Categorizing these issues adds an important and useful additional perspective. Options for categorizing social capital issues can include (amongst others) whether they are:
- Positive or negative (recommended)
- Social capital impacts or dependencies (recommended)
- Known or potential issues
- Risks or opportunities
It is particularly important that companies consider measurement and valuation of both potential positive and negative impacts.
For example, positive socio-economic impacts in one area should not be used as an offset for negative impacts in another (for example impacts on natural capital). Each impact needs to be considered as a single issue which can be improved, mitigated or remedied.
Companies are increasingly viewed by stakeholders as complicit where there are social transgressions within their value chains - even if they are not directly responsible. Companies that acknowledge and take actions to tackle the social challenges throughout their value chains are not only more respected by stakeholders but are also able to proactively manage issues that could present material risks to the business. With this in mind, devoting the significant resources and influence of the private sector towards tackling negative social issues is considered a positive contribution towards social capital.
Prioritize social capital issues by their importance to the company’s stakeholders
Once issues have been mapped across the value chain and classified, companies should prioritize the issues identified.
Options for criteria to rank the importance of the social issues identified include:
- The severity of the potential impact23,
- The likelihood of the company impacting this issue,
- In the case of negative impacts, to what degree the impact can be remediated and,
- In the case positive impacts, the degree to which the impact can be enhanced.
Completing this step with appropriate stakeholder input further enhances the credibility and value of the approach. Global and/or local stakeholders can play an important role in informing the long list of issues, determining their business relevance, and/or validating the final lists.
Companies can choose the most appropriate process for capturing stakeholder views. Some companies may decide to draw on existing internal committees or external stakeholder advisory boards; others may choose to develop entirely new processes. To identify stakeholders, companies may want to conduct a stakeholder analysis and mapping exercise that classifies stakeholders by criteria such as their expertise, legitimacy, and willingness and ability to engage. See Box 3 on stakeholder engagement and recommended resources for more guidance.
Box 3: Stakeholder Engagement in the Social Capital Protocol
Stakeholder engagement is not required at the outset of applying the Protocol, but is highly recommended as it can enrich the Protocol process and strengthen the quality and credibility of the results. External stakeholder engagement may be useful at various stages of the Social Capital Protocol. For example, stakeholders can:
- Offer perspectives on the issues or impacts of greatest concern
- Inform on the relative importance of issues and impacts
- Provide data and expertise
- Validate and add credibility to the process and results
For some of the measurement and valuation techniques, stakeholder engagement is necessary, particularly when it requires the perspectives or data of those people directly impacted by the company.
Risks of not engaging with stakeholders include having an incomplete view of the social capital issues and impacts, missing out on opportunities for innovation, and having results that are not credible or usable for comparing options and making decisions.
As social capital valuation is still in early stages, it is important that companies are clear about their current ambition level and long-term goals. This will help set the expectations with stakeholders and invite stakeholders to serve as partners as the company refines and improves its approach.
Putting Theory into Practice
13 The UN, Universal Declaration of Human Rights
15 The UN, Guiding Principles Reporting Framework
16 The ILO, MNE Declaration
17 The UN, Sustainable Development Goals
18 UNEP/SETAC, Guidelines For Social Life Cycle Assessment Of Products
19 Roundtable for Product Social Metrics, Product Social Impact Assessment Handbook Version 3.0
22 South African Government, National Development Plan 2030
23 For further details on severity, see the UN Guiding Principles on Business and Human Rights, explanatory notes on Article 14