The prospective audience should influence how the Protocol is implemented, informing the level of detail of the assessment, the valuation approach chosen, and the type of outputs delivered. Objectives for measurement and valuation should be set based on the needs and interests of the target audience, considering the type of decisions for which they require social information, and their value perspective - i.e., who are they interested in creating value for. This step should draw on the outputs of Step 2 as a starting point.
Determine the audience for the results
The audience can be a group of stakeholders the business wants to share results with for either communication purposes or for decision-making purposes.
Either type of audience could be internal and/or external stakeholders. An audience for decision-making purposes will be stakeholders who have an interest in the company’s social capital impacts and dependencies and whose actions can have a significant influence on a company’s success.28 This is likely to be drawn from the list of decision-makers identified in Stage 1. Providing these decision-makers with the right information is essential in order to integrate relevant social considerations into business thinking and action.29
The table below identifies some of the potential internal and external audiences for the Protocol results. Companies should identify the target audience(s) for each of the priority social capital issues that they plan to measure and value, where possible pinpointing the specific individuals whom the results will inform. These individuals should then be involved throughout the analysis as key stakeholders.
Determine the objectives of the assessment
Identifying the target audience and understanding what drives them will also inform the objective for using the Protocol. When setting objectives, companies should consider:
- Business decisions - Companies should refer to the output of Stage 1 that mapped relevant social capital issues to the business drivers and potential decisions. With a specific target audience in mind, companies should set their objectives based on how the results can inform key business decisions. Business decisions could include whether to invest in a specific program or product portfolio or how to reduce the negative impacts or improve the effectiveness of a specific investment. Companies may want to communicate the assessment results in order to influence or inform decisions by governments regarding local employment, project location, or scale of co-investment.
- Audience perspective - Companies should also clarify the audience’s perspective. This means considering whether they are interested in information about impacts on society, impacts on business and/or business dependencies on society. For example, if companies want to decide whether to continue investing in a specific training program, they may want to understand the impact of the training on the employees (the impact on society) as well as the impact on the company itself. Some companies may be interested in a more macro view of the way the company generates profits and losses via its impacts on social capital. Similarly, companies may be interested to measure and value their dependency on skilled workers and how that could be impacted by changes in the stock or availability of skilled workers due to migration to other regions.
The following are some example objectives for measurement and valuation of social capital based on current practice. These are not exhaustive, but provide an illustration of common applications of measurement and valuation among multi-national corporations:30
1. Deepening Stakeholder engagement and managing relevant social impacts
- External - government, media, customers, communities, general public, employees
- Internal - national level leadership, project managers
Understanding and demonstrating social capital impacts for external stakeholders remains the starting point for many measurement and valuation initiatives, however we are seeing companies moving on from their initial analysis to apply their findings in internal decision-making. Studies that highlight how government and community priorities intersect with the activities of a company can be used to guide impact improvement activities, inform discussions and enhance the company’s relationships and reputation. This is particularly effective in situations where government ambitions are clear or when the company has been provided with a clear framework to align with.
2. Improving ‘local content’ performance
- Internal - local community investment managers, human resource and procurement managers, social performance and community engagement staff. Where investments are significant, global business unit presidents and top management can be involved.
Where companies have large operations, license to operate can be highly dependent upon ‘local content’- the extent to which local workers, suppliers and distributors are included in the company’s value chain. Companies are using measurement and valuation approaches to ensure that their local content strategies strengthen both the local economy and the company’s performance.
3. Supporting entry into new markets
- External - government, institutional customers, individual customers
Governments are often the initial gatekeepers for new market entry. Social capital assessments can help companies to hold more informed discussions with government about the impact that their planned investment may have on a country or region, and so help establish their license to operate. They can also inform the development and growth of new products and services by helping to understand the market and inform new local stakeholders.
4. Facilitating government sales and contract development
- External - government clients, general public, employees
- Internal - bid and contract managers, social innovation initiative managers, resource allocation managers
Governments can be important decision-makers when it comes to product sales and innovative service solutions. This is even more pronounced when the government is the customer. In the UK in particular, the Social Value Act is driving companies to apply monetary valuation techniques to understand and improve their performance in government contracts.
5. Better human resource management by shifting thinking on human capital
- External - stakeholders and clients
- Internal - executive leadership, client managers, functional leaders, training managers
Human capital is essential to all companies, but it is generally measured as a cost rather than as an asset, impact or dependency. Human capital-intensive
companies are beginning to look at how shifting their perspective might lead to better decisions for the company and its employees.
6. Driving integrated thinking through inclusive business
- External - external stakeholders, investors
- Internal - executive leadership, board, managing directors, national managers, sales managers, procurement managers
Inclusive business initiatives31 are commercially viable, scalable business models that expand access to goods, services and livelihood opportunities for the economically disadvantaged. In this area, companies are applying social and business information side-by-side. Measurement and valuation initiatives are being used to understand, demonstrate and manage the social impacts and dependencies related to these emerging business models.
Putting Theory into Practice
28 Note that this is different set of criteria to identifying those stakeholders who are affected by a company’s activities, which should be considered when identifying material social capital issues and the impacts/ dependencies themselves.
29 WBCSD Social Capital in Decision-making.
30 These objectives are drawn from WBCSD publication Social Capital in Decision-making. The publication also includes company examples for each of the objectives.
31 For more information on inclusive business see: Said Business school & Deloitte, In Pursuit of Inclusive Capitalism.