This should be done by building an impact or dependency pathway (also called a logical framework, results chain or theory of change), which guides the formation of a hypothesis on social capital creation, destruction or reliance; which can then be tested and evaluated empirically.
Depending on the results of the previous steps, a company may conclude that it is most important to focus on social capital impacts, dependencies, or a combination of the two. Whereas dependencies, by definition, are felt by the business, social capital impacts may be experienced by a variety of stakeholders in society, including the business itself.
For illustrative purposes, we have focused primarily on social capital impacts, as this concept currently has the most established methodologies and is most widely used by companies - specifically to outline impacts on stakeholders other than the business itself.
An impact or dependency pathway can equally be used to show an impact on the business (i.e. financial cost) or to show a pathway outlining a specific social capital dependency the business has.33
Figure 13 explains the core elements of an impact pathway from inputs to impacts. Impact pathways are well-established as the foundation for social impact assessments. It is important to note that there may be more than five links in the chain, especially between “outputs” and “impacts.” Similarly, results chains do not have to be linear. For example, “activities” can lead to multiple “outputs,” which each lead to multiple “outcomes” and so on.
It is important to keep a record of any references, assumptions or justifications that have been used to make causal links in the pathway. These should be cited in any analysis of the data in validation exercises or sensitivity analysis (see Step 10).
Companies should refer to the outputs of Steps 3, 4 and 5 of the Protocol to frame their impact pathway(s), looking in particular at the organizational and geographic scope to define the business activities that will be included, as well as the audience perspective to define who is impacted.
Companies should develop separate impact pathways for each social capital issue they plan to measure and value. Within each social capital issue, there may be a number of specific outcomes or impacts.
Benefits of using the impact pathway approach:
Impact pathways can help a company understand how business activities are traced all the way through outputs to outcomes and impacts. This helps the company ensure that they are not wasting time gathering data on outputs that are actually not contributing to their overall impact objective.
Impact pathways can highlight unintended consequences or indirect effects of a business activity that might occur despite not being the primary intention of the activity.
Impact pathways can demonstrate the causal links between a business’ activity or product and downstream impacts. This can be particularly useful when the company wants to demonstrate the societal value of the use of its products.
Putting Theory into Practice
33 Refer to Natural Capital Protocol for more guidance on drawing dependency pathways.
34 WBCSD, Measuring Socio-economic impact: A guide for business.