What

Through a systematic process of prioritizing the most material social capital issues to stakeholders and to the business, companies will identify a starting point for measuring and valuing their impacts or dependencies on social capital and a clear sense of how the results could be used. 

Some companies may have already conducted some or most of this stage through their existing sustainability strategy and reporting. In this case, companies should use the steps in this stage to validate existing social priorities (or ‘social capital issues’; see below) with a view to social capital measurement and valuation. Users should consider whether existing materiality analyses and stakeholder engagement could be adapted or extended to lay better foundations for social capital measurement and valuation. 

Why

This stage ensures that the measurement and valuation of social capital is aligned with both broader corporate strategy and stakeholder priorities from the very start of the process, thereby laying a solid foundation for mainstreaming the measurement and valuation of social capital impacts and dependencies across the company. It is an important first step for deciding on the most material social capital impacts or dependencies that the initial assessment will focus on, and for setting a longer-term measurement plan.

How

Step 1. Understand social capital and its relevance to the business

This first step is intended to help companies identify social capital issues that are relevant to their business. This may include social capital issues that the business already positively or negatively interacts with in their value chain, but may also include external social capital issues, such as national priorities, that the business might be able to positively interact with in the future.

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Step 2. Identify potential business decisions

This step is intended to help companies identify how the social issues identified in Step 1 relate to business decisions and thereby create the business case for undertaking an assessment.

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Step 3. Prioritize social capital issues

Step 3 brings the previous two steps together to determine the most material social capital issues that can be used as a starting point for identifying the company’s social capital impacts or dependencies so they can be measured and valued.

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Outputs

At the end of stage 1, companies should have clearly identified:

  • The most relevant social capital issues for the business;
  • Business decisions that could be informed by the measurement and valuation of these social capital issues; and
  • Which of these issues will be prioritised for further measurement and valuation using the Protocol.

These outputs are the foundation for building the company’s frame for social capital measurement and valuation. They define the starting point for measurement activities, and set out a longer-term plan for mainstreaming the consideration of social impact within the organization.

Practical Considerations

Stage 1 lays the groundwork for the rest of the Protocol, which is why it is critically important that companies give sufficient thought to the issues and decisions in these three steps. However, it does not always need to be a resource intensive step as most leading companies already have existing systems and processes that they can leverage for this stage. Below are a few considerations for completing Stage 1:

  • Skills/Expertise: Companies can draw on internal knowledge/expertise for most of this stage but may want to consider involving external advisors and stakeholders to inform and validate the selection of issues.
  • Timing: For companies that have already conducted a materiality analysis of social issues, this stage should take a relatively short time to complete (i.e. less than a week). For companies who are new to issue prioritization, it may take longer depending on their capacity to access information on relevant issues and to gather input from internal and external stakeholders.
  • Stakeholder engagement: External engagement is optional but highly recommended as it adds credibility and quality (see box 2).  Ideally this stage should be conducted with internal stakeholder engagement (key department heads, local/national managers, etc.) to gain buy-in and validate decisions amongst a cross-section of the company for your corporate approach and priorities. This could be done via surveys, workshops, interviews, or other means. Before moving on to Stage 2 companies should ensure that they secure senior level support and appropriate resources.

Recommended Resources

Step 1. Understand social capital and its relevance to the business

Background on social capital and prioritization:

1. GRI, UN Global Compact, WBCSD, (2015), SDG Compass

2. IIRC, (2013), The Capitals: Background Paper for Integrated Reporting. 

3. ILO, (2014), Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy

4. UN, (1948), UN Universal Declaration of Human Rights. 

5. UN Human Rights, Office of the High Commissioner, (2012), UN Guiding Principles on Business and Human Rights. 

6. UN Sustainable Development, (2015), UN Sustainable Development Goals

Stakeholder Engagement:

7. GRI, (2013), Principles for Defining Report Content: Stakeholder Inclusiveness. 

8. IFC, (2007), Stakeholder Engagement Handbook, Stakeholder Identification and Analysis. 

9. IFC, (2007), Stakeholder Engagement Handbook, Stakeholder Consultation. 

Step 2. Identify potential business decisions

10. Accounting for Sustainability, (2014), Natural and Social Capital Accounting: An Introduction for Finance Teams.

11. WBCSD, (2015), Social Capital in Decision Making: How social information drives value creation.

Step 3. Prioritize social capital issues

12. GRI, (2013), Principles for defining report content: Materiality. 

13. GRI and RobecoSAM, (2015), Defining Materiality: What Matters to Reporters and Investors. 

14. IIRC and the International Federation of Accountants, (2016), Materiality in Integrated Reporting: Guidance for the Preparation of Integrated Reports. 

15. KPMG, (2014), The essentials of materiality assessment. 

16. Social Value International (2012), Supplementary Guidance on Materiality.