What

Based on the valuation techniques, companies will define fit for purpose indicators, metrics and data sources, before conducting the technical measurement and valuation of their social impacts and/or dependencies. 

Why

Measurement and valuation is at the core of the Social Capital Protocol. Establishing reliable access to tailored information will support informed action from decision-makers. When comparable values are allocated to social capital impacts and dependencies, they can be used alongside other business information. This is key to integrating and mainstreaming the consideration of social capital within business operations and decision-making. 

There are still many challenges for business in conducting social impact measurement and valuation, but the field is rapidly evolving. This guide contains current good practice, but improved methods and resources are becoming available as companies continue to strive for credible, useful and comparable valuation of social capital. 

    How

    Step 7. Select appropriate valuation technique

    Valuation is the process of determining the relative importance, worth, or usefulness of something in a particular context. 

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    Step 8. Choose indicators and metrics

    Before companies can conduct a valuation exercise they need to measure their social capital impacts or dependencies. 

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    Step 9. Undertake or commission measurement and valuation

    The final step in Stage 3 involves collecting and analysing the data needed to complete the necessary measurement and valuation.

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    Outputs

    By the end of stage 3, companies should have:

    • Decided which type of value, or combination of values, will be most useful for achieving the aims of the assessment and the needs of the audience for the results;
    • Used this to choose an appropriate valuation technique;
    • Chosen the most appropriate indicators and metrics to support this valuation technique that are, as far as possible, SMART;
    • Decided whether or not measurement should be done relative to a baseline or counterfactual scenario and, if so, decided what baseline or counterfactual to use;
    • An understanding of the issues of additionality and attribution and disclosed any relevant assumptions that have been made concerning these issues;
    • An understanding of the ethical considerations around data collection; and
    • Undertaken the collection of primary or secondary data (or a mix of both) and documented data sources, assumptions and limitations. 

    Practical considerations

    This stage is the most time- and resource-intensive stage and many companies using the Protocol for the first time will likely engage external experts to capture, analyze, and validate the data and results.

    • Skills/expertise: Many of the measurement and valuation techniques require economics/econometrics expertise. Some companies may also engage specialists, academics or civil society partners - including sociologists, ethnographers, or anthropologists - in field work.
    • Timing: The amount of time to complete the data collection and analysis varies significantly depending on the approach and the data available. As highlighted above, a narrowly focused value transfer approach using available corporate-level data sets could take less than a month. Any primary data collection is likely to take more time.
    • Stakeholder engagement: Most companies will choose to engage external stakeholders at some point in the process. Capturing the perspectives of the stakeholders impacted by the company strengthens the quality and credibility of the results and analysis. Stakeholder engagement is also potentially needed to gather or confirm the interpretation of data. When engaging stakeholders in data gathering and analysis, there are ethical considerations which should be kept in mind - please refer to Box 5. 

    Recommended Resources

    Step 7. Select valuation technique

    1. IFC, (2011), Measuring Returns on Community Investments in Mining. 

    2. Office of National Statistics, Measuring National Wellbeing. 

    Step 8. Choose indicators and metrics

    3. B Analytics, Global Impact Investment Rating System. 

    4. OECD, (2013), OECD Guidelines on Measuring Subjective Well-being. 

    5. UNEP, SETAC, (2009), Social Life Cycle Assessment Guidelines, p.49. 

    6. UNEP, SETAC, (2013), The Methodological Sheets for SLCA.

    Step 9. Undertake or commission measurement and valuation

    7. European Commission, (2014), Proposed Approaches to Social Impact Measurement.