The three key boundaries that should be considered are organizational (or value chain), geographic, and temporal. Companies may decide to start with a narrow approach to the Protocol focused on one part of the value chain, in one location, within a very narrow timeframe. For example, a company could decide to assess impacts and dependencies related to professional advancement of women in one supplier factory in Bangladesh over the last three years. Once the methodology is established, the company could expand the approach to include all suppliers and/or other parts of the value chain, such as retail workers.
When setting the boundaries of the assessment, companies should consider the following:
- Stakeholder and audience interest - There may be certain operations, projects, or regions where there is a more urgent need for the Protocol, where there is greater scrutiny by external stakeholders, or where using the Protocol has more support from senior leadership.
- Likely effectiveness of tackling high priority social capital issues - Some issues may be higher priorities for certain locations, projects, or parts of the value chain. In the example above, living wage is a priority for Bangladesh but may not be an issue in other manufacturing regions.
- Company ambition level and available resources - There may be boundaries that would provide meaningful results quickly and therefore would help build momentum for further measurement.
- Data availability - Some data may be difficult to access or not meet high enough quality standards to be used. For example, this could be the case when companies depend on surveys or other data sets from resource-constrained governments or when measurement requires capturing data from thousands of Tier one and two suppliers without already established data collection systems in place.
- Objectives and scope of impacts - The audience and objectives identified in previous steps could dictate clear boundaries for the assessment.
The following figure provides a snapshot of the boundaries, which are explained in more detail below.32
Organizational boundary: When determining the organizational boundaries, companies should consider the business operations or activities that will be measured and valued.
Options for some of the different organizational foci could be:
- Value chain - this looks at individual phases of the value chain, upstream or downstream, such as raw material extraction, manufacturing, distribution, product use phase, or disposal/ end of life. Alternatively, it could look at the full value chain.
- Corporate - this includes everything within the direct control of the company. For example, a company could develop an approach for safety promotion for all of its direct employees.
- Project - this looks at a specific initiative or project, such as a skills building program for small-medium enterprises in the supply chain.
- Site - this focuses on impacts and dependencies at specific sites or operations. For example, this could include looking at all manufacturing operations in the company.
- Product - this includes an approach focused on a specific product or brand. Depending on the impacts and dependencies this could cut across the value chain if considering the product lifecycle.
Geographic boundary: The spatial boundaries of the assessment should be determined not only by where the company is operating but by its influence and reach. For example, companies might focus on the impacts on employment in the community where they operate. But, the migration of workers from other regions into this community could have impacts on those other regions.
Narrowing the approach to focus on the community in the immediate vicinity of the plant or operation could miss significant changes in social capital that result for those other regions; e.g. from employee remittances back to workers’ families. In these cases, companies could set
the boundary to include those regions that receive the most remittances.
Options for spatial boundaries to consider include:
- Global - this includes anywhere that the company has an impact.
- Regional / National - this looks at one country or several countries within a defined region.
- Local - this includes one specific geographic area such as one city, town, county or state.
Temporal boundary: This means determining an appropriate time horizon for the approach. This has significant implications for the measurement and valuation methods used, particularly regarding baselines and the use of counterfactuals (see Stage 3). Some companies may want to compare impacts and value before and after a certain intervention.
The temporal boundaries that should be considered are:
- Time Period - past, present or future impacts and dependencies.
- Duration - the period of time (and the impacts and dependencies associated with this). This could be in years, months or a snapshot in time.
Example options for temporal boundaries include a company’s assessment covering a financial year with the aim to establish an annual measurement inventory, or an assessment looking at all impacts that result from an activity for as long as those impacts persist.
Putting Theory into Practice
32 This draws on some material in the Natural Capital Protocol that refers to the organizational focus, value chain boundary, value perspective, and other technical issues. The Natural Capital Protocol