The Protocol is flexible and therefore will be applicable regardless of the method or classification framework that is used to identify social & human capital issues.
To undertake this step, users of the Protocol should:
- Map relevant social & human capital issues across the value chain, using whichever terminology or external framework is most relevant to them;
- Categorize social & human capital issues by type; and
- Prioritize issue importance to the company’s stakeholders.
Mapping issues across the value chain (although sometimes challenging due to data availability) is important because it provides companies with a full view of their direct and indirect social & human capital effects from initial design of a product or service and raw material sourcing through to the end of life. Classifying these issues as positive and negative, and as impacts and dependencies, adds another level of credibility to the analysis. Issues are likely to vary in importance at each stage of the value chain and between different projects or locations, so mapping them can also help prioritize issues for each stage of the value chain and for the company as a whole.
Box 2: Social & Human Capital Issues
A key concept we introduce in the first stage of the Protocol is that of ‘social & human capital issues’. The Protocol uses this term to describe categories or themes of issue, which may include both social & human capital impacts and/or dependencies.
A challenge that is faced in the social & human capital field is the plethora of different ways to classify social impacts or dependencies. This is no surprise given the variety and importance of social impacts or dependencies that are relevant for businesses in different contexts. But it can make it difficult for companies to select which classification framework to use when deciding what impacts or dependencies are most material for them and, in reality, the answer is likely to be different depending on the context faced. It is not the Protocol’s intention to set out a new classification here, or to try to reconcile the classifications that are widely accepted at this time (something which is likely to be both time consuming and, ultimately, open to debate).
Instead, in Steps 1, 2 and 3 of the Protocol, companies are advised to consider their own ‘social & human capital issues’. These may be social topics or themes that a business has already identified itself; they may be taken from existing national priorities or other external classification frameworks; or, for some companies, they may already be specifically defined social & human capital impacts or dependencies. This allows users of the Protocol to identify which social issues are most material to them using whichever language or classification frameworks are most familiar. Once issues have been chosen, the company can continue with more detailed identification of specific social & human capital impacts or dependencies that the assessment will measure and value
Map social issues along the value chain
When identifying potential social issues along the value chain, there are a number of external frameworks that can be used as helpful references. Three such frameworks, recognized by the UN and national governments, are highlighted below by way of example:
- UN Universal Declaration of Human Rights (UDHR) - proclaimed by the United Nations General Assembly in 1948, and forming the basis for international human rights law, these 30 articles lay out a common standard of achievement for all people and nations.1
- The UN Guiding Principles for Business and Human Rights (UNGPs), launched in 2011, further explain how these rights are applicable to business and can be put into practice by companies;2
- The UN Guiding Principles Reporting Framework, launched by RAFI in 2015, use the UNGPs along with the ILO’s Declaration on Fundamental Principles and Rights at Work to summarize 32 “internationally recognized human rights.3
- ILO Tripartite Declaration of Principles Concerning Multinational Enterprises - developed and adopted by governments, employers and workers from around the world, the MNE Declaration provides direct guidance to enterprises on social policy and inclusive, responsible and sustainable workplace practices.4
- The Sustainable Development Goals - ratified by all 193 UN member states in September 2015, these 17 global goals, and associated 169 targets, provide an aspirational model for international development to which business can align and contribute.5
These frameworks outline both baselines for social performance, as well as aspirational targets which companies can help to achieve, capturing significant business opportunities in the process. Table two6 contains an analysis of these key resources in order to distill key social and human capital issues.
Not every company will start in the same place on this step. Depending on the company’s perspective and level of current maturity with regards to integrating sustainability into core business functions, some companies will refer to, build on and validate existing lists of social & human capital issues such as:
- Corporate materiality analysis: Companies may already have conducted a materiality analysis as part of their social or sustainability strategy development or reporting. These may be informed by external guidance on identifying types of stakeholders and social issues, such as those contained within the Guidelines for Social Life Cycle Assessment of Products7 and the Handbook for Product Social Impact Assessment.8 Work can draw from such lists to map and rank the relevance of the issues across the value chain.
- Industry-specific priorities: Companies can also draw on industry or sector-wide mappings of issues. As an example, Table 3 illustrates mapping conducted by the chemicals sector as part of the development of guidelines on social lifecycle metrics for chemical products, where 25 topics were identified and mapped against three key stakeholder groups.9 This work in turn drew on guidance from initiatives such as the Guidelines for Social Life Cycle Assessment of Products. As another example Figure 7 highlights social issues along the forests value chain, identified by WBCSD’s Forestry Solutions Group.10
- National priorities: Including national development plans (e.g. the South African government’s National Development Plan 2030)11, national action plans on business and human rights, or national sustainable development strategies.
- Local priorities: Including community action plans and municipal strategic plans.
Categorize social & human capital issues by type
Categorizing these issues adds an important and useful additional perspective. Options for categorizing social & human capital issues can include (amongst others) whether they are:
- Positive or negative (recommended)
- Social & human capital impacts or dependencies (recommended)
- Known or potential issues
- Risks or opportunities
It is particularly important that companies consider measurement and valuation of both potential positive and negative impacts.
Similarly, positive socio-economic impacts in one area should not be used as an offset for negative impacts in another (for example impacts on natural capital). Each impact needs to be considered as a single issue which can be improved, mitigated or remedied.
Companies are increasingly viewed by stakeholders as complicit where there are social transgressions within their value chains - even if they are not directly responsible. Companies that acknowledge and take actions to tackle the social challenges throughout their value chains are not only more respected by stakeholders but are also able to proactively manage issues that could present material risks to the business. With this in mind, devoting the significant resources and influence of the private sector towards tackling negative social issues will generate wider positive societal benefits.
Prioritize social & human capital issues by their importance to the company’s stakeholders
Once issues have been mapped across the value chain and classified, companies should prioritize the issues identified.
Options for criteria to rank the importance of the social issues identified include:
- The severity of the potential impact12,
- The likelihood of the company impacting this issue,
- In the case of negative impacts, to what degree the impact can be remediated, and,
- In the case positive impacts, the degree to which the impact can be enhanced.
Completing this step with appropriate stakeholder input further enhances the credibility and value of the approach. Global and/or local stakeholders can play an important role in informing the long list of issues, determining their business relevance, and/or validating the final lists.
Companies can choose the most appropriate process for capturing stakeholder views. Some companies may decide to draw on existing internal committees or external stakeholder advisory boards; others may choose to develop entirely new processes. To identify stakeholders, companies may want to conduct a stakeholder analysis and mapping exercise that classifies stakeholders by criteria such as their expertise, legitimacy, and willingness and ability to engage. See Box 3 on stakeholder engagement and recommended resources for more guidance on this issue.
Box 3: Stakeholder Engagement in the Social & Human Capital Protocol
Stakeholder engagement is not required at the outset of applying the Protocol, but is highly recommended as it can enrich the Protocol process and strengthen the quality and credibility of the results. External stakeholder engagement may be useful at various stages of the Social & Human Capital Protocol. For example, stakeholders can:
• Offer perspectives on the issues or impacts of greatest concern
• Inform the relative importance of issues and impacts
• Provide data and expertise
• Validate and add credibility to the process and results
For some measurement and valuation techniques, stakeholder engagement is necessary, particularly when it requires the perspectives or data of those people directly impacted by the company.
The risks of not engaging with stakeholders include having an incomplete view of material social & human capital issues and impacts, missing out on opportunities for innovation, and having results that are not credible or usable for comparing options and making decisions.
As social & human capital valuation is still in early stages, it is important that companies are clear about their current ambition level and long-term goals. This will help set the expectations with stakeholders and invite stakeholders to serve as partners as the company refines and improves its approach.
Putting Theory into Practice
1 The UN, Universal Declaration of Human Rights
3 The UN, Guiding Principles Reporting Framework
4 The ILO, MNE Declaration
5 The UN, Sustainable Development Goals
6 This exercise was initiated in order to further support companies using the Protocol by producing tables that list out key ‘social & human capital issues’ in a way that is analogous to the natural capital impact driver and dependency categories (akin to Tables 4.1 and 4.2 of the Natural Capital Protocol). This serves as an initial list to allow companies to understand how social and human capital is relevant to them; to identify which issues may be most material for further analysis in their social capital assessment; and that can be validated, added to or refined in the future. The exercise uses three reference documents from which to distil key issues:
-UN Universal Declaration of Human Rights (Guiding Principles Reporting Framework)
-ILO Tripartite Declaration of Principles Concerning Multinational Enterprises (the MNE Declaration)
-Sustainable Development Goals (SDG Compass)
Additional social capital issues have been added to the resultant list as appropriate. However this is not intended to provide a comprehensive listing of all potential social and human capital issues which may be relevant to all companies and sectors. It is intended to spur further thought and discussion, rather than specifically linking to a set of pre-defined metrics and indicators. The list of issues is not intended to produce mutually exclusive categories, hence there will be overlap between multiple issues included.
7 UNEP/SETAC, Guidelines For Social Life Cycle Assessment Of Products
8 Roundtable for Product Social Metrics, Product Social Impact Assessment Handbook Version 3.0
11 South African Government, National Development Plan 2030
12 For further details on severity, see the UN Guiding Principles on Business and Human Rights, explanatory notes on Article 14