In this step, users of the Protocol should map the social issues identified in Step 1 to relevant business value drivers. They should also identify key decision-makers and the type of decisions that would benefit from social & human capital information.
While Stage 1 of the Protocol might be developed as an annual inventory to understand material social & human capital issues, for some companies it may be useful to undertake Step 2 of the Protocol more frequently; i.e. each time there is a business decision that needs the support of social & human capital information.
As described in Figure 8 below the business case for measuring, valuing and managing social & human capital can be connected to five business value drivers. These business drivers are the mechanisms through which social & human capital drives business performance improvement and value creation. The importance of these drivers will vary by company. For example, for some companies, mitigating any negative impacts on nearby communities in order to obtain a ‘license to operate’1 may be their highest priority, while other companies might be interested in developing new product lines to address the health needs of low-income consumers.
Companies should map the relevant social & human capital issues identified in Step 1 against these business value drivers, Figure 9 provides an example of this.2
When considering relevant business value drivers, companies should especially consider key decision-makers who are responsible for or reliant on the management of these issues, and whose decisions would be informed and influenced by social & human capital measurement and valuation in these areas. This could include decisions about resource allocation, investments in new markets, business models, or product lines, or actions to improve talent acquisition or productivity. Consulting relevant internal stakeholders through interviews, workshops, or regular meetings can strengthen this process and also build buy-in and momentum internally for subsequent steps. More information on determining the target audience for the assessment can be found in Step 4.
Companies are encouraged to consider how the results of the assessment might contribute to value creation, protection, and destruction for the company or society:
- Value protection is the value saved by avoiding risks such as costly delays in planning, construction and operations, lawsuits or other unforeseen added costs, project cancellation, or appropriation.
- Value creation is the excess of benefits over costs. For example, it can be the value from input savings or productivity gains - such as local workforce training that enables the substitution of expensive expatriates with local hires.
- Value destruction is the value lost due to the use of or impact on social & human capital.
Putting Theory into Practice
1 The term ‘license to operate’ does not necessarily refer to a regulatory permit or license that is required by an authority for the business to operate. According to Thomson and Boutilier (2011) a social license to operate (SLO) is a community’s perceptions of the acceptability of a company and its local operations. SociaLicense.com identify four levels of social license: withheld/ withdrawn, acceptance/tolerance, approval/support, and psychological identification.
2 For further details, including company examples, please refer to the WBCSD publication Social & human capital in Decision-Making.