Companies should prioritize issues that substantively affect their ability to create value both for the business and key stakeholders over the short, medium and long term, and hence those issues that should be included in decision-making. At the same time, companies that are starting their social & human capital measurement and valuation journeys may also wish to be pragmatic, identifying a starting point that is feasible for the resources they have at their disposal and that can stimulate engagement and further adoption across the organization (it should be noted, however, that this approach risks omitting social issues that may be material for decision-making).
A well-accepted way to prioritize social & human capital issues is by combining the stakeholder and company perspective in a materiality assessment, which many companies carry out as part of their sustainability strategy development and reporting processes. For the purposes of the Social & Human Capital Protocol, a materiality assessment should be viewed as a systematic approach to prioritizing issues, and not a process necessary to meet corporate reporting legal disclosure requirements or expectations.
Materiality can be thought of as determining the relevance and significance of an issue to an organization and its stakeholders.1 In the context of the Protocol, this should be applied in terms of:
- Relevance: which social & human capital issues are relevant when considering the activities that occur across a company’s value chain (see Step 1).
- Significance: the relative importance of these issues to a company and their stakeholders (see Steps 1 & 2).
The output of a materiality assessment should provide a company with a clear understanding of which, of the relevant social & human capital issues it has identified, are most significant to its stakeholders and therefore most relevant to its business. The output of this will then determine the focus of the social & human capital assessment.
Some companies will use this information to prioritize all the social & human capital issues that have been identified as most significant to stakeholders and the business for inclusion in its social & human capital assessment. Others will focus on a smaller, pragmatic selection of issues or a cluster of issues within a priority area, e.g. supply chain or product impact issues.
Regardless of the number of priority issues chosen, the key objective is to ensure the Protocol is not framed as a one-off assessment, but as a continuous process and an ongoing movement for change within the organization.
Companies that are at early stages of using the Protocol are encouraged to start where they can build internal momentum for further measurement and valuation to eventually expand their resulting approach across the organization. For these companies there are some pragmatic entry points that could be considered for pilot studies:
- Decide how you want to use the results of a pilot study, e.g. communication, reporting, monitoring, strategy, decision-making, steering, KPI setting.
- Start with any social & human capital measurement and valuation approaches that are already familiar to the organization, which can be improved, built upon and expanded through the Social & Human Capital Protocol.
- Start within the remit of a particularly influential and engaged individual or group who can dedicate appropriate resources, serve as an example to others and act as a champion going forward.
- Add a social perspective to the scope of ongoing natural capital assessments within the organization.
- Take the opportunity to tackle a challenging issue within the organization which already has stakeholder and senior leadership attention.
Box 5: Considerations for a pragmatic approach to kicking off the Social & Human Capital Protocol journey
The WBCSD publication “Social & Human capital and Decision-Making” consolidates the lessons learned through interviews and conversations with companies on how they began their social & human capital measurement and valuation journeys. Their advice is captured in the three points below:
Kicking off the journey
- Every company we spoke to highlighted one important point: that they are all at the beginning of their measurement and valuation journeys. Each company strongly felt that this is an iterative process that cannot be precisely planned, but that getting started is the most important step.
- Focus your efforts and work step-by-step towards concrete results: start with pilots that have a feasible scope.
- Select pilots that are closely connected to the core business of your organization to show the value of a measurement exercise and use these good examples to demonstrate the business case for measurement internally.
Building internal buy-in, collaboration and ownership
- Use a committee of board members as ambassadors and to test results. Board-level ambassadors support you in creating awareness and commitment throughout the company.
- Create a small core team with team members that represent several departments of your organization (finance, business development, procurement, HR, etc.) to encourage ownership and leverage different perspectives. Consider involving the CFO/finance function before involving communications to avoid the risk that a project will be labelled internally as ‘marketing’ or ‘for external reporting purposes’.
- Consider allocating a dedicated change management person within the company at an early stage.
- Secure local input, particularly for multinational companies, as you cannot fully understand social & human capital issues from a headquarters position.
Leverage external experience and dialogue
- Involving external experts and other practitioners can help to build a credible approach, and can save a company a lot of time ‘re-inventing the wheel’.
- At the same time, carefully consider in which phase of the project it is most suitable to involve which external stakeholders, and be clear with your messaging around how your company aims to use the outcomes of the measurement and valuation project.
Putting Theory into Practice
1 Adapted from Social Value International Supplementary Guidance on Materiality