SOCIAL& HUMAN
CAPITAL
PROTOCOLa primer for businessCAPITALS COALITION
Social & Human Capital Protocol Primer

1. Introduction
People are at the core of business.
The Capitals Coalition is a global collaboration transforming decision-making
by including the value that flows from natural, social and human capital.
Businesses that understand the value they receive from people and communities are
more successful – considering social and human capital performance is a core part of
informed business decision-making.

This is a short introduction to theSocial & Human Capital Protocol. It
outlines how applying the Protocoland including social & human capitalin your considerations will improveyour decision-making.

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Social & Human Capital Protocol Primer

2. Business Case: Value drivers
By incorporating the value of social & human capital into your decision-making you canboth gather insights into significant risks, and also discover opportunities for adaptation,resilience and efficiency.

Opportunity

Risk

Applying the Protocol provides benefits in many areas:

3

Obtain or
maintainlicense tooperate

Mitigate the risk of negative publicity, protest, boycott, lawsuits anddeclining support for current and future operations.

Improve thebusinessenabling
environment

Advance the right mix of rules, incentives, support and public services.

Optimizehumanresource
management

Ensure the ongoing safety, engagement, development and availabilityof appropriately skilled resources that enhance business productivity.

Strengthen
value chains

Improve the performance, stability and capacity for growth of suppliers.

Encourage
product
and service
growth andinnovation

Develop new products, services and business models and improveexisting offerings beyond industry standards.

Strengthen community relationships on which the business depends.

Prepare for regulation.

Enhance trust and reputation with distributors and retail partners.

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Social & Human Capital Protocol Primer

3. Why Measure and Value?
“Understanding the value provided by social and human capital will deliver a muchneeded yardstick for humanity. It will provide an approach that is able to compare andcontrast industries and understand the players that outperform in their sectors in a clear
and meaningful way. In turn, this will empower governments to effectively shape policyand have a framework for auditing.”
Sonja Haut,
Head of Strategic Measurement and Materiality, Novartis“The protocol helps us think of the possibilities in front of us and how to use valuation todrive strategy. It provides the fence posts and the guidance to make sure we follow bestpractice, involve all the right stakeholders, and account for what matters most. Using thevaluation approach is creating awareness across our company and has helped our seniorleaders get engaged with important issues.”
Andreza Souza,
Sustainability Manager, Natura“Employee health and safety is a fundamental human right. At L’Oréal, we that believe
if we can create a great place to work, where safety and health is a visible felt corevalue, that this is an important element of employee talent retention, happiness at work,
company trust and ethics. If employees can align their own personal values and ethics
with that of the company it’s a win-win. Investing in all aspects of social and humancapital and putting our employees at the centre, creates value and just makes goodbusiness sense”
Malcolm Staves,
Global Vice President-Health & Safety, L’Oréal“At ERM, we are a people business. For us, this means a focus on our people and on thecommunities in which we live and work. From our own experience and that of our clients,
we see a greater need than ever to take a total worker health approach encompassing
safety, physical and mental health, and wellbeing. In response to growing challenges,
such as the COVID-19 pandemic, we will continue to evolve our responses to meet theneeds of our workforce, clients and communities and continue to be at the forefront ofdeveloping the thinking around human and social and capital.”
Linden Edgell,
Global Sustainability Director, ERM

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Social & Human Capital Protocol Primer

4. Conceptual Model
Social and human capital are integral to business success.

StocksFlowsValues

Human Capital• Knowledge, skills,
competencies, andattributes embodied
in individuals

Human Capital• Capabilities andwork force

Benefits tobusiness, societyand individuals

Social Capital• Networks with sharednorms, values, andunderstanding

Social Capital• Cooperation,
trust, laws, andempowerment

Biodiversity

Figure 1: Capital stocks, flows and values
You may consider social and human capital in terms of stocks and ﬂows in a manner
similar to ﬁnancial capital stocks and ﬂows. In other words:
Human capital The knowledge, skills, competencies and attributes embodied inindividuals that contribute to improved performance and wellbeing.
Social capital The networks together with shared norms, values and understandingthat facilitate cooperation within and among groups.
Both social and human capital result in significant value to business, societyand individuals.
The Protocol is part of a broader movement to enable businesses to integrate people,
planet and proﬁt as drivers of sustainable growth. To achieve an inclusive picture of anorganization’s impacts and dependencies, business should consider social and humancapital, along with natural capital, as part of a holistic assessment of non-ﬁnancial capital.
Understanding the connections between business and society and the associated risks
and opportunities will inform better, more timely decision-making.

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CAPITALS COALITION
Social & Human Capital Protocol Primer

NATURAL CAPITAL

Biodiversity

IMPACTS/
DEPENDENCIESCOSTS/
BENEFITSCOSTS/BENEFITS

BUSINESSSOCIETY
Including government
and people

RISKS/OPPORTUNITIESFINANCE SECTORRISKS/OPPORTUNITIESFigure 2: Capitals impacts and dependencies: conceptual model for businessAll businesses interact with the capitals (social, human, natural and produced) in thefollowing three ways (depicted in figure 2):
1.

Impacts on society. These can be direct impacts, for example, through employment
and the payment of wages, or indirect impacts, for example, through changes tonatural capital, such as the emission of pollutants that cause respiratory problems
and illness in local communities.
Impacts on social and human capital can be described as the extent to which abusiness’ actions or decisions contribute positively or negatively to a persistentchange in the well-being (i.e., capabilities, relationships, health, etc.) of people
living in society.

2. Business dependencies. Businesses depend on healthy and skilled workers,
customer relationships and trust, as well as the rule of law. Some businesses depend
heavily on resources that local communities also use and are therefore dependenton a good relationship with these communities.
3. Impacts on your business. This internalization of impact takes place when an impact
on society is reﬂected back on the business. For example, a business may practice
unfair working conditions that lead to decreases in employee engagement andproductivity, impacting the business bottom line.

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Social & Human Capital Protocol Primer

5. Importance of Valuation
Valuation is essential for implementing a capitals assessment in an organizationalenvironment. Understanding value highlights the significance of our impacts anddependencies and enables us to include their value in traditional decision-making
processes. Being able to communicate the value that we create or erode by taking acertain decision provides us with the tools to make the most informed decisions thatgenerate value across the capitals.
As the Protocol describes, valuation is very context specific and organizations need tocarefully consider the appropriate choice(s). For example, the monetary valuation of aworker safety program could evaluate the value of the program to the company in terms
reducing lost work days, employee turnover, or healthcare costs and/or the value as
perceived by the workers, depending on the goals of the assessment.
Alternatively, incorporating basic human right issues, such as a living wage or childlabour, can be an integral part of human and social capital assessments; however,attempting to place a monetary value on human rights is clearly unnecessary as theirvalue has been collectively agreed upon at a global level.
Valuing the impact organizations have on human and social capital leads tothe realization that issues they had considered to be immaterial in fact directly
underpin their success, which in turn leads to finding new opportunities to besuccessful and sustainable.

A different way of looking at value:
Valuation is the process of estimating the relative importance, worth, or usefulnessof social and human capital to people. Validation can be qualitative, quantitative,
monetary or a combination of these. As discussed in the Protocol, the appropriate
valuation approach depends on the materiality of the impact or dependency, theavailable data and needs of stakeholders.

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Social & Human Capital Protocol Primer

6. What is the Protocol?
Although many organizations provide guidance on external reporting and disclosure,businesses still struggle with understanding their impacts and dependencies in a
way that provides useful and actionable information for internal decision-makers tostrengthen their social and human capital for the beneﬁt of society and business.
The Protocol is a framework designed to help generate trusted, credible andactionable information for business managers to inform decisions.

8Stage 1:
FRAME

Step 1

Get started

Stage 2:SCOPE

Step 2

Define the objectives

Step 3

Scope the assessment

Step 4

Determine the impact and/or dependencies

Stage 3:
MEASUREAND VALUE

Step 5

Measure impacts and/or dependencies

Step 6

Measure changes in the state of social and human capitalStage 4:APPLY

Step 7

Value impact and/or dependencies

Step 8Interpret and test results

Step 9Take actionCAPITALS COALITION
Social & Human Capital Protocol Primer

7. Business Case: Hypothetical example
Unison Biopharmaceuticals – Valuation of Diversity, Living Wage, andEmployee Well Being.
STAGE 1: FRAME
In Stage 1 of the Protocol, you will develop an understanding of how all businesses
interact with social and human capital, including the areas of your business that canfunction better with an improved understanding of these interactions.
Unison Biopharmaceuticals (UB) is a global business specialising in the productionof innovative treatments for rare disease. UB is a large company, providing many job
opportunities locally, but is struggling to retain and grow talent. They have anecdotal
evidence that three issues are contributing to this challenge: their workforce does notreflect the diversity of the communities they serve; actual wages are not aligned with theliving wage; and some workers are concerned about the company’s health and safety
programs. These issues may have hidden costs for the company and society. UB decided
to carry out a social and human capital assessment to measure and value the relative
importance of these three issues, in order to design appropriate programs to addressthese challenges.
STAGE 2: SCOPE
In Stage 2 of the Protocol, you will determine the key audiences and objectives andwill set the boundaries of your measurement and valuation project.
UB seeks to measure and value the ways in which each of these factors is affecting
employee productivity and profitability, as well as subjective measures of employee
well-being, talent attraction and retention. In talking with internal stakeholders, theproject proponents recognized that they need a company-wide evaluation in order toget support for the assessment and that it should cover the last three years, because theinformation needed for the evaluation would be found at the time when UB is compilingtheir statistics
STAGE 3: MEASURE AND VALUE
In this Stage, you will define fit-for-purpose indicators, metrics and data sources before
conducting the technical measurement and valuation of your social and human capital
impacts and/or dependencies.
Through previous employee surveys, HR statistics and financial data, UB wasable to assemble a database, at the operating unit level, that contained thefollowing information:
♦♦
♦
♦
♦
♦
♦

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Employee turnover (overall)
Employee diversity (by race, ethnicity, age and gender)
Operating income, per employee
Employee satisfaction surveys (overall)
Demographic information about the community around the business unit (race,ethnicity, age, gender)
Information about local living wages
Worker safety statistics

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Social & Human Capital Protocol Primer

UB uses some simple statistical models and discovers there is generally a high degreeof correlation between lower operating income, higher turnover, the lack of employee
diversity, living wages, and lower worker safety. However, the relative importance of eachissue varies on a regional basis.
STAGE 4: APPLYIn the final Stage of the Protocol you will interpret the results of Stage 3 and apply
them to relevant business decisions. You will investigate how to integrate the socialand human capital measurement and valuation approach into business processes andsystems to make better decisions.
After considering the results of their assessment UB decided to:
♦♦♦♦

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Create a program of fifty annual entry level jobs with stringent diversity and inclusion
goals, to grow talent and offer equal opportunity employment.
Introduce a variable compensation scheme linked to wellbeing KPIs, recompensing
senior managers based on the wellbeing of employees.
Invest greater resources into capturing data surrounding living wage and set
appropriate levels based on this data in the future.
Commission an independent study to understand the root causes of the issues
surrounding workforce diversity, living wage and health and safety in each of theiroperating regions.

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Social & Human Capital Protocol Primer

8. The Audience
The Protocol, although relevant for any organization, has been developed specificallyfor business.
The Protocol incorporates social and human capital into valuation and businessdecision-making, and is an iterative process suitable for actors at all levels of familiarity
with the concept.
For those businesses who are more experienced or already understand theirrelationship with social and human capital, the Protocol offers a standardized approachfor conducting assessments. For businesses who are new to the idea, the Protocol willallow them to begin to identify the costs and benefits of their relationship with socialand human capital.
The Protocol also provides the information needed to understand when and how toinvolve external experts and other practitioners to help to build a credible approachand save time.
The Protocol is applicable to anyone who is involved in decision making. It is atechnical document and therefore most likely to be applied by managers from finance,sustainability, health and safety, procurement, and operations departments. This will
involve the outputs being applied by all departments and functions within the businessand becoming an integral part of strategic and financial decision-making.

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Social & Human Capital Protocol Primer

9. The Collaboration
The Social & Human Capital Protocol was developed by the Social & Human Capital
Coalition, a broad collaboration of business, institutions, and experts who contributed
their insights, experience and expertise.
The process was led by WBCSD and lent heavily on the experience and structureof the Natural Capital Protocol in order to create consistency.
Contributing Businesses

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Social & Human Capital Protocol Primer

10.

The Future

A single capital assessment can be helpful, but the capitals approach shows thateverything is connected. Hence, the Social and Human Capital Coalition united
with the Natural Capital Coalition in 2020, to simplify the space and deliver a
harmonized approach.
Together the united community is working to standardize and mainstream
capitals practice with the shared ambition that by 2030 most of business, financeand government will include all capitals in their decision-making, and that this will
deliver a fairer, just and more sustainable world.

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We would like to extend sincere thanks to
ERM and L’Oréal for developing this Primer.

Suggested citation
Capitals Coalition. 2021. “Social & Human Capital Protocol Primer”(Online) Available at: www.capitalscoalition.org.
This work is licenced under a Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International Licence©Stichting Capitals Coalition 2021
www.capitalscoalition.org@CapsCoalition