The measurement and valuation of social and human capital is a relatively new concept. There exists the potential for misunderstandings of the intent, and misuse of the concept; especially around the mechanics of valuation, and monetary valuation in particular.
With this in mind, the ‘Social and Human Capital Charter’ was developed, setting out a framing for the Social and Human Capital Protocol. The Charter is intended as a guide for companies and stakeholders when conducting or applying social and human capital measurement and valuation, in particular when making judgements about how to interpret the Protocol.
The Social and Human Capital Protocol can be used to measure business impacts relating to the avoidance of illegal activities such as child labor and forced labor. Some companies will already be reporting on these issues as signatories to certain international agreements. The Protocol does not seek to act as a substitute for these agreements, but can act to support business in mainstreaming their measurement, valuation and response to these issues.
Purpose of the Charter
The purpose of this Charter is to highlight key ethical issues that should be considered by users of the Protocol, to help ensure that the application by business of the concept of social capital through the Protocol leads to the protection, maintenance and, where possible, enhancement, of people’s rights, skills, experience, knowledge, and well-being in addition to societies’ shared values, norms and institutions.
Article 1. Sustainable Development
Application of the concept of social and human capital by business should support sustainable development1 and be guided by the principles of living within planetary boundaries and ensuring a strong, healthy and just society.
Article 2. Human Rights
Application of the concept of social capital by business should respect human rights as set out in the UN Guiding Principles on Business and Human Rights2. Where information is gathered directly from stakeholders; their free, prior and informed consent should be obtained.
Article 3. Transparency
Any substantial assumptions and recognised limitations, in the methodologies used to measure and value social and human capital, should be disclosed to the users of the information.
Article 4. Acceptability of valuation approach to stakeholders
It should be recognized that not all stakeholders will recognize valuation - and in particular monetary valuation - of some impacts or dependencies. For example, whilst it is common in Government policy appraisal to value a human life in monetary terms3 some stakeholders may disagree that this is ever appropriate. Whether or not stakeholders are likely to accept the type of approach used to value social and human capital should be considered when identifying a valuation approach.
Article 5. Trade-offs
Just because it is possible to value an impact does not, by itself, justify trading one impact off against another that may have been valued more highly. Similarly, the net value of the impacts from an activity may be positive but there may be negative impacts as well. Companies should look both at the total value as well as the individual impacts or dependencies making up this value, to ensure that the company isn’t overlooking any key risks, and is communicating these transparently.
Article 6. Monetary Valuation
Not all social and human impacts can and/or should be monetized. If monetary values are allocated to human life or health, this should be applied in a transparent and equitable way.
Article 7. Role of governments, society and communities
Governments, societies and communities at global, regional and local scales should understand their impacts and dependencies on social and human capital and take responsibility for actions required to make society more cohesive and resilient at global and local scales.
Article 8. Continuous learning and adaptive management
Knowledge of the evolving theory and practice of social and human capital should be shared widely and used to continuously improve our understanding of the concept of social and human capital and ensure more effective application of this Charter over time.
1 As defined by the Brundtland Report: “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.
2 See: UN Guiding principle on Business and Human Rights
3 See, for example Mortality Risk Valuation in Environment, Health and Transport Policies, OECD (2012).