Social capital: What it is


31st May 2016

Social capital: What it is


31st May 2016

Social capital: What it is

What is social capital?

  • It is “the glue that binds society together’’ and provides the opportunity for businesses to be purposefully involved in creating a sustainable future for their operations, communities, and society at large.
  • It allows companies to demonstrate the impact of their business activities on communities, the economy, and the environment through their stakeholder engagements and the social value created.
  • It provides value to businesses in the form of improved performance, market opportunities, innovation and new product development, and enhanced reputation.
  • It fosters economic development and growth for communities which are part of the ecosystems in which businesses are embedded.
  • Companies with higher levels of social capital gain competitive advantage as a result of access to valuable resources, knowledge and information that are not easily traded.
  • It provides businesses with the opportunity to gain license to operate through the social legitimacy they gain and maintain in communities.

What is the value of social capital?

  • Provide opportunities for businesses to explore the benefits of both formal relationships (e.g. established relationships between a business and its suppliers or the government) and informal relationships (e.g. relationships or engagement between a business and community leaders).
  • Enable communities to identify the benefits that can be derived from the trust, norms and value systems that exist within communities and the relationships they develop with businesses, non-governmental organisations (NGOs) and government departments involved in community development.
  • Provide opportunities for businesses to use the connections and relationships they develop with communities to create social change, inculcate the idea of sustainability and address the social needs of communities.

How is social capital different to other capitals?

Social capital can be differentiated but also share some similarities:

  • It is closely linked to natural capital because it is based on relationships between people and groups who in turn rely on the natural environment.
  • Facilitates the development of intellectual capital by influencing the conditions necessary for relationship building and the exchange and combination of ideas and knowledge.
  • Is instrumental in the development of human capital through educational experiences and social interactions with other employees.
  • Assists in the acquisition, management and use of manufactured capital through the shared norms, value systems, goal and social relationships with external stakeholders.
  • Influences the creation of financial capital by increasing profitability, market share, sales growth, operational efficiency, etc.

How is social capital similar to other capitals?

  • It is a resource or an asset.
  • It is not costless to produce, it requires an investment.
  • It provides a value.
  • The value persists.
  • Can be reduced to economic capital in the long run.

An input/output/outcome/impact model of social capital:

Social Capital Inputs

For more information: The following presentation is available for download: Understanding social capital

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