Social capital and its use within CSR – Moving away from the target

A segment of a social network

Ever since Pierre Bourdieu cornered the term social capital it has been used and misused to a degree that even the inventor would have a hard time recognising the concept. In order to understand what capital in a Bordiuedian contact one needs to understand that it is centred on class and how people position themselves within society and organisations. He identifies three different sources that capital can come from Economics (e.g. money or what we would call monetary resources), Culture (e.g. art, beauty, etc.) and Social capital. In his understating social capital is centred around an emphasis on conflicts and the power function like the social relations that increase the ability of a subject or actor to advance their interests. Social positions and the division of economic, cultural and social resources (which is legitimized with the help of Symbolic capital which is the combination of capital that is most valuable in the specific field) in general is determined by the capital resources which a person is able to gather within the field were he or she wants to be active. The field is understood as a network or a configuration of objective relations between position that gain their position depending on the capital that is valid in the field. Or “’the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition’ (Bourdieu, P. 1986. ‘The Forms of Capital.’ Pp. 241-58 in Handbook of theory and research for the sociology of education, edited by John G Richardson. New York: Greenwood Press.).

This means (at least in my mind) that one could never look at social capital in isolation from other forms of capital, but it should rather be seen in combination with other forms in order to understand how power was distributed within a given field. So much for theory…

Within the CSR movement there have been a tendency to see social capital as a way to measure and justify sustainability issues (e.g. capital in isolation). This is mainly because it is seen as a relative easy concept to comprehend and within the definition there seem to be real quantitative measurements to be made. For example one would ask; how many personal connection does a person have?, How much do they socialize?, Where do they put their trust? What is their impact on the local community? etc. All of these examples of things that one can go out in the field and investigate and come back with measurement. In theory (at least in this one) it would be possible to find out whom in a given field have the most social capital and thereby identifying who and about what a socially responsible company should communicate around what issues. Or at least this is the idea.

However, this will in my mind be a step in the wrong direction as it dilute both the concept of social capital as it was intended by Bourdieu and will make Corporate Social Responsibility impact a matter of how much or little capital impact one is able to produce. I have come up with five arguments why the two should not be mixed.

First it presents a theoretical challenge. As I have blogged about before is CSR not a concept with one specific definition it is more or less up to the use or organisation to define what it means to them and then take it from there. So if on uses the concept of CSR and proclaims that the operationalized form of is to be called Social Capital which is also an ambiguous concept the whole thing seems to be diluted into something that nobody understands or agree upon. This would not only leave the organisations that adopt the concept not much better of than when they started but might even lead to more bewilderment.

Second is that fields or networks are under constant change especially within the world of NGOs, CSOs, municipalities and governments were companies need to operate with their CSR efforts. CSR is very much a political battleground and requires constant negotiations with stakeholders on what is important and what is not. The capital that is valuable in one instance might have much to say in another and as companies need to operate efficiently in many social contexts it would not make sense to just to stick to one understanding of what social capital is. Just think of BP and how there was a sudden but decisive shift in public opinion despite the fact that they were ( or at least they themselves) considered the “green Oil Company”.

Which leads to the third subject that field analysis is retrospective it will not give you a indication about what will be important next, what is the future issue we need to be aware of. In this sense it is more analysis that will lead to the status quo rather than give organisations an idea what will come next. What is the challenge that management need to deal with in the future what will come that will force this field to change it understating of what capital is valuable.

My fourth objection to the use of social capital comes from the idea that every human action and understanding should somehow be capitalised. Why is it that in order to understand something we will need to measure it in terms of money? In my mind moral and ethics in the centre of CSR that is about doing good and doing well at the same time. If one is only willing or able to talk about something if we can measure it in terms of value there is something fundamentally wrong with us. CSR can be a effective approach to handle social complexity so why not use it as such instead of reverting back to an economic mindset that will just make it an useless activity.

Fifth is what Ben Fine call the issue of BBI or “Bringing Back In”. It seems like that as the concept of Social capital is so undefined and it would that each time the so-called “real” economists does not understand something it must be Social capital. This means that the whole concept have become some form of Freudian garbage bin where we put stuff because it has something to do with the unconscious or the things we can’t measure and therefore not understand. This has meant that we have seen race, gender, crime, security, rules and norms being included into our understanding of Social capital. And even as time have progressed and it has become even less transparent we have started to bring Bourdieu back in as we have wondered so far of the centre that it doe not resemble the original idea.

Does this means that Social capital cant be used for analysis? No it does not. It can be very valuable as a strategic tool and understanding of environments and social contexts which otherwise would be too abstract or complex to comprehend.But it should be done so as it was originally intended not as a concept which have morphed into something which have stretched it much too far. In social science it tell us something about the dynamic of the field we are trying to understand. But as one can see from the list of definitions below there is more than one that wants to stretch the concept further than it can take. CSR is a concept by which organisation takes a critical look upon itself and its actions and evaluate if the consequences of these are to the benefit or harm of its stakeholders. It does so using normative standards that are issued by institutions like the EU, OECD, UN or local governments.

CSR is a reactive concept that gives organisation an idea what is expected of them now and what they might expect of them in the future. The use of social capital will only lead to a degeneration of both concepts and take out the benefits that a open understanding of the role of business in society, which CSR brings with it into a realm where it no longer will be effective.

I can just hear the executive manager talk about how much impact their company have on social capital and proclaim, “that while our internal stakeholders are still underpay and discriminated against they are at least rich on social capital”.

Definitions of Social Capital from Social Capital Research

External versus Internal Authors Definitions of Social Capital
Baker ‘a resource that actors derive from specific social structures and then use to pursue their interests; it is created by changes in the relationship among actors’; (Baker 1990, p. 619).
Belliveau, O’Reilly, Wade ‘an individual’s personal network and elite institutional affiliations’ (Belliveau et al. 1996, p. 1572).
Bourdieu ‘the aggregate of the actual or potential resources which are linked to possession of a durable network of more or less institutionalized relationships of mutual acquaintance or recognition’ (Bourdieu 1986, p. 248).’made up of social obligations (‘connections’), which is convertible, in certain conditions, into economic capital and may be institutionalized in the form of a title of nobility’ (Bourdieu 1986, p. 243).
Bourdieu Wacquant ‘the sum of the resources, actual or virtual, that accrue to an individual or a group by virtue of possessing a durable network of more or less institutionalized relationships of mutual acquaintance and recognition’ (Bourdieu and Wacquant 1992, p. 119).
Boxman, De Graai. Flap ‘the number of people who can be expected to provide support and the resources those people have at their disposal’ (Boxman et al. 1991, p. 52).
Burt ‘friends, colleagues, and more general contacts through whom you receive opportunities to use your financial and human capital’ (Burt 1992, p. 9).’the brokerage opportunities in a network’ (Burt 1997, p. 355).
Knoke ‘the process by which social actors create and mobilize their network connections within and between organizations to gain access to other social actors’ resources’ (Knoke 1999, p. 18).
Portes ‘the ability of actors to secure benefits by virtue of membership in social networks or other social structures’ (Portes 1998, p. 6).
Internal/ Bonding/ Linking Brehm Rahn ‘the web of cooperative relationships between citizens that facilitate resolution of collective action problems’ (Brehm and Rahn 1997, p. 999).
Coleman ‘Social capital is defined by its function. It is not a single entity, but a variety of different entities having two characteristics in common: They all consist of some aspect of social structure, and they facilitate certain actions of individuals who are within the structure’ (Coleman 1990, p. 302).
Fukuyama ‘the ability of people to work together for common purposes in groups and organizations’ (Fukuyama 1995, p. 10).’Social capital can be defined simply as the existence of a certain set of informal values or norms shared among members of a group that permit cooperation among them’ (Fukuyama 1997).
Inglehart ‘a culture of trust and tolerance, in which extensive networks of voluntary associations emerge’ (Inglehart 1997, p. 188).
Portes Sensenbrenner ‘those expectations for action within a collectivity that affect the economic goals and goal’ seeking behavior of its members, even if these expectations are not oriented toward the economic sphere’ (Portes and Sensenbrenner 1993, p. 1323).
Putnam ‘features of social organization such as networks, norms, and social trust that facilitate coordination and cooperation for mutual benefit’ (Putnam 1995, p. 67).
Thomas ‘those voluntary means and processes developed within civil society which promote development for the collective whole’ (Thomas 1996, p. 11).
Both types Loury ‘naturally occurring social relationships among persons which promote or assist the acquisition of skills and traits valued in the marketplace. . . an asset which may be as significant as financial bequests in accounting for the maintenance of inequality in our society’ (Loury 1992, p. 100).
Nahapiet Ghoshal ‘the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships possessed by an individual or social unit. Social capital thus comprises both the network and the assets that may be mobilized through that network’ (Nahapiet and Ghoshal 1998, p. 243).
Pennar ‘the web of social relationships that influences individual behavior and thereby affects economic growth’ (Pennar 1997, p. 154).
Schiff ‘the set of elements of the social structure that affects relations among people and are inputs or arguments of the production and/or utility function’ (Schiff 1992, p. 160)
Woolcock ‘the information, trust, and norms of reciprocity inhering in one’s social networks’ (Woolcock 1998, p. 153).

It’s all about what you do – from gender equality to strategic benefits

Most international surveys rank the Scandinavian countries among the very best in terms of women and men’s equality. At the World Economic Forum are all the Nordic countries among the top 10 and the independent NGO, Women Watch the small group of countries in northern Europe is also among the very best. So there is little doubt that there is something at the Scandinavian approach to gender equality, which rings true.

Although we are close to being world champions in the equality discipline it has not been something we have been particularly good at exploiting in a commercial sense. Instead we have resorted to toasts and speeches and we highlighting the individual women who have actually been able to beat their way through the glass ceiling.

In Denmark we have come up with initiatives such as charter for more women in management which is a set of principles like the Global Compact that is meant as tool for strategic gender equality development within originations or the torch campaign were individual companies communicate how they work with equality within their organization. While these initiatives are very fine they have the drawback that they simply perpetuate women and femininity as a handicap.

It is not because equality is not a real problem and that for many women means that being thirty is also de-facto means the end of their professional career in management. I just think that if we continue to regard the female gender as a handicap, we will never move beyond the challenges that both the country, but more specifically the individual companies are facing in terms of organizational development and continued competitiveness. A novel approach towards gender equality that has not exactly been dominant in the current debate neither here in Scandinavia nor to my knowledge anywhere else in the world.

Companies in charge know how to use sex

Men and women are in many ways different and in many cases, the direct opposites, like Mars and Venus, if I had to take a familiar example. Yet we are out unable to function without dealing each other’s good and sometimes bad sides.

Take, for example the trait of being entrepreneurial and the willingness to assume risk. Here is one of the traits that we perceive as being masculine and it is something we as a society appreciate. It turns out also that around. 2.5 times more men are entrepreneurs than women. Of course there are also female entrepreneurs and we are lucky to have them, yet it is a trait we usually put in connection with being a man.

As a counterweight to the enterprising men we see the risk averse women. The ability to understand and devise strategies to avoid risk is something we associate with feminine traits. It would be wrong to say that men can’t be risk averse but as we traditionally have favored the risk-taking in men and given credit to women who understand and is able to avoid risk it is the traits we see now as being most prominent. Remember that I do not judge if these traits are good or bad if they have come from the creation of stereotypes or if it is something in our genes, but only look at how people actual act.

There are many companies that have discovered that women are good in the role of risk monitors. Thus, more than 45% of audit committees in the Swedish OMX companies of women, which is in contrast to that is somewhere between 10 to 20% women on boards in general. It turns out also to companies with a gender-differentiated Board of Directors and generally cope better with the crisis at least the first one in 2008. These organizations have been able to respond quickly and consistently to market changes and have implemented the changes needed to make money in a difficult market. Examples include the Swedish Hennes & Mauritz (clothing and fashion), or the Danish firms Carlsberg (beer and soda) and D/S Norden (shipping), who all have women in both the Board and executive management. All three companies have fared well through the crisis and although it has been difficult, they have been able to exercise constant care in very troubled waters.

I’m not sure that these businesses have completely understood the significance that gender has had on their ability to adapt to its environment in an efficient manner, but in any event, it worked.

The patriarchal business is stalled

In contrast stand the less diversified firms, or said in another way, those who either did not want or have failed to attract other than male employees into their strategic management group. These companies have not been able to get rid of their risk as the market they operated in changed. This can obviously be due to many factors, but the interesting thing is that they generally perform worse than their more diversified counterparts. As a consequence of their inability to understand the organizational risks that they faced, they have not been able to show a sufficient earning capacity or have had direct losses. Both of which have been penalized by the stock markets to a degree where some of theses companies are valued less in terms of market price than the value it has according to its books.

An example of a company that has a high organizational risk seen with a gender perspective is firm Vestas. Time after time, Vestas has disappointed the market mainly because they have not had a good feel for what their stakeholders wanted to know and therefore could not live up to expectations that primarily professional market analysts and portfolio managers had. As a consequence, we have seen share prices today are at the bottom even when compared to its tangible value. As I have blogged about Vestas before there is no doubt that they have a good product, excellent production and are market leaders so there is no reason why there share price should not be much higher than it is today.

Two typical strategic moves that male-dominated companies have been using are first, to try to save themselves out of trouble by cutting costs; secondly to dismiss its leaders. It is not because this is a particularly patriarchal features that organizations use in times of recession, but the strategies only aims to reduce costs and simultaneously makes them unable to think further ahead, the whole exercise ends up in an actual fight for survival. To use an analogy it is like beating the body into submission and when that does not bring results we cut of the head. Not that some companies do have a lot of fat which can be trimmed but if there is no strategic thinking behind the cost reduction it will mount to little less than the ultimate loss of the business.

Everything else being equal, companies that have come through the crisis by adapting to and cultivating new markets perform better than those who are just coming through to save and reduce their organizations as the only means of maintaining a solid balance sheet.

The Scandinavian competitive advantage

Both here in Denmark but also in particular the rest of the countries were gender equality is high we have a resource that is not only unique but also virtually impossible to copy. By using our human resources to its full potential, we can provide competitive advantages in both the short and long term that will enable companies to navigate more safely and with less risk on the global market.

Universities and business schools produce far more women than male candidates. If business continues to let this resource remain unused and under utilized, we must compete on parameters where do not have many chances such as production costs and human and labour rights areas were we are unable or unwilling to compete.

Today there are already well-developed tools that can contribute to positive gender development in private and public organisations. The question is whether the HR departments, executives and board members are willing and have the courage to embark on an organizational debate about strategic consequences that extend far beyond the words and cheers and speeches in for example Charter for more women in leadership, Torch and other kinds of woman leader priced which reduces the debates to centre around gender quotas or not.

As individual and members of organisations we have to come to terms with the fact that women and men bring different approaches, viewpoints and perspectives to organizational development. And that these differences can be utilised strategically by organisations that know how. Through an understanding the differences that gender contribute with, we will be able to attract and retain skilled employees and thus be able to reap the benefits found in the fact organisations consist of people that think and behave differently. Female and male employees contribute, for better and for worse, to the development of companies and that the sexless organisation does not exist and that it is better to work to exploit these differences rather than ignoring them.

Institutional investor drops Lundbeck

The first institutional investor Unipension have dropped their Lundbeck shares due to its controversial drug Nembutal that have been used in executions.

Lundbeck have been under attack for several months due to its unwillingness to take a definite stand on capital punishment in the United States. While the issue has been growing in Denmark and several key stakeholders have raised their voice there have not been much movement in terms of real economic pressure until now.

While Unipension is a relative small shareholder (40 million Dkr) in Lundbeck they do represent a group of stakeholders who have significant influence on the general discourse on ethical investments.

“We are an active owner and always try to establish a constructive dialogue with the companies we invest in. We have done this many times and in most cases, we have detailed and complete answers to our queries. This also applies to Danish companies, which usually take their social responsibility and reputation seriously. Contrary to what we normally experience, it has actually been our impression that Lundbeck did not want to engage in a genuine dialogue with us as an investor ” said Niels Erik Petersen, Chief investment officer at Unipension. And he continues.

“It has not been possible for Unpension to get a detailed report on Lundbeck’s efforts to ensure that its products are not being used in undesirable ways.”

While there hasn’t been much movement in terms of negative share price on the contrary the company have experienced a steady increase in the last year but this could be a turning point for the company. There are several ingredients, which can make this case troublesome for the company.

  1. Lundebeck have until now been one of the model companies in terms of CSR commitment and reporting. This have in it self created a platform from which critical stakeholders can hold the company accountable.
  2. The company has in the past been involved in somewhat dubious affairs when it was engaged in the UN food-for-oil-program despite the company had a very explicit anti-corruption policy. For this it the company was heavily criticized together with a number of other companies.
  3. The company is involved in the production of drugs, which normally would be associated with improving people’s life not helping life come to a rapid end.
  4. Lundbeck is a major player in the anti-depressant drug industry and have a major stake in the US and European market making them highly visible to a lot of consumers. It is estimated that about one in twenty will have a depression at any given time making the decease common place among the majority of the population.

All of these factors, and properly one or two more, can create a situation were Lundbeck’s image and the brand value of the company could suffer resulting in a fall in its total value and share price. From an investors point of view I would rather miss the 1% of total sales that Nembutal is then risking the value of the remaining 99%.

The Lundbeck case in short:

  • In January this year U.S. Hospira stopped production of the anesthetic, as 35 U.S. states use when they execute death convicts. Hospira would produce it in Italy, but the U.S. authorities intervened.
  • Since the first German and later British authorities, under pressure from grassroots organizations slowed other European companies’ exports of anesthetic to the U.S..
  • Therefore, the preliminary four U.S. states have switched over to using the Lundbeck product Nembutal, which Lundbeck is the only supplier of the U.S..
  • The means is the longest course of the patent. Last year sold Lundbeck 50 million. doses, which according to IMS earned 25.5 million. dollars.
  • Lundbeck has protested against the use, but will not pull the product back, particularly as it approved for treating severe epileptic seizures.

What systems do and communication doesn’t

So is CSR an exercise in the effective management of systems or is all about communicating on the go so to speak? Being an “old” systems person I have always favoured systems over the ups and downs of communicating on a case by case basis. But even I have to admit that systems will not do the trick on its own there need to be some form of room to manoeuvre.

On the other hand one should not think that organizations can communicate their way of out of everything so here is a short and incomplete list of things systems will do which “communicating” alone will not help you with. Of cause one can always argue that systems are communication just in another form but in this case I will keep the two separate.

  1. CSR Systems will create consistency. Creating effective management systems is all about creating rigidity in the organisational processes. One should not look at systems as something completely static but as a way that management can ensure that there is some form of strategic direction and that the odd case will not distort the whole organisations approach. For stakeholders this means that there is some form of consistency when dealing with the organisation.
  2. CSR systems is organised learning. People change but systems remain in place. This process ensures that organisations are able to learn and develop regardless of the people within its walls. The day when employees stayed within the same company until retirement is long gone. Today people change jobs much more frequent sometime within the organisation but frequently they change organisations as well. Even though companies have elaborate programs for retaining their employees there will never be a employee loyalty program that will not be matched by something better.
  3. Systems are control. Not all employees will think that the strategic interest of corporate management is inline with their own desires. And while systems are not able to change peoples mind they can coerce employees to act in a certain way that management wants them to.
  4. Systems are effective. Of cause they are otherwise we would have found another way of organising our processes and knowledge. Systems help organisations become more effective at what they do but they do not help companies come up with new ideas or create new ways of addressing new problems. Sometime management will confuse systems with efficiency in all the issues that their organisations are dealing with. A “systems only” approach will normally results in miscommunication and loss of reputation as systems do not confront current issues but are rather a collection past experiences and learning.

So what communications do which systems can’t? Follow the next episode…

Are the biggest necessarily the best?

Flags of the Nordic countries - from left: Fin...

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I have done a small survey of the top ten employers in Scandinavia (Denmark, Sweden, Norway and Finland) to look for evidence that these companies are also engaging in CSR activities. My question was if the nordic companies subscribe to the UN Global Compact and if so what CSR system do they use for reporting?

 

Company

Country

Number Employees

Member of Global Compact

Using a normative reporting tool like GRI, ISO26000, Etc.

Comments

1.

ISS Holding A/S

Denmark

482.531

Yes

None

Cleaning and Facilities services

 

2.

 

Sweden

236.713

No

None

Security

Securitas AB

3.

Nokia OY

Finland

123.171

Yes

GRI

Telecommunication

4.

A.P. Møller – Mærsk A/S

Denmark

115.386

Yes

GRI

Transportation and Retail

5.

Volvo, AB

Denmark

94.250

Yes

GRI

Automobile

6.

Ericsson

Sweden

91.825

Yes

GRI

Telecommunication

7.

H & M Hennes & Mauritz AB

Sweden

59.440

Yes

GRI

Textile retail

8.

Helse Sør Øst RHF

Norway

54.979

No

None

Governmental Health institution

9.

Skanska AB

Sweden

51.645

Yes

None

Building and Construction

10.

Electrolux, AB

Sweden

51.544

Yes

GRI

Electronics

 

It does seem like that the big companies have a tendency to use Global Reporting Initiative (GRI) as their preferred reporting platform. The ISO26000 haven’t found its way into the large corporations at this point but it’s still early days for the standard and I would not expect anything solid until next year.

Another interesting finding is that companies that have products that are relative close to the consumers like clothing, mobile phones or cars are more likely to have implemented a normative reporting system. On the other hand are companies and organisations like ISS and Securitas that does provide a service but who are not perceived as being close to the end consumer not as likely to have adopted a system which would is perceived as communicating transparency.