Corporate Social Capital (CSC)

In corporations, the importance of physical capital, human capital and intellectual capital is well understood but another type of capital, Social Capital, has received a lot less attention (Servaes and Tamayo, 2017). According to Gabbay and Leenders (2001), CSC refers to “the set of resources, tangible or virtual, that accrue to a corporate player through the player’s social relationships, facilitating the attainment of goals,” where corporate player refers to an organization and its members. CSC can be seen as the total number and strength of networks that exist among the members within a firm and the resources generated. It is the quality of the relationships that a firm, and its executives and employees, have built with other stakeholders.

 

In the Social Capital Protocol developed by the World Business Council for Sustainable Development (2017),

 

WBCSD applies the term ‘social capital’ to refer to the resources and relationships provided by people and society. This encompasses human capital (people’s skills, knowledge and wellbeing), and societal capital (societies’ relationships, shared values and institutions). Together, these resources need to be maintained and enhanced to make society more cohesive and resilient, and to make business more successful. (p.7)

 

As emphasized by the WBCSD, nowadays, corporations need to look beyond financial returns; they need to understand the value they create for their stakeholders, for society, and for their business. Most successful companies are those that truly value people (Ibid.).

Corporations that invest in Social Capital earn the trust of their stakeholders, thereby enhancing cooperation, potentially leading to better economic outcomes for the firm. CSC can be particularly beneficial during times of crises (Servaes and Tamayo, 2017). Furthermore, corporate project activities which benefit the community can increase the level of social participation and generate positive attitudes in the business; these activities can also contribute to economic prosperity and sustainable development (Saeed and Arshad, 2012). The development of CSC can build reputational capital, which signifies a corporation’s stock of perceptual and social assets. Thus, CSC is essential in creating a positive corporate image.

 

Corporations’ internal and external networks provide opportunities for social transactions. Corporations derive benefits and value from their internal and external social capital. High level of internal social capital can improve sharing and dissemination of information and knowledge within a firm. Employees that have trusting relationships would have a stronger commitment and loyalty. Both benefits would enhance the efficiency and reliability in operations, projects and innovation management. On the other hand, building external social capital can bring competitive advantage as a firm’s ability to access external information and knowledge would increase and its reputation would improve. External social capital can also generate other positive outcomes such as cost reductions and talent recruitment (Network for Business Sustainability South Africa, 2014).  

In matching with the trend of disclosing ESG information by corporate organizations in Hong Kong, Hong Kong corporations are more willing to develop their own Corporate Social Responsibility (CSR) activities alongside their corporate policy and business development. Research has found that the adoption of CSR practices would help to create reliable social networks for organizations and social capacity. Social Capital is accumulated through such networks and interactions which encourage cooperation and collective action. The creation of Social Capital is embedded into many corporate activities in a way that helps knowledge transfer and innovation. It also boosts efficiency in community development and CSR (Saeed & Arshad, 2012)

 

In fact, many corporations have incorporated Social Capital development into their strategies for fulfilling CSR. This includes utilizing corporate expertise to actively participate in social services, helping disadvantaged groups expand their social networks and increase opportunities to broaden their horizons, thereby bringing longer-term benefits to society and the corporation. When corporations fulfil corporate social responsibilities by leveraging Social Capital development strategy, both corporations and society can reap ample returns. In addition, corporations which participate in implementing social capital projects can improve corporate culture and inculcate positive values in the community and society, thereby creating an environment favourable for social and economic development (see Figures 2 & 3).  

Figure 2. Positive returns to corporations and society. Adapted from the CIIF website.

Figure 3. CSC building as an alternative investment. Adapted from the CIIF website.

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