Human Capital as a Component of Sustainability
I’m working with a group of F500 CPG (consumer packaged goods) companies on developing new metrics for the assessment, reporting and targeting of environment and social impact. In the mission/impact statement, we referenced the concept of Human Capital. One member asked for clarification. Here’s my response:
Along with the environmental component of the three-pronged model of sustainability (whether “triple bottom line” or ESG), we are experiencing a very strong up-tick in focus on social responsibility, both internally and externally. Internally, human capital of course refers to the relationship between labor and economic value (I believe that Adam Smith considered human capital one of the four elements of fixed capital, the other three being machines, buildings and other improvements on land — though I digress). The attention to labor has taken new directions, with sites set on significantly higher levels of health, productivity and engagement. Just look at the new craze in published lists relative to “best places to work.”
Concurrently, focus is also on the impact that companies have on the public outside of the company (read: society as a whole and not just a direct customer, i.e. society’s human capital). By way of example, CSR departments are trending away from the “big checks for top billings” type philanthropy and towards direct contact with social organizations, NGOs and communities (e.g. thousands of people from many large corporations are out building homes with Habitat for Humanity or planting gardens in public schools, etc.).
So what’s this got to do with the supply chain? Well if you want to assess/measure sustainability along the supply chain, then a measurement of the impact upon human capital is a necessary component. Doing so will not only allow for the setting of targets towards increased health and productivity (for employee and community), but will attract new talent and add value to the products being manufactured.
At a recent conference, a single mother employee (non-management) from a highly sustainable company stood up and was practically in tears talking about how much she loves working for her employer. I’m not sure that I’d need any form of metric to show the value in having such a happy and committed workforce, though they do exist. Employees have responded most favorably to an employer’s commitment to both the environment and the employee’s personal well being.
The bar has been raised relative to the impact companies have on people as it has been raised relative to the environment. I believe that embracing both in a supply chain analysis is critical.