Social capital in a Post Covid world – better business, better society
By Fay Watkin – Head of Entrepreneurial Development
As we continue to shine a light on Inclusive Growth and the role of the entrepreneur this week we look at Social Capital…..
With the challenge of ‘levelling up’ the economy even more mammoth than ever, and the consequences of not ‘building back better’ being truly dire, it is thought that SME’s are front and centre of us achieving this ambition. If they are to succeed in supporting this challenge, one thing is clear – they’ll need to go forward and create social capital – value that’s not just good for business, but good for everyone.
So, what does building Social Capital mean for business owners and what fertile ground is needed to help them help everyone?
In his 2018 blog, Beyond the why: social capital as a business strategy, Canadian CEO of brand agency Republik makes the case that “to challenge today’s consumers, businesses need to be motivated to create value, not just for themselves, but for the entire communities surrounding them; they need to create social capital.”
The agency, who are unequivocal about the types of businesses they want on their books (“organisations who like us, have a sincere and genuine desire to turn their convictions into positive actions”), are one of many voices zooming in on Social Capital and it’s place in business. And they’re in good company, Michael Porter (business professor and arguably the grandfather of modern day business strategy) has long been banging the drum for businesses to give more to society and operate more responsibly, and in a seminal 2013 Ted Talk (The case for letting businesses solve social problems) he describes as to why he thinks historically businesses haven’t stepped up to the challenge;
“conventional wisdom in economics and the view in business has historically been that actually, there’s a trade-off between social performance and economic performance. The conventional wisdom has been that business actually makes a profit by causing a social problem.”
Porter of course argues that this isn’t and shouldn’t be the case, instead urging businesses to aspire to achieve Shared value
“capitalism as it was ultimately meant to be, meeting important needs, not incrementally competing for trivial differences in product attributes and market share. Shared value is when we can create social value and economic value simultaneously.”
This shared value is the cornerstone for Social Capital and for businesses, this important strand of Inclusive Growth weaves through everything from fair recruitment practices, community and place engagement programmes and of course offering stable and fair employment. The latter receiving much needed attention as the pandemic eases and the wealth gap widens.
So why does unfair employment still exist and why should business owners do something about it, if the trade-off is potentially viewed as short term reduction in profits? It’s common knowledge that zero hours contracts and low wage, low productivity jobs erode societies and create cyclical poverty that permeates generations and according to a July 2020 briefing paper by economists Rebecca McDonald and Alina Şandor (Making work secure: unlocking poverty and building a stronger economy) when COVID-19 hit
“there were at least 2.4 million workers in insecure working arrangements and another 2 million low-earning self-employed people also likely to experience insecurity in their work. This adds up to roughly 13% of the workforce.”
Which, makes a compelling case that businesses do need to be steered away from models that are only sustainable via cheap labour, if we are to tackle the poverty traps that currently exist in our society.
McDonald and Sandor argue that, although undoubtedly beneficial for some businesses, there are two reasons why the current conditions should cause concern
“First, the costs of insecurity are falling on those least able to bear them (…) Second, having a significant number of workers in insecure roles limits the productivity of the UK economy.”
But surely if businesses are to make the seismic shifts needed to ‘build back better’ there will need to be some handholding and direction given? And an understanding that for some businesses, if used responsibly, offering less secure employment can be of value, particularly for businesses who find predicting demand difficult. So what could government do to provide this guidance? Writing for the Joseph Rowntree Foundation, Dave Innes and Rachelle Earwaker lay out a number of principles to stem the ‘long tail’ of low-productivity businesses, particularly in sectors where this issue is prevalent, such as Retail, Hospitality and Social Care.
Among a number of recommended principles, aimed at shaping a recovery that reduces poverty, Innes and Earwaker suggest that there needs to be a renewed focus on Improving productivity in low-wage, low-productivity businesses and sectors by improving the quality of work, boosting in-work training and enhancing management practices, stating that this could be achieved if government provided
“business incentives to train workers, investment in business support services to improve management quality, and providing better-quality jobs through more secure and stable contracts.” Read more here
Wage and employment conditions are just one of the ways that businesses can help build social capital and buffer the societies they sit within – with some imagination the routes to achieving this are endless. Some questions to consider – What will your business do to make a difference in society? What gives your business it’s purpose? No one’s expecting one small business to solve all of societies woes alone but the little incremental changes you make, perhaps by volunteering your office space to a local community group, developing a graduate scheme for disadvantaged local graduates or by pledging to pay the Real Living Wage. If done in unison with other businesses in your area, these acts of social capital building will stack up and make a real difference to your local community, at a time where your efforts are needed the most.
Where does it all start though? It starts with helping entrepreneurs create sustainability, inclusivity and social capital into their business models. It’s time to start and support the conversations in the thousands of Startups and Scaleups in the UK. If we can ignite a flame which entrepreneurs can add their fuel to, then we can further the movement that has begun and deliver widespread sustainable businesses to “build back better” and support communities around the globe. Recovery isn’t just a theory, its only a reality when we take action.