8. Social and Human Capital

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8.0 Background

Consumers who buy Unilever products expect them to have been produced in a ways that provide reasonable rewards and social benefits for farmers and farm workers. Unilever also wishes to eliminate exploitative and unethical practices from our supply chains.

Good relationships along the supply chain between business partners, between businesses and the local community and between managers and workers are invaluable. Sustainable farming businesses are supportive of their local communities and workers.

What is social and human capital?

Social Capital is a concept used to describe the value that can be created by the social networking and trust within and between people and organisations.

Human Capital relates to the physical capabilities and skills of the people involved, and is therefore linked to responsible employment and training practices and the provision of a safe and healthy working environment. Many farming businesses not only employ labour but also provide housing and other services to the workforce; for these businesses, such provisions are part of the value they create in terms of Human Capital.

In practical terms, this section of the code covers many of the ā€œPeopleā€ aspects of the People/Planet/Profit three-fold approach to sustainability.

Social Capital

We have chosen to use the term ā€œsocial capitalā€ to cover important aspects of how suppliers and farmers work with employees, their local community and business partners. In doing this, we were influenced by the ideas of sociologists such as Robert Putnam (as explained to us by experts we were working with) to think along the lines of:

  • bonding;
  • bridging, and
  • synergistic social capital.

All of these concepts are involved in building up social relations, formal and informal social networks, shared values, obligations, expectations, group membership, trust, reciprocity, empowerment, good business practices and civic engagement.

Bonding social capital refers to the capital built up within a group (for example, a family, friends or within a club or organisation), bridging between groups or long-distance organisations (such as religious organisations) with many branches or networks, and synergistic with governments (which will be an issue mainly for larger suppliers and growers and others working through trade associations or trade unions etc.).

There is general agreement that building social capital has consequences for development, prosperity and (potentially) democracy.

Some commentators consider that, for example, ā€œSocial capital has a well established relationship with the outcomes policy makers are concerned with, namely: economic growth, social inclusion, improved health and more effective governmentā€1, although others are wary of extrapolating the ideas behind this analysis into different contexts, such as the business context. However, it is clear that good Social Capital can save money - for example, if there is trust within a group or between business partners, then less money needs to be spent on lawyers, frequent audits or expensive pesticide residue analysis. This is what sociologists call ā€œreduced transaction costsā€.

NGOs and businesses are also seeing the advantages of building up social capital in order to further their own agendas. The idea of farmer-groups (usually built around the farmers that deliver their produce to individual suppliers that supply us) or co-operatives and group-based learning (for example, in Sustainable Agriculture) is particularly compelling for Unilever as the challenge of using natural resources sustainably is fundamentally a social one. It requires collective action, the sharing of new knowledge and continuous innovation, employing people who understand and appreciate the benefits of a sustainable approach to agriculture, and who have the knowledge to implement it.

Groups are also useful for negotiating with suppliers, customers and governments (obviously with due compliance to the prevailing competition and anti-trust laws). Groups of farmers or smallholders are more able to input into government decision-making and to access useful information on subsidies, tax structures, and support available than are organisations or individuals working separately. Groups of farmers, or management and workers together, have the capacity to co-solve problems in ways that ensure greater buy-in and commitment from all of those involved. We and our suppliers can also be involved with public policy development and have dialogue with NGOs.

Good relationships with the workforce and their dependants, local community, suppliers, customers, local government and responsible non-governmental organisations (NGOs) are all vital for the long-term sustainability of a business.

However, it is worth remembering that all individuals and organisations need to keep a healthy balance between their ā€œbondingā€ and ā€œbridgingā€ social capital. ā€œMoreā€ social capital is not necessarily better if inward-looking bonding progresses at the expense of being able to develop good relations with outsiders. Moreover, although being part of a relationship with a high level of trust and understanding of each othersā€™ positions may reduce transaction costs in the short term, it has usually taken a considerable amount of time and energy to build the relationship in the past. There is also a tension between social capital and maximising opportunity costs and profitability in business relationships. Good relationships and a reasonable level of trust need to be maintained during difficult negotiations, for example between suppliers and customers, or management and workers. Both buyers and sellers may value a strong long-term relationship most of the time but inevitably would prefer to buy or sell elsewhere when the market changes.

Human Capital

Healthy, well-educated people with the skills to do their job are assets to any enterprise. Building human capital is considered to be primarily a governmental responsibility in developed countries, although skillsā€™ training should be part of any business worldwide. Whereas Social Capital is related to the processes and human interactions required for sustainable business, Human Capital is linked to workers having the income, support, healthcare and skills needed to ensure a sustainable business and reasonable livelihoods for farmers and employees.

Direct Unilever suppliers

All Unilever direct suppliers are required to comply with the Unilever ā€œBusiness Partner Codeā€. Suppliers and farmers/growers of agricultural goods are also expected to conform to the Unilever ā€œSustainable Agriculture Codeā€. All direct Unilever suppliers must provide assurance to Unilever that they can meet the requirements of the Unilever ā€œBusiness Partner Codeā€ or explain where they are unable to do so. They must be prepared, when requested, to demonstrate good social and environmental practices by completing site self-assessments, and/or audits, by using the Sedex platform. The Unilever ā€œBusiness Partner Codeā€ is a set of minimum requirements; the ā€œSustainable Agriculture Codeā€ is a set of requirements that ā€œmustā€ and ā€œshouldā€ be adopted to demonstrate good practice. For Unilever suppliers, there are obvious areas of overlap between the two systems in the area of Social and Human Capital.

In order to make the ā€œSustainable Agriculture Codeā€ and Sedex systems compatible, the Corrective Action Guidance to the Sedex Members Ethical Trade Audit (SMETA) has been used to illustrate ā€˜what accepted good practice looks likeā€™ to help create Implementation Guidance for the ā€œSustainable Agriculture Codeā€. In this current document, the SMETA guidance is identified by the use of green highlight with white text. All suppliers subject to Sedex Responsible Sourcing Audits are NOT required to duplicate their efforts by responding to these sections in the ā€œSustainable Agriculture Codeā€.

The Unilever supplier assessment programme, using the Sedex methodology, is generic in its application to all sites of employment and deploys both self-assessment questionnaires (SAQs) and their verification by using site audits by qualified, specialist external audit servicesā€™ providers. This enables a standard verification approach that is accepted by agreement made with many of our industry peers, and facilitates audit data exchange for Responsible Sourcing Audits.

The ā€œSustainable Agriculture Codeā€ is applicable only to growers and farmers of agricultural produce and is specific to the circumstances found within the sector. At present, independent verification using site audits is not required. However, in the area of social capital, a strong overlap between the two self-assessment methodologies exists. Therefore, in order to avoid duplication of assessment methodologies, the ā€œSustainable Agriculture Codeā€ has embodied similar assessment criteria to those used in the Sedex audit methodology - SMETA.

Indirect Unilever suppliers and farmers

The Unilever ā€œBusiness Partner Codeā€ is relevant to farmers and other indirect suppliers for Unilever. However, indirect suppliers are not usually part of the formally-managed Supplier Code auditing system, which is part of the Sedex, voluntary, multi-business coalition on Responsible Sourcing.

Where areas are common to Responsible Sourcing and Sustainable Agriculture (e.g. labour standards and worker Health & Safety), guidance for the implementation of the ā€œSustainable Agriculture Codeā€ is consistent with that for Responsible Sourcing. However, we fully understand that, for many farming systems in the world, it is unreasonable to demand written policies and documented Standard Operating Procedures (SOPs). Assessments of compliance must instead be made by judging what is seen and heard when visiting farms and from discussions with farmers, farm workers and their families.

Relationships with other Supplier Codes and Sustainable Agriculture Standards and Codes

Many businesses are now adopting Supplier Codes or working with Standards (e.g. Rainforest Alliance, UTZ, GLOBALGAP, Walmart requirements, or those of other organizations within Sedex2), parts of which are founded upon:

  • ILO Declaration on Fundamental Principles and Rights at Work - many of which are ratified by governments into national laws;
  • UN Global Compact - in which Unilever is a registered Participant, and
  • OECD Guidelines for Multinational Enterprises - observed by Unilever.

In summary, these deal with four key requirements that are concerned with:

  • Employment Standards in the work place;
  • Health and Safety in the work place;
  • Environmental Management practices of the operations;
  • Business Integrity of supplier transactions.

Consumer Safety and Product Quality are often covered as well, although in Unilever the Policy and Practices for their assurance are established within other functions and dealt with as part of the Value Chain and Local Economy Implementation Guide in our Sustainable Agriculture programme.

For our indirect suppliers (e.g. farmers who supply processors, who supply producers who supply Unilever) compliance with other Supplier Codes or Audits covering these issues should be sufficient to provide the assurance we need for the relevant parts of the Sustainable Agriculture programme.

Footnotes

1 e.g. http://www.statistics.gov.uk/socialcapital/downloads/soccaplitreview.pdf

2 Sedex is a non-for-profit membership organisation to which Unilever, as a member, subscribes. Sedex is governed by representatives of its members in accordance with its constitution. In joining Sedex, the supplier shall become a member and entitled to the rights of membership. For further details, please see the Sedex website: http://www.sedex.org.uk.

Dairy Guidance

Key Issues in dairy

  • Worker training (including health and safety)
  • Implementation of health and safety procedures for workers
  • Long working hours
  • Air quality (odour management) for local community