Are Social Values Measurable Too?
Social values are being highlighted by global business enterprises as a strategic priority of the future. Last year all SK affiliates launched DBL(Double Bottom Line) management initiative pursuing both economic value(EV) and social value(SV). Starting this year, social value metrics will reflected 50% on management KPI(key performance index) of each affiliate and social value metrics will be disclosed every year.
Delivering both economic and social values
SK’s pursuit of social values is not a recent development of the past several years. SK is committed to social contribution initiatives since the 1970s, including talent pool development through the ‘Scholarship Quiz’, forestation program, and volunteer service programs to name a few, and is trying to build a social enterprise ecosystem since 2010 by boosting up the competitiveness of social enterprises and promoting a pool of social entrepreneurs. More recently, SK launched DBL management initiative in full swing last year by declaring the beginning of ‘New SK’.
To measure social values more accurately, SK has developed a social value measurement methodology based on agreements with third party consultants and affiliates since 2017. As a result, three foundational principles underlying the measurement of social values have been developed: first, measure social values in all measurable corporate activities; second, measure social values as actual outcome of managerial activities; and third, measure social values in monetary terms by applying objective criteria.
Guided by these three principles, SK decided to measure social values in terms of their ‘Economic Contributions’ referring to indirect contribution of corporate activities to the Korean economy, ‘Business Performance’ capturing values created by product development, production and distribution, and the ‘social contributions’ delivered by social contribution activities for local communities.
For example, suppose SK sells a product worth 10,000won. As the product is produced and sold, 800won will be created in ‘Economic Contributions‘ accounting for employment, tax and dividend payment; and 10won will be created in ‘Business Performance’ encompassing donation, etc. With ‘social contributions’ not included in financial statements added, the social value created by SK amounts to 700won in total.
SK measures social values in a bid to develop metrics and benchmarks to deliver greater social values and link them with a business model innovation in the same manner as it is applicable to economic value.
Lee, Hyung-hee who is Chief of Social Value Committee in SUPEX Council explains why SK measures social values as quoted above, underscoring that by doing so, SK does not intent to boast of its achievements but to lay down the first benchmark by which the created social values will be measured and factors having negative impact on social value creation will be mitigated.
SK is now collaborating with several public enterprises including Korea Land & Housing Corporation, and Korea Gas Corporation, KORAIL on the development of a social value measurement system, and beefing up cooperation with the State-owned Assets Supervision & Administration Commission of the State Council of China. SK held a ceremony in Frankfurt, Germany on August 19, celebrating the incorporation of the not-for-profit entity ‘VBA (Value Balancing Alliance)’ tasked with a joint research into a social value measurement system. VBA jointly incorporated by SK and the German chemical giant BASF is supposed to develop a globally interoperable social value accounting standard by 2022 and promote the standard to business organizations in various OECD countries. Holding the position of vice chairman in VBA, SK aims to take the initiative in developing the international standard by providing its know-how and experience in social value measurement as inputs.
The ultimate goal that guides SK in developing a social value measurement system is to further spread social values across our society. More expectations are laid upon the future of SK as they try to identify social issues to deliver greater social values and intend to leverage the process as a business model innovation opportunity.
