WORK’S SOCIAL CAPITAL FOOTPRINT: A New Blueprint for ESG

Chris Bullivant

INTRODUCTION

Work preoccupies the lives of a majority of the population of the United States and for almost two thirds of the average American’s lifespan. For many, work serves the wider purpose of starting and supporting a family, enjoying leisure time, and engaging with projects and communities outside of the work space. The interdependent relationship between work and social capital is so obvious it is sometimes difficult to see or appreciate it. Yet social capital is required to get work and work funds social capital.

Yet, while social capital is always a positive factor for work, the activity of work itself, and the impact a business can have, can either build or erode social capital—for the individual, the family, the community, or society. Profit is good, until it erodes social capital.

Social capital describes the rich network of relationships in family and all associational life, including clubs, volunteering, faith institutions, and philanthropy. Of these, family is the most primary social capital building block, and so the limitations of this paper mean a greater focus rests on this institution.

The decline in social capital in America over recent decades is explored here with a tour of figures related to friendships; families and households; volunteering and neighborliness. Could it be possible that work itself has played a role in this decline? The evidence to suggest that it has, explored in this paper, is mostly anecdotal and survey led. Outlined in this paper is a new approach for how ESG data could better measure an employer’s “social capital footprint.”These new metrics could help employers and investors know their efforts are truly building social capital—an asset of vital national importance.

SOCIAL CAPITAL DECLINE

Since Robert D. Putnam’s groundbreaking Bowling Alone, there has been broad acceptance of the phenomenon of social capital decline across America. Sadly, since publication of initial findings, this decline shows little sign of abating. A quick tour of friendships, families and households, volunteering and neighborliness illustrates this phenomenon.

1. Friendships

“Americans report having fewer close friendships than they once did,”according to the May 2021 American Perspectives Survey. This research, comparing surveys from 2021 and 1990, finds a sharp decline of people with 10 or more close friends, and a sizeable growth of individuals with no close friends.

SOURCE: American Perspectives Survey, May 2021; Gallup, 1990.

Daniel A. Cox, summarizing the survey, recognizes that the workplace is now the main venue in which Americans can make friends, more so than in their schooling, neighborhood, faith-institution, or existing networks. Yet he further explains that, “Americans are working longer hours and traveling more for work, which may come at the cost of maintaining and developing friendships.”

This then, the number of hours spent in work and the decline of other avenues for finding friendship, puts a premium on work as a venue for building social capital.

2. Marriage, families, and households

Part of the decline in social capital is perhaps also reflected in shifts in household structures, namely the decreasing number of people per household in the United States.

America has tended toward the lower end of numbers in households in the developed world, at about 2.6 people living in a household—comparable to a handful of Western European countries, but fewer than much of Eastern Europe, Latin America, and Asia.

Numbers in households have been decreasing for decades but have seen a recent uptick. The uptick is in part due to changes in living arrangements during the COVID-19 pandemic. But a growing development is young adults in their 20s and 30s living with their parents: the share rising from 32 percent of 18–34-year-olds in 2010, to 35 percent by 2017.

This rise in the average household number, however, conceals a more notable trend in household size: the increase of older people living alone.

Among households headed by people aged 45 to 64, more than a quarter are one-person households, compared to just 16 percent that are headed by families with children, and 37 percent empty-nesters. Among older adults, 27 percent live alone, more than in most other countries.

But declining marriage rates and later marriages also have an impact on household formation. For households headed by an adult aged under 25, the share headed by married-couples with or without children is 15 percent, almost matched by single-parent families at 14 percent.

Not only is marriage increasingly elusive, but even cohabiting has also become harder to achieve. In 2019 nearly four in ten prime-age working adults (18-54 years) were unpartnered, neither married nor cohabiting. This is a sizeable increase from 29 percent in 1990 to 38 percent in 2019. This trend comes with several impacts because, “unpartnered adults generally have different–often worse–outcomes than those who are married or cohabiting”: lower income, lower educational attainment, and poorer health outcomes. This isn’t just an issue for young people. Among those aged 40-54, the percentage of people who are unpartnered is up from 24 percent in 1990 to 31 percent in 2019.

Further, the U.S. has the highest single parent family rate in the world. Almost a quarter of America’s children live in single parent homes, more than in any other country, and more than three times the global average. This has marked impact on achieving favorable life outcomes and adds downward pressure on household formation figures.

These numbers are at odds with personal aspirations. Three out of four high school seniors say having a strong marriage is “extremely important” to them. This value maintains into young adulthood, with 80 percent of young-adults rating marriage as an “important” part of their life plans, according to the National Marriage Project.

With such a decline in friendships, romantic partnerships, or even marriage, and a rise in older people living alone, has work played a role in shaping these dynamics?

3. Volunteering, community, neighborliness

Data on volunteering is mixed but clear. On one hand the number of hours volunteered, and money donated, has reached a “record high” in recent years. But the Do Good Institute at the University of Maryland are concerned that these figures conceal a steep decline in the actual percentage of Americans volunteering: 31 states experienced significant decreases in volunteering between 2004 and 2015, and this drop is “surprisingly more prevalent in states historically rich in social capital.” They also observe that communities with traditionally high levels of social capital and volunteering, rural and suburban communities, have also experienced steep decline. In rural areas from 30.9 percent in 2003 to 25.2 percent in 2015. Volunteering in suburban communities is waning from 30.1 percent in 2003 to 25.3 percent in 2015. Volunteering within cities, they find, has maintained a steady figure at its relatively low rate of 23.1 percent in 2015, as in 2002.

Possible causes for such decline in volunteering are commuting times, more women working, and a lack of free time. A U.S. Department of Labor report in 2016 state that married individuals volunteer at a higher rate than single people—29.9 percent compared to 19.9 percent. So perhaps the decline in marriage rates has an impact on rates of volunteering. Leisure time during work years also has an implication on volunteering rates. Those who volunteer before retirement are more likely to volunteer in retirement, according to a Stanford study. This would suggest that today’s declining rate is tomorrow’s even steeper decline in volunteering.

Neighborliness is remarked to be in decline too, with Pew Research identifying a smaller share of those who would spend a social evening with their neighbor: at least once a month down from 61 percent in 1974, to 46 percent in 2014. This lack of neighborly community appears to be hitting hard with younger generations. Two in three millennials don’t feel like they belong to their local community, while a recent survey found that Gen Z report as being the loneliest generation, perhaps through a lack of avenues to make new friends including community decline. This is not surprising if they are tending to live with parents.

If a lack of free time is part of the reason people give for not volunteering and being able to build community, could work hours have a role to play in this decline?

4. Work to reinforce social capital building measures

The figures above paint a complex and stark portrait of social capital in America today—growing up without both parents, finding it harder to find friendship in adulthood, difficulty in finding a spouse and starting a family, and more people living alone into older age. An apparently robust voluntary sector concealing decay and younger generations feeling increasingly isolated.

Many of those who delay volunteering, who don’t invest in friendships, who put off marriage and family until later in their life, each cite “not having time”, or explicitly “work” or “career” as the reason for not entering into these social capital building activities.

The State of Burnout in Tech Report by Yerbo claims that the tech industry’s work demands leave “little time for personal life” and cause burnout in tech workers. Often career is cited as the biggest impediment to fulfilling relationship goals, certainly for those in highly-educated, high-income roles.

When Elon Musk challenged staff at Twitter in November 2022 to work “long hours at high intensity” or leave, it was unclear how many hours he was expecting employees to work. But an expectation for the American workforce to overwork must surely come at the cost of building private social capital.

For low-income and low-skilled employees or contractors, the work environment in the United States can also have an impact on an individual’s ability to build basic social capital. A lack of advanced scheduling, flexible work options, no employer-based healthcare benefits, and zero job-protection in the event of pregnancy, can place enormous pressure on relationships and parents (or parents-to-be). This lack of flexible work arrangements with protections and benefits, as we have published previously, has a disproportionate impact upon Hispanics in America today.

Personal relationships and private social capital building can emerge from work. Professional relationships can become personal friendships. Employer organized volunteering may spill over into personal volunteering. But employment cannot be the sole venue by which an individual is expected to build social capital. Time invested in families, friendships, clubs, societies, faith groups, neighbors and communities, need by definition to occur primarily outside of the workplace and free of employer control.

MEASURING A COMPANY’S “SOCIAL CAPITAL FOOTPRINT”

The reality is that we cannot know what a company’s impact on social capital is—their “social capital footprint”—without some basic metrics in place to gauge whether an employer contributes to social capital creation or not.

The ESG framework allows companies to measure the impact their core business has on a number of externalities. More than 90 percent of S&P companies now publish some form of ESG reporting. Much of this has been voluntary to date. But with investment in public companies now increasingly directed by an ESG score, and with the Securities and Exchange Commission exploring the potential for ESG in regulation, ESG scoring may become increasingly coerced. For now, it is unclear whether ESG reporting is a fad, or whether it may evolve into something more manageable, effective and “real”.

The ABCD Analysis of Social Capital

Without factoring in social capital, much ESG reporting is dislocated from reality, and therefore less likely to be achieved. ESG, to be effective, needs to accommodate, measure, and protect the social capital environment that it is a part of. Without any metrics in place, it is impossible for a company to know if it is affirming, building, creating, or destroying social capital.

This ABCD analysis applies to company impact on employees’ social capital and that on wider society. This essay focuses on impact upon employees.

THE ABCD OF CORPORATE IMPACT ON SOCIAL CAPITAL

Employers and companies can have the following dynamic interactions with social capital, with likely more than just one occurring across operations:

A: Affirms – Activity affirms existing social capital or, at least, takes a “do no harm” approach, e.g., social media can affirm existing family or associational networks, e.g. a corporate culture that permits employees to go home when their hours are completed.

B: Builds – Activity builds on existing social capital, helping form professional
and private relationships, family stability, volunteering, citizen engagement, and associational life, e.g. paid family leave allows an individual financial security to be able to bond with an infant and adjust to parenting.

C: Creates – Activity creates social capital that didn’t exist before the services were provided. In the event of an online platform this may be to make community relationships that didn’t previously exist, e.g. providing advanced schedules for low- income, low-skilled workers so that they can better manage their personal and family affairs, would create social capital where there was none, e.g. providing affordable housing for workers or allowing flexible work that increased housing affordability could improve neighborhood building.

D: Diminishes – Activity diminishes or destroys social capital. Overwork or lack of employment protections may cause families undue distress and to collapse, or not form in the first place; to hinder the development of volunteering and neighborhood interaction; activity promotes anti-social capital building behavior and distorts the market to social dysfunction: through crime, addiction, or establishing barriers to individuals’ aspirations to achieve social capital, e.g. asking employees to work long hours at full intensity destroys social capital.

How the ABCD analysis would add or subtract from an ESG score

If we use the McKinsey, “Minimum practice”, “Common Practice”, “‘Next Level’ Practice” levels of ambition for ESG with the ABCD dynamic relationship with social capital, we can see more clearly how it would be possible to consider a social capital metric’s impact on an ESG score.

A: Affirm

A “do no harm” approach, affirming pre-existing social capital among employees, would be a positive, low score contribution to an overall ESG score.

B: Build

Companies that develop a new common practice beyond core business, and can measure that they are building on existing social capital, would receive a positive, medium- weighted score boosting their overall ESG score.

C: Create

Companies seeking exemplar “next level” practice would be able to ensure their social capital ESG components are fully integrated into their strategy and operations. Such efforts that are measured to reverse a decline in social capital, and instead create social capital where there was none before, would achieve a maximum score contribution toward an overall ESG score, allowing investors to know they are achieving social capital creation.

D: Destroy

Companies whose social capital ESG data reveals a destructive effect on social capital have the opportunity to set out goals that would reverse this negative impact, and to develop strategy to achieve a “do no harm” approach as a minimum. A company that diminishes or destroys social capital should secure a negative score from their social capital metrics, lowering their overall ESG score. Investors would be alerted to the fact that this company, by destroying social capital, is adding to the breakdown of trust in society, increased polarization, polluting the free market, and undermining the capacity for a democracy to function as a society.

A SOCIAL CAPITAL METRIC WOULD HELP ACHIEVE ESG GOALS

In addition to boosting social capital, integrating social capital will help companies to achieve their wider ESG goals.

Social capital and “E” for environment

The “E” for “Environment” category of ESG helps companies to better understand their role in the wider impacts of environmental sustainability and to cooperate with policy efforts to mitigate against man-made climate change, amongst other things. Adding social capital metrics will help achieve climate change goals.

For example, household formation has a sizeable impact on resource use and carbon footprint. A 2007 international comparison study measured the effect of divorce on the environment. Divorce can be significant for resource consumption. In 2000 divorce created 6,060,883 extra households in the United States. Divorced households in 2005 spent 46 percent and 56 percent more on electricity and water per person than married households by using 38 million more rooms, 627 billion gallons of water, and 73 billion kilowatt-hours of electricity—an electrical consumption equivalent to the output of 8 big nuclear reactors. In all, the report concluded, “U.S. households that experienced divorce used 42–61% more resources per person than before their dissolution.”

The other elements of household formation mentioned above, including a decline in friendships, marriages, and partners–and a rise of single parenting, and people in older age living alone–may also be an impact of work. This, then, with an impact upon the environment.

Divorce, family breakdown, and social atomization in general are contributors toward and consequences of social capital decline. Without a social capital evaluation within ESG reporting, it is difficult to know if a company’s corporate culture fosters social capital, or whether it doesn’t. It therefore cannot truly assess its environmental impact.

Social capital and “S” for social

If companies want to increase the diversity of ethnicity and backgrounds represented in their employment and boards, they would do well to ensure the means to achieve social capital are measured. The principal engine for opportunity and upward social mobility is family stability.

As we noted in our report by Brad Wilcox, Chris Bullivant, and Peyton Roth, Harvard economist Raj Chetty and his coauthors found a strong community effect in upward mobility that aligned well with family-structure differences across geographic areas. “Chetty found that the most predictive factor of upward mobility in a community was the share of homes with two parents present in the household. This factor was more predictive than other measures such as school quality, income inequality, or racial segregation. Chetty’s research also found that the difference in economic mobility between black and white boys is smaller in communities with a greater share of present fathers and married adults.” This analysis was borne out by further findings by Richard Reeves who notes the chances of upward economic mobility are different for low-income children of married versus unmarried parents. Four-out- of-five children born into the bottom income quintile who were raised by married parents had risen out of that range by adulthood. In contrast, those raised by a never-married single mother had only a one-in-two chance of doing the same.

To achieve diversity in a high skilled workforce, companies should recognize their role in a wider social capital ecology and ensure at minimum they have a “do no harm” approach. This, then, puts an emphasis on pro-social capital creating policies.

Social capital and “G” for governance

Transparency in governance, such as in executive pay and representation of diversity at Board level, is laudable, helping to narrow the capital gap that can drive society apart. But governance measures without social capital indicators only tell half the story.

Social capital measures would help reveal in governance transparency not just executive compensation, but whether a social capital accumulation divide exists between executives, and employees and workers. There is currently a gaping marriage divide in America today, where 60 percent of the upper middle class among prime working age marry, while only 20 percent of the poor do. Done correctly and sensitively, social capital measures would allow for true transparency. Do executives benefit from not just better compensation but also an advantage in the accumulation of social capital for themselves and their children? Do they have greater access to housing, school choice, safer neighborhoods, ease of access to support networks? If so, a company is adding to polarization within society by reinforcing a segregation between those who have high capital and social capital and those who do not.

At present, it is impossible to determine a company’s social capital asset transparency as no measures exist.

Social capital is the means by which a company can improve diversity in the workforce, meet environmental impact goals, and ensure transparency in achieving life outcomes between executives and workers. It is, therefore, in the private sector’s best interests to consider how to achieve these measures.

PROTECTING PRIVACY IN DEVELOPING A SOCIAL CAPITAL ESG METRIC

We recommend that a framework is developed to include social capital in ESG reporting. This is something company’s shy away from on the pretext of causing offense or intruding into personal lives.

We agree. It is not for companies to intrude upon the personal lives of their employees. The potential pitfalls in creating a metric for social capital are clear:

1. Employers should not make moral judgments or shape the private lifestyle choices of an employee.

2. Social capital as we are describing it is predominantly private. A social capital metric could lead corporations to think they “own” or possess social capital creation. Staff away days, corporate volunteering, training, HR policies, faith inclusion, and work social events no doubt enhance professional relationships and corporate culture boosting that element of social capital. But these cannot replace the private activity of social capital building, participation in family, faith institutions, non-profits, neighborliness, and political campaigning outside of work.

3. Metrics, then, need to be developed that are aggregated through anonymized HR data, measurable by indicators, or develop by consent through sample surveys.

However, without a social capital ESG measure, a company may well be making moral judgements that shape the private choices of an employee.

Employers should not impede an individual’s ability to fulfil their private, personal social capital aspirations. If inflexible work conditions—a lack of advance scheduling, no paid sick leave, no paid family leave, or an expectation to overwork—means that an individual is unable to establish community, participate in a faith group, or afford to work and start a family, employers have made moral decisions about an individual’s lifestyle, and are intruding upon the private sphere.

ALIGNING SOCIAL CAPITAL METRICS WITH PERSONAL ASPIRATIONS

To avoid concern about privacy intrusion, it is important to ensure that social capital metrics work in-line with the personal and private aspirations of individuals.

Companies have been willing to strike the right balance between private lifestyle choices and public affirmation for, say, members of the LGBT community or inclusion of those of diverse, minority faith backgrounds. These policies are oriented around deeply private and personal choices—or innate characteristics. And yet these have been achieved without too much intrusion into the personal sphere or objection.

In the same way, campaigns on climate change, teen pregnancy, and smoking have all been helpful at changing behaviors through regulation, education, and in some cases tax policy. These campaigns have been successful in part because they are aligned with personal aspiration. By and large people want to protect the environment, have wanted children at a secure life-stage, and to enjoy good health free of addiction.

Social capital metrics would be far less intrusive, not seeking to change behavior. Rather corporations can be assured that the majority of their employees want to have friends, belong to a community, and to start a family. Rather than be offended, a workforce may enjoy their employer supporting their personal aspirations with policies such as paid family leave, paid sick leave, health insurance, and a guarantee of a job role after taking a maternity or paternity break. Especially should these benefits be extended to low-skilled, low-income laborers and contractors.

ESG social capital metrics would, therefore, allow a company to know whether it is working within the grain of private aspirations or not.

TOWARD A SOCIAL CAPITAL METRIC

Adding a social capital component to ESG would allow corporations to be able to truly invest in America’s social capital fabric and boost the strength of society and the market. The Joint Economic Committee Social Capital Project Social Capital Index provides indices
by which such as measure could be built. These consider a range of factors such as marriage rates in a neighborhood, neighborliness and volunteering, crime statistics, and participation in democratic processes, among others. These measure the presence of social capital in an objective, unobtrusive way with comparable data available across the United States.

SOCIAL CAPITAL FOOTPRINT MEASURES

The following proposed measures would help a company or investor assess whether its operations within the United States were affirming, building, creating, or destroying social capital, both within its workforce and wider society. They provide essential strategy for achieving ESG goals.

Sustainable Household Structures Measure - Measures to assess whether company activity support sustainable household structures that minimize environmental impact.

Social Capital Diversity Measures - Measuring the diversity of social capital creating institutions supported by the organization, to include:
* The number/share of married families supported by payroll and as a share of your employees
* The number of children whose early infancy was protected by paid leave programs
* The affordability of childcare for your workers
* The number of clubs, societies, or voluntary efforts employees were able to participate in outside of the work environment because they had the leisure time to do so.

Career Progression Diversity Measure - Measuring the social capital diversity representation at Executive level. Including:
* Share of parents who have achieved career “success” while able to take medium-to- long term “career breaks” to invest in their family.

Social Capital Building Measures - Measuring the social capital support policies in place for all employees and contractors within the United States including low-skilled, low-paid workers for whom they would have maximum benefit especially in boosting upward social mobility, such as:
* advanced scheduling
* flexible work options
* employer-based healthcare
* job protection in the event of pregnancy (the ability to return to a role after leave)
* paid family leave
* health insurance

Executive Social Capital Asset Transparency - Measures of social capital assets such as house ownership, marriage, (numbers of ) children, hours worked and time available to participate in activities outside of work, and whether limited to senior managers and executives.

The measures above would measure a company’s “social capital footprint”. For many, adding a social capital metric will allow them to integrate much of their existing operations into their ESG data: initiatives, programs and HR policies currently used are likely to be a positive to their ESG score. For those corporations, law makers, regulators and investors who believe ESG to over-emphasize misaligned policy objectives, the inclusion of social capital metrics would ensure ESG data is integrated with reality and the personal aspirations of workers.

Policy

• If the private sector continues to use ESG data, these should include Social Capital metrics using indices comparable to those used by the Social Capital Index developed by the JEC Social Capital Project. These would measure whether a company affirms, builds, creates, or destroys social capital among their employees and communities

• The SEC in pioneering ESG regulation should include a social capital metric that boosts social capital creation
  

CONCLUSION

Social capital works. And yet we see a decline in social capital, no more than in the make-up of households, an increase in lone parent families, older people living alone, and a decline in personal friendships among adults and rates of volunteering.

Employers can boost the professional and personal social capital relationships enjoyed by adults by developing and including standard social capital measures in their ESG scores.

Factoring in an employer’s “social capital footprint” will boost awareness and transparency of the social capital costs of doing business. This will ensure individuals and families are not paying the price for another’s capital and social capital gains. Rather employers who invest in employees’ social capital should be rewarded with greater investment, happier employees, and a stronger market.

Chris Bullivant is the director of the Social Capital Campaign. Previously he helped to establish the London-based online commentary magazine UnHerd and two think tanks: U.K. 2020 focused on improving environmental policy and global food security, and the Centre for Social Justice developed a welfare policy platform implemented by the then incoming Prime Minister. His commentary has been published in USA Today, The American Conservative and UnHerd.

Chris earned an M.Sc. in Political Sociology from the London School of Economics, and a B.A. in Politics from the University of London.