Social Capital – a fundamental part of the organisation and how to build it

By Sajan Pillai |5th Nov 2020
Organisations are consciously investing in social capital to empower the marginalised sections of the society and engage with the community in meaningful ways, which, in turn, helps build customer loyalty.
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The pandemic brought with it a terrible cost to human life and livelihoods. But it also brought with it an opportunity to showcase our humanity. We were inundated with inspiring stories of individuals, communities, and organisations extending support, and collectively fighting the pandemic. Through these endeavours, the pandemic has highlighted a very important aspect of life and business – social capital.


It is safe to say, that a few years ago, a great deal of importance was laid on financial capital as well as intellectual capital. If we look at history and study the course of organisations, from the time of the industrial revolution, companies with high financial capital would gain further funding and an edge over other organisations.


Then in the 21st century, companies with intellectual capital began to emerge and distinguish themselves. But recently, a new phenomenon is on the rise, where organisations must now value their standing in terms of the social capital they hold.

What is social capital?

Companies are now recognising the impact of social capital, ergo, making conscious decisions to invest in it. Before moving on to the process of building social capital, let me explain what it means. Social capital is the art of doing good and creating a sustainable impact on the way of doing business. Social capital is something that goes beyond making profits and focuses on creating a grassroots-level impact.


In simple words, giving back to society and creating value in doing so, is generating social capital. For example, more and more companies in India are now focusing on creating an impact on the grass-root level and empowering the underserved communities while going about their usual business.


Microsoft is seen as a firm that generates immense social capital by creating an impact on the ground through the Bill and Melinda Gates Foundation.


Social capital enables us to create value, gets things done, achieve our goals, fulfils our missions in life, and in turn, makes impactful contributions to the world.


Social capital can be a very powerful asset in an organisation and lack of it can be a substantial hindrance to success in the new digital world where customers not only build a sense of loyalty towards the company with their wallets but also with their hearts and souls.

What it means for business

In business, investors care about making good returns but many care about making returns by doing good. Increasingly, they place a great deal of importance on sustainability, with governments and private sector firms alike helping them make ethical choices.


Financial capital is the funding you need to get off the ground, sustain growth, and develop operations. Human capital is the team that brings value to your organisation. And while both are essential resources for your business, social capital — the connections and shared values that exist between people and enable cooperation — is the key to entrepreneurial success.


We have all witnessed leaders who focus on social capital have built immense trust and legacy over the years. Everyone knows Ratan Tata who focused more on doing good and is now better known as a philanthropist than a businessman.


Today with more and more emphasis being laid on socio-economic and human development and the need to ensure social cohesion and inclusion through growth and development, social capital formation has come to the forefront. 


Consumers are now becoming more and more aware of companies that are building social capital and giving back to the society they operate in. There is a fundamental social shift on both sides where consumers will relate to companies more which focus on doing well for themselves while doing good for society. We witness this particularly in companies such as Starbucks, Amazon, and ITC where every major company is beginning to recognise the power of social capital.

How to build social capital?

The key to building social capital is to build long-lasting relationships that are meaningful and based on trust. It cannot be built on transactional operations and disconnect. Social capital focuses on developing relationships to create valuable resources.


Organisational knowledge cannot merely be described as the sum of individual knowledge, but as a systematic combination of knowledge based on social interactions shared among organisational members. 


The intent behind having these meaningful conversations is to build symbiotic relationships and creating a positive ecosystem.


Social capital, working on a basis of trust makes businesses more innovative because it:


  • Strengthens social ties by creating more trust and increasing the speed of exchange
  • Improves the quality of thinking by increasing willingness to share tacit knowledge and brings in more perspective
  • Increases innovation and creativity through increased exchange of ideas


While the shareholders take the capital risk in starting or supporting the company, the larger stakeholder set (employees, partners, communities where you operate and customers) help grow and sustain the company through direct and indirect contributions and in many cases can dwarf the shareholder investments.


Social capital has now become a part of boardroom discussions. The corporate world has seen a shift from purely financial capital to a more inclusive, warmer place with better productivity because of social capital. The pandemic has accelerated the idea of a socially inclusive environment and thus, made social capital a fundamental part of the organisation.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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