Social Capital – The Glue For Sustainable Business

In the business world, one of the most crucial element is Capital. Whilst we might not immediately think of capital in physical and financial terms, another important form of capital is social capital. Although the concept has been practiced for centuries, but the systematic realisation and development occurred only from the last few decades and has captured the attention of sociologists, anthropologists, businesses and economists.

What is Social Capital?
The term “social capital” is a recognisable term and easy to understand, but at the same time it absorbs diversity of meaning and has been approached in various ways. Robert Putnam (an American political scientist) describe it as, “While physical capital refers to physical objects and human capital refers to properties of individuals, social capital refers to connections among individuals – social networks and the norms of reciprocity and trustworthiness that arise from them.” Putnam further stresses that “a well-connected individual in a poorly connected society is not as productive as a well-connected individual in a well-connected society.”

Significance of Social Capital:
To put the concept in simple terms is to understand through the old adage, “its not what you know, its who you know.” The fact remains true that the former is highly important but without the latter, it would be less effective and not bear as significant results. It is therefore recognised that Social Capital exists at all three levels; Micro, Meso, and Macro as described in Figure 1.

Value of Social Capital:

  • The core essence of Social Capital is trust. Trust between business leaders, shareholders, employees, suppliers, and community enables the businesses to build healthy relationships, mutual understanding and healthy society.
  • Social Capital not only serves its immediate participants but also has the capacity to get transferred to the successors. The success of the successor is the success of predecessor.
  • Social capital beyond borders: Developing social network is vital for the expansion of businesses. With the growth and time; expansion for businesses can be taken place through development of social capital by networking with other nationwide or global businesses and the opportunities can be utilized to desired objective through partnerships, guidance and joint ventures.
  • Unlike other capitals, social capital has unique value that upon use does not get depleted, but rather strengthens and has synergetic attributes. Therefore it can be argued that the stronger and broader social capital is; the better outcomes and scope for business and society.

Outcomes of Social Capital’s application:
Three major effects identified as result of Social Capital are; Bonding, Bridging, and Linkage. Common factors bring people together and group identification further helps individuals to build bonds with each other together within the common goals and causes of the group. Bonding is not only necessary for work or can be cause related, but is also important for human nature through the need to affiliate and connect with others. Thus, the importance of social capital becomes vital when it results in bonding, bridging and linking. It further also provides network of resources and connects individuals and groups through which one can benefit his/her business activities in a sustainable manner.

Simon Peter Nadeem – PhD Candidate, University of Derby

Simon is an ambitious, emerging researcher in the era of Circular Economy, Logistics and Supply Chain Management, and Business.