Social Metrics
- 01:51
Explores the key metrics used for measuring social risks.
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Glossary
ESG Social Risks SustainabilityTranscript
Social metrics. When we're conducting benchmarking analysis of social risks, we use a number of different metrics, and it's important to be familiar with the most commonly-used metrics. Now, for social risks, the focus is on both social capital and also human capital. And for social capital, we tend to focus on things like supply chain risk, product safety, and data security. For supply chain risk, investors often focus on the amount of activities, that's revenues or suppliers, which are covered by codes of conduct which are widely recognized in the investor community. In terms of product safety, the focus instead is on the number of high-risk events. So that's the number of product recalls and fines or litigation related to product safety issues. The approach for data security is similar, again focusing on the number of high-risk events. So that's the number of data breaches per year or the amount of fines related to data security. Now, in terms of human capital, the focus is on both labor practices and also employee health and safety. And when it comes to labor practices, the key metric here is employee turnover. That's the number of employees leaving each year relative to the number of full-time employees. And also many investors will focus on the amount of fines or litigation related to employee matters in a given year. Now, in terms of employee health and safety, this can be a major issue in more industrial businesses. And, typically, we focus on the lost time incident rate, and that's the total number of employee hours lost to health and safety incidents in the year compared with the total employee hours worked for 100 full-time employees. And further to this, the number of incident-related fatalities in a year is widely tracked as well. Hopefully, you can see that social metrics rely heavily on event counts. That's the number of high-risk events which have occurred during the year.