The Rethinking Capitals events in December 2014 aimed to bring together business, academics, practitioners, policy makers, and members of civil society to explore views on ‘capitals beyond the financial’ and their impact on businesses.
In partnership with Newcastle University Business School and the Natural Capital Coalition, ICAEW hosted a series of events to engage debate, share ideas and experiences. The concept of rethinking capitals is about pushing boundaries; how do organisations report or value capitals beyond the financial?
The objective was to re think how the six capitals - identified by the International Integrated Reporting Council (IIRC) as financial, manufactured, intellectual, human, social and relationship and natural - interact with each other as opposed to working in isolation. Combined, they represent stores of value for any business and are the basis of any organisation’s value creation. The challenge now, is to change this linear way of thinking about financial capital and consider a multi capital approach.
Why should businesses include valuations of non-traditional forms of capital on their balance sheets, or perhaps more importantly, how do we put a value on these impacts? For example, thinking about natural capital do businesses have the right to use and profit from natural resources just because our social norms have accepted this in the past? The principal challenge for business and society is to address global needs and aspirations without destroying the natural capital which we all rely on. In practise, this requires systemic changes in the form of integrated reporting and responsible business practices. How these systems should be governed, implemented and reported is one of the fundamental issues that the conference collectively aimed to address.
The very nature of our language produces another challenge; there isn't even a firm consensus of what 'capital' is and whether non-renewable resources should be excluded within the definition? 'Capitals' can be defined as: a stock of accumulated goods and possessions calculated to bring in an income. However, in the context of valuing capitals beyond the financial, “capitals” refers to any store of value that an organisation can use in the production of goods and services, which need to be maintained, protected and nourished if they are to continue to produce benefits in the future.
The relationship between financial and natural capital, plays an important role in our economy. We are facing a global crisis as our stocks of natural capital are being consumed faster than they are being produced or replenished. If businesses and organisations can collectively take responsibility to maintain and increase these stocks, we can live off the financial capital or income without reducing the natural capital itself. Damaging or degrading our stocks when the natural capital has no immediate financial impact on a business is simply not sustainable. Clean rain water may not be a cost on a balance sheet but this natural way of watering plants, if preserved and protected, will contribute towards sustaining our futures in numerous ways.
To continue the engagement, participants from the colloquium were invited to contribute with a variety of articles displaying their points of view. These will be published in a series of six chapters; Introductory, Natural Capital, Capital Interactions, Investor Perspectives, Alternative Perspectives and finally, Practical Approaches. Please take this opportunity to read the first chapter now and participate in the debate.
For more information contact Olivia Cox: firstname.lastname@example.org and join the debate at #RethinkingCapitals
On behalf of the Sustainability team at ICAEW, Newcastle University Business School and the Natural Capital Coalition, we would like to thank the following reviewers for their time and contribution:
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