Why A Capitals Approach?
The success of organizations around the world is dependent on the value they receive from the capitals; natural capital, social capital, human capital and produced capital.
We are failing to mitigate climate change, reduce inequality and protect the natural world because organizations are unequipped to make sense of their complex relationships with the capitals and to recognize the ways in which they impact on them and depend on them for success.
Understanding these holistic relationships provides a clear business case for the protection of and investment in the health and resilience of previously undervalued capitals, leading to cascading benefits throughout the system.
Without this understanding, decisions are too often made based on incomplete information, leading to ineffective, inefficient or damaging outcomes for organizations, their stakeholders, broader society and the natural world.
Understanding the value of their impacts and dependencies on the capitals can be a watershed moment for organizations, who realize that issues they had considered to be immaterial in fact directly underpin their success.
By providing organizations with tools to identify and measure the value they receive from natural capital, social capital and human capital (as well as produced capital), we provide a holistic understanding of the system in which organizations operate, leading to integrated decision-making with broad benefits across the capitals.
The stock of renewable and non-renewable natural resources that combine to yield a flow of benefits to people.
The networks together with shared norms, values and understanding that facilitate cooperation within and among groups.
The knowledge, skills, competencies and attributes embodied in individuals that contribute to improved performance and wellbeing.
The man-made goods as well as all financial assets that are used to produce goods and services consumed by society.
In our report, The Top 100 Externalities in Business, we found that in certain cases the traditional approach to wealth creation can actually create a net loss of wealth. For example, the uncounted costs of East Asian wheat and rice farming were roughly $500 billion in 2009. 2012 revenue from that farming was less than $100 billion.
By harmonizing natural, social, human and economic issues, a capitals approach connects to and builds upon existing initiatives like the UN Sustainable Development Goals.
A capitals approach also identifies nexus issues and highlights opportunities for partnership and collaboration between existing and influential communities, for example, those working across climate, biodiversity and development.
Capitals thinking goes beyond traditional concepts of corporate social responsibility (CSR) and sustainability in three important ways:
Impacts & dependencies
A capitals approach moves beyond understanding only our impacts on the capitals to also highlighting how we are dependent on them. This shift in thinking contextualizes organizational relationships with the capitals and illustrates a clear business case for the protection of and investment in their health and resilience.
Measurement & Valuation
Capitals thinking moves beyond measurement to also include valuation. Understanding the value provided to organizations by the capitals further highlights the significance of their dependencies, reinforcing the business case for investing in the health of the capitals and enabling us to include their value in decision-making.
The value illuminated by a capitals approach can be economic, social, environmental, cultural or spiritual, and can be expressed in qualitative, quantitative or monetary terms.
Silos to Systems
A systems approach sits at the core of the capitals approach. Actions taken in one part of the system cannot be understood in isolation. In order to reduce unsustainable impacts on the capitals and secure a flow of value from those that businesses are dependent on, organizations must understand the integrated outcomes of their decision-making across the capitals.
What it might mean for you
Business leaders need a framework that enables them to drastically shift the mindset of their organizations, but one that is harmonized with their current processes and can be implemented in the short term without radically overturning current business models.
Investors need to better understand their opportunities and risk profiles in new and dynamic global markets affected by climate change, rising inequality and the loss of biodiversity.
Policymakers need to enact smart legislation that provides economic, social and natural benefits.
People are increasingly aware of natural and social issues, and demand more from organizations.
- A capitals approach helps organizations to understand their dependencies on nature and people, connecting these previously secondary considerations directly to their impacts, and to operational and financial success.
- A capitals approach helps investors to map and limit their exposure to environmental and social variables across global portfolios, while identifying opportunities to invest in resilient projects and organizations.
- A capitals approach can identify issues and areas such as nature-based solutions where a single smart intervention provides benefits for nature, people and businesses.
- A capitals approach gives credibility to organizations by placing nature and people at the heart of decision making, rather than bolting on CSR initiatives that are unconnected to their core businesses.
Trainers and technical advisors
The Capitals Coalition includes many organizations who specialize in providing training and technical advice and services to help organizations conduct assessments.
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