We live within a web of deeply complex and interconnected global systems. Flourishing communities, strong and resilient social institutions, thriving natural ecosystems and a stable climate underpin economic and societal prosperity and the performance of all organizations.
To be successful, businesses, financial institutions and governments must understand how they impact and depend on natural, social, and human capital alongside ‘produced’ or financial capital.
But in today’s economic landscape, most organizations measure success based on their relationship to just one form of capital – produced capital – often favouring short-term profit over long-term sustainability. The incentives that dictate the way that business and society as a whole is operating are not sustainable in the long-term and radical change is required.
As global value chains continually evolve, driven in-part by climate change, social inequity, systemic loss of biodiversity and degradation of Earth’s natural systems, a shift in the way businesses operate is now required if we hope to challenge the conventional measures of progress and success that continue to intensify collective global challenges.
If organizations are to survive and thrive in this ever-changing economic landscape, they must do so within the ecological limits of our planet while enhancing and safeguarding the wellbeing of billions of people across the globe. This unchartered territory requires a radical shift in how we define, measure, and incentivise business performance.
We must now embrace a new economic paradigm that recognizes and acts upon the fundamental interconnections between the health of nature, the wellbeing of people, the strength of our societies, and the success of global economies and financial markets.
Through this integrated approach, organizations can take decisions based on a multitude of information that is currently unavailable to them. It provides a new lens for organizations to understand how any impact or dependency placed on one capital ripples across the system, causing changes in the other forms of capital. This data can allow them to better understand interconnections, unintended consequences, synergies and trade-offs that stem from the decisions they make, enabling them to transform their practices to address collective global challenges, while futureproofing their businesses in the process.
We believe the capitals approach has an essential role to play in changing the system. Since the foundations of the Coalition were formed over a decade ago, we have continually championed a comprehensive overhaul of business as usual and existing measures of economic success.
In 2016, we published the Natural Capital Protocol, followed in 2019 by the Social & Human Capital Protocol. Both are essential tools to help businesses to identify, measure and value their impacts and dependencies on natural and social & human capital respectively.
As we stand on the cusp of what may be a major upswing in capitals-focused thinking, the Coalition is just starting its journey to create a new flagship framework we are calling The Capitals Protocol.
The Capitals Protocol aims to provide a unified and integrated framework for businesses to identify, measure and value their impacts and dependencies across all four capitals to inform their decision-making and deliver positive outcomes for nature, people, society and economies.
Developing this new cutting-edge framework is not without challenges. Ongoing consultations across our global community have brought complex questions surrounding ethics in the capitals approach, how we define sustainable and just decisions, and how we manage trade-offs, and optimise value creation across the capitals. Practical challenges such as ensuring the Capitals Protocol is accessible for a wide range of organizations, that it will increase confidence in decision-making and ensuring realistic timeframes for business decision-making have also been explored.
To embark on addressing these challenges, the Coalition has written a white paper to explore the core concepts of integrated decision-making, building on over 400 comments in an early consultation and drawing on the work of the UNDP’s SDG Impact Standards, SustainValue, r3.0’s work on multicapitalism, IDEEA Group, and others.
As part of our engagement in the development of the Capitals Protocol, we have a survey open until 30 October 2023 seeking feedback on the challenges and concepts discussed within the white paper. As with everything the Coalition does, it is not possible without our global community advising and supporting us on this transformational journey.
While the challenges ahead may seem daunting, we cannot lose sight of the immense possibilities that lie within our grasp. By maintaining a steadfast commitment to this transformative path, and collaborating with others, we have the power to shape a more holistic, just, and sustainable economic system — one that values nature, people, and society alongside economic success.