Six Capitals, or Can Accountants Save the Planet?: Rethinking Capitalism for the Twenty-First Century by Jane Gleeson-White

Author:Jane Gleeson-White [Gleeson-White, Jane]
Language: eng
Format: epub
Publisher: W. W. Norton & Company
Published: 2015-02-24T22:00:00+00:00

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THE HOLY GRAIL: INTEGRATED REPORTING AND THE SIX CAPITALS

The difference is that integrated reporting, unlike

financial reporting, is not technical. It is the company telling its story.

Paul Druckman, 2013

An integrated report aims to provide insight about the resources and relationships used and affected by an organization—these are collectively referred to as “the capitals” in this Framework.

The International <IR> Framework, 2013

On December 9, 2013, the International Integrated Reporting Council (IIRC) published online the framework of a new way of business thinking and reporting, the International Integrated Reporting (<IR>) Framework Version 1.0. Just as in 1494 Luca Pacioli had codified the leading accounting practice of his day—Venetian double-entry bookkeeping—so in 2013 the men and women of the IIRC formulated an already existing practice they considered suited to the demands of the twenty-first century. Calling itself a “global coalition,” the IIRC comprises regulators, shareholders, accounting professionals and others from twenty-five countries. Together they believe that “communication about value creation should be the next step in the evolution of corporate reporting,” and that integrated reporting and thinking can improve the allocation of financial capital—or investment in business—and in doing so bring greater financial stability and a sustainable future.

So this new way of reporting—and of thinking about—business value purports to address two of the most urgent problems of our times, turbulent stock markets and a turbulent earth, the latter manifested most spectacularly in extreme weather such as Hurricane Sandy, which devastated the eastern United States in 2012, as well as droughts and floods; disappearing plants, animals and polar ice; shortages of food, oil and gas; and proliferating waste and environmental destruction. In the IIRC’s view, the strength of integrated reporting lies as much in the holistic thinking it aims to encourage—by directors and managers, about the place of their business in the world and its part in the creation and destruction of value (financial, social and natural)—as in the reporting it seeks to elicit. But what exactly is this integrated reporting that might just allow Homo sapiens to make it into the twenty-second century?

The IIRC’s chief executive officer Paul Druckman says that integrated reporting is a matter of getting businesses to tell their story (or strategy). And businesses tell this story by addressing six different “capitals,” or stores of value they can use to produce goods or services. As we have seen, these are financial, manufactured, intellectual, human, social and relationship, and natural capital. Information about financial and manufactured capital is currently provided by the financial report, while information about natural and social capital is conveyed by a sustainability report, as promoted by the Global Reporting Initiative; but information about intellectual and human capital is not yet well reported. So an integrated report combines in one report the currently disconnected financial and sustainability data, as well as the (as yet) mostly unreported information about intangible wealth. The six capitals are effectively a conceptual structure to enable businesses (directors, managers, chief financial officers, accountants and employees) to broaden their thinking about value and their business model; in

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