In the article The Five Capital Model - a framework for sustainability Jonathon Porritt simply defines capital as “wealth creation” and he shows us 5 ways in which capital can be both created and destroyed.
Each of the 5 types of capital are created in various ways. Natural Capital is created by the earth. With or without humans, Natural Capital will exist and create value for other organisms and the planet. In fact, without humans extracting Natural Capital it probably would create even more value for other organisms. Human Capital is created by humans for humans. Social Capital is also created by humans for humans. However, unlike Human Capital, Social Capital is created by many people for the enjoyment and use of many people. Manufactured Capital is create by humans to do specific work. The last form of capital in this model is the first form of capital that we often think of - Financial Capital. Both Manufactured Capital and Financial Capital are created as a means to an end, unlike Natural, Human and Social Capital which all have value independent of the others.
I enjoyed reading the examples that Porritt shared for practical ways to incorporate and understanding of different forms of capital into a businesses. I imagine there are many companies, managers, investors, and leaders that want to incorporate sustainability into their product and services, but they don’t know what that really means or how to make that happen. By expanding the idea of what constitutes capital businesses leaders and companies can use their knowledge about increasing manufacturing and financial capital to the other forms of capital. This framework makes it easier to begin thinking about sustainability and it’s everyday impact into every organizational action and decision, like ordering recycled paper, offering family friendly HR policies, or reducing sugar from a product.
For the businesses already working on sustainable policies, I think this framework adds depth beyond a “triple-bottom-line” approach. It provides a framework that integrates sustainability into every business action rather than cordoning it off into philanthropic or environment ideas. It also looks beyond “doing less harm” and into the ways that we create and destroy value beyond money.
What I like about the 5 model framework is that it reminds us that our economy is not separate from society and the environment. There are many ways to create wealth and there are many ways in which we can lose value through exploitation. It seems that the difficulty lies in measuring the value that is created when it wasn’t created explicitly to generate money.
This brings the question of, how do you measure it? We have been exploiting 3 forms of capital to increase Manufacturing Capital and Financial Capital for centuries and we have good ways to measure how that value is created. How do we measure value (and destruction) of the other forms of capital?
I look forward to learning more about that in the coming term.
