The MultiCapital Scorecard - Introduction
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Chelsea Green PublishingThe MultiCapital Scorecard - Introduction
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Chelsea Green PublishingIntroduction
e, the authors, have grown up and earned our living in a western
world shaped essentially by capitalism. That has traditionally meant
the generation of economic capital, mainly for the benefit of shareholders or
other providers of financial capital. We understand the powerful driving forces
that underlie such a purpose. We acknowledge the contribution that economic
capitalism has made to the industrial revolution, social structures, and the development of many of the technologies on which the world has come to depend.
However, we also recognize the enormity of the environmental footprint
our economic growth has left over the last 250 years and the ever-growing disparity between that footprints annual demands and the biospheres capacity
to support them. We believe that these ecological issues cannot be resolved
without addressing the intergenerational deficit we are creating and the gap
that today exists between the worlds wealthiest two billion inhabitants and
its poorest two billion.
We therefore believe the world needs to attend to the quality and sufficiency of all its vital capitals, not just its economic capitals. This is what
we call multicapitalism. It is a doctrine that measures and manages impacts
organizations are having on multiple capitals and therefore their own triple
bottom lines: their social, environmental, and economic performance.1
Although many noteworthy institutions accept the validity of the need
to preserve multiple capitals, we have yet to see any principles or practices
that enable organizations to enact multicapitalism in a meaningful way.
Hence this book.
The MultiCapital Scorecard
The principles underpinning our approach to multicapitalism are those
of Context-Based Sustainability. They owe their heritage to one of us, Mark
McElroy, and Jo van Engelen, as set forth in their book, Corporate Sustainability Management, in 2012.2 That book dealt with nonfinancial performance
drawing on stakeholder engagement; this book deals with performance
impacting all capitals, including financial capital. It applies identical principles to engagement with all vital stakeholders.
McElroy and Van Engelens 2012 book gave pioneering worked examples of Context-Based Sustainability in practice. Those examples illustrated
how groundbreaking projects set thresholds for sustainable performance
for social and environmental impacts in their appropriate contexts. We have
adopted in this book the practices set out by McElroy and Van Engelen, while
extending them to embrace financial and economic capitals as well.
The result is a multiple capitals approach to management that, for the
first time, offers organizations of all sorts a triple bottom line performance
measurement model that can indicate how far an organization is from performing sustainably. It can be used to measure progress toward sustainability,
too. We do not pretend that this approach can provide a perfect measurement
initially, but we do believe it offers a meaningful learning framework. While
the learning proceeds, the MultiCapital Scorecard provides the best method
available for measuring performances impacting all capitalsfinancial,
social, natural, and moreusing identical evaluation principles for them all.
Performance is reported against context-based sustainability norms, science-
based and otherwise. Consequently, organizations of all sorts adopting the
MultiCapital Scorecard are able to see for the first time the extent to which
their impacts on all vital capitals are sustainable, set target thresholds, and
monitor progress toward meeting them.
Indeed, measuring shortfalls and surpluses against sustainability
thresholds across multiple capitals is an entirely new concept, and it offers
an entirely new way to manage performance. The very act of providing
routine scorecard results will initiate paradigm shifts in most of the organizations that adopt it. As they use their historic performance data to improve
future performance, the old paradigm of maximizing impact on a single
capital will gradually give way to recognizing the need to manage impacts
on multiple capitals.
Introduction
Since the objectives of many stakeholder groups are in conflict with each
other at any given organization, there will be many cases where directors,
governors, owners, and managers will have to decide on allocating scarce
resources between competing demands. No simple formula can exist for deciding such allocations. But it is always the case that local context and stakeholder
engagement are required inputs to any such responsible decision-making process. Our multicapitalism process provides both in an even-handed manner.
Strategic decision takers are therefore presented for the very first time with
context-based information about the extent to which their organizations are
either fulfilling their duties and obligations or failing to do so.
All the evidence we have seen suggests that most organizations are currently operating in an unsustainable manner. Consequently, it might be seen
as a source of embarrassment to report unsustainability to stakeholders.
However, we believe the world needs to know the truth (however unpalatable
that may be) rather than persisting in willful ignorance of reality. And the call
for corporations and other organizations to be responsible and transparent is
growing louder. Rating agencies are now rising to this challenge, too, and so
must organizations themselves.
Some might argue that in an essentially unsustainable world, it is folly to
attempt to assess how an individual organization can reach sustainability on its
own. But the application of fair shares of available multicapital resources or
of the burdens to produce them can provide us with very meaningful reference
points to move toward the required collective objective of sustainable futures.
Indeed, the basic analysis needed to establish the thresholds of sustainable
performance should be a fundamental precursor to any improvement process.
Others might criticize our multicapital performance measurements for
their imprecision or subjectivity. To these critics, we ask the question: Is it
better to be precisely wrong or approximately right? We believe the world
needs us all to ask the right questions and for organizations to provide the
best information available. Awaiting perfection is a counsel of despair.3
Indeed, humanity has a moral duty to safeguard the quality and sufficiency of all vital capitals, the disregard of which is irresponsible. Hiding
unethical practice behind a faade of spuriously objective accuracy, while
propagating an endless stream of negative externalities, is inexcusable. This
is what we call precisely wrong.
