The five capitals

 

Human Capital

The health, knowledge, skills, intellectual outputs, motivation and capacity for relationships of the individual are important as organisations depend on individuals to function – a healthy, motivated and skilled workforce is necessary. Damage to human capital by abuse of human or labour rights, or compromising health and safety, has direct as well as reputational costs.

Manufactured Capital

Material goods and infrastructure owned, leased or controlled by an organisation that contribute to production or service provision but do not become part of its output, mainly include buildings, infrastructure (transport networks, communications and waste-disposal systems) and technologies – from tools and machines to information technology (IT) and engineering. Manufactured capital is important for a sustainable organisation in two ways: firstly, the efficient use of manufactured capital enables an organisation to be flexible, innovative and increase the speed to market of its products and services; secondly, manufactured capital and technology can be used to reduce resource use and enhance efficiency and sustainability.

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Natural Capital

Natural resources (energy and matter) and processes are needed to produce products and deliver services, including sinks that absorb, neutralise or recycle waste (such as forests), resources (some renewable, others not) and processes (such as climate regulation and the carbon cycle) that enable life to continue in a balanced way. All organisations rely on natural capital to some degree and have an environmental impact; consuming energy and creating waste. Organisations need to be aware of the limits in the use of the natural environment, and operate accordingly.

Social Capital

Organisations rely on social relationships and interactions to achieve their objectives. Value added to the activities and economic outputs of an organisation by human relationships, partnerships and co-operation are, therefore, important. Internally, social capital takes the form of shared values, trust, communications and shared cultural norms, which enable people to work cohesively and thus enable the organisation to operate effectively. Externally, social structures help create a climate of consent, or a social licence to operate, in which trade and the wider functions of society are possible. Organisations also rely on wider socio-political structures to create a stable society in which to operate (such as government and public services, effective legal systems, trade unions and other organisations).

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Financial Capital

The assets of an organisation that exist in a form of currency that can be owned or traded. This is the traditional primary measure of business performance and success (the single bottom line) in terms of reporting performance to shareholders, investors, regulators and government. Sustainable organisations understand that the creation of financial value is dependent on other forms of capital.

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