Sustainable Brands Issue in Focus
CHANNELS    |    Behavior Change      Leadership      Products & Design      Supply Chain      Marketing & Comms      New Metrics    |    MORE

Beyond Integrated Reporting: Multicapital Accounting of Integral Data

Image credit: Integrated Reporting

Part Five in a 10-Part Series by Reporting 3.0. See previous parts below.

The 2013 launch of the Integrated Reporting <IR> Framework from the International Integrated Reporting Council (IIRC) swung a double-edged sword through the disclosure field:

  • Helpfully, one side carved a space to firmly establish the integration of the multiple capitals (natural, social, human, financial, etc) into corporate disclosure;
  • Problematically, the other side sliced the carrying capacities of capitals (which measure sufficient resource levels needed for their preservation) out of the viewfinder.

This conundrum is one among several confounding delivery on the redemptive promise of multicapital integrated reporting. The Reporting 3.0 Data Blueprint documents several of these shortcomings in its fourth chapter, which is focused on Integration.

Integration & the Limits of <IR>

In addition to the limits of <IR>, the chapter addresses problems around valuation (or monetization) and aggregation, using the Crown Estate’s Total Contribution and KPMG’s True Value multicapital accounting methodologies as examples. Ultimately, the chapter calls for advancing from Integrated Data (with its documented shortcomings) to Integral Data, which takes a more holistic and comprehensive approach.

First, we appealed again to our “bible,” Dana Meadows’ 1998 report, Indicators and Information Systems for Sustainable Development, as well as her 1999 essay, Leverage Points: Places to Intervene in a System, to identify four key elements of truly integrated data:

Bill Baue and Ralph Thurm
will discuss
Blueprinting the Future
of Reporting, Accounting
and Data Management

at New Metrics '17.
  • Multicapital-based;
  • Context-based;
  • Mindset- and paradigm-shifting;
  • Wellbeing creating.

<IR> hits the first and third bullets square on, as it embraces the multiple capitals and calls for integrated thinking, which aligns with Dana’s top 2 (of 12) leverage points. Unfortunately, <IR> falls short of embracing the GRI Principle of Sustainability Context, which calls for linking company impacts to the systems they operate in; and by extension, it doesn’t attend to stakeholder wellbeing, which requires maintenance of the carrying capacities of the vital capitals they rely on.

Contextualizing the Capitals

These same issues apply to Total Contribution, leading Crown Estate Head of Stewardship & Sustainability Claudine Blamey (who serves on the Reporting 3.0 Steering Board) to state:

“The Crown Estate fully acknowledges that our Total Contribution methodology continues to be a work in progress, intended not only for our purposes but also for use by others to enable consistency and comparability. A logical next step for Total Contribution is to integrate context, taking into account the carrying capacities of the capitals. Reporting impact on all the capitals that an organization relies on makes complete sense and I believe we will see more of this happening in the near future, spurred in part by Reporting 3.0, which is providing the platform for this movement to take place faster.”

Shortcoming 1: Monetization

The Data Blueprint adds KPMG’s True Value methodology to its scope of inquiry to explore two other issues: valuation (or monetization) and aggregation. Both Total Contribution and True Value use monetization as a “commonalizing” tool, enabling comparison of impacts on diverse capitals by using a common measuring stick: namely, monetary value. While this is a perfectly valid concept, it falls short of assigning value in relation to the key variable for capitals: respect for their carrying capacities. As a Recommendation for next-generation practice, the Blueprint appeals to Mark McElroy’s Monetization Cost Curves, which raise the “price” of capitals, as they near their carrying capacity, to become prohibitively expensive, in order to discourage overshoot.

Source: Center for Sustainable Organizations, Context-Based Monetization Curves, 2014

Shortcoming 2: Aggregation

Another challenge of multicapital accounting: how to add up impacts across capitals. The Crown Estate enacts such “aggregation” by applying its adjusted Gross Value Added (aGVA) methodology that merges the conventional economic measure of Gross Value Added (net return minus the costs of goods and services purchased) with the net of the positive and negative values of the other capitals to calculate Total Contribution.

Crown Estate’s 2017 Total Contribution (Valuated and Aggregated) (Source: The Crown Estate, Everything is Connected: Total Contribution Report, 2017)

The tricky thing about integrating the capitals is the need to treat them separately when considering the sustainability of a capital stock (i.e. maintaining flows within the carrying capacity of the capital), while also considering how the capitals integrate dynamically. This question has been addressed in sustainability literature, resulting in the distinction between “weak sustainability” and “strong sustainability” that pivots on the question of “substitutability.” Thus writes Simon Dresner in The Principles of Sustainability:

“There is controversy about whether to consider human-made capital and natural capital together (weak sustainability) or separately (strong sustainability). If they are counted together, then increases in human-made capital can compensate for running down natural capital. Is that legitimate? Are the two kinds of capital substitutable in that way?”

As with its approach to monetization, where The Crown Estate’s Total Contribution methodology does not factor in the sustainability of capitals, so too does its approach to adding up the impacts on the capitals neglect to address their sustainability. Total Contribution simply nets the positive and negative impacts on each capital, then adds up those net impacts to come up with a total. In this approach, a positive score on one capital can offset a negative score for another capital, essentially swapping them amongst each other.

Unsurprisingly, the Data Blueprint makes the following Recommendation:

“Aggregate capitals only after contextualizing them within their carrying capacities to maintain the integrity of strong sustainability and abide by the doctrine of non-substitutability.”

From Integrated Data to Integral Data

Given that the term “integration” is commonly used to describe the combination of discrete components but falls short of more holistic interconnectivity, it warrants considering a term that more comprehensively encompasses these broader synergies. The ThriveAbility Foundation has advanced a synthesis approach that applies Integral Theory, a broad body of knowledge drawing from diverse disciplines. Among many tenets of Integral Theory is the synthesis of four quadrants of human experience, ranging from individual to collective on one axis and from interior/subjective to exterior/objective on the other axis.

Source: A Leaders Guide to ThriveAbility, ThriveAbility Foundation, 2015.

Whereas integrated data combines elements in one or two quadrants (for example, integrating capitals on the “collective” quadrants), what we might call “Integral Data” synthesizes amongst all quadrants. We draw an example from the Public Comment Letter from the Network for Sustainable Financial Markets (NSFM) to the Taskforce for Climate-Related Financial Disclosure (TCFD):

“The transformative changes required to develop and to implement sustainable long-term business strategies and business model transformations that align to Net Zero GHG business models by 2050 and which will address climate-related financial concerns require identification of director, executive and investment decision-makers who have the personal conceptual and systems thinking (cognitive) capacity to effectively think longer-term and through complex issues.”

In other words, the NSFM letter calls for redefining “value creation” across multiple dimensions, accounting for internal (cognitive) as well as external (financial, ecological and social) systems.

So, Integral Data calls for the integration of data amongst and across the multiple capitals across subjective and objective perspectives at the individual and collective levels. Such an information system liberates the capitals from silos, placing them into dynamic and synergistic relationship with each other, reflective of their interconnectedness in the real world. It also frees the economy from the shackles of monocapitalism, the singular lens that has constricted the vision of economic life into a monochrome, opening up to multicapitalism as a full spectrum palette that more accurately paints the picture of a truly regenerative, distributive and open economy.

Table of Contents: Reporting 3.0 10-Part Series on the Reporting Blueprint & Data Blueprint

As an internationally recognized expert on sustainability context, online stakeholder engagement, and sustainability communications, Bill Baue designs systemic transformation. He's co-founder of a number of companies and initiatives:

  • Sustainability Context Group, a global community of thought leaders… [Read more about Bill Baue]

    Ralph Thurm is a leading professional in sustainability strategies, operational sustainability, sustainability reporting, sustainable innovation and behavioral change for sustainability. With more than 25 years experience working for major corporates, industry federations, governments and NGOs all over the world, Ralph…
    [Read more about Ralph Thurm]

  Sign up for SB Newsletters
Get the latest personalized news, tools, and virtual media on a wide range of sustainable business topics in your inbox.


User login



Most Recently Viewed in the Library

Greg Hills
Tara Collison
Courtney Martin