In the last part in the series, I introduced the concept of the capitals in use or the notion that value in use is stored in things to do work in the future. In the next part, I will start the work of classifying things into their various forms of value. Defining and locating stores of value in use in money, commodities, ideas, people and promises, culture and relationships and the natural environment among others. But before doing so, I need to address the widespread use of the term “the capitals” and “multiple capitals” in the context of accounting and reporting.

Those on the other side of the value divide see the same things but from a different angle. Money, commodities, ideas, people etc. can all be studied from a value in exchange perspective and a value in use perspective.

In the case of value in exchange, nowhere is this phenomena more evident than within the integrated reporting movement that has been at the forefront of incorporating the concept of “the capitals” into accounting and other reporting systems. Now led, after the recent merger of the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board, by the Value Reporting Foundation, the movement’s vision and purpose is to understand and institutionalize the concept of The Capitals.

The expression the capitals therefore has two different meanings. When expressed by accountants, economists and management consultants it means a particular category of exchange value and its relationship with the production of goods and services. And when used in this series of posts, a particular form of value in use and its relationship with change. To minimize confusion, one may be called “capitals in exchange”, the other, “capitals in use”. The first, expressing a store of exchange value and the second, a store of value in use.

The two varieties of The Capitals are not only semantically different. There are deep methodologically differences between the two concepts that need to be identified before moving on. Namely, that the use of the term the capitals by the IIRC and others to describe many things is metaphorical. Whereas from a value in use perspective, the term capital is not a metaphor but a description of a thing that possesses particular properties or characteristics.

The Capitals in Exchange is a Metaphor

In 2011 the International Integrated Reporting Counsel (IIRC) adopted the term “the capitals” to describe and expand the factors of production of goods and services for the 21st Century . Capitals are defined as:

stores of value on which all organizations depend for their success as inputs, in one form or another, to their business model, through which they are increased, decreased or transformed. The capitals identified in this Framework are: financial, manufactured, human, intellectual, natural, and social and relationship” (IIRC 2012)

At the launch, the then CEO describing the framework as giving “technical rigour and cohesion” to an organic process (Gleeson -white 2014). But no one could say the same of its substance. The IIRC’s multi capital framework has the theoretical cohesion of a shopping list.

The IIRC intentionally left the key terms “value” and “capital” conceptually ambiguous. Explicitly leaving it up to organizations to create their own ontology and taxonomy of categories of “stores” or “stocks” of value. But this is not completely honest. The expression “value” appears in the framework with the silent prefix “exchange”. This conclusion can be inferred from two foundational constructs:

• The IIRC employs the economic distinction between subjective utility or use value (discussed in part 5) and profit. From the perspective of stakeholders value is said to be subjective and, from the perspective of providers of financial capital for whom the integrated report is prepared, value represents profits and the factors of production that might impact on the same.

• Consistent with the first construct, the metaphor of economic capital is then used to develop an integrated reporting framework by positing that ideas, people, culture and relationships and the natural environment are analogous to money and goods and services than can be turned into money. Attempting to draw parallels between financial capital and things that can be exchanged for financial capital with things that possess neither of these properties.

The use of “capital” by the IIRC to describe stores of value is metaphorical. (Coulson et al.) And it is the power of the capital metaphor that does the heavy conceptual lifting and explains why the explosion in multi capital technical standards is not reflected in a corresponding expansion of the theory in support of the model. The reason for this is simple. While you can endlessly expand on a metaphor, creating all kind of mischief, you can’t place a metaphor at the heart of a useful theory because there in nothing there other than a rhetorical linguistic device. This is, or at least should be, shocking.

A metaphor is a comparison between two seemingly dissimilar concept that involve the carrying over of a word from its normal use to a new use. Their purpose is to help make connections between abstract concepts and everyday experience. In the case of the IIRC the source domain is the everyday accepted meaning of economic capital. Described in Part 8 of this series to means financial capital and objects that can be transformed into financial capital. The target domains are “human, intellectual, natural, and social and relationship”. Lackoff and Johnson’s theory of conceptual metaphor explains the relationship between source and target domains. The metaphor forms the foundations for thought processes and conceptual understandings that function to map meaning from knowledge in the source domain (the classical and ne0-classical capital construct) to the target domains (everything conceivably employed in the production of goods, services and money).

In the case of integrated reporting, our understanding of capital as a store of value in exchange, is mapped onto intangible phenomena such ideas and relationships to give meaning to these abstract concepts. Enabling us to imagine (somewhat falsely) that these other categories of capital as being able to be produced, stored, exchanged in markets, quantified, measured, valued etc. in the same way as financial capital and commodities. In this sense, the IIRC capitals are more accurately described as “the capitals in exchange”.

Though the use of the term The Capitals as a metaphor has been heavily criticized in the literature on the grounds that the expanded categories of capital have nothing in common with financial capital, the capitals metaphor has, nonetheless, become pervasive and accepted. The metaphor lost on many in the ESG and sustainability community. Who, perhaps motivated to speak the same language as the economists and accountants, fail to see the difference between a poor economic analogy and the real science of change:

The Five Capitals Model provides a basis for understanding sustainability in terms of the economic concept of wealth creation or ‘capital’

Forum for the Future

While it is possible to discredit the metaphor, my purpose in this part is not to argue why the metaphor is wrong. This is a problem for exchange value theorists (of which I am not). Many of whom object to the use of the terms capitals beyond its traditional boundaries. Rather, I think it necessary to acknowledge that capitals in exchange metaphor for several reasons.

• First, the metaphor creates and re-enforces a perception that financial, manufactured, human, intellectual, natural, and social and relationship and all other categories can only be understood and analyzed from a value in exchange perspective. Essentially monopolizing the analysis of these concept and excluding other forms of analysis as illegitimate or even “unscientific”.

• Second, if it has not already occurred, the term “the capitals” risks losing its metaphorical status, together with all the limitations of metaphors, and becoming “demetaphorised” (Maasen and Weingart 1995). If unchallenged, The Capitals metaphor will become fully absorbed into the sustainability discourse as a fact rather than a poor analogy to the value in exchange concept. Ironically, locating attempts to find a solution to sustainability in the same concept that is widely acknowledged as a primary cause of planetary abuse.

  The implication this analysis is that current approaches to sustainability based on emerging integrated accounting standards may be deeply unscientific at their core. Something lost on or ignored by the industrial complex charged with saving the planet.

• Third, I’m concerned it may be impossible to understand the dual character things. One as metaphorical stores of value in exchange and the other as an actual stores of value in use. By highlighting the difference between the two varieties of The Capital my hope is readers will avoid the temptation of trying to map the metaphor of The Capitals in exchange onto the abstract concept of the capital in use. Perversely, using one metaphor to create another in circumstance where no analogy is needed because the science already exists to explain it. For want of a word, the The Capitals are at risk of being “remetaphorised”. Transformed from a scientific or common fact, into a meaning less metaphor. This can only end in dissonance and confusion. The measure of which is the distance between an increasingly precarious reality and the neo-classical hope of market/information driven salvation conjured up by the metaphor.

The Capitals in Use is Not a Metaphor

The purpose of the Millennia Challenge is to develop a scientific understanding of value in use and by extension things that store value in use. I do not rely of metaphors or analogous reasoning to develop my propositions. Rather, the idea that the capitals store value in use is grounded in both the literature and the second law of thermodynamics discussed in Part 7 of the Series. The capitals in use is not a metaphor.

To be clear, I am not arguing the Capitals in Use store something analogous to energy. The argument developed in each of the parts of this series is that value in use is energy in its socially useful form. The two are homologous. In this sense, financial, manufactured, human, intellectual, natural, and social capital and a host of other capitals are considered stores of value in use because they all posses the same property - the capacity to effect socially useful change.

The same can not be said of the capitals in exchange concept.

There is no common property between all categories of capital in exchange. Least of all value in exchange. On this measure its not even a good metaphor. But even if we were to accept that value in use, from which the metaphor is drawn, is based in good science (which is not admitted), any metaphorical extension to various categories of capital does not magically invest those categories with the status of a scientific fact. That status must be earned with good method and spirit and not left up to stakeholder to decide for themselves. At best the capital in use metaphor is a useful technical heuristic and and at worse, an obstacle to a better understanding of the relationship between the various capitals and the many crises facing the planet.

In the next part in the series I ask what makes a capital useful.