Context and Capitals: The Next Big Things in Corporate Sustainability

Context-Based Sustainability is a compelling new approach to corporate sustainability management that takes social, economic, and environmental thresholds into account. There are still unfortunately many corporations that instead more or less ignore them. More progressive companies have plans in place Corporate Social Responsibility, Eco-Efficiency, Citizenship, and the Shared Value doctrine.

CBS derives from the very deliberate efforts to take contextually relevant circumstances into account when attempting to measure, manage, or report the sustainability performance of an organization. These circumstances consist of several factors. Things that are taken into account are whom an organization’s stakeholders are, the type and status of capitals, and the already-defined sustainability standards of performance.

Having this knowledge makes it possible to define meaningful norms, standards, or thresholds for what an organization’s impacts on vital capitals would have to be in order to be sustainable. Context-based metrics can then be used to measure performance against them. Goals, strategies, and interventions can be devised for improving or maintaining performance. More than anything else, CBS finally makes it possible to answer the question, “Are we sustainable?”

Multiple capital concepts involves the capitalization of earnings in determining the value of an organization by calculating the net present value of expected future profits. The capitalization of earnings estimate is determined by taking the entity’s future earnings and dividing them by the capitalization rate. This is an income-valuation approach that determines the value of a business by looking at the current cash flow, the annual rate of return, and the expected value of the business.

The leap from theory to practice in terms of when capital-based performance accounting was first broadened from financial performance alone took place in the mid-nineties. Next in the evolution of multiple capitals as a basis for assessing organizational performance came around 2002 when it became obvious that sustainability reporting helps sharpen management’s ability to assess the organization’s contribution capital. This assessment enlarges the perspective provided by conventional financial accounts to create a more complete picture of long-term prospects.

For the full article, CLICK HERE.