The Five Capitals model provides the basis for understanding sustainability in terms of economic concept of wealth creation. Any organisation will use five types of capital to deliver its products or services. A sustainable business will take care and enhance these assets rather than deplete them.
This model helps organisations to develop a model of sustainability. It is based on what the organisation needs to do in order to maximise the value of these capital. It encourages the business to consider their impact on them and lead the business decision-making.
This dynamic process would help organisations to achieve balance through system change.
We are facing a sustainable crisis because we consume more capital that we produce, therefore increasing stock and value of these capital we can deliver a sustainable future.
Natural capital
Natural capital is any flow of materials or energy that organisation needs to maximise their value. This includes resources, waste and processes. The goal here is to developing processes for reducing waste and improving making the pollutants and waste safe in the same way as natural circles. Organisations must therefore operate within the limits of enhancement or regeneration of natural environment.
Human capital
Human capital consists of peoples skills, education, knowledge, health and motivation. These things are needed for a productive work. This capital is very much a social issue. Damaging human capital by poor work standards has a negative impact on businesses creating wealth. Looking after employees will definitely aim to a sustainable business.
Social capital
Social capital concerns networks, institutions and groups and develop human capital in cooperation with others. Businesses should provide mechanisms that allow human relationships to develop. This will result in building a common values allowing businesses working more effectively.
Infrastructure capital
Infrastructure capital comprises assets which contribute to the production process. These include transport, shelter, water, energy, tools, machine and buildings. This element encourage businesses to improve the quality of goods and infrastructure needed to turn raw materials into product. This capital should be flexible, innovative and increase efficiency.
Financial capital
Financial capital plays an important role in our economy and it considers savings, credit and working wages. If our business is not making money, even if the other capitals are being well managed, the business cannot be sustainable. They should improve in time and the Five Capitals framework provides a method to organisations to follow.
Bibliography:
Forum for the Future, 2020, The Five Capitals
Jon Binns, 2018, The Five Capitals - a Model for sustainable development, RRC International, 2018.
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