The Roots of the Multicapital Model in Integrated Reporting

The Integrated Reporting Movement is a world-wide undertaking by thousands of businesspeople and companies who are seeking to drive better thinking, action and communication in business.

One of the key elements of the IIRC Framework is the multi-capital model. The Framework includes six capitals that draw from three traditions:

  1. Traditional financial/corporate reporting (backed by accounting standards boards and corporate regulations)
  2. Sustainability reporting (backed by standards such as GRI, SASB and diverse third party ratings)
  3. Intangible capital reporting (with early stage standards such as WICI and research from the intellectual capital field)

Each of these fields of study have very different roots and purpose. Sometimes it feels like the only thing they have in common is that they are all important to the ability of a company to create value in a sustainable way.  It’s like a family that finds a way to get along because they care about their shared legacy and future. But inside companies, the connection is clear. Company shareholders and stakeholders have to integrate these three perspectives in order to succeed.  The tension between these models is part of the every-day experience of companies as they juggle multiple internal and external priorities.

The IIRC has been very wise in not legislating the exact names and categories so there is great diversity in how companies are using the multi-capital concept to tell their stories to the marketplace. I sometimes use the following simplified framework to help companies discover their own capitals:


PURPOSE – Every company has a reason for being. It exists to solve a problem, create value for a customer. Value must flow both ways. Companies create value for others and get value in return. If the company cannot create value in a profitable way, it is not sustainable. Thus, purpose includes values, culture and governance but also strategy and business model. Through the business model, purpose is connected to one of the most tangible capitals: financial, as well as one of the most intangible: strategic capital.

PROPERTY – To fulfill its purpose, every company assembles a set of owned resources. They may be tangible, like inventory, equipment, buildings or land. These are called manufactured capital in the IIRC model.  Or they may be intangible like knowledge, data, processes, systems or designs. This is called intellectual capital (IC) in the IIRC model although the classic definitions of IC actually include all the intangible capitals.

PEOPLE – To fulfill its purpose, every company must include people. This is an attracted capital with the contribution of employees being influenced by two-way value flows (employees can choose whether to work and how much they contribute depending on their engagement). The sustainability perspective focuses more on the quality of treatment of employees while the IC perspective focuses more on knowledge, competencies and contributions to value creation. But the importance of human capital is understood in all three perspectives.

PARTNERS – To fulfill its purpose, every company must also attract partners. The most important partner is the customer. But many other kinds of partners may be critical to a company’s value creation process including suppliers, outsourcing partners, communities, regulators, industry groups and financing partners. The sustainability perspective tends to focus on stakeholders in the community and the practices of suppliers. The IC perspective focuses more on how each of the partners contributes to the overall value creation system.

PLANET – To fulfill its purpose, every company uses shared resources that it usually does not own including air, water, land and natural resources. And every company creates waste that affects their natural or social environment. The full cost of a lot of this use and waste is not currently borne by companies. This is changing and direct charges and/or higher prices will become more of a norm in the future. The market is already anticipating these changes driving more companies to measure, manage and take responsibility for stewardship of natural capital.

These three traditions support a truly integrated model of value creation. Every company creates a unique combination of these multiple kinds of capital. One of the goals for integrated reporting and thinking is to help validate the importance of these capitals and how they are all connected.


The multi-capital model is one of the three big ideas behind Integrated Reporting. To learn about the other two, read our new paper called The Three Big Ideas behind Integrated Thinking and Reporting.


Read Three Big Ideas Now


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