Human Capital, Social & Relationship Capital and Intellectual Capital - 2 of 3 in a series of posts on the Six Capitals

As promised earlier, this is the second of three "sub-posts" outlining the Six Capitals, a way of articulating value beyond basic financial terms, in support of forward-looking corporate governance. Ultimately, the Capitals provide an accessible way of articulating how companies are creating sustainable value. Sustainable value is about taking a holistic view on people, planet and profits. I'm also doing this to kickstart a discussion on how Steem and the Steemit community can influence this new(ish) approach to corporate governance.

I’m posting about these three Capitals, Human Capital, Social and Relationship Capital and Intellectual Capital, together because I’ve found people often conflate and confuse them.

Let me start with the definitions which the International Integrated Reporting Council proposed in the Integrated Reporting Background Paper on the Capitals, and paraphrase/simplify them a bit.

Human Capital

People’s competencies, capabilities, experience and motivation to innovate, including:

• alignment with and support for an organisation’s risk management approach and ethical values, etc.
• ability to understand, develop and implement an organisation’s strategy
• loyalties and motivations for improving processes, goods and services

I’ve highlighted motivation in particular, because it doesn’t matter how smart, well-trained and obedient staff members are – if they don’t want to contribute to creating value for the organisation, they will find ways not to. Conversely, if they do, the organisation will start to see innovation, collaboration, higher performance and, dare I say, systemic solutions capability emerging, particularly if that motivation is nurtured for…long term value creation.

Social and Relationship Capital

For organisations, Social and Relationship Capital encapsulates the institutions and the relationships within and between communities, groups of stakeholders and other networks, and the ability to share information to enhance individual and collective well-being. The World Business Council on Sustainable Development (WBCSD) defines Social Capital as “the resources and relationships provided by people and society.” This definition includes human capital (people’s skills, knowledge and wellbeing), social capital (societies’ shared values, norms and institutions) and relationship capital (connections and networks).
Some expressions of Social and Relationship Capital include:

• strength of key stakeholder relationships (e.g. with employees, customers, supply chain, communities, government)
• intangibles associated with the brand and reputation that an organisation has developed
• improving the enabling environment for business
• strengthening value chains
• an organisation obtaining or maintaining its social licence to operate.

The WBCSD is driving the development of the Social Capital Protocol, which will be a "harmonised approach for businesses to measure and value their interactions with people and society”.

Source: http://www.wbcsd.org/SocialCapital.aspx

As I mentioned in my previous post on the Capitals, some thinkers have started to add Political Capital to thinking on value and the inter-related Capitals, but for the purposes of this discussion it’s well-covered under Social and Relationship Capital.

I’ll also venture to say that the governance framework an organisation chooses to use (explicitly or implicitly – there’s compliance, and there’s how we really drive strategy, after all) will largely define its Social and Relationship Capital. I invite discussion on this point!

Intellectual Capital

Comprises organisational, knowledge-based intangibles, including:
• intellectual property, including copyrights, trademarks, patents and the like
• ‘organisational capital’ such as tacit knowledge, systems, procedures and protocols (the stuff the knowledge management guys are supposed to capture).

Reporting on value creation through these three Capitals

When we look at the three of these Capitals together, it’s easy to see how they interrelate and yet how different they are. Different companies report differently on these capitals because, well, companies are different and they all create value differently. That’s why it’s important not to hold to a rigid definition of these Capitals but to focus more on how they contribute to value creation in terms of a given strategy.

….Which leads me to ask how Steem and the blockchain can ultimately contribute to a systemic improvement in how these stocks of value are assessed and articulated. Look forward to your views.