Reinventing Performance Accounting for Sustainable Commerce
Aggregate Capital Sufficiency (ACS)
Although most if not all economists agree that Gross Domestic Product (GDP) is not, and never was, intended to be a measure of the well-being of a society, others still view it as such. The fact is that GDP expresses the size of an economy in terms of the monetary value of goods and services produced by and within it, the magnitude of which may or may not correlate with human well-being. Not everything produced or sold in an economy contributes to well-being, and not everything that contributes to human well-being is counted in GDP.
Because of its shortcomings as an indicator of human well-being, many alternatives to GDP have been put forward. These include:
The so-called “Green” or Comprehensive Net National Product (NNP) and many others.
In general, these alternatives either (a) propose alternative ways of measuring the size of economies, or (b) do indeed provide ways of assessing, rating and ranking levels of human well-being in society, albeit in relative or incremental terms.
None of that, however, provides us with ways of assessing the sustainability of economies in more absolute or context-based terms. To do that, measurement must explicitly compare human impacts on vital resources (capitals) relative to their limits and thresholds, and the effects they have on human well-being. This is in accord with multicapitalism, a new perspective on micro- and macroeconomic accounting that assesses impacts on all vital capitals (natural, human, social, etc.) and not just one of them (economic).
Indeed, while it is true that many of the sustainability problems we face today are attributable to capitalism, it (capitalism) is not the problem per se – rather, monocapitalism is. And multicapitalism is the solution.
To operationalize multicapitalism, two things must happen: (1) individual organizations must embrace the MultiCapital Scorecard (or else some other multiple capital accounting system very much like it) as a tool for assessing their own performance, and (2) economists must at least augment GDP with measures of the manner in which economies are affecting the quality and sufficiency of vital capitals for human well-being.
At CSO, we have already contributed to development of the former; now, happily, we are turning to development of the latter: Aggregate Capital Sufficiency (ACS), an alternative to GDP that assesses the sustainability of economies, where “capital” is defined as natural, human, social, constructed, intellectual, and economic resources upon which people rely for their well-being. Unlike GDP and the other alternatives identified above, ACS assesses the sustainability of an economy in terms of its impacts on the sufficiency of vital capitals. No other econometric does this, and yet it must be done if humanity is to have any chance of understanding and managing the sustainability of its economic affairs!
The Center for Sustainable Organizations
What differentiates CSO from others in the sustainability arena is its strong commitment to an approach for corporate sustainability measurement, management and reporting that is context-based