A New Way of Looking at Intangible Capital

For many years, my work in the intellectual/intangible capital field focused on the kinds of capitals that are considered intangible from an accounting perspective: human, relationship and structural capital. But the integrated reporting movement has challenged me to see things more broadly. That movement combines three perspectives (click to view full size):


All three of these perspectives are critical if you want to understand how a company creates value in a sustainable way. To sustain the company itself. To sustain the social foundation and natural ecosystems it relies on. Of course, the big challenge to proving sustainability comes with measurement. The traditional way of talking about the capitals is in terms of financial and non-financial metrics. But understanding the different perspectives in the table above (financial, sustainability and intangible capital) led me to develop a more precise classification of metrics. As you can see below, the non-financial metrics should be seen from two perspectives. The first is externalities (aka sustainability or ESG-Environmental, Social and Governance), the effects of a company’s operations on society and the environment. The second is internalities (aka intangibles).

All three perspectives—financials, internalities and externalities—are focused on sustainability. That’s the beauty of the integrated model. It enables companies, their investors and their stakeholders to think holistically about how their interests are intertwined and co-dependent:

  • No company can build value without its customers, suppliers and employees (see the Market Basket story)
  • A company can’t succeed without access to key raw materials (see example of water sustainability and companies like PepsiCo)

This graphical summary shows how each of these three perspectives is valid for all the kinds of capital in the integrated model (click to view full size):


This graphic helped me think through the intersection of intangibles and the integrated model. When it was finished, I took a step back and decided that it is easier than ever before to explain how the non-financial/intangible value in companies has risen so dramatically in recent years. This summary identifies how each of the three disciplines can contribute to a holistic view of a business.  As always, feedback welcome!

Want to learn more about this chart and how to use it in your business?



(includes examples of how to apply this thinking in a business)

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