What is value? How do we measure it in the business world?
These are the kinds of questions I was pondering before I'd ever heard of Steem. When I finally heard of Steem, the proverbial light bulb exploded in my head - because we finally have an acknowledgment of value and a way of articulating it which isn't purely financial, embedded in a currency. Wow!! Well, wow for me, at least.
Changing approach to governance - looking far forward instead of recently backward
The business world has been hard at work the last decade trying to find ways to express how it contributes to sustainability (mostly to a cynical chorus of boos), but I've seen that there has been some genuine progress in the arena of Integrated Reporting, so I've decided to write a series of posts on the basis for this animal we call Integrated Reporting. It relates to a completely different approach to governance - one that is forward looking and strategy driven, rather than backwards looking and informed by indicators we can't influence because they're in the past.
As I mentioned in my first post about reaching the summit of Kilimanjaro, it gave me a real compass for strategy in life. That led me to become deeply critical about so-called company strategies - most of which on deeper examination turn out to be operational plans which are pretty vulnerable to external shocks, because often those companies haven't had the deep strategic discussion about where they're really going and why they're going there - factors which make a strategy robust. Aiming for the summit of Kili, you need a robust strategy because the consequences of missing the objective are pretty drastic.
When I first read about the Capitals-based way of expressing value for companies, the idea really resonated with me - it gives a way of articulating value which isn't limited to financial value, and through Integrated Reporting, communicating with stakeholders how an organisation is succeeding at implementing its strategy to create value. In a forward looking way. And not just how the company is creating financial value for its shareholders, I repeat.
No, Integrated Reporting is about telling the story of how all of an organisation's resources are creating value. Holistically. In support of achieving the organisation's strategy (which of course implies it has one). And it seems to me that there's a strong link between integrated reporting and the blockchain, given the peer to peer value exchange possible under the blockchain. The key here: the value doesn't have to be financial. But the perception of value has to be articulated somehow. And for an organisation which responsibly employs resources to deliver on its strategy, it needs governance at some level (a hand on the tiller, shall we say) to make sure the organisation keeps its eyes on the strategy and doesn't get stuck in the weeds of daily operations.
New governance framework - Capitals-based
I'd like to explore with the Steemit community how Steemit could influence governance under the holistic thinking of the Capitals. So first, let me introduce one representation of the Six Capitals which makes particular sense to me:
One of the many visual representations of the inter-relationships between the Capitals (Source)
It's basically an extension of thinking on the so-called "triple bottom line" - social, economic and environmental. All our value nestles in and is derived from Natural Capital (let's face it, we're all stardust anyway). By drawing on Human Capital, Social and Relationship Capital and Intellectual Capital, we are able to create Manufactured Capital. Financial Capital enables trade between these stocks of capitals - and therein lies the rub. We see the value in Financial Capital but often struggle to articulate the value in the other Capitals...except in financial terms.
Look for a series of posts on the Capitals
I'll post some thoughts on each of the Capitals separately...but since the idea of Integrated Reporting is to look at value creation holistically, I'd like to avoid siloing the discussion.
Some organisations are adding a seventh capital, "Political Capital", but for the purposes of this discussion let's include that in "Social and Relationship Capital".
There's a pretty cool video created by Sasol to explain the Capitals - watch it here: Sustainable Development - Sasol six capitals video.
Integrated Reporting - what is it?
The International Integrated Reporting Council (IIRC) has done a great deal of valuable work in getting consensus on how to report on value creation, and how this links to companies' reporting. When sustainability first became a "thing" for companies, they would produce an annual report chock full of financial pages looking back at what had already happened and couldn't be changed (using lag indicators), then another pretty Sustainability Report, usually put together by the marketing department with the aim of convincing shareholders they weren't really awful (i.e. destroying ecosystems, messing with communities, treating labour badly, that sort of thing) in what amounted to an ineffectual defensive move (wethinks they doth protest too much), typically using cherry-picked environmental indicators such as carbon or water footprint...but again, these were generally lag indicators. Just like in the blockchain, you can't change the past.
Two key elements missing in those reports: the look forward at how the company is delivering on its journey to create value, and a consensus view on how to articulate that value. Enter Integrated Reporting, which looks forward, doesn't baffle with bafflegab, and deals with holistic value creation. Entire governance frameworks are being developed based on Integrated Reporting - I'm looking forward to the launch in South Africa 1 November of King IV™, hosted by the Institute of Directors of Southern Africa (IODSA). The King IV™ approach to corporate governance is rooted in the principles of Integrated Reporting and can be used by any kind of organisation: listed, private, non-profit...whoever wants to govern their organisation through a value-based approach to realising strategy can benefit from this governance framework. There are other governance frameworks out there, of course. This is one I'm reasonably familiar with, and as a member of the IODSA's Sustainable Development Forum, frankly, I'm keen to get this thinking into Southern Africa's corporate world.
How could Steem deepen the value discussions under Integrated Reporting?
I believe that Steem has profound potential to influence governance in support of sustainability, as we move towards a world where value is exchanged via the blockchain. Sure, Steem is a cryptocurrency and a currency is by nature financial. But Steem incorporates some of the other Capitals (particularly Social and Relationship Capital) in ways others do not yet appear to have envisioned.
Keen to engage with the Steemit community on what this can mean for corporate governance and sustainable value creation in the business world.