The Sigma Project

Introduction How to use Foreword Executive summary SIGMA Principles Principles at a glance Accountability The 5 capitals Natural capital Human capital Social capital Manufactured capital Financial capital Other approaches Management Framework Views on the Guidelines

‘Financial capital’ reflects the productive power and value of the other four types of capital and covers those assets of an organisation that exist in a form of currency that can be owned or traded, including (but not limited to) shares, bonds and banknotes.

Why it is important to organisations?
Financial capital is the traditional primary measure of business performance and success (the ‘single bottom line’) in terms of reporting performance to shareholders, investors, regulators and government. Sustainable organisations need a clear understanding of how financial value is created, in particular the dependence on other forms of capital. For measures of financial capital to truly reflect the value of other forms of capital, organisations must understand the importance of a number of other factors and how to ascribe financial importance to them (see below).

Ways organisations can enhance financial capital

Ensure that the organisation’s financial measures reflect the value of the other four capitals.

Value intangible assets such as brand and reputation to better understand their contribution to shareholder value.

Internalise environmental and social costs and benefits and assign an economic value to them (i.e. understanding that they are either assets or liabilities on the organisation’s balance sheet).

Manage opportunities, risks and corporate governance issues.

Demonstrate a positive stance on, and management of, sustainability issues to improve access to financial capital or reduce financial costs, for example by demonstrating that the organisation meets socially responsible investment (SRI) criteria or through achieving a reduction in insurance premiums as sustainability opportunities and risks are managed.

Ensure equitable use of the wealth created.

Honour relationships with suppliers and customers/citizens.

Assess the wider economic impacts of the organisation’s activities, products and services on society, e.g. creating wealth in the communities in which the organisation operates.

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