Executive Summary: From Monocapitalism to Multicapitalism — 21st Century System Value Creation
By Bill Baue, Senior Director, r3.0
The Executive Summary of the r3.0 White Paper, From Monocapitalism to Multicapitalism — 21st Century System Value Creation.
The paradigm shift from Monocapitalism to Multicapitalism is necessary, inevitable, and already well underway. This White Paper lays out the fatal flaws of the existing Monocapitalism paradigm, then outlines the historical, conceptual, and practical foundations of Multicapitalism in order to understand how this emerging paradigm not only resolves these fatal flaws, but also opens the door to creating sustainable, regenerative, and thriveable business models and economic systems.[1]
This White Paper defines Monocapitalism and Multicapitalism as follows:
- Monocapitalism: capitalism designed to grow and concentrate one form of vital capital — financial capital — very often at the expense of the ongoing viability of other capitals;
- Multicapitalism: capitalism designed to maintain the carrying capacities of all vital capitals (natural, human, social, intellectual, constructed, and financial) respecting normative thresholds.[2]
The promised progress of the Monocapitalist paradigm, predicated on Economic Growth Theory, actually generates decapitalization,[3] whereby increases in one capital (financial) come at a cost to other capitals (natural, human, social, intellectual, and constructed), resulting in overall devaluation that not only destroys System Value, but also aggregates to create systemic risks — and ultimately existential risks.
After identifying the shortcomings of Monocapitalism (its sole focus on financial capital, and its “irrationally exuberant” fixation on economic growth and concentration, primarily through privatization), this White Paper lays out the case for Multicapitalism. The promise embedded in the emerging Multicapitalist paradigm rests on its transformative nature: in addition to its comprehensive scope (across all six capitals), Multicapitalism also calls for respecting the carrying capacities of the capitals as a means of creating System Value — or value that accrues in dynamic balance across allcapitals, and the systems associated with them.[4]
In other words, Multicapitalism does not seek to continual growth of any single capital, but rather seeks to dynamically balance all capitals, as measured with respect to their carrying capacities. The seminal 1972 Club of Rome Limits to Growth report brought into our collective consciousness the concept of carrying capacity, which distinguishes sustainable and regenerative systems on the one hand, from unsustainable systems that trigger overshoot-and-collapse dynamics on the other hand.[5] The carrying capacity concept applies to both ecological and social sustainability thresholds, which can be allocated to the sub-system levels — such as the company, portfolio, or national level — hence the notion of thresholds and allocations.[6]
The carrying capacities of the capitals can be measured and assessed by applying the Sustainability Quotient, which holds that S=A/N, or Sustainability = Actual Impacts (on the carrying capacities of the capitals) / Normative Impacts (on the carrying capacities of the capitals).[7] Attempts to transcend Monocapitalism have been hampered by focusing only on the numerator, seeking incremental improvements on actual impacts; actualizing Multicapitalism requires adding the normative denominator to guide these actual impacts into the “Safe and Just Operating Space” of bona fide sustainability.[8]
After a Survey of Existing Initiatives that address 1) the multiple capitals, 2) carrying capacity thresholds, and 3) the carrying capacities of the capitals, this White Paper provides Case Studies of Multicapitalism applied at three levels of scale:
- Micro (Company) Level
o Griffith Foods
o Agri-Mark / Cabot Creamery Cooperative
o Tourism Holdings Limited (thl)
o Novo Nordisk
- Meso (Portfolio) Level
o Asset Owner Integrated Reporting and Threshold Investing
- Macro (National) Level
o EY MultiCapital Scorecard implementation
o Wellbeing Economy Governments (WEGo) Alliance
The White Paper ends with a set of Proposed Pathways to spur the emergence of Multicapitalism, starting from the need for a paradigm shift from current incrementalism, hampered as it is by considerations of the political world, to normative mindset focused on the carrying capacity thresholds of what’s required by the material world of thermodynamic reality. Global Reporting Initiative Co-Founder Allen White calls this approach (which has been prevalent for the past two decades) “Numeration” as it only assesses the numerator of the Sustainability Quotient. White notes that a paradigm shift to Multicapitalism requires an embrace of “Denomination,” or the integration of carrying capacity thresholds into the assessment of our impacts on the multiple capitals.
The Pathways explored cover the corporate, investment, economic, and policy realms.
- On the corporate front, the Pathways address the specific areas of:
o Performance Accounting;
o Management Practices and Principles;
o Data Flows and Information System Architecture;
o Reporting Standards;
o Business Model Design; and
o Transformation Triggering.
- On the investment front, the Pathways traverse from asset owner integrated reporting to more comprehensive application of Threshold Investing as a means of applying Multicapitalist thinking.
- On the economic front, support must shift from Economic Growth Theory to Post Growth and Degrowth doctrines,[9] and economic system design must shift from a supply and demand orientation to align with resource thresholds and population allocations[10] and thereby design economies as ecosystems.[11]
- On the policy front, global governance needs to adopt policy orientation toward a carrying capacity regime. This will entail abandoning Gross Domestic Product as the global benchmark of progress, and embracing instead measures aligned with ecological and social thresholds. It will also entail abandoning the mindset of progress through economic growth, and embracing an ethic of abundance through sufficiency for all.
These Pathways set the foundation for a final Call to Action, which returns to the core first principles of Multicapitalism:
- First, entities need to identify the vital capital resources they impact;
- Second, they need to identify the rightsholders who also rely on those resources for their well-being;
- Third, they need to identify where their impacts fall in regards to the carrying capacities of those vital capital resources.
In the paradigm of Monocapitalism, these considerations are absent from consideration, and therefore, impacts inevitably transgress carrying capacities, at the organizational and, in aggregate, at the collective level, resulting in systemic risks that have coalesced into existential risks. Monocapitalism is literally killing us.
Multicapitalism, by contrast, assesses the carrying capacities of the capitals, and thereby enables organizations to manage their impacts sustainably, enabling us to manage our collective impacts in ways that respect and uphold these carrying capacities. Multicapitalism, therefore, is our route to sustainability, regeneration, and thriveability.
Earlier articles in this Series:
[1] McElroy & Thomas 2014, op cit.
[2] Mark McElroy, “Sustainability and Multicapitalism — Together at Last!” Sustainable Brands, 10 April 2014. https://sustainablebrands.com/read/defining-the-next-economy/sustainability-and-multicapitalism-together-at-last; Mark McElroy, Great Transition Inititive listserve, August 2016. On P2P Foundation Wiki Page https://wiki.p2pfoundation.net/Multicapitalism; the version of these definitions included in this White Paper are the result of further refinements resulting from discussions between McElroy and the author.
[3] Peter Tunjic, “Social Purpose without Social Responsibility : Rethinking the Corporation,” OnDirectorship, 10 February 2018. http://ondirectorship.com/ondirectorship/2018-2
[4] McElroy, 2008, op cit.
[5] Donella Meadows, Dennis Meadows, Jorgen Randers, William Behrens, Limits to Growth, Universe Books, New York, 1972. http://www.donellameadows.org/wp-content/userfiles/Limits-to-Growth-digital-scan-version.pdf
[6] McElroy 2008, op cit.
[7] Ibid.
[8] Kate Raworth, A Safe and Just Space for Humanity: Can We Live Within the Doughnut? Oxfam Discussion Paper, February 2012. https://oi-files-d8-prod.s3.eu-west-2.amazonaws.com/s3fs-public/file_attachments/dp-a-safe-and-just-space-for-humanity-130212-en_0_4.pdf
[9] Tim Jackson, Prosperity Without Growth: Economics for a Finite Planet, Earthscan, 2011.
[10] James Quilligan, Resource Thresholds / Population Allocations, 5th International Reporting 3.0 Conference, Amsterdam 13 June 2018. https://www.2018.reporting3.org/wp-content/uploads/2018/07/Amsterdam-Quilligan.pdf; James Quilligan, “Beyond Supply and Demand: The Dynamic Equilibrium Between Global Thresholds and Allocations,” Sustainable Brands, 2 March 2018. https://sustainablebrands.com/read/finance-investment/beyond-supply-and-demand-the-dynamic-equilibrium-between-global-thresholds-and-allocations
[11] James Quilligan, “Will Green Growth & Innovation Save Modern Civilization?” Economic Democracy Advocates, 2 December 2019. https://economicdemocracyadvocates.org/2019/12/02/will-green-growth-innovation-save-modern-civilization/
