Multicapitalism in Practice at the Enterprise Level: Cabot Creamery Cooperative Case Study
By Bill Baue, Senior Director, r3.0
Part 11 (and last) of a series on the r3.0 White Paper, From Monocapitalism to Multicapitalism — 21st Century System Value Creation.
Having excerpted the full Introductory section of the Multicapitalism White Paper, we now focus on specific sections of the paper, starting with an enterprise level case study from the Multicapitalism in Practice section profiling the implementation of the MultiCapital Scorecard by Cabot Creamery Cooperative.
Cabot Creamery Cooperative, which was established in 1919 and merged with Agri-Mark in 1992, has a long history of applying sustainability thresholds to its performance accounting. The cooperative, best known for its aged cheddar cheese, established a full-time sustainability position in 2008, and soon thereafter embarked on assessing its water footprint in the context of water availability (at the watershed level) across its ~1000 member-owner farms and 4 processing facilities, which involved a five-step process:
The first step is to identify renewable supplies (of water), to be defined as precipitation volumes (only) in the watersheds where Cabot does business — conservatively, no surface or groundwaters would be touched. Next would be to subtract a percentage of annual precipitation for evapotranspiration [evaporation from terrestrial surfaces and transpiration from plants], which in New England can be fifty-percent or higher. Third — allocate half the remaining supplies to ecological or non-human needs. Fourth would be to fully satisfy all household needs in the watershed. And finally, the fifth and last step is to allocate the remaining supplies — something like a quarter of what originally shows up in the form of precipitation — to organizations, including businesses, based on their proportionate contributions to GDP in the watershed.[1]
In 2012, Cabot used the same conceptual approach to assess its greenhouse gas (GHG) emissions in the context of “limits in the Earth’s carrying capacity to absorb them without putting the climate system at risk.”[2] The co-op compared these context-based calculations to conventional metrics — both absolute (actual impact) and relative (actual impact relative to some other variable of interest: per unit of production, per dollar of sales, or per full-time-equivalent employees.) The analysis found that absolute and relative metrics send conflicting signals, whereas context-based metrics send signals that express authentic sustainability performance. This suggests that integrated reporting that simply references the multiple capitals may also send mixed signals (including inaccurate signals), unless contextualized to the carrying capacities of those capitals.
The next logical step was to extend this context-based approach across the entire Triple Bottom Line, applying it not only to natural and social capitals, but also to financial capital. Cabot applied the MultiCapital Scorecard to all of its areas of impact, across the multiple capitals of the Triple Bottom Line. Their progress and selected results for 2018 are included in Figure 1.
The MultiCapital Scorecard includes a number of features that warrant deeper unpacking. First, the multiple capitals:
While the capitals in the left-hand column are familiar, those in the right column need further explanation. Economic Capital is divided along two axes: internal and external, and financial and nonfinancial. Economic financial capital is what is often recognized as monetized capital, which can be internal to the organization (in the Cabot case, this belongs to the farmer-owners or lenders) or external (such as the financial performance of customers due to Cabot’s products). Economic nonfinancial capital is capital that has economic value that transcends financialization — for example, the intangible value of the brand. The MultiCapital Scorecard recognizes these four sub-categories of Economic Capital, while also recognizing the traditional capitals: natural, constructed, human, and social & relationship.
Also fundamentally important to Context-Based Sustainability and the MultiCapital Scorecard is the “baseline” of the scoring schematic: one point zero (1.0) or “OPZ.” Recalling the Sustainability Quotient (Sustainability Performance = Actual Impacts / Normative Impacts) and basic mathematics, a quotient achieves “equilibrium” when the numerator and denominator are equivalent, resulting in a value or score of 1.0. CBS and MCS use “OPZ” as the dividing line between sustainability and unsustainability.
In addition, it is fundamentally important to remember that ecological thresholds amount to ecological “ceilings” (or “outer limits”), while anthropogenic thresholds amount to social “foundations” (or “inner limits”), resulting in inverse measures of sustainability. While social and economic sustainability is represented by results greater than or equal toone point zero (³ 1.0) environmental sustainability is represented by results less than or equal to one point zero (£ 1.0).
To demonstrate this inversion, consider the examples of Cabot’s sustainable performance that include scores of
- 1.03 (>1.0) on Safe Food, which inhabits the Social Bottom Line dealing with Constructed Capital (prepared food) that serves the wellbeing of Consumer rightsholders;
- 1.06 (>1.0) on Commercial Performance on the Economic Bottom Line impacting External Economic Capitals (Financial and Nonfinancial) affecting Customers; and
- -0.01 (<1.0) on Water, which inhabits the Environmental Bottom Line impacting Natural Capital that serves the wellbeing of rightsholders in Communities.
Conversely, Cabot earned an unsustainable score of
- 1.16 (>1.0) on Resource Recovery, which is on the Environmental Bottom Line impacting Natural Capital that serves the wellbeing of rightsholders in Communities.
Next, the MCS embeds assessment across a flow of time, so it encompasses trajectory targets, or what could be considered “interim goals” — stepping stones toward ultimate achievements. The MCS thereby includes what it calls “Progression Performance Scores,” which reflect levels of movement in the right — or wrong — direction on a year-over-year basis. These Progression Performance Scores are expressed on a 7-point scale, from +3 (fully sustainable) down to 0 (no change) for movement in the right direction (i.e., toward sustainability), and from 0 (no change) down to -3 (three or more years of regression) for movement in the wrong direction (i.e., away from sustainability).
For example, Cabot’s Progression Performance Score on climate (on the Environmental Bottom Line, concerning natural capital) is 2, as it meets or exceeds the year’s trajectory target (as defined by the IPCC mitigation curves), but falls short of the sustainability norm of zero emissions. See Figure 4 for details on this scoring regime.
On these Progression Performance Scores, Cabot earned the highest mark (3) by meeting / exceeding not only that year’s trajectory target but also its sustainability norm on Safe Food (Social Bottom Line), Commercial Performance (Economic Bottom Line), and Water (Environmental Bottom Line). Only one Progression Performance Score showed regression: Resource Recovery (Environmental Bottom Line.)
Finally, these Progression Performance Scores combine across areas of impact within each of the three legs of the Triple Bottom Line, enabling aggregate scoring on each of the three bottom lines, as well as a single unified score for the triple bottom line as a whole. (See Figure 5) Cabot has completed assessment of its Environmental Bottom Line, which adds up to 44% of the way to full sustainability. Aggregated results for the other two bottom lines (Social and Economic) are pending, so Cabot is not yet in a place where it can assess its overall Triple Bottom Line performance.
Importantly, this aggregation approach avoids the pitfalls of Impact Valuation described earlier, as it uses Progression Performance as its aggregating mechanism, instead of using the monetization of impacts on capitals — which, as we already established, are not fungible or substitutable for one another. While ecological and social impacts are clearly interconnected, this does not mean that positive performance on economic capital (paying a living wage, for example) necessarily compensates for negative performance on natural capital (overdrawing a company’s fair share of water from a watershed, for example). As McElroy and his co-author Martin Thomas in their 2016 book The MultiCapital Scorecardexplain:
The MultiCapital Scorecard does not compensate “apples with oranges.” But it does aggregate progression scores. Such aggregation does not in any way compensate for unsustainable performance … [The] single score that reports the triple bottom line performance of an organization … makes no assumption of intercapital substitution, as it is a measure of progression, not of sustainability per se.[7]
To illustrate this, note that Cabot’s -33% regression on Resource Recovery significantly drags down its overall Progression Performance score on the Environment Bottom Line of 44%, which would otherwise have been 83% based on the Progression Performance Scores of 100% on Water and 66.7% on Climate.
Cabot’s use of the MultiCapital Scorecard enables the coop to measure its performance with precision, identifying areas of positive performance where the cooperative can feel confident about its System Value Creation, while also tracking underperformance that helps pinpoint risks and remediation opportunities for mitigating — and ultimately eliminating — those risks.
As Cabot Director of Sustainability Jed Davis says:
The MultiCapital Scorecard, which builds on our decade-plus implementation of Context-Based Sustainability, is emerging as a vital tool for Cabot — and our cooperative of farmer-owners — to fulfill our credo of “living within our means and ensuring the means to live.” It’s not only the right thing to do — it’s also the smart and strategic thing to do in a world of increasing volatility where we strive to continue on our journey toward providing sustainable nutrition.[8]
[1] Mark McElroy, “How Leadership at Cabot Creamery Makes All the Difference,” Sustainable Brands, 20 January 2012. https://sustainablebrands.com/read/leadership/how-leadership-at-cabot-creamery-makes-all-the-difference
[2] Mark McElroy, “Groundbreaking Cabot Study Reveals Shortcomings of Conventional Sustainability Metrics,” Sustainable Brands, 26 September 2012. https://sustainablebrands.com/read/new-metrics/groundbreaking-cabot-study-reveals-shortcomings-of-conventional-sustainability-metrics
[3] Martin Thomas & Mark McElroy, The MultiCapital Scorecard: Rethinking Organizational Performance, Chelsea Green, 2016.
[4] Mark McElroy, Social Footprints: Measuring the social sustainability performance of organizations, Dissertation, University of Groningen, 2008. https://www.rug.nl/research/portal/files/13147569/DISSERTATION-2.pdf
[5] Thomas & McElroy, 2016, op cit.
[6] Ibid.
[7] Ibid.
[8] Jed Davis, email to author, 3 August 2020.
Part 10 of this series (and access to all earlier parts) can be viewed here:
