CHIEF VALUE OFFICER – THE IMPORTANT EVOLUTION OF THE CFO | 1. WHAT DO WE MEAN BY ‘VALUE’
1.3 The enablers of value The six capitals of the IIRC’s Integrated Reporting (<IR>) Framework (IIRC 2013) provide an initial basis for the enablers of value in an organisation. Several roundtable participants referred to the Framework in their initial comments. Indeed, two academic institutions that provide courses for the CVO use it as their basis (Audencia n.d. and University of the Witwatersrand n.d.). That of the University of the Witwatersrand builds upon the work of Mervyn King in his book The Chief Value Officer: Accountants can Save the Planet (King and Atkins 2016). The concept of these enablers is that they represent the levers that an organisation uses to create value through its activities. Each organisation will use them in a different combination according to the product or service it provides. Several of the roundtable participants commented that whereas a ‘traditional’ view of the valuation of an organisation, for example when a transaction was undertaken, would have been based upon the physical assets that it used, it is increasingly the value of the intangible assets, as represented by the intellectual capital as well as its human capital, that constitutes the most approrpriate valuation of an organisation. The concept of value is closely aligned to how an organisation uses each of these capitals in combination to generate a future revenue stream which provides benefits. Some roundtable participants even went as far as singling out the human capital as the key. Their assertion was that the human capital, the people of the organisation, working together with the other capitals create the organisation’s commercial advantage. A CFO working in the not-for-profit sector commented that value is a matter of, ‘what are we doing with the resources we have? How are we improving the lives of others? How we are fulfilling the deliverables of our mission’.
FIGURE 1.3: The six capitals of the IIRC’s Integrated Reporting Framework
Social and relationship
Financial
Manufactured
Intellectual
Human
Natural
The definition of a sustainable organisation (Figure 1.4) is also closely linked to these enablers of value. A sustainable organisation is one which creates long-term value by taking into consideration how it operates in its ecological, social and economic environments. The progression of value in an organisation is therefore determined by how the six capitals are worked in combination to lead to such a sustainable future. This was a factor echoed by several roundtable participants. Such a view of value makes the link between a purely financial objective, which might be associated with the economic aspect, and the need to balance this with the broader social considerations and those of environmental protection. 1 A CFO from Africa commented that, ‘sustainability is [a] key that we cannot run away from, and in addressing the issue of sustainability, you are basically looking at an organisation, considering all its stakeholders over and above the shareholders and ensuring that you know the likely impact upon them’. A UK CFO commented that: ‘there is obviously the impact we can have in improving the environment, and on the social side it is the value either internally or outside in communities. This value to those stakeholders…is very different to the financial value that you [already] know’.
FIGURE 1.4: The three domains of sustainability – the triple bottom line
Social equity
Economic viability
Sustainability
Environmental protection
1 The social aspects of value and the responsibility of organisations, and in particular finance functions, is considered in ACCA 2023.
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