When I look up the definitions of “Capital” in Google, varied results come up on websites.

One site says the capital of a business is the money it has available to fund its day-to-day operations and to bankroll its expansion for the future, while another defines it as anything that a business or business owner can use to generate more value.

The obvious question that arises is the reason that causes such huge variation in the definition. For me, it is due to change in the outlook of businesses. As the industry finds more and more entrants without a business background setting up their businesses, we are witnessing new and fresh visions coming both at the level of individual businesses and also the community as a whole. Even the government and other regulatory bodies are acknowledging this change and actively looking at revising their reporting frameworks.

As in my past blogs, I have been mentioning that the outlook of business investors has transformed from generating mere profit to intangible parameters of much higher impact, the same has also happened for capital. Contrary to our traditional belief that funds put into businesses are used to generate profit, the recent trends of the industry also acknowledge other factors for the same goal and much beyond.

While we still will have the financial capital types like debt, equity, working and trading capital, for maintaining our books, the changing times also force us to look at parameters such as intellectual, human, natural, manufactured, social, and stakeholder relationships as the capital of a business that helps generate value.

Such a change in perspective brings in a more forward-looking outlook in the mind of investors since it is time that we accept that the real value that a business generates is much beyond mere profiteering.

In my opinion, the change is helping improve the quality of information to the investors and promote a collaborative and cohesive approach to business operations. The approach is more long-term and creates accountability across the organization, rather than keeping it focused only at the executive level. It also gives importance to the factors beyond the immediate organization and brings in the aspect of relationships with other business entities and also indirect stakeholders.

This, in long term, will help support integrated thinking, decision-making, and processes that are more oriented toward the creation of value. Profit is an organic outcome if we can do all these right.