Human capital convergences in intellectual capital and sustainability reports
| Published date | 24 April 2007 |
| Pages | 346-366 |
| Date | 24 April 2007 |
| DOI | https://doi.org/10.1108/14691930710742880 |
| Author | Matteo Pedrini |
| Subject Matter | Accounting & finance,HR & organizational behaviour,Information & knowledge management |
Human capital convergences in
intellectual capital and
sustainability reports
Matteo Pedrini
ALTIS – Postgraduate School of Business and Society, Via San Vittore,
Milano, Italy
Abstract
Purpose – The purpose of this paper is to examine the points of convergence between intellectual
capital and corporate responsibility reports with a focus on human capital issues.
Design/methodology/approach – To investigate this degree of integration the paper analyzes the
common elements between human capital accounting and the Global Reporting Initiative Guidelines
2002. The assessment methodology consists of a study of which indicators for employees proposed in
GRI guidelines are frequently used in 20 international best practices for intellectual capital reports.
Findings – Results show a large overlapping of indicators around three issues: the description of
human capital, the reporting on diversity and opportunity, and the measurement of the quality and
intensity of training.
Research limitations/implications – The research is focused on human capital that is one of the
three dimensions of intellectual capital. It could also be interesting to study the points of convergence
between corporate responsibility and the remaining two dimensions of intellectual capital: network
capital and organizational capital.
Practical implications – The results demonstrate that the opportunity exists to integrate
intellectual capital and corporate responsibility report in a global report, that will be useful to orient
the sustainability practices in developing human capital.
Originality/value – This paper sustains the possibility that a correct management of corporate
responsibility practices will be an opportunity to develop intellectual capital and a source of value
creation.
Keywords Intellectualcapital, Intangible assets, Human capital
Paper type Research paper
Introduction
Since the second half of the 1980s, the achievements of knowledge and innovation
companies have pushed professionals and academics to identify new methodologies to
determine a company’s value and to understand the features of this new process of
value creation. In the 1990s the emergence of the resource-based view theory and the
knowledge-based view theory suggested that the success of companies was no longer
attributable solely to access to material resources – comparable to commodities – but
rather to intangible assets, and it was that access that could provide a competitive edge
over the long term (Argyris, 1992; Argyris and Scho
¨n, 1996; Barney, 1991, 2001; Bontis
et al., 2002; Grant, 1991, 1996a, b; Itami and Roehl, 1987; Nonaka and Takeuchi, 1995;
Priem and Butler, 2001a, b; Peteraf, 1993; Senge, 1990; Wernerfelt, 1984, 1995).
The growing importance given to intellectual capital has underlined the limits of
financial measurement systems, which cannot fully evaluate intangible resources and
are inadequate to deal with the difficulties inherent in managing the development of
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1469-1930.htm
JIC
8,2
346
Journal of Intellectual Capital
Vol. 8 No. 2, 2007
pp. 346-366
qEmerald Group Publishing Limited
1469-1930
DOI 10.1108/14691930710742880
new emerging assets. The difficulties related to the application of financial criteria,
based on historical costs or negotiation values, have highlighted the lack of timeliness
and reliability of information, so much so that management has been forced to make
decisions regarding intangible assets while relying exclusively on periodic financial
information which is intrinsically unable to assess these assets real value. The lim its of
monitoring systems based on financial criteria are found in the ever-increasing
discrepancy in price-to-book value observed in recent years, an indication of the
incapacity to fully measure the value of a company’s intangible resources (Lev, 1997,
2001; Andriessen, 2001, 2002; Pike et al., 2002).
In response to these inadequacies companies have developed monitoring systems
for intellectual capital. This development has included the daunting task of
determining a taxonomy and identifying those drivers which best describe and
measure intellectual capital’s impact. Several models have been devised to measur e
intangible resources. These have been used as internal accounting instruments as well
as external disclosure tools. This tool, often referred to as the Intellectual Capital
Report, communicates the coherence between corporate strategy and management
practices (Dati, 1997, 2000; Edvinsson and Malone, 1997; Guilding and Pike, 1990;
Haanes and Lowendhal, 1997; Hall, 1992; Hammerer, 1996; Hendriksen and van Breda,
1992; Kaplan and Norton, 1992, 2004; Mortensen et al., 1997; Petrash, 1996; Roos and
Roos, 1997; Sullivan, 2000; Sveiby, 1997; Teece, 2000).
At the time intellectual capital was being recognised as a determining factor in the
success of a company, the consolidation of a new concept regarding businesses was
taking place. The idea that the shareholders’ interests are the only legitimate aim of a
company’s activities (Friedman, 1962, 1970), gave way to the urgent need, in running a
company, to pay attention to the expectations of all those influenced, directly or
indirectly by the companies activity: the stakeholder theory (Freeman, 1984; Carroll,
1989; Clarkson, 1995; Donaldson and Preston, 1995).
Over time companies have developed accounting tools that reflect their commitment
to the stakeholder theory. These tools have included Environmental and Social Reports
and then Sustainability Reports. Around the subject of corporate respo nsibility, a
group of practices and documents have been formed regarding ethical and social
accountability, which attempt to respond to the needs and expectations of the
stakeholders. These documents are drawn up with the aim of both implement and
communicate corporate adherence to the stakeholder theory (Bauer and Fenn, 1972;
Estes, 1976; Medawar, 1978; Mathews, 1993; Zadek and Evans, 1993; Gray, 1996, 2001;
Zadek et al., 1997; Adams, 2002).
It is of interest to query whether the simultaneous increase of attention being paid to
both intellectual capital and corporate responsibility are independent phenome na or
whether there are convergences between the monitoring systems developed for
intellectual capital and practices of ethical and social accountability.
The aim of this research is to carry out an empirical investigation into the theory of
a convergence between the Intellectual Capital Report and the Sustainability Report, in
order to identify their common points and isolate the information relating to the subject
of corporate responsibility that is provided within the Intellectual Capital Report. To
this end human capital, being of substantial importance for both theories, was the
focus of attention. A sample of 20 companies measured the frequency with which the
Human capital
convergences
347
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