Triple Bottom Line

[Update January 2015 -- see Comments]

February 2014

Explainer: what is the triple bottom line?

http://theconversation.com/explainer-what-is-the-triple-bottom-line-22798#comment_572887

A modern organisation has three broad areas of impact: economic, social and environmental. While we measure one of these through financial profit, we have no systematic means of measuring the other two. A “triple bottom line” would therefore capture not just the financial bottom line (the profit or loss) but the social and environmental impacts of activity as well, although not necessarily as an amount of money...

Finally, all the data suggests that, in all likelihood, most, if not all commercial organisations are actually contributing to unsustainability. A proper sustainability report would indicate the broad extent of an organisation’s contribution to unsustainability: something a triple bottom line is very unlikely to be able to do.

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Comments

January 28, 2015

Rob Gray Professor of Social and Environmental Accounting at University of St Andrews

Voluntary Initiatives and Cajolery have patently failed... and that goes for Triple Bottom Line as well from Rob Gray and Markus Milne

It is great to see John Elkington re-joining this debate; his influence and wisdom have been crucial to such advances in the business and social/environmental/sustainability debates. That so little advance has been made is not for lack of effort on John’s part. And John is absolutely right to flag up the need to be pessimistic and optimistic simultaneously: the trends and global data are unlikely to engender anything other than the deepest pessimism in any person with even the most shaky claims on sanity; but we have to have optimism if we are to extract ourselves (and the rest of the planet) from the mess. But, just as misplaced pessimism breeds negatively and passivity, so misplaced optimism can lead to self-delusion and a Panglossian tendency more akin to lotus-eating. In essence, the self-congratulatory rhetoric that pervades so much of the business and the “sustainababble” agenda simply drives out anything that might pass for analysis. (A point made better than most by Barbara Ehrenreich’s Or Die: How Positive Thinking Fooled America and the World).

In the context of the triple bottom line, accountability and the recognition of un-sustainability the misplaced optimism relates to the widely touted notion that voluntary action by large corporations has been a success. It simply hasn’t been.

Calls for voluntary social and environmental accountability have been around for at least 40 years (since the ASSC’s Corporate Report in 1975 for example) and active support of voluntary environmental reporting (followed by social and then “sustainababble” reporting) has been centre stage for 25 years. 25 years! And in that time hardly a single organisation has consistently produced a document through which they discharged their accountability; hardly any organisation has produced a report through which civil society could transparently review its social and environmental impacts; and certainly no organisation has produced any account that would allow us to assess the extent of its un-sustainability.

The greatest “success” is often held up to be the Global Reporting Initiative (GRI), set up in 1997 to support and encourage voluntary disclosure. Some 6,900 organisations are represented on the GRI website (as at 20th January 2015). A great many of these are not-for-profit organisations and many of them are certainly not the leading multinational corporations (MNCs) about which so much fanfare is made. Furthermore, not all of those 6,900 are in compliance with GRI – even at a basic level.

Let us be generous as say that 3,000 MNCs have registered a GRI report; there are approximately 60,000 multi-national enterprises in the world. The GRI “success” is that after 17 years, about 5% of MNCs comply. That is a strange measure of success. And of course, what few reports there are have nothing to do with substantive accountability, un-sustainability and mostly are not subject any sort of rigorous assessment.

Any optimism about reporting and accountability is surely misplaced!

That is not to say that great work hasn’t been done and that great work is not being done. We must continue to encourage initiative wherever we can. John’s new book will advance things a little further, we have no doubt – but is John Elkington, in fact, too optimistic about how big business can or wants to change? Admirably, he – and many other insightful business visionaries – are looking for “left-handed” solutions in a “right-handed” world. The problem, as we see it, is that “business-as-unusual” ultimately falls foul of the right handed logic of international financial capitalism - as Anita Roddick had to so regrettably admit. That system seems happy to absorb marginal new ideas but it simply cannot consider (nor would it want to consider) any form of substantial change – any recognition that the problems are systemic and deeply-rooted and need to be exposed and addressed. Consequently, so much of the voluntary talk and piecemeal action touted as “radical change” ends up being ultimately superficial and cosmetic at best and greenwash at worst.

Jochen Zeitz’s experiences at PUMA should tell us this. PUMA came as close as any major company of which we are aware to producing a relatively substantial account of their engagement with the natural environment: the PUMA environmental profit and loss account (EPL). At the Edinburgh Inaugural World Forum on Natural Capital, however, Zeitz admitted that PUMA’s EPL had not caught on, and wasn’t really being followed by anyone. Why? For 25 years the business world in all its guises (including academics and politicians) has blatantly refused to face up to any such substantial initiatives – the world didn’t follow Traidcraft, Landcare, Bristol Squibb Myers or Novo Nordisk or any of the other piecemeal but well-intentioned attempts at substantive engagement. Voluntary initiatives and polite cajolery have been an abject failure for many years now – especially in the light of the accountability and sustainability of large organisations.

No amount of rhetoric should be allowed to obscure this… the last thing species need now is more self-delusion.

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John Elkington

Chairman

Many thanks to professors Rob Gray and Markus Milne for breathing some further oxygen into this debate. In reading the later stages of their assessment, however, I am reminded of the late Anita Roddick's comments on the pessimism of the thought -- and the optimism of action.

For those new to this area of discussion, The Economist had this to say on the triple bottom line (hereafter TBL) a while back: http://www.economist.com/node/14301663

Twenty years on from the first launch of the idea, I have been working with Jochen Zeitz, who pioneered the Environmental Profit & Loss (EP&L) approach while Chairman and CEO of PUMA. He and I have done a book on what we call 'tomorrow's bottom line,' called 'The Breakthrough Challenge: 10 Ways to Connect Today's profits with Tomorrow's Bottom Line' - see http://eu.wiley.com/WileyCDA/WileyTitle/productCd-1118539699.html.

The spirit of the piece is that business can's simply account and report itself out of the hole we have collectively dug for ourselves. Integrated reporting is only a small piece of the puzzle. Instead, what we call the 'Global C-suite,' the top teams of the world's most powerful 1,000 companies, are going to have to embrace a 'Stretch Agenda' linking their strategies (whether couched as TBL, shared value or whatever) to the wider sustainability context.

This is the theme of a white paper we have just completed at Volans, with support from the Generation Foundation.

Called '"The Stretch Agenda: Targets & Incentives for the Breakthrough Decade", this is due for launch in March.

If you're interested in receiving a copy let me know at [email protected].

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References

The Global Reporting Initiative (GRI)

W(h)ither Ecology? The Triple Bottom Line, the Global Reporting Initiative, and Corporate Sustainability Reporting

http://link.springer.com/article/10.1007%2Fs10551-012-1543-8

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Cannibals with Forks: The Triple Bottom Line of 21st Century Business (The Conscientious Commerce Series)

Elkington convincingly argues that future market success will often depend upon a company's ability to satisfy the three-pronged fork of profitability, environmental quality, and social justice. This lively and practical guide outlines the seven great "sustainable" revolutions that are already unfolding, showing how business leaders should respond...

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Global Reporting Initiative - https://www.globalreporting.org/

https://www.globalreporting.org/reporting/g4/Pages/default.aspx

https://www.globalreporting.org/network/Pages/default.aspx

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Economist

Triple bottom line

Three Ps: profit, people and planet

Nov 17th 2009 | Online

The phrase “the triple bottom line” was first coined in 1994 by John Elkington, the founder of a British consultancy called SustainAbility.

His argument was that companies should be preparing three different (and quite separate) bottom lines. One is the traditional measure of corporate profit—the “bottom line” of the profit and loss account. The second is the bottom line of a company's “people account”—a measure in some shape or form of how socially responsible an organisation has been throughout its operations. The third is the bottom line of the company's “planet” account—a measure of how environmentally responsible it has been. The triple bottom line (TBL) thus consists of three Ps: profit, people and planet. It aims to measure the financial, social and environmental performance of the corporation over a period of time. Only a company that produces a TBL is taking account of the full cost involved in doing business.

In some senses the TBL is a particular manifestation of the balanced scorecard. Behind it lies the same fundamental principle: what you measure is what you get, because what you measure is what you are likely to pay attention to. Only when companies measure their social and environmental impact will we have socially and environmentally responsible organisations.

The idea enjoyed some success in the turn-of-the-century zeitgeist of corporate social responsibility, climate change and fair trade. After more than a decade in which cost-cutting had been the number-one business priority, the hidden social and environmental costs of transferring production and services to low-cost countries such as China, India and Brazil became increasingly apparent to western consumers. These included such things as the indiscriminate logging of the Amazon basin, the excessive use of hydrocarbons and the exploitation of cheap labour.

Growing awareness of corporate malpractice in these areas forced several companies, including Nike and Tesco, to re-examine their sourcing policies and to keep a closer eye on the ethical standards of their suppliers in places as far apart as Mexico and Bangladesh, where labour markets are unregulated and manufacturers are able to ride roughshod over social and environmental standards. It also encouraged the growth of the Fairtrade movement, which adds its brand to products that have been produced and traded in an environmentally and socially “fair” way (of course, that concept is open to interpretation). From small beginnings, the movement has picked up steam in the past five years. Nevertheless, the Fairtrade movement is still only small, focused essentially on coffee, tea, bananas and cotton, and accounting for less than 0.2% of all UK grocery sales in 2006.

One problem with the triple bottom line is that the three separate accounts cannot easily be added up. It is difficult to measure the planet and people accounts in the same terms as profits—that is, in terms of cash. The full cost of an oil-tanker spillage, for example, is probably immeasurable in monetary terms, as is the cost of displacing whole communities to clear forests, or the cost of depriving children of their freedom to learn in order to make them work at a young age.

Further reading

Elkington, J., “Cannibals with Forks: the Triple Bottom Line of 21st Century Business”, Capstone, 1997

Savitz, A.W. and Weber, K., “The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success—and How You Can Too”, Jossey-Bass, 2006

Willard, B., “The Sustainability Advantage: Seven Business Case Benefits of a Triple Bottom Line”, New Society Publishers, 2002

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