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In practical terms, triple bottom line accounting means expanding the traditional reporting framework to take into account ecological and social performance in addition to financial performance. Likewise "ecologic" or "ecological" is often taken in the sense of environmentally friendly. In the absence of agreement about its meaning, the term "social" is used in many different senses, referring among other things to: • attitudes, orientations or behaviours which take the interests, intentions or needs of other people into account (in contrast to anti- social behaviour); • common characteristics of people or descriptions of collectivities (social facts); • relations between people (social relations) generally, or particular associations among people; • interactions between people (social action); • membership of a group of people or inclusion or belonging to a community of people; • co-operation or co-operative characteristics between people; • relations of (mutual) dependence; • the public sector ("social sector") or the need for governance for the good of all, contrasted with the private sector; • in existentialist and post modernist thought, relationships between the Self and the Other; The triple bottom line is made up of "social, economic and environmental" the "people, planet, profit" phrase was coined for Shell by sustainability, influenced by 20th century urbanist Patrick Geddes's notion of 'folk, work and place'. "People, planet and profit" succinctly describes the triple bottom lines and the goal of sustainability. "People" (human capital) pertains to fair and beneficial business practices toward labour and the community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well being of corporate, labour and other stakeholder interests are interdependent. A triple bottom line enterprise seeks to benefit many constituencies, not exploit or endanger any group of them. The "upstreaming" of a portion of profit from the marketing of finished goods back to the original producer of raw materials, i.e., a farmer in fair trade agricultural practice, is a not unusual feature. In concrete terms, a TBL business would not knowingly use child labour, would pay fair salaries to its workers, would maintain a safe work environment and tolerable working hours, and would not otherwise exploit a community or its labour force. A TBL business also typically seeks to "give back" by contributing to the strength and growth of its community with such things as health care and education. Quantifying this bottom line is relatively new, problematic and often subjective. The Global Reporting Initiative (GRI) has developed guidelines to enable corporations and NGOs alike to comparably report on the social impact of a business. "Planet" (natural capital) refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtail environmental impact. A TBL endeavor reduces its ecological footprint by, among other things, carefully managing its consumption of energy and non-renewables and reducing manufacturing waste as well as rendering waste less toxic before disposing of it in a safe and legal manner. "Cradle to grave" is uppermost in the thoughts of TBL manufacturing businesses which typically conduct a life cycle assessment of products to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user. A triple bottom line company does not produce harmful or destructive products such as weapons, toxic chemicals or batteries containing dangerous heavy metals for example. Currently, the cost of disposing of non-degradable or toxic products is borne financially by governments and environmentally by the residents near the disposal site and elsewhere. In TBL thinking, an enterprise which produces and markets a product which will create a waste problem should not be given a free ride by society. It would be more equitable for the business which manufactures and sells a problematic product to bear part of the cost of its ultimate disposal. Ecologically destructive practices, such as overfishing or other endangering depletions of resources are avoided by TBL companies. Often environmental sustainability is the more profitable course for a business in the long run. Arguments that it costs more to be environmentally sound are often specious when the course of the business is analyzed over a period of time. Generally, sustainability reporting metrics are better quantified and standardized for environmental issues than for social ones. A number of respected reporting institutes and registries exist including the Global Reporting Initiative, CERES, Institute 4 sustainability and others. "Profit" is the bottom line shared by all commerce, conscientious or not. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the economic benefit enjoyed by the host society. It is the lasting economic impact the organization has on its economic environment. This is often confused to be limited to the internal profit made by a company or organization. Therefore, a TBL approach cannot be interpreted as traditional corporate accounting plus social and environmental impact. Supportive Argument Reaching untapped market potential: TBL companies can find financially profitable niches which were missed when money alone was the driving factor. Future- Legislation permitting corporations to adopt a 'Triple Bottom Line' is under consideration in some jurisdictions including Minnesota and Oregon. Some businesses have voluntarily adopted a 'Triple Bottom Line' as part of their articles of incorporation or bylaws, and some have advocated for state laws creating a "Sustainable Corporation" that would grant triple bottom line businesses benefits such as tax breaks Example: No, that's not a typo, that's Nau -- an outdoor apparel company committed to "inspiring and affecting positive change through a holistic approach to design." I learned recently that Nau actually did this, so when I found out that Eric Brody, Nau's sustainability Manager, was the Interactivist this week on Grist, I posed this question: "I advocate that companies put a legally enforceable commitment to sustainability and a triple bottom line in their articles of incorporation or bylaws. I have read that Nau has language to this effect in its bylaws. What is the language? Has this language helped or hindered Nau in raising capital?" Grist asked Brody my question, and here is his interesting response (see all questions and answers here): Even before Nau had raised any money to fund its efforts or had designed a single product, the team began to examine how to set the company on a deliberate social and environmental trajectory. Corporate attorney Robert Hinkley influenced Nau's founders. Hinkley incorporated the work of management expert W. Edwards Deming and systems theorist Peter Senge to develop new ideas pertaining to the notion of a corporation as citizen. Deming had written that "most of the time it's the system that causes the problem, not the people in the system." He combined this idea with the insight of Senge, who said that to change any system you should "look to make the smallest change possible that will generate the biggest effect." From these theories, Hinkley created a code for corporate citizenship. In only 28 words, it stated that henceforth the "duty of directors shall be to make money for shareholders but not at the expense of the environment, human rights, public health and safety, dignity of employees, and the welfare of the community in which a company operates." Nau chose to follow Hinkley's guidance and include similar language in its corporate bylaws. This issue has come up in the process of raising capital to fund the company. In fact, people have advanced the point of view that the language suggested a greater degree of responsibility and therefore could lead to the company being devalued. We have taken the opposite point of view and have been able to resolve any objections that we have received to date. If you would like to see the exact language of Nau's Rules of Corporate Responsibility, please see the March/April '07 issue of GOOD magazine. Subscribe to GOOD magazine for a year and they will give 100 percent of your subscription fee to the nonprofit organization of your choice. This is an extremely bold move by Nau. As Brody notes, some have indicated that Nau might be less valuable because it is taking on a greater degree of responsibility. And indeed, in a very real sense, Nau has agreed to internalize the societal costs of things such as the emission of carbon dioxide, for example, that almost every other corporation is free to externalize with almost complete impunity. And we are all the better. By taking this step, Nau creates a more valuable world, and its efforts should be widely recognized and applauded. But we need to go further. States should create a mechanism to encourage businesses to follow Nau's lead. New York, for example, could amend its Business Corporation Law to permit creation of a new corporate form, a "Sustainable Corporation." If the Sustainable Corporation includes statutory "sustainability" language in its charter documents requiring the business to comply with a set of specific environmental standards much higher than otherwise required (e.g., carbon neutral, commitments to waste reduction and recycling, green purchasing, etc.), the business would be entitled to a very specific set of benefits (tax credits, expedited permitting, business assistance, etc.). The "sustainability" commitments could be enforceable not just by the shareholder, but by the state's Attorney General as well, similar to how Attorneys General currently have oversight authority over charitable corporations. Businesses such as Nau increase the value of the commons, and we must help them succeed. |
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| The Triple Bottom Line |
| This is a preliminary report defining The Triple Bottom Line prepared by Shannon Chiaverini. It is a work-in-progress currently available only through a link in our March 2009 newsletter. |