Triple bottom line
Encyclopedia
The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational (and societal) success: economic, ecological, and social. With the ratification of the United Nations
and ICLEI
TBL standard for urban and community accounting in early 2007, this became the dominant approach to public sector
full cost accounting
. Similar UN standards apply to natural capital
and human capital
measurement to assist in measurements required by TBL, e.g. the ecoBudget standard for reporting ecological footprint
.
In the private sector
, a commitment to corporate social responsibility
implies a commitment to some form of TBL reporting. This is distinct from the more limited changes required to deal only with ecological issues.
and social
performance in addition to financial performance. In 1981 Freer Spreckley first articulated the triple bottom line in a publication called 'Social Audit - A Management Tool for Co-operative Working' as he described what Social Enterprises should include in their performance measurement.
The phrase was coined by John Elkington
in his 1997 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business. Sustainability
, itself, was first defined by the Brundtland Commission
of the United Nations in 1987.
1988 also marked the foundation of the Triple Bottom Line Investing group by Robert J. Rubinstein
, a group advocating and publicizing these principles.
The concept of TBL demands that a company's responsibility lies with stakeholders rather than shareholders. In this case, "stakeholders" refers to anyone who is influenced, either directly or indirectly, by the actions of the firm. According to the stakeholder theory
, the business entity should be used as a vehicle for coordinating stakeholder interests, instead of maximizing shareholder (owner) profit.
'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 common feature. In concrete terms, a TBL business would not use child labour and monitor all contracted companies for child labour exploitation, 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.
The eco bottom line is akin to the concept of Eco-capitalism
.
"Profit" is the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It therefore differs from traditional accounting definitions of profit. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the real economic benefit enjoyed by the host society. It is the real 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 (which nevertheless remains an essential starting point for the computation). Therefore, an original TBL approach cannot be interpreted as simply traditional corporate accounting profit plus social and environmental impacts unless the "profits" of other entities are included as a social benefits.
Fiscal policy
of governments usually claims to be concerned with identifying social and natural deficits on a less formal basis. However, such choices may be guided more by ideology
than by economics
. The primary benefit of embedding one approach to measurement of these deficits would be first to direct monetary policy
to reduce them, and eventually achieve a global monetary reform
by which they could be systematically and globally reduced in some uniform way.
The argument is that the Earth
's carrying capacity
is itself at risk, and that in order to avoid catastrophic breakdown of climate
or ecosystem, there is a need for a comprehensive reform in global financial institutions similar in scale to that undertaken at Bretton Woods
in 1944. Marilyn Waring
has been a major proponent of this reform.
With the emergence of an externally consistent green economics and agreement on definitions of potentially contentious terms such as full-cost accounting, natural capital
and social capital
, the prospect of formal metrics for ecological and social loss or risk has grown less remote through the 1990s.
In the United Kingdom
in particular, the London Health Observatory has undertaken a formal programme to address social deficits via a fuller understanding of what "social capital" is, how it functions in a real community
(that being the City of London
), and how losses of it tend to require both financial capital
and significant political and social attention from volunteers and professionals to help resolve. The data they rely on is extensive, building on decades of statistics of the Greater London Council
since World War II
. Similar studies have been undertaken in North America
.
Studies of the value of Earth
have tried to determine what might constitute an ecological or natural life deficit. The Kyoto Protocol
relies on some measures of this sort, and actually relies on some value of life
calculations that, among other things, are explicit about the ratio of the price of a human life between developed and developing nations (about 15 to 1). While the motive of this number was to simply assign responsibility for a cleanup, such stark honesty opens not just an economic but political door to some kind of negotiation — presumably to reduce that ratio in time to something seen as more equitable. As it is, people in developed nations can be said to benefit 15 times more from ecological devastation than in developing nations, in pure financial terms. According to the IPCC
, they are thus obliged to pay 15 times more per life to avoid a loss of each such life to climate change
— the Kyoto Protocol
seeks to implement exactly this formula, and is therefore sometimes cited as a first step towards getting nations to accept formal liability
for damage inflicted on ecosystems shared globally.
Advocacy for triple bottom line reforms is common in Green Parties. Some of the measures undertaken in the European Union
towards the Euro
currency integration standardize the reporting of ecological and social losses in such a way as to seem to endorse in principle the notion of unified accounts, or unit of account
, for these deficits.
The main arguments against it are summarised below.
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.
The triple bottom line was adopted as a part of the State Sustainability Strategy, and accepted by the Government of Western Australia but its status was increasingly marginalised by subsequent premiers Alan Carpenter
and Colin Barnett
and is in doubt.
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
and ICLEI
ICLEI
ICLEI - Local Governments for Sustainability, founded in 1990 as the 'International Council for Local Environmental Initiatives', is an international association of local governments and national and regional local government organizations that have made a commitment to sustainable development...
TBL standard for urban and community accounting in early 2007, this became the dominant approach to public sector
Public sector
The public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...
full cost accounting
Full cost accounting
Full cost accounting generally refers to the process of collecting and presenting information - about environmental, social, and economic costs and benefits/advantages - for each proposed alternative when a decision is necessary. It is a conventional method of cost accounting that traces direct...
. Similar UN standards apply to natural capital
Natural capital
Natural capital is the extension of the economic notion of capital to goods and services relating to the natural environment. Natural capital is thus the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future...
and human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...
measurement to assist in measurements required by TBL, e.g. the ecoBudget standard for reporting ecological footprint
Ecological footprint
The ecological footprint is a measure of human demand on the Earth's ecosystems. It is a standardized measure of demand for natural capital that may be contrasted with the planet's ecological capacity to regenerate. It represents the amount of biologically productive land and sea area necessary to...
.
In the private sector
Private sector
In economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...
, a commitment to corporate social responsibility
Corporate social responsibility
Corporate social responsibility is a form of corporate self-regulation integrated into a business model...
implies a commitment to some form of TBL reporting. This is distinct from the more limited changes required to deal only with ecological issues.
Definition
In practical terms, triple bottom line accounting means expanding the traditional reporting framework to take into account ecologicalEcology
Ecology is the scientific study of the relations that living organisms have with respect to each other and their natural environment. Variables of interest to ecologists include the composition, distribution, amount , number, and changing states of organisms within and among ecosystems...
and social
Social
The term social refers to a characteristic of living organisms...
performance in addition to financial performance. In 1981 Freer Spreckley first articulated the triple bottom line in a publication called 'Social Audit - A Management Tool for Co-operative Working' as he described what Social Enterprises should include in their performance measurement.
The phrase was coined by John Elkington
John Elkington
John Elkington is a world authority on corporate responsibility and sustainable development. He is currently the Founding Partner & Executive Chairman of , a future-focused business working at the intersection of the sustainability, entrepreneurship and innovation movements...
in his 1997 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business. Sustainability
Sustainability
Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...
, itself, was first defined by the Brundtland Commission
Brundtland Commission
The Brundtland Commission, formally the World Commission on Environment and Development , known by the name of its Chair Gro Harlem Brundtland, was convened by the United Nations in 1983...
of the United Nations in 1987.
1988 also marked the foundation of the Triple Bottom Line Investing group by Robert J. Rubinstein
Robert J. Rubinstein
Robert J. Rubinstein is a Social Entrepreneur and the founder and driving force behind TBLI Group, a group that specializes in Environmental, Social and Governance ESG and Impact Investing, using Triple Bottom Line principles.-Early career:From 1974 to 1975 he worked on a Kibbutz...
, a group advocating and publicizing these principles.
The concept of TBL demands that a company's responsibility lies with stakeholders rather than shareholders. In this case, "stakeholders" refers to anyone who is influenced, either directly or indirectly, by the actions of the firm. According to the stakeholder theory
Stakeholder theory
The stakeholder theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization. It was originally detailed by R...
, the business entity should be used as a vehicle for coordinating stakeholder interests, instead of maximizing shareholder (owner) profit.
Bottom lines
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 GeddesPatrick Geddes
Sir Patrick Geddes was a Scottish biologist, sociologist, philanthropist and pioneering town planner. He is known for his innovative thinking in the fields of urban planning and education....
's notion of 'folk, work and place'.
"People, planet and profit" succinctly describes the triple bottom lines and the goal of sustainability
Sustainability
Sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...
.
"People" (human capital
Human capital
Human capitalis the stock of competencies, knowledge and personality attributes embodied in the ability to perform labor so as to produce economic value. It is the attributes gained by a worker through education and experience...
) 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
Social structure
Social structure is a term used in the social sciences to refer to patterned social arrangements in society that are both emergent from and determinant of the actions of the individuals. The usage of the term "social structure" has changed over time and may reflect the various levels of analysis...
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
Fair trade
Fair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
agricultural practice, is a common feature. In concrete terms, a TBL business would not use child labour and monitor all contracted companies for child labour exploitation, 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
Global Reporting Initiative
The Global Reporting Initiative produces one of the world's most prevalent standards for sustainability reporting - also known as ecological footprint reporting, Environmental Social Governance reporting, Triple Bottom Line reporting, Corporate Social Responsibility reporting...
(GRI) has developed guidelines to enable corporations and NGOs alike to comparably report on the social impact of a business.
"Planet" (natural capital
Natural capital
Natural capital is the extension of the economic notion of capital to goods and services relating to the natural environment. Natural capital is thus the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future...
) 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
Ecological footprint
The ecological footprint is a measure of human demand on the Earth's ecosystems. It is a standardized measure of demand for natural capital that may be contrasted with the planet's ecological capacity to regenerate. It represents the amount of biologically productive land and sea area necessary to...
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
Life cycle assessment
A life-cycle assessment is a technique to assess environmental impacts associated with all the stages of a product's life from-cradle-to-grave A life-cycle assessment (LCA, also known as life-cycle analysis, ecobalance, and cradle-to-grave analysis) is a technique to assess environmental impacts...
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.
The eco bottom line is akin to the concept of Eco-capitalism
Eco-capitalism
Eco-capitalism is one of several strategies of the green movement and Green Parties. Its central idea is that capital exists in nature as "natural capital" on which all wealth depends...
.
"Profit" is the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It therefore differs from traditional accounting definitions of profit. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the real economic benefit enjoyed by the host society. It is the real 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 (which nevertheless remains an essential starting point for the computation). Therefore, an original TBL approach cannot be interpreted as simply traditional corporate accounting profit plus social and environmental impacts unless the "profits" of other entities are included as a social benefits.
Supporting arguments
The following business-based arguments support the concept of TBL:- Reaching untapped market potential: TBL companies can find financially profitable niches which were missed when money alone was the driving factor. Examples include:
- Adding ecotourismEcotourismEcotourism is a form of tourism visiting fragile, pristine, and usually protected areas, intended as a low impact and often small scale alternative to standard commercial tourism...
or geotourismGeotourismGeotourism is "best practice" tourism that sustains, or even enhances, the geographical character of a place, such as its culture, environment, heritage, and the well-being of its residents....
to an already rich tourism market such as the Dominican RepublicDominican RepublicThe Dominican Republic is a nation on the island of La Hispaniola, part of the Greater Antilles archipelago in the Caribbean region. The western third of the island is occupied by the nation of Haiti, making Hispaniola one of two Caribbean islands that are shared by two countries... - Developing profitable methods to assist existing NGOs with their missions such as fundraising, reaching clients, or creating networking opportunities with multiple NGOs
- Providing products or services which benefit underserved populations and/or the environment which are also financially profitable.
- Adapting to new business sectors: Since many business opportunities are developing in the realm of social entrepreneurialism, businesses hoping to reach this expanding market must design themselves to be financially profitable, socially beneficial and ecologically sustainable or fail to compete with those companies who do design themselves as such. For example, Fair TradeFair tradeFair trade is an organized social movement and market-based approach that aims to help producers in developing countries make better trading conditions and promote sustainability. The movement advocates the payment of a higher price to producers as well as higher social and environmental standards...
and Ethical Trade companies require ethical and sustainable practices from all of their suppliers and service providers. A business which is planning to work with Fair Trade or Ethical Trade companies must design their business model to be TBL.
Fiscal policy
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
of governments usually claims to be concerned with identifying social and natural deficits on a less formal basis. However, such choices may be guided more by ideology
Ideology
An ideology is a set of ideas that constitutes one's goals, expectations, and actions. An ideology can be thought of as a comprehensive vision, as a way of looking at things , as in common sense and several philosophical tendencies , or a set of ideas proposed by the dominant class of a society to...
than by economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
. The primary benefit of embedding one approach to measurement of these deficits would be first to direct monetary policy
Monetary policy
Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
to reduce them, and eventually achieve a global monetary reform
Monetary reform
Monetary reform describes any movement or theory that proposes a different system of supplying money and financing the economy from the current system.Monetary reformers may advocate any of the following, among other proposals:...
by which they could be systematically and globally reduced in some uniform way.
The argument is that the Earth
Earth
Earth is the third planet from the Sun, and the densest and fifth-largest of the eight planets in the Solar System. It is also the largest of the Solar System's four terrestrial planets...
's carrying capacity
Carrying capacity
The carrying capacity of a biological species in an environment is the maximum population size of the species that the environment can sustain indefinitely, given the food, habitat, water and other necessities available in the environment...
is itself at risk, and that in order to avoid catastrophic breakdown of climate
Climate
Climate encompasses the statistics of temperature, humidity, atmospheric pressure, wind, rainfall, atmospheric particle count and other meteorological elemental measurements in a given region over long periods...
or ecosystem, there is a need for a comprehensive reform in global financial institutions similar in scale to that undertaken at Bretton Woods
Bretton Woods, New Hampshire
Bretton Woods is an area within the town of Carroll, New Hampshire, USA, whose principal points of interest are three leisure and recreation facilities...
in 1944. Marilyn Waring
Marilyn Waring
Marilyn Waring, CNZM, D.Phil., D.Litt. is a New Zealand feminist, a politician, an activist for female human rights and environmental issues, an author and an academic, known for her contributions to feminist economics....
has been a major proponent of this reform.
With the emergence of an externally consistent green economics and agreement on definitions of potentially contentious terms such as full-cost accounting, natural capital
Natural capital
Natural capital is the extension of the economic notion of capital to goods and services relating to the natural environment. Natural capital is thus the stock of natural ecosystems that yields a flow of valuable ecosystem goods or services into the future...
and social capital
Social capital
Social capital is a sociological concept, which refers to connections within and between social networks. The concept of social capital highlights the value of social relations and the role of cooperation and confidence to get collective or economic results. The term social capital is frequently...
, the prospect of formal metrics for ecological and social loss or risk has grown less remote through the 1990s.
In the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
in particular, the London Health Observatory has undertaken a formal programme to address social deficits via a fuller understanding of what "social capital" is, how it functions in a real community
Community
The term community has two distinct meanings:*a group of interacting people, possibly living in close proximity, and often refers to a group that shares some common values, and is attributed with social cohesion within a shared geographical location, generally in social units larger than a household...
(that being the City of London
City of London
The City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...
), and how losses of it tend to require both financial capital
Financial capital
Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc....
and significant political and social attention from volunteers and professionals to help resolve. The data they rely on is extensive, building on decades of statistics of the Greater London Council
Greater London Council
The Greater London Council was the top-tier local government administrative body for Greater London from 1965 to 1986. It replaced the earlier London County Council which had covered a much smaller area...
since World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
. Similar studies have been undertaken in North America
North America
North America is a continent wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere. It is also considered a northern subcontinent of the Americas...
.
Studies of the value of Earth
Value of Earth
In green economics, value of Earth is the ultimate in ecosystem valuation, and important to value of life calculations. It begins with the simple problem that if the Earth ceases to support life, and human life does not continue elsewhere, all economic activity will also cease.-Methods of...
have tried to determine what might constitute an ecological or natural life deficit. The Kyoto Protocol
Kyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...
relies on some measures of this sort, and actually relies on some value of life
Value of life
The potency of life is an economic value assigned to life in general, or to specific living organisms. In social and political sciences, it is the marginal cost of death prevention in a certain class of circumstances. As such, it is a statistical term, the cost of reducing the number of deaths by...
calculations that, among other things, are explicit about the ratio of the price of a human life between developed and developing nations (about 15 to 1). While the motive of this number was to simply assign responsibility for a cleanup, such stark honesty opens not just an economic but political door to some kind of negotiation — presumably to reduce that ratio in time to something seen as more equitable. As it is, people in developed nations can be said to benefit 15 times more from ecological devastation than in developing nations, in pure financial terms. According to the IPCC
Intergovernmental Panel on Climate Change
The Intergovernmental Panel on Climate Change is a scientific intergovernmental body which provides comprehensive assessments of current scientific, technical and socio-economic information worldwide about the risk of climate change caused by human activity, its potential environmental and...
, they are thus obliged to pay 15 times more per life to avoid a loss of each such life to climate change
Climate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
— the Kyoto Protocol
Kyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...
seeks to implement exactly this formula, and is therefore sometimes cited as a first step towards getting nations to accept formal liability
Legal liability
Legal liability is the legal bound obligation to pay debts.* In law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. See Strict liability. Under English law, with the passing of the Theft...
for damage inflicted on ecosystems shared globally.
Advocacy for triple bottom line reforms is common in Green Parties. Some of the measures undertaken in the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
towards the Euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
currency integration standardize the reporting of ecological and social losses in such a way as to seem to endorse in principle the notion of unified accounts, or unit of account
Unit of account
A unit of account is a standard monetary unit of measurement of value/cost of goods, services, or assets. It is one of three well-known functions of money. It lends meaning to profits, losses, liability, or assets....
, for these deficits.
Criticism
While many people agree with the importance of good social conditions and preservation of the environment, there are also many who disagree with the triple bottom line as the way to enhance these conditions.The main arguments against it are summarised below.
- Division of labourDivision of labourDivision of labour is the specialisation of cooperative labour in specific, circumscribed tasks and likeroles. Historically an increasingly complex division of labour is closely associated with the growth of total output and trade, the rise of capitalism, and of the complexity of industrialisation...
is characteristic of rich societies and a major contributor to their wealth. This leads to the view that organisations contribute most to the welfare of society in all respects when they focus on what they do best: the baker exchanges his loaves with the shoemaker rather than making his own shoes - to the benefit of both and by extension the whole of society. In the case of business the expertise is in satisfying the needs of society and generating a value addedValue addedIn economics, the difference between the sale price and the production cost of a product is the value added per unit. Summing value added per unit over all units sold is total value added. Total value added is equivalent to Revenue less Outside Purchases...
surplus. Thus the triple bottom line is thought to be harmful by diverting business attention away from its core competency. Just as charitable organizations like the Red CrossInternational Red Cross and Red Crescent MovementThe International Red Cross and Red Crescent Movement is an international humanitarian movement with approximately 97 million volunteers, members and staff worldwide which was founded to protect human life and health, to ensure respect for all human beings, and to prevent and alleviate human...
would not be expected to attend to environmental issues or pay a cash dividend, and GreenpeaceGreenpeaceGreenpeace is a non-governmental environmental organization with offices in over forty countries and with an international coordinating body in Amsterdam, The Netherlands...
would not be expected to make a profit or succor the homeless, business should not be expected to take on concerns outside its core expertise, provided the business doesn't do obvious harm to people or the planet.
- EffectivenessEffectivenessEffectiveness is the capability of producing a desired result. When something is deemed effective, it means it has an intended or expected outcome, or produces a deep, vivid impression.-Etymology:...
: It is observed that concern for social and environmental matters is rare in poor societies (a hungry person would rather eat the whaleWhaleWhale is the common name for various marine mammals of the order Cetacea. The term whale sometimes refers to all cetaceans, but more often it excludes dolphins and porpoises, which belong to suborder Odontoceti . This suborder also includes the sperm whale, killer whale, pilot whale, and beluga...
than photograph it). As a society becomes richer its citizens develop an increasing desire for a clean environment and protected wildlife, and both the willingness and financial ability to contribute to this and to a compassionate society. Support for the concept of the triple bottom line itself is said to be an example of the choices available to the citizens of a society made wealthy by businesses attending to business. Thus by unencumbered attention to business alone, Adam SmithAdam SmithAdam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...
's Invisible HandInvisible handIn economics, invisible hand or invisible hand of the market is the term economists use to describe the self-regulating nature of the marketplace. This is a metaphor first coined by the economist Adam Smith...
will ensure that business contributes most effectively to the improvement of all areas of society, social and environmental as well as economic.
- NationalismNationalismNationalism is a political ideology that involves a strong identification of a group of individuals with a political entity defined in national terms, i.e. a nation. In the 'modernist' image of the nation, it is nationalism that creates national identity. There are various definitions for what...
: Some countries adopt the view that they must look after their own citizens first. This view is not confined to one sector of society, having support from elements of business, labour unions, and politicians.
- LibertarianLibertarianismLibertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
: As it is possible for a socially responsible person to sincerely believe that the triple bottom line is harmful to society, the libertarian view is that it would be arrogant to force them to support a mechanism for the improvement of society that may, or may not, be the best available. That is, those who would not force Greenpeace and the Salvation Army to generate a profit should not force businesses to take responsibilities outside their area of expertise. At least in areas where a business doesn't do obvious harm to people or the planet.
- InertiaInertiaInertia is the resistance of any physical object to a change in its state of motion or rest, or the tendency of an object to resist any change in its motion. It is proportional to an object's mass. The principle of inertia is one of the fundamental principles of classical physics which are used to...
: The difficulty of achieving global agreement on simultaneous policySimultaneous policySimultaneous policy requires governments in all jurisdictions at once, worldwide, to implement a policy shift at once, so that none is disadvantaged or unfairly advantaged....
may render such measures at best advisory, and thus unenforceable. For example, people may be unwilling to undergo a depressionDepression (economics)In economics, a depression is a sustained, long-term downturn in economic activity in one or more economies. It is a more severe downturn than a recession, which is seen by some economists as part of the modern business cycle....
or even sustained recessionRecessionIn economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
to replenish lost ecosystemEcosystemAn ecosystem is a biological environment consisting of all the organisms living in a particular area, as well as all the nonliving , physical components of the environment with which the organisms interact, such as air, soil, water and sunlight....
s.
- Application: According to Fred Robin's The Challenge of TBL: A Responsibility to Whom? one of the major weaknesses of the TBL framework is its ability to be applied in a monetary-based economic system. Because there is no single way in monetary terms to measure the benefits to the society and environment as there is with profit, it does not allow for businesses to sum across all three bottom lines. In this regard, it makes it difficult for businesses to recognize the benefits of using TBL for the company, itself.
- Criticism from the Left: TBL is viewed as an attempt by otherwise exploitative corporations to avoid legislation and taxation and generate a fictitious people-friendly & eco-friendly image for PR purposes.
Legislation
Legislation permitting corporations to adopt a triple bottom line is under consideration in some jurisdictions, including MinnesotaMinnesota
Minnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...
and Oregon
Oregon
Oregon is a state in the Pacific Northwest region of the United States. It is located on the Pacific coast, with Washington to the north, California to the south, Nevada on the southeast and Idaho to the east. The Columbia and Snake rivers delineate much of Oregon's northern and eastern...
.
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.
The triple bottom line was adopted as a part of the State Sustainability Strategy, and accepted by the Government of Western Australia but its status was increasingly marginalised by subsequent premiers Alan Carpenter
Alan Carpenter
Alan John Carpenter is a former Australian politician. He was the 28th Premier of Western Australia, serving from 2006 to 2008. He took office following the resignation of Dr Geoff Gallop...
and Colin Barnett
Colin Barnett
Colin James Barnett , Australian politician, is the leader of the Western Australian Liberal Party, the 29th and current Premier of Western Australia since the 2008 election and served as the Treasurer of Western Australia in 2010. He was sworn into office by Governor Ken Michael on 23 September 2008...
and is in doubt.
See also
- Double bottom lineDouble bottom lineDouble bottom line is a business term used in socially responsible enterprise and investment.While all businesses have a conventional bottom line to measure their fiscal performance—financial profit or loss—enterprises which seek a second bottom line look to measure their performance in...
, a similar concept predating the UN standard - EC3 Global
- Grassroots Business FundGrassroots Business FundThe Grassroots Business Fund is a non-profit based in Washington, DC. It has field offices in Ghana, Kenya, and India. Their mission is to build and support high-impact enterprises that provide sustainable economic opportunities to thousands of people at the base of the economic pyramid...
- Green GlobeGreen GlobeGreen Globe is based on Agenda 21 principles for Sustainable Development endorsed by 182 Heads of State at the United Nations Rio De Janeiro Earth Summit . Green Globe Certification and Green Globe Asia Pacific deliver separate certification services and standards to the travel & tourism as well...
- Institute for Sustainable CommunicationInstitute for Sustainable CommunicationThe , , was founded in 2003 and is a non-profit organization that is devoted to sustainability through the printing, digital media and advertising industries. These fields are known together as Graphic Communication. ISC prepares graphic communication leaders to advance their businesses with...
- Integrated bottom line, an attempt to combine the parameters from the triple bottom line as a single parameter
- Not Just For ProfitNot just for profitNot Just For Profit is a concept that captures an expanded set of values for defining and evaluating for-profit private sector organizations, not only by their ability to generate profit as is done traditionally, but also by their determination and success in driving a benefit for people and/or...
- SustainabilitySustainabilitySustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well being, which has environmental, economic, and social dimensions, and encompasses the concept of union, an interdependent relationship and mutual responsible position with all living and non...
- Value networkValue networkA value network is a business analysis perspective that describes social and technical resources within and between businesses. The nodes in a value network represent people . The nodes are connected by interactions that represent tangible and intangible deliverables. These deliverables take the...
- Value network analysisValue network analysisValue network analysis is a methodology for understanding, using, visualizing, optimizing internal and external value networks and complex economic ecosystems. The methods include visualizing sets of relationships from a dynamic whole systems perspective...
- Social entrepreneurshipSocial entrepreneurshipSocial entrepreneurship is the work of social entrepreneurs. A social entrepreneur recognizes a social problem and uses entrepreneurial principles to organize, create and manage a venture to achieve social change . While a business entrepreneur typically measures performance in profit and return, a...
Further reading
- Sprekley, F. (1981). Social Audit - A Management Tool for Co-operative Working. Beechwood College.
- The Gaia Atlas of Green Economics (Gaia Future Series) [Paperback], by Paul Ekins, Anchor Books
- Harvard Business Review on Corporate Responsibility by Harvard Business School Press
- The Soul of a Business: Managing for Profit and the Common Good by Tom Chappell
- Capitalism at the Crossroads: The Unlimited Business Opportunities in Solving the World's Most Difficult Problems by Professor Stuart L. Hart
- The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success—and How You Can Too by Andrew W. Savitz and Karl Weber
- The Sustainability Advantage: Seven Business Case Benefits of a Triple Bottom Line (Conscientious Commerce) by Bob Willard, New Society Publishers ISBN 978-0865714519
External links
- The Triple Bottom Line: What Is It and How Does It Work? - Indiana Business Review
- Balancing Act - A Triple Bottom Line Analysis of the Australian Economy
- Citizens for Corporate Redesign (MinnesotaMinnesotaMinnesota is a U.S. state located in the Midwestern United States. The twelfth largest state of the U.S., it is the twenty-first most populous, with 5.3 million residents. Minnesota was carved out of the eastern half of the Minnesota Territory and admitted to the Union as the thirty-second state...
) - Triple Pundit - Blog on Triple Bottom Line (GlobalGlobalGlobal means of or referring to a globe and may also refer to:-Entertainment:* Global , 2003* Global , 2007* Global , 1989* Global Underground, music label* Bruno J...
) - Corporate Responsibility (United KingdomUnited KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
) - TBL Accounting without boundaries - Australian corporate and government experiences