Understanding the Triple Bottom Line, its Shortcomings, and the Solution

“People, planet, profit – the Triple Bottom Line.” While it seems straightforward enough, the Triple Bottom Line is ripe with complexity, criticism, and alternating conceptions on what exactly it means. What are the criteria by which we evaluate each bottom line? Is it possible to do so accurately and objectively? And, finally, does the Triple Bottom Line actually offer a philosophically useful business tool, or is it just hot air?

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The Idea

The TBL is accredited to a number of people, but some of the earliest public mention of it was with the management think-tank AccountAbility. More popularly, John Elkington used it in his 1997 book Cannibals With Forks: The Triple Bottom Line of 21st Century Business. Since then, the term has become prominent in corporate rhetoric, as well as the rhetoric of environmentalism. But what does it mean?

Sustainability Dictionary provides one of the clearest definitions: The Triple Bottom Line requires “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Wikipedia even does a nice job at it: “The triple bottom line captures an expanded spectrum of values and criteria for measuring organizational (and societal) success: economic, ecological and social.”

While the idea is here, there is much more required to actually develop a corporate tool. Many argue that, yes, we need to take environment and people into consideration, but many others chime back, how? As one would assume, offering only a piece of the puzzle has ended up generating much criticism.

The Criticisms

Many scholars and businesspersons have raised concerns about the conceptual standing of the TBL, as well as its practical functioning. While not much academic writing has been generated about the TBL, Wayne Norman, a professor of ethics at Duke, and Chris MacDonald*,  an associate professor of philosophy at Saint Mary’s University in Halifax, Canada, also raise concerns. Here are some of the summarized criticisms:

“The TBL is vague and for all intents and purposes, already in effect”

It’s easy to say “People, planet, profit”, but it’s hard to say what we mean by those things. Corporations and businesses alike are in fact concerned with the nature of these aspect inherently in the standard operation of business. People is what any business focuses on; by definition, the people are the only reason the business exists. Similarly, businesses must always focus on the resources they require, government regulations, and public relations in regards to the environment. That said, once we discern the ideas behind our first two P’s, it would be prudent to investigate whether or not corporations already take these into account, which – by and large – the critics of TBL argue they do.

“There is no standardized way to track or report social and environmental performance”

Let’s say, for example, we flesh out exactly what we mean when we say people and profit. A strong bottom line for “People”, in this case, will require socially desirable, culturally acceptable, and psychologically nurturing causes (as put by Sustainable Dictionary). Planet, on the other hand, will require environmentally robust ideas, generationally sensitive production, and an environment that is capable of continuous upkeep and learning.

So, we understand what we mean, but how do we quantify this? How do we arrive at the bottom line of people and planet? For a corporation to abide by the TBL, surely we expect them to report on social and environmental performance in addition to financial. We need something analogous to “profit/loss.”

“Even if we can track and develop methodology to measure social and environmental performance, to what will we compare to for an objective evaluation

Norman and MacDonald raise this issue in their paper “Getting to the Bottom of ‘The Triple Bottom Line’”. Let’s say we decide to track employee information like demographics, satisfaction, and annual ‘lives lost’ (for example, the engineers who died in the recent BP accident). To paraphrase Norman and MacDonald, let’s say 20 percent of the corporate management if women and 7 percent are visible minorities  – that's 27 percent, but of what? Is that a good proportion for each group? Is it a bad one? To what do we compare it to? Similarly, let’s say 80 percent of employees said they were “satisfied” with the business, 15 percent said “unsure”, and 5 percent said “unsatisfied”. Does that fulfill the obligation to people? If public polling was in place, what numbers or standard would we compare the results to? Likewise, is BP contributing to or causing the death of 11 employees a high or low number for a company that operates on a global scale?

Amending the TBL and Turning it Into a Tool

Even as supportive of the TBL as I am, I cannot ignore the glaring shortcomings and potential philosophical barriers that seem to plague the conception of multiple bottom lines. While these concerns may be valid, the TBL can still be useful – especially if it is amended and revised.

Measuring People and Plant

When developing a measure of people and planet, we must first remind ourselves that unlike profit, these things do not add up or reduce to some specific value. With finances, we enjoy a dollar value that allows for us to calculate our costs and revenues. With social and environmental measures, however, the currency is much more abstract, making it difficult to obtain, no doubt.

Norman and MacDonald mention this difficulty and suggest it may even be impossible to quantify or track in a objective fashion these two criteria. However, while we may not be able to calculate as clearly the measures of social and environmental performance, we can nonetheless track it.

When tracking ‘people’ there are two aspects a business must pay attention to: first, its employees, and second, the people in the community/region in which it operates. (Consumers are left out because businesses, as stated above, are already constantly polling and gauging social reaction to products). With employees, we are looking not only for satisfaction and demographic makeup, but also for job mobility. Tracking this data can we achieved through the polling discussed earlier, as well as data gathering on past employees and their ventures.

Environment CostsIn the second sense, the communities surrounding a business’s or corporations operations should be polled or at least considered. It would not be impossible to have communities assemble committee that could develop and articulate goals and concerns of said communities. Further, because it is in the community's own interest, this would not be expensive – the people would volunteer for an audience with corporate directors. For a company reporting this, they should investigate all actions that may affect the society’s health, property value, and economic standing. Sampling polling on the community sentiments toward the company would also be revealing.

Some may argue that this research is similarly hard to gather, but I suggest a commonsensical approach: is the company using chemicals known to cause disease or cancer? Does it leach into water supplies? What natural habitats are being destroyed, if any, and how the company relocate or replace it? Does the aesthetics of a company decrease the value of property in the area (i.e. are 10-story smoke stacks looming in the distance of every home)? How does the company influence the communities economic standing; that is, how many jobs does it supply to the community, and if it were to go under, how many in the community would be put at risk?

As far as evaluation goes, I suggest that is up to the shareholders and people (i.e. the citizens/community members) themselves. Because no standardization exists in a perfect form, we should allow the people (as well as their officials) to judge the performance of the business in a constructive manner. The key here is that the company must report these figures, questions, and faults.

Planet works in the same manner: what resources are required for the business to function? In the area that the business resides, how long will it take to deplete those resources? What can the company do to alleviate those costs, reinvest in those resources, and decrease ecological impact? Are there chemicals or practices in place that threaten native species? How can the company safeguard the flora and fauna while still making a profit?

Like people, we simply need to report it; stakeholders, citizens, and officials can evaluate it, and the company can do its best to react. This, in essence, is what provides an ethical appeal to deliberation – we take into consideration the voices of those affected.

The Real Triple Bottom Line

While the methodology remains murky (something I will return to in later revision and articles, no doubt), the real purpose of the Triple Bottom Line may be beginning to be pinned down. That said, let’s revise our previous definition:

People – A company must consider the social implications of business; it should track effect on staff and those in the communities they operate in (even in developing countries, i.e. what social benefit is being brought to XYZ village?). Qualitatively, it can use polling, and quantitatively, it can track jobs created, job mobility, salary in comparison to other companies, and property value.

Planet ­– A company must also consider environmental impact; it should track its pollution, the severity of that pollution, and ways to curb that pollution. Qualitatively, it should avoid being conservative in its evaluation of importance of natural habitats – the company should always choose to operate in the lowest-impact area for business. Quantitatively, it can track the raw amount of pollution, the amount of clean up, the land used, and the development costs to the land.

Profit – A company must also consider financial soundness; this is much more easily tracked by totaling a company’s total expenses to a company’s total income.

A discussion about these outcomes can be presented at board meetings, and they should also be presented publicly, as well as sent to local administration for evaluation. Third-paPin Itrties can come in and do the job of measurement for objectivity’s sake, but ideally a company would track this for its own good. The thing we must remember here is that despite the methodological shortcomings of determining the TBL, we must recognize it first as principle: we have an obligation to practice social responsibility as citizens, and corporations and business is not exempt.

Organic Soul will revisit this model, revise it, and continue the discussion on the utility of the TBL in the future.

*Chris MacDonald also addresses broad issues of business ethics and corporate social responsibility on his blog, BusinessEthicsBlog.com.

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