Disadvantages of Applying the Triple Bottom Line A key challenge of the triple bottom line is the difficulty of measuring certain social and environmental bottom lines. Next we convert the criticisms into five questions and use forty reports from acknowledged listed corporations to inform out answers to these questions. Triple bottom line, which measures the social, environmental and financial impact of business, may have seemed like a fad a decade ago, but the growing number of sustainability reports issued by large corporations show that this fad is here to stay. Before discussing this limitation in detail, the advent of the Global Reporting Initiative (GRI) and their guidelines needs to be discussed to uncover how the framework has tried to overcome this limitation. Gri. To date, they have not taken this step. Rescuing the baby from the triple bottom line bathwater: A reply to Pava. In order to effectively take account of environmental and social issues the TBL framework must develop along genuinely trans-disciplinary lines that integrate social and natural sciences with economics. In addition, the TBL approach does not necessarily address the concerns that are usually expressed by citizens who are the intended beneficiaries of strategic and project level undertakings (Ho and Taylor 2007). As we can see from Fig. While sustainability reporting and TBL for that matter is not related to certification that is required for the validation of a management system, TBL is a vehicle for allowing corporations to adopt a set of criteria that gets them recognition on sustainability indexes such as the DJSI. Moving beyond the three legged stool and reporting on more areas material to corporations is a move beyond compliance as the traditional TBL framework is simply not adequate. (1994). Hawken, P., Lovins, A., & Hunter Lovins, L. (1999). A further avenue for research would be incorporate corporations from various sustainability indexes, and those that are listed as well as not listed. This leads to the other point of criticism which is a lack of a common unit of account for each of the three categories which was part of the promise in the original conception of TBL (Elkington 1994, 2004). The DJSI has nine dimensions that it uses to rate corporations. New York: Macmillan. Michael Borowitz, CPA, Columbus shareholder at Clark Schaefer Hackett, says . USA: New Society Publishers. The required aggregation involving the goals to be sought, the costs of achieving them and the availability of resources to meet the costs in the future is seldom if ever provided. Von Kutzschenback, M., & Brown, C. (2006). However, future measurable results have not been factored into the reporting system. Lehman, G. (1999). Environmental Impact Assessment Review, 28, 7389. Difficult to Quantify While a company may quantify financial aspects such as earnings, revenues and costs, it is difficult to quantify social and environmental aspects. The three fundamental criticisms of the Triple Bottom Line approach: An empirical study to link sustainability reports in companies based in the Asia-Pacific region and TBL shortcomings, https://doi.org/10.1007/s13520-012-0019-3, Sustainability performance indicator trends: a Canadian industry-based analysis, Integrated reporting: boon or bane? Strengthen your supply chain. This creates a cause for concern as to how robust is the ISO standard, and also how rigorously the DJSI applies its own standards. If any interactions between the parts are win-lose, one will, by definition, sub-optimize the whole. However, the sustainability reports say otherwise. There are also repercussions of ignoring your business's responsibility to People and the Planet, these include; exploitation of labor, fueling inequality, and destruction to the environment such as; over forestry, pollution of oceans, and damage to the ozone layer. The Relevance section in the framework could be expanded or a Materiality section added to describe why a particular indicator was considered to be important to one or more stakeholder groups. Ho, L.-C., & Taylor, M. (2007). The second limitation found in the TBL approach is a lack of ability to aggregate the results across the three principles of TBL. Most shareholders are more geared to the short-term profits than to long-term results. They impact on individuals and communities differently. GRI and the camouflaging of corporate unsustainability. Getting to the Bottom of Triple Bottom Line. This growing awareness is developing at a time when there is growing scrutiny by corporate and public administration bodies, as well as rising power of independent watchdogs. However, the weightings of each indicator vary which gives corporations leeway as to the methodology they use to get ranked on the index. Asahi Breweries established the cross-organizational Moderate and Responsible Drinking Committee in 2004. Sydney: Premiers Executive Development Program Report. The accounting framework takes into account a social, ecological and financial dimension. The review of the forty corporations' CSR reports is shown below in Figs. The balanced scorecard (Kaplan and Norton 2004), intellectual capital assessment, environmental and social audits, the tools of social accounting and social impact analysis (Epstein and Birchard 1999; Scott and Jackson 2002; Unerman et al. Economic and environmental impacts tend to subject themselves well to a positivist approach. Key Disadvantages:-Marketing Tool - Often CSR initiatives can come across a simply marketing . . Perrini, F., & Tencati, A. A businesss management traditionally aims to maximize returns to shareholders. The stage of strategic proactivity is where systems thinking become salient. Disadvantages of Triple Bottom Line. Correspondence to While both the approaches are valid, they cannot aggregate into a single number, at least as far as the social dimension is concerned. Boston: Shambhala Publication. We propose answers which are inferred by content analyses of sustainability reports produced from the top forty Asia-Pacific corporations in the Dow Jones Sustainability Index (DJSI). The discussion of their employees in terms of human capital development, talent attraction etc. Pava, M. (2007). Organizational mortality in the newspaper industries of Argentina and Ireland: an ecological approach. Isomorphism is simply a constraining process that coerces one actor within a population to mimic the other actors, as long as they face the same set of environmental forces or conditions (Hawley 1968). Gibson, R. (2006). Profit In a capitalist economy, a firm's success most heavily depends on its financial performance, or the profit it generates for shareholders. Berger, I., Cunningham, P., & Drumwright, M. (2007). The DJSI was chosen because it was the first and robust global index formed to measure the financial performance of firms operating in a sustainable manner. NAB does have a rigorous policy with their suppliers but fail to deliver the data on their procurement policies in their CSR report. Dimaggio, P., & Powell, W. (1983). The triple bottom line is, strictly speaking, a subfield of CSR, or one of its particular practical applications. The Global Reporting Initiative is arguably the largest and most widely accepted framework for corporate sustainability reporting. The lack of systems focus in TBL approach is perhaps the fundamental flaw that negates the basic premise of the approach. The TBL approach substitutes three bottom lines for a single bottom line of financial performance. Carroll, G., & Delacroix, D. (1982). (2006). And at a more fundamental level, failings in areas like pollution and employee relations can incur hefty fines, remediation costs and reputational damage. 2007) have arisen to help focus the concerns of those seeking to make business more accountable, transparent and sustainable. In short, normative institutional theory asserts that institutions will react to changes in the environment by initiating reforms and welcoming greater complexity. The reason behind a majority of these problems is the lack of systems thinking in the TBL reporting system. The three pillars approach is often accompanied by an assumption that sustainability is about balancing, which contradicts both the key insights concerning the interdependence of factors and the need for mutually supporting advances on all fronts. The social measurement that can be introduced is to monitor the number of underage drinking violations, and other accidents related to alcohol, both before and after the implementation of the Committee. The company emphasizes obtaining the ISO 14001 throughout their report which seems to be a major achievement for them. The Basic Philosophy and rules on moderate drinking are required subjects in training programs for newly hired employees at each Group company. Hacking, T., & Guthrie, P. (2008). Corporational Change for Corporate Sustainability: A Guide for Leaders and Change Agents of the Future. Companies that embrace the triple-bottom-line approach tend to adopt more of a compliance approach, stating that they have engaged in certain activities that are environmentally sound, for example. Towards the sustainable corporation: Win-Win-Win Business Strategies for sustainable development. (2004). The corporate world has demonstrated a willingness to respond to public pressure for improved performance on noneconomic issues by embracing Triple Bottom Line (TBL) principles. The first discussion point is the importance of the dimension criteria weighting of the DJSI (Fig. A more interesting finding here is the lack of certification among Australia corporations in the index. Random sub categories under the social performance do not provide a meaningful result of how the company is impacting the community. In terms of their social performance, units of measurement range from the percentage of women in the workforce to the turnover rate of employees. Elkington (1997) states that the three components, including the social area of the TBL approach can and need to be measured. Bottom line is the total profit or loss of the business for a particular reporting period. Asystematic review. Triple bottom line is a financial framework measured with three dimensions. In addition, it rates its customers and suppliers. For example, from a financial perspective, money can be arguably used as a common unit of measurement whereby expenses can be subtracted from revenues. For example, Google has committed to operating carbon-free by 2030, Walmart has promised to reach zero emissions by 2040, and . The model in Fig. We want to investigate whether corporations tend to highlight their certifications prominently throughout their sustainability reports. The necessity for corporations to disclose information about its social and environmental performance is growing (Ho and Taylor 2007). Elkington's Triple Bottom Line - Explained. The benefits of any social and environmental actions that a business engages in are likely to emerge over the long term. These corporations display characteristics in line with the selecting criteria of the DJSI index since they are part of this ethical index. Disadvantages of triple bottom line reporting by Stephen Byron Cooper / in Money Triple bottom line reporting is a system that enables companies to add the "social bottom line" and the "environmental bottom line" to their "financial bottom line" when reporting their results. The conceptual roots of TBL are embedded in a quantitative, economic paradigm. A social bottom line can possibly be deciphered in a qualitative manner; however a calculation of this bottom line still remains a mystery. Corporate Communications: An International Journal, 7, 169183. Business Ethics Quarterly, 17, 111114. Recognition that TBL reporting does not end with data collection and analysis but extends into the planning process arises from the straightforward observation that planning sustainable development is a process, not a singular event. Article The evidence from the reports show a lack of integration, a focus on compliance, a hazy social measurement and its impacts, and finally, a lack of aggregation of the TBL results. Five questions that arose from these three criticisms and the 40 corporations' sustainability reports were analysed to determine how corporations were putting TBL into action in terms of their reporting. The Pros And Cons Of The Triple Bottom Line. Journal of Environment Assessment Policy and Management, 8, 259280. This paper has not attempted to deconstruct the TBL from the perspective of putting a nail into its coffin. Another reason for choosing corporations listed in the DJSI is that the index has some claim to rigor in that it is one of the indexes that actually remove corporations that have been unethical or found guilty of other wrongdoings. While a company may quantify financial aspects such as earnings, revenues and costs, it is difficult to quantify social and environmental aspects. Unfortunately, 25 years later he was disillusioned with the manner in which business leaders had embraced the triple bottom line, and the slow pace at which the business world was evolving to become sustainable, so he issued a public recall of the triple bottom line, claiming it had become mere window dressing with business leaders using it to This leads to the next criticism of effective integration which is absent in all forty reports. Corporations need to acknowledge their negative impacts from the social space. Public Relations Review, 31, 578583. Sustaining edges: CSR, postmodern play, and SMEs. Triple bottom line reporting as social grammar: integrating corporate social responsibility and corporate codes of conduct. The aim of this question is to identify social goals/activities that corporations undertake which has a meaningful end result in terms of measurement towards the corporations' overall performance. Moving beyond compliance, developing new technologies, formulating company values and mission statements based on its sustainable goals are the characteristics of a sustaining corporation. Hence, the TBL approach from a corporate reporting perspective has raised questions and confusion in terms of what is profit maximization. California Management Review, 49, 132157. Measuring What Counts. These are HR statistics isolated from their social impacts. In the last 15years, various proposals have been developed to overcome the focus on the financial performance of a corporation as the main indicator of a firm's health. Firstly, it's hard to quantitatively assess the goodness or bad of a problem, and secondly, when dealing with social impacts, both quantitative and qualitative distinctions need to be made (Norman and MacDonald 2003). Google Scholar. Human ecology. Beyond the Pillars: Sustainability assessment as a framework for effective integration of social, economic and ecological considerations in significant decision-making. Elkington, J. Review of sustainability reports (answers to questions from Criticism #1), Review of sustainability reports (answers to questions from Criticism #2 and #3). So, let us a have a look at some of the major ones: Frequently Asked Question (FAQS) What is the bottom line? Friedman, T. (1999). In spite of gaining worldwide prominence, corporations like British American Tobacco and Japan Tobacco are ISO 14001 certified. Tepco is one of the few corporations that have included nonconformity disclosure criteria in its sustainability report. Brisbane: School of Construction Management and Property. The Triple Bottom Line: How Today's Best Run Companies are Achieving Economic, Social, and Environmental Success- and How You Can Too, San Francisco, John Wiley & Sons, Inc. Schoenberger-Orgad, M., & Mckie, D. (2005). 3BL is a state of thinking not an outcome. The consequences include a tendency to ignore the profound interdependence of these factors, and to see them as likely to be conflicting rather than potentially complementary. Doppelt, B. Their inclusion is primarily based on DJSI attaching the industry average to their economic performance. Corporations believe that following a TBL format would make them similar or compliant with formats that most other corporations use (mimetic & normative). The concept of institutional isomorphism is a useful tool for understanding the politics and ceremony that pervade much modern corporational life (Carroll and Delacroix 1982). Natural Capitalism: Creating the Next Industrial Revolution. The distinction between core and additional is based on different presumptions of materiality. Corporations look at stakeholders and the business and see what issues is material to both parties and focus on them. Rather than regulating corporations, the Triple Bottom Line (TBL) is a method of pushing social problems and pressures towards economics and changing corporate behaviour through institutional pressure and self-regulation. These three elements are financial, environmental, and social. London: EarthScan. More attention should be paid not only on how to measure but also how reliable are the values once obtained. The next step is to improve TBL to accurately define and demonstrate its value as a measurement tool, and also as a means for corporations to produce meaningful sustainability reports that shows the reader a clear picture of their sustainable performance. These concerns rarely fit into the social, economic or ecological categories. These multiple objectives can cause corporations to pursue multiple objectives and thus become inefficient. The money raised goes toward transportation safety, environmental protection and social welfare programs. This is extremely difficult. Hence, TBL can be seen as an In addition, the objectivity and reliability of the values obtained through measurement is doubtful. Hence, this is a limitation in terms of trying to study the findings from an Asian context as the majority of companies are based out of one particular region. Sustainability reports by corporations in the Dow Jones Sustainability Index showcase this problem explicitly. (2002). Frameworks like AccountAbility 1000 have made progress in the area of social measurement and with the advent of the GRI, social measurement is not an illusionary goal but in fact, a realistic evolution. As identified in the criticism of TBL, the integration of the three principles are absent in the literature. New York: Anchor Books. Elkington's Triple Bottom Line model is an influential model that has helped share the corporate social responsibility agenda. An important - but not insurmountable - obstacle is the measurement of a Triple Accounting based system. Triple-bottom-line reporting might create a conflict for such a business. The Tao of Physics: an exploration of the parallels between modern physics and Eastern mysticism. With any new regulation or . The first limitation of the TBL approach revolves around social measurement. As seen in Fig. More specifically, companies that follow the TBL business model claim to equally prioritize three pillars (or "bottom lines"): people, planet and profit. Kimmett, P., & Boyd, T. (2004). A potential avenue for further research would be investigate TBL based on each criticism, with corporations through interviews to understand their views on the TBL framework, and whether they agree or disagree with the findings in this paper. According to DiMaggio and Powell (1983), there are three types of isomorphism: coercive, mimetic and normative. The meaning of this question lies in the ability to properly measure a social investment, or a social undertaking by a corporation. The Role of Analogy in the Institutionalization of Sustainability Reporting. All corporations across our sample of reports that we review in this study can do to embrace TBL in their reporting system is to indicate that certain areas will experience one type of impact, while other sections or areas will undergo a different issue or impact. This was a development of systems theory (Capra 1975, 1996). Being committed to the social bottom line entails treating employees in an ethical and fair manner, as well as engaging in equitable compensation. In order to expand their measurement and reporting systems, corporations constantly and consistently state the different choices they have to make: whether it's in developing a reporting process that is integral to their business alone or to use external guidelines; where is the limit in terms of how much resources are used; what techniques or methods are best in terms of measurement. What are the boundaries for corporations in terms of what they choose to measure? The Triple Bottom Line, therefore, includes incorporating social, environmental and economic impacts that might affect a company, instead of using profit and economics as the driving force. People and corporations need to develop the idea of thinking holistically and look for interrelationships among the Earth's natural and social systems. Henriques, A., & Richardson, J. Institutions are constraints devised by actors that govern the way they interact, and these institutions can come in the form on rules and constraints (March and Olsen 1995; North 1992). Advantages & Disadvantages The bottom line consists of both good and bad points influencing a business. Every fine imposed on BHP is mentioned in their sustainability report. Available: http://www.grig3.org [Accessed 30/07/2009]. As businesses become more socially and environmentally conscious, they are likely to engage less in activities that generate pollution. A response to Getting to the bottom of Triple Bottom Line. Environmental and social factors are increasingly impacting the market in complex ways. Our conclusion based on the findings is that the TBL reporting system depicts a negative outlook of what corporate sustainability should aim to be, in spite of raising awareness of multiple objectives for corporations to report against. The need for research in this area has not been raised in other articles. Such research should be undertaken, because without it, the outcomes may be remote from anything that could be described as a collective interest. Corporate citizenship and the communicator: communication's role in developing the triple bottom line in the new economy. In this question, coercive forces come in the form of the sustainability index through their selection criteria, mimetic forces comes from the similarities in TBL reporting among the corporations, and normative forces is displayed through the norm that is TBL reporting and whether corporations have moved on from this framework or not. (1968). TBL reporting has been institutionalized as a way of thinking for corporate sustainability. Environmental, social and sustainability reporting and the web: best practices. Sustainability Accounting and Accountability. However, if the corporation takes a systemic view, then the stage of sustaining corporation is attainable. Coverage of social impact among various measurement systems is inadequate, and the concept of TBL does nothing to enhance the measurement of social bottom lines. In order to carry this out, they use the TBL approach to strengthen their case for a more publicly accepted method of exuding compliance and satisfactory behaviour in a sustainable manner. The TBL as an approach has multiple flaws and it is necessary for corporations that want to become more sustainable to identify these flaws and eliminate them in the course of creating their sustainability report. Michel Coulmont, Sylvie Berthelot & Vincent Gagn, Fridolin Simon Brand, Verena Berger, Claus-Heinrich Daub, Khine Kyaw, Julio Pindado & Chabela de-la-Torre, Zeeshan Mahmood, Rehana Kouser & Md. If reporting frameworks of this kind are to gain a practical credibility, they must be seen to effectively enhance the planning process.