Section 6.1: Business models and incentives for sustainability
Section 6.2: The Triple Bottom Line (TBL) framework
Section 6.3: Natural resource based view framework
6.2.1 The framework
The Triple Bottom Line (TBL) concept was coined by John Elkington and is a means to assess the degree to which a company pursues sustainable growth. The TBL identifies that the operations of a company should be measured along three aspects – Economic, Social, and Environmental . It alternatively goes by the term 3 Ps which stand for People, Planet, and Profits.
Economic/Profit: Growth enhancement, Capital efficiency, Profit margin improvement, Innovation, Research and Development, Risk management, Resource and cost savings.
Social/People: Human rights, Local/ Indigenous community benefit and approval, Labor relations, Standards of living, Poverty reduction, Education, Diversity, Equality.
Environment/Planet: Pollution management, Emission reductions, Zero waste, Biodiversity promotion, Conservation efforts, Sustainable resource use.
The TBL is an accounting framework that attempts to broaden the standard definition of a company’s “bottom line”, and therefore looks both at “gains” and “losses”. In this framework, a company can assess its impact on and activities implemented towards social responsibility (people), the natural environment (planet), and its economic value (profits).
The areas in which these three ‘bottom lines’ intersect, especially when a company addresses all three, leads a company towards a sustainable business model
Focus Box: Business view of the Triple Bottom Line
The TBL sustainability framework acts as a catalyst to develop innovative and effective business models for the future. It encourages companies to look beyond the traditional measures of profits to include environmental and social accountability considerations to further enhance their operational efficiency, effectiveness and success.
Socio-economic
Socio- environment
Socio-efficiency
Health and Safety Regulations
Business Ethics
Resource use efficiency
Essential resource access (ie. water)
Fair trade
Product Stewardship
Environmental Justice
Workers/Employee Rights
Life-cycle management
Hazard and Crisis Management
Job creation
Products to services shift
Natural Resource Stewardship
Capacity Building
Energy efficiency
Social Security
Cradle to Cradle
Product Labelling
Anti-corruption/competition
6.2.2 Triple bottom line accounting framework
With the global shift in societal focus toward environmental sustainability, there is growing demand from stakeholders for greater access to more extensive information about the operations and financial standings of companies. This has encouraged companies to look at the bigger picture and see the impacts of their action on the world around them.
The recognition that there are finite resources available for use, along with a greater understanding of the impacts of their over-consumption has driven businesses to incorporate, account for, and report on sustainability factors. One approach to the measuring a company’s sustainability is by using the Triple Bottom-line framework (TBL).
Reporting on the TBL is a method commonly used in business accounting to further expand stakeholders’ knowledge of the company. It extends accounting beyond the traditional the traditional measure of profits, return on investment, and shareholder value to include environmental and social dimensions that accurately reveals the company’s impact on the world around it.
By equally incorporating economic, environmental, and social considerations into a company’s evaluation and decision making processes, TBL reporting establishes principles by which a company should operate to identify the total effect of all their actions (both positive and negative). This way, companies are able to remain accountable and stakeholders have more transparency about all aspects of a business’ activities.
Advantages and Disadvantages of TBL reporting
Advantages
– TBL reporting presents a balanced view of what the business is doing well and what requires improvement.
– Increases transparency of company operations and performance.
– Mitigates stakeholder concerns on unknowns or hidden information.
– Demonstrates increased accountability of company.
– Raises or at least maintains the expectation of company performance.
– Improves company’s influence and power amongst peers.
– Avenue for employees and external stakeholders to expand relationships with other stakeholders in the company.
– Facilitates stakeholder community sustainability learning.
– Establishes common goals, vision and objectives to improve internal resilience.
– Resistance to negative exposure, reduced liabilities and risk.
Disadvantages
– Company’s actions might not support their intentions (all talk and no action).
– Reporting may be influenced by corporate supremacy making TBL reporting ineffective.
– Resistance to reporting especially negative activities. Hesitant about loss of control or power.
– Resistance to extensive readjustment of company’s operations due to findings.
– The additional time brought on by TBL reporting may negatively impact bottom line initially by increasing task complexity of operations.
– Time consuming training will add further responsibilities in order to incorporate and manage new procedures.
– Additional work and stress on labor resources; costly for companies.
– Ethical issues uncovered may subject company to criticism and backlash initially.
Supplementary Resources
Zaman (2007) “The Relationship Between Triple Bottom Line Reporting and Corporate Governance”
Ranganathan (1998) “Sustainability Rulers: Measuring corporate environmental and social performance”
Corporate Sustainability Management 