disadvantages of triple bottom line disadvantages of triple bottom line

The more balanced focus on the economic, the environmental and the social has provided a framework for institutions and markets around the world who want to focus indicators towards a sustainable future. The Challenge of TBL: A Responsibility to Whom? While the first question dealt with the integration of the TBL principles, the final question here is whether the reports have a discussion at the end that summarizes the overall performance/sustainability based on the tracking of the social/economic/environmental performance from the report. Dunphy, D., Griffiths, A., & Ben, S. (2003). However, the sustainability reports say otherwise. TBL claimed on assigning a number to items in the social and ethical dimensions of reporting. There is insufficient guidance in G3 of the reasons why indicators were considered to be core or not. Morland, M. P. (2006). Elkington, J. This was a development of systems theory (Capra 1975, 1996). For example, how does one monetize the death of a worker on the job? This is extremely difficult. The committee undertakes a broad range of activities, such as ensuring full compliance with voluntary rules on advertisements and promotions and managing the Fund for the Prevention of Underage Drinking. Another important lesson from the above analysis is the lack of interdependence of the three main indicators of TBL in any of the reports. When a business makes a commitment to protecting the environment by recycling, for example, its impact is not easily discernible. NAB does have a rigorous policy with their suppliers but fail to deliver the data on their procurement policies in their CSR report. The Role of Analogy in the Institutionalization of Sustainability Reporting. Brown, B. C. (2005). (2007). This paper presents a criticism of the TBL approach that adds to the limited information on the pervasiveness of this approach. The DJSI has nine dimensions that it uses to rate corporations. This paper presents a criticism of the TBL approach that adds to the limited information on the pervasiveness of this approach. 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. Journal of Communication Management, 10, 304322. Mainstreaming Corporate Social Responsibility: DEVELOPING MARKETS FOR VIRTUE. The GRI consists of a number of guidelines listing reporting principles, parameters and provides 79 performance indicators for quantitative and qualitative reporting of non-financial information (GRI 2006). To date, they have not taken this step. Whole Systems Thinking as a Basis for Paradigm Change in Education: Explorations in the Context of Sustainability. 3, six out of the 40 corporations attempted to provide a link between the TBL principles in the form of environmental accounting (Komatsu Ltd., Nippon Steel Ltd.), a performance scorecard (Westpac), or providing sustainable environment management indicators (Ricoh Ltd.). For example, Ricoh uses a formula dividing the gross profit by the total social cost to provide a ratio of profit to social cost. However, if the corporation takes a systemic view, then the stage of sustaining corporation is attainable. While each company needs to measure indicators that directly apply to it, corporations like NAB don't mention anything about its suppliers. With any new regulation or . 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. An Institutional Understanding of Triple Bottom Line Evaluations and the use of Social and Environmental Metrics. 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). Corporate Communications: An International Journal, 7, 169183. Elkington's Triple Bottom Line model is an influential model that has helped share the corporate social responsibility agenda. Human ecology. Hence, TBL has been a catalyst for confusion in measurement through a lack of aggregation as it had promised. As they weigh the effects of their actions on the environment and on society, they are likely to make more environmentally beneficial decisions. The ISO has different standards, one of which is ISO 14001:2004. 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. This leads to the next criticism of effective integration which is absent in all forty reports. Whether you are starting your first company or you are a dedicated entrepreneur diving into a new venture, Bizfluent is here to equip you with the tactics, tools and information to establish and run your ventures. Out of the forty corporations surveyed, twenty-one have social goals that can properly be evaluated. Government pressures, regulatory standards, stakeholder pressures (coercive) are examples of why and how TBL came into corporate reporting (Yew 2000; Friedman 1999). 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. The forty listed corporations in our sample choose to be compliant as a means to achieve powerful accreditations. Seven out of the forty corporations in the DJSI Asia-Pacific rankings do not state any sort of certification that their product/service or corporation has obtained. If corporations that are responsible for the deaths of millions of their clients can get international certifications, then the motive behind being compliant and sustainable comes into question. Accompany that considers A triple bottom line, does not in any way produce harmful products, or even destructive products for instance, weapons, chemicals that are toxic or even batteries that contain heavy metals that can be termed as dangerous" (Giddens, 1995). Epstein, M. J., & Birchard, B. As a ratio, it provides balance but not interrelationships. Capra, F. (1996). These guidelines have inherent limitations as a one size fits all approach doesn't bode well for different corporations. Von Kutzschenback, M., & Brown, C. (2006). The review of the forty corporations' CSR reports is shown below in Figs. In practice, the TBL focuses on the co-existence of the three bottom lines but doesn't show their interdependence. This concept came into existence due to increasing awareness of social and environmental issues. What are the boundaries for corporations in terms of what they choose to measure? Continuous changes in the world's economy have forced companies to go beyond their commercial purposes and pay attention to the importance of social actions. The primary purpose of this research was to examine sustainability reports of corporations and how much did they correlate to the criticism of the TBL approach made in the literature review. In the following section we identify and discuss briefly the literature of TBL out of which we identify three fundamental criticisms of the TBL approach. Slider with three articles shown per slide. This creates a cause for concern as to how robust is the ISO standard, and also how rigorously the DJSI applies its own standards. Future research needs to focus on this area especially if the aim of the research is to improve the TBL approach and find a way of making the TBL output understandable to the readers. (2003). March, J., & Olsen, J. P. (1995). October 31, 2022. The meaning of this question lies in the ability to properly measure a social investment, or a social undertaking by a corporation. https://doi.org/10.1007/s13520-012-0019-3, DOI: https://doi.org/10.1007/s13520-012-0019-3. TBL mentioned the need for integration between the economic, environmental and social areas as this provides a better picture to the community in terms of impacts (Downes et al. Use the Previous and Next buttons to navigate the slides or the slide controller buttons at the end to navigate through each slide. This is an international standard on Environmental management systems; it provides requirements with guidance for use and does not provide requirements for specific performance. Berger, I., Cunningham, P., & Drumwright, M. (2007). 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. 2003; Bishop and Beckett 2000). Essentially, it is an accounting framework consisting of three elements as opposed to just one in conventional accounting. As we can see from Fig. Theory and practice of integral sustainable developmentan overview. The model was developed by John Elkington, in his 1994 book SustainAbility. Environmental initiatives: Towards Triple Bottom Line reporting. Triple Bottom Line Reporting. While developing a common metric to measure social performance of corporations can be difficult, it certainly isn't impossible. The three major criticisms of the TBL approach are in its measurement approach, its lack of integration across the three dimensions and its function as a compliance mechanism. Corporations believe that following a TBL format would make them similar or compliant with formats that most other corporations use (mimetic & normative). This is the closest that any of the forty corporations came to attempting to create a link from social to economic realizations. American Sociological Review, 48, 147160. The number of indicators in corporational performance is growing showing a need for diversity and plurality (Schoenberger-Orgad and McKie 2005). The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields. (2006). Gray, R. (2002). Existing research does not elaborate on the problematic issues of TBL nor is there any empirical work looking at corporation's failures upon their adoption of this framework. In D. Sills (Ed. However, Origin Energy and NTT DoCoMo Ltd. excluded this information from their CSR report. Sridhar, K., Jones, G. 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. Asahi Breweries established the cross-organizational Moderate and Responsible Drinking Committee in 2004. Dimaggio, P., & Powell, W. (1983). One way for corporations to tackle compliance is to adopt an approach that grows out of their business practices. Finally, the sum total of the empirical analysis leads to the conclusion that TBL as an institutional lever for sustainability performance needs to be improved. Etzion, D., & Ferraro, F. (2009). 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). London: Harper Collins. Triple-bottom-line reporting means that a business has to report the effect of social and environmental aspects of the business, rather than just financial aspects. GRI and the camouflaging of corporate unsustainability. Measuring Organizational Performance: Beyond the Triple Bottom Line. None of the forty reports show any major research or innovation in providing a system of accurately measuring their TBL numbers, especially their social impacts. Sustainability and Stakeholder Management: Need for New Corporate Performance Evaluation and Reporting Systems. The survey intends to find out if corporations have a summary page that tells us whether the method of aggregation of the three bottom lines is giving the reader a proper understanding of how the company is performing from a sustainability perspective. This is a limitation because TBL promised in its aggregation claim to provide a social profit and loss number, whereby the claim states that the social metric can be quantified into a single number using various formulae, for any firm (Norman and MacDonald 2003). Hence, the basis on which DJSI chose to include the two corporations into their Top-40 Index is mysterious because the corporations fail to report on thirty percent of the grading scale. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. An emerging idea fitting with this tradition is the 'Triple Bottom Line', an innovative way of measuring an organisation's environmental, social and economic impact. TBL has become a dominant approach today in terms of corporate reporting and being more transparent in accounting practices (Robins 2006; Savitz and Weber 2006). 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. AQAL Journal of Integral Theory and Practice, 1. 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. Michael Borowitz, CPA, Columbus shareholder at Clark Schaefer Hackett, says . Other weaknesses of TBL and sustainable reporting methods include:The belief that companies/investors must sacrifice one value over another (Profit vs. Henriques, A., & Richardson, J. Ultimately, the goal of every corporation should move into this stage. For example, Google has committed to operating carbon-free by 2030, Walmart has promised to reach zero emissions by 2040, and . Disadvantages of triple bottom pattern: There are some disadvantages to using a triple bottom pattern. The necessity for corporations to disclose information about its social and environmental performance is growing (Ho and Taylor 2007). 4 provides a way of thinking that can help people determine whether reports are being produced to provide mere compliance or whether they are being used to develop/evolve corporations to higher levels of sustainability. Coercive pressures come from other corporations in which they are dependent upon; mimetic is the process of imitation; and normative is simply following a framework or rule that is the benchmark or standard. These corporations display characteristics in line with the selecting criteria of the DJSI index since they are part of this ethical index. Friedman, T. (1999). Boston: Shambhala Publication. It is a process not just because it happens over time, but rather because it involves a range of interests and a range of possible interpretations of those interests. Corporational structure, which was created from the rules of efficiency in the market, now arises from the institutional codes and constraints that are put in place by states and the professions. The Organizational and Operational Boundaries of Triple Bottom Line Reporting: A Survey. Administrative Science Quarterly, 27, 169198. 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. In spite of gaining worldwide prominence, corporations like British American Tobacco and Japan Tobacco are ISO 14001 certified. Macdonald, C., & Norman, W. (2007). 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. The Singapore story: 19652000. Business Strategy and the Environment, 15, 296308. Several arguments are currently being made against . Such research should be undertaken, because without it, the outcomes may be remote from anything that could be described as a collective interest. Strategic planning initiatives and key business decisions are generally carefully designed to maximize profits while reducing costs and mitigating risk. Kaplan, R., & Norton, D. (2004). However, no such common unit of measurement exists for the social indicator of the triple bottom line reporting system, thus making the aggregation principle that much harder to execute. A coalition in search of organizational measures supportive of sustainability has attempted to achieve greater visibility and legitimacy (Gray 2002; Lehman 1999; Perrini and Tencati 2006). 2008). 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. The Triple Bottom Line is a novel and unique concept, worthy of the focus it receives from scholars, practitioners and citizens interested in economic, community and environmental development. Business Ethics: A European Review, 15, 352364. Kaushik Sridhar. GRI has put out the G3 guidelines which can be applied to corporations of different sizes and locations. First of all, with the triple bottom line reporting, the business can improve the risk management through enhancing the management systems and the company can have better business planning as the risks are understood. Low Recognition: Companies often neglect the TBL concept since it hinders their financial goals and profit-making strategies. A number of sustainability indexes as well as internationally recognized standards and frameworks such as the Global Reporting Initiative (GRI) exist today. In addition, it rates its customers and suppliers. Under Economic indicators, governance, risk management and codes of conduct are the three important constituents. A triple bottom line approach gets help from tech. More specifically, companies that follow the TBL business model claim to equally prioritize three pillars (or "bottom lines"): people, planet and profit. People and corporations need to develop the idea of thinking holistically and look for interrelationships among the Earth's natural and social systems. It would be fair to rename TBL as IBL or integrated bottom lines, as other issues like culture, corporate governance, are bottom lines that should be factored into the calculation, if the social indicator is given such importance. Their inclusion is primarily based on DJSI attaching the industry average to their economic performance. Some sectors and industries are unique, and the environmental and social performance can only be understood if a certain level of alignment to the issues and problems present in that industry context is mapped out in the guidelines of the GRI. This would in turn allow us to claim whether such prominence in certifications shows a culture in the organization that also embeds TBL reporting as part of its reputation enhancement mechanism. While both the approaches are valid, they cannot aggregate into a single number, at least as far as the social dimension is concerned. The social accounting project and Accounting Corporations and Society Privileging engagement, imaginings, new accountings and pragmatism over critique? Business Strategy and the Environment, 18, 177191. The G3 guidelines would benefit by including clearer guidance with regards to the interrelationship between the different principles and how each principle applies to the reporting indicators. Enter the Triple Bottom Line. Capra, F. (1975). A system consists of individual parts that can be looked at individually; the whole cannot be entirely defined without recognizing the relationships among those parts. Corporations should incorporate their economic, environmental and social requirements into their core values (Brown 2005; Dunphy et al. 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. The corporation conducts heavy analysis on its products and its life cycle and how resources can be saved as well as improved. If reporting frameworks of this kind are to gain a practical credibility, they must be seen to effectively enhance the planning process. Firstly, the integration between the three dimensions of TBL will be hard as people are trained to be experts in each of the three dimensions and not across all of them, and this leads to the data collection within each area separately (Gibson 2006). 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. Potential and probable conflicts between the different principles are not covered adequately. Natural Capitalism is a systemic theory that provides four core movements which constitute the foundation of the strategic elements for any corporation's sustainability journey (Hawken, Lovins and Hunter Lovins 1999). So, let us a have a look at some of the major ones: Frequently Asked Question (FAQS) What is the bottom line? Corporations use indicators such as dollars and Co2e values in their economic, environmental and social inputs. (2003). Hawken, P., Lovins, A., & Hunter Lovins, L. (1999). Companies are geared to making profits and typically focus on the impact of their actions on their bottom line, or earnings. 3BL is a state of thinking not an outcome. As a majority of corporations are value driven, the corporations' culture needs to be built around those values. 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. In addition, can the data be measured in reliable and objective manner, especially around the social dimension? 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 Perrini, F., & Tencati, A. While the GRI Sustainability Reporting Guidelines (G3) is the leading reporting standard for the TBL approach, the analysis in this paper was centred more around the robustness of the TBL approach and the robustness around the ranking criteria of the DJSI (criteria centred around TBL) used for the analysis, to understand how TBL and the selection criteria put forth by sustainability indexes are used by corporations in order to get ranked and recognized for their efforts. Komatsu, Kao and NTT DoCoMo conduct environmental accounting where they factor in social and environmental costs and benefits into their economic performance. There is no integration among the three categories. Trends in sustainability reporting by the Fortune Global 250. Business Strategy and the Environment, 12, 279291. Unerman, J., Bebbington, J., & O'dwyer, B. Elkington, J. Next is the criticism of measurement. Natural Capitalism: Creating the Next Industrial Revolution. Boston: Little, Brown & Co. Hawken, P., Lovins, A., & Lovins, L. (1999). However there is no discussion of relations between the three, and the reader gets lost at the end of each report, not knowing how to decipher the data systematically. Asian J Bus Ethics 2, 91111 (2013). Recent research indicates that for a variety of reasons, corporations adopting Triple Bottom Line (TBL) reporting are making changes to the way they do, or at least think about, business (Kimmett and Boyd 2004). There is no quantitative or qualitative summary that is aggregated or provided across the three legs of TBL (Robins 2006). Among the financial institutions that were analysed, Westpac was the only bank that dedicated a column to its suppliers and showed the sustainability performance of each of its suppliers. This means that the ability to quantify impacts with respect to these two components is possible. In order to think beyond compliance, corporations need to think of how the definition of sustainability evolves, and also how as an organization, how the reporting evolves from TBL to a more holistic approach. 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. The entire discussion in this paper not only revolves around integration of the TBL principles but also for a way to encapsulate the three results into a meaningful endgame/conclusion at the end of the CSR reports. The remainder of the corporations provided individual sections dedicated to economic, environmental and social performance in their CSR report. Due to the absence of mandatory standards, corporations handpick those metrics that they can easily measure and disclose information on these metrics while ignoring those that cannot be measured or those that could possibly show a darker side of the corporation in terms of their sustainability initiatives. Firstly, TBL offers no means of prioritizing among the requirements of different stakeholder groups. The third criticism/fourth limitation found in the TBL approach is the desire to be compliant and whether TBL, as an institutionalized norm, pushes corporations to be compliant or go beyond compliance. 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. Question #4 investigates how many corporations comply with the DJSI selection criteria (based on the TBL approach) and whether corporations have stuck to the three dimensions or have attempted to go beyond the TBL requirements and also beyond compliance, in a manner of speaking. 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. Every single company measures each of the TBL indicators separately, but fails to tie them together at the end and makes no comment on intermediate causeeffect relations at levels above the bottom line. Review of sustainability reports (answers to questions from Criticism #1), Review of sustainability reports (answers to questions from Criticism #2 and #3). Hence, there is a paradox when corporations that are highly transparent about their legal breaches and fines lose investors turned off by their social and legal irresponsibility. Lehman, G. (1999). These concerns rarely fit into the social, economic or ecological categories. The pressure on corporations to show links or interrelationships between these three principles and how one can affect the other is absent (Hubbard 2009). Environmental reporting has the least favourable weighting, while human capital development and talent attraction are given the highest weighting in the social dimension. From third world to first. The American Economist, 36, 37. The second limitation found in the TBL approach is a lack of ability to aggregate the results across the three principles of TBL. 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. The five questions/issues uncovered in the TBL analysis revolve around meaningful social performance measurement, aggregation of social performance data, integration, compliance and ranking and certification through standards to enhance corporate reputation. TBL reporting has been institutionalized as a way of thinking for corporate sustainability.