Triple bottom line
The triple bottom line, a.k.a. "3BL" or "People, Planet, Profit", captures an expanded spectrum of values and criteria for measuring organizational (and societal) success—economic, environmental and social. For some a commitment to Corporate Social Responsibility brings with it a need to institute triple bottom line reporting.
The triple bottom line, a.k.a. "3BL" or "People, Planet, Profit", captures an expanded spectrum of values and criteria for measuring organizational (and societal) success—economic, environmental and social. For some a commitment to Corporate Social Responsibility brings with it a need to institute triple bottom line reporting.
Definition
In practical terms, triple bottom line accounting means expanding the traditional company reporting framework to take into account environmental and social performance in addition to financial performance. The phrase was coined by John Ellington, co-founder of the business consultancy Sustainability in 1994. It was later expanded and articulated in his 1998 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business. (Ref Business and Sustainable Development: A Global Guide)
Arguments in favor of the concept
Fiscal policy of governments usually claims to be concerned with identifying social and natural deficits on a less formal basis. However, in a democracy at least, such choices are usually 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 nature's services, there is a need for a comprehensive reform in global financial institutions similar in scale to that undertaken at Bretton Woods in 1944, and not since. This argument has been made most coherently by Marilyn Waring, perhaps the only individual to have actually read all the documents that arose from that meeting.
Mainstream acceptance of her view has steadily grown. 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 program 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. There are some similar studies in North America, although with less rigorous methods, less uniform data, and which tend to be more regionally based.
Studies of nature's services and assessments 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—Kyoto 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. However, the principle is increasingly popular among those of other stripes, e.g. in Islamic economics and in creditor economics. It is increasingly common also in United Nations circles as well. 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 argument is that the Earth's carrying capacity is itself at risk, and that in order to avoid catastrophic breakdown of climate or nature's services, there is a need for a comprehensive reform in global financial institutions similar in scale to that undertaken at Bretton Woods in 1944, and not since. This argument has been made most coherently by Marilyn Waring, perhaps the only individual to have actually read all the documents that arose from that meeting.
Mainstream acceptance of her view has steadily grown. 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 program 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. There are some similar studies in North America, although with less rigorous methods, less uniform data, and which tend to be more regionally based.
Studies of nature's services and assessments 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—Kyoto 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. However, the principle is increasingly popular among those of other stripes, e.g. in Islamic economics and in creditor economics. It is increasingly common also in United Nations circles as well. 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.
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 may be summarized as;
Division of Labor, which is characteristic of rich societies and a major contributor to their wealth, leading to the view that organizations 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 added 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 Salvation Army would not be expected to attend to environmental issues or pay a cash dividend, and Greenpeace 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.
Effectiveness: It is observed that concern for social and environmental matters is rare in poor societies (a hungry person would rather eat the whale 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. Indeed 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 Smith's Invisible Hand will ensure that business contributes most effectively to the improvement of all areas of society, social and environmental as well as economic.
Nationalism: Some countries adopt a nationalistic approach with 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, labor unions, and politicians.
Libertarian: 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.
Inertia: The difficulty of achieving global agreement on simultaneous policy may render such measures at best advisory - and thus not enforceable. For example, people may be unwilling to undergo a depression or even sustained recession to replenish lost ecosystems
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