Eco-friendly practices like recycling waste may cost the firm higher than normal. Factors influencing corporate social and ethical reporting: moving on from extant theories. Environmental, social and sustainability reporting and the web: best practices. Making donations to charities or putting in voluntary hours can be measured but how can the outcome be reported by TBL, or even towards their sustainability efforts. . 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. Based on the survey results, fourteen corporations went beyond compliance with the DJSI criteria; four corporations did not meet the nine dimensions, while twenty two corporations were compliant with the nine dimensions. However, Japan Tobacco provides no information on how it is making a difference in the community, and hence fails to comply in social impacts/goals area. Hence, TBL can be seen as an They do not show that these impacts have occurred. Organizational mortality in the newspaper industries of Argentina and Ireland: an ecological approach. 3, DJSI gives heavy importance to the economic dimensions of TBL, and not economic outcomes. However, in this category, the corporation flourishes its ISO and OHSAS accreditations eight times in the report while other corporations average about four times. (2003) have created an evolutionary path which they represent as a Phase model. Not only financial needs, triple bottom line concept also takes environmental and social requirements into consideration. For the sake of this paper, we will only argue that TBL promised aggregation and failed to deliver. Boston: Little, Brown & Co. Hawken, P., Lovins, A., & Lovins, L. (1999). For example, higher weight is given to compliance with governance codes than environmental reporting or social reporting. Fujifilm and Fujitsu factor their suppliers into the sustainability audit, while corporations like BHP Billiton and Woodside Petroleum briefly measure a policy of procurement from sustainable suppliers but provide no detail. 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. While environmental accounting measures environmental performance (excluding economic and social), TBL claims to measure all three. The ISO has different standards, one of which is ISO 14001:2004. Corporate Communications: An International Journal, 7, 169183. 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. The main points for analysis are based on the three fundamental principles of TBL (economic, social, and environmental) and how the corporations reported against principles in their reporting system. 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. Bottom line is the total profit or loss of the business for a particular reporting period. Our broad research question is: are there TBL shortcomings within the sustainability reports analysed that can be correlated with the weaknesses in TBL found in the research? The pressure on corporations to show links or interrelationships between these three principles and how one can affect the other is absent (Hubbard 2009). 2007) have arisen to help focus the concerns of those seeking to make business more accountable, transparent and sustainable. There is no integration among the three categories. Performance data look at a range of environmental efficiency based criteria, and also raises bigger questions about the issue of social responsibility. Leading change toward sustainability: a change-management guide for business, government and civil society. This will be investigated in the survey. While both the approaches are valid, they cannot aggregate into a single number, at least as far as the social dimension is concerned. There are two main claims about TBL and social performance that are central to the criticism of TBL: the measurement claim and the aggregation claim (Elkington 1997). This creates a cause for concern as to how robust is the ISO standard, and also how rigorously the DJSI applies its own standards. The DJSI, in the context of TBL as the subject of research, has not been identified in numerous literary works and hence this is the basis for adopting this dataset. 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. People and corporations need to develop the idea of thinking holistically and look for interrelationships among the Earth's natural and social systems. Quantifying the Social and Environmental Aspects: Everything is factual and quantifiable when it comes to financial accounting . London: Harper Collins. From an accounting perspective, the ability to neatly analyse the end result of all these reporting values is incoherent. Another avenue for further research is to deconstruct TBL purely from an institutional theory or systems theory point of view. The goal of becoming a sustaining corporation requires an awareness of the system. A review of empirical research on its determinants and implications, Overcoming current practical challenges in sustainability and integrated reporting: insights from aSwiss field study, Disentangling the Bidirectional Relationships Across the Corporate Sustainable Development Indicators, An emerging economy perspective on corporate sustainability reporting main actors views on the current state of affairs in Pakistan, Sustainability Reporting and Firms Economic Performance: Evidence from Asia and Africa, Corporate strategies oriented towards sustainable governance: advantages, managerial practices and main challenges, Factors affecting the outcome of corporate sustainability policy: a review paper, Whats wrong with integrated reporting? Elkington, J. 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. Gri. Hence, TBL has been a catalyst for confusion in measurement through a lack of aggregation as it had promised. 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. Provided by the Springer Nature SharedIt content-sharing initiative, Over 10 million scientific documents at your fingertips, Not logged in The TBL approach substitutes three bottom lines for a single bottom line of financial performance. In D. Sills (Ed. In attempting to combine the very different and often competing, imperatives of profitability, social justice and environmental protection, we show that the Triple Bottom Line (TBL) approach is problematic, as seen in the reports. There are three major criticisms of TBL in this paper: TBL's measurement, TBL as a non-systemic approach, and TBL as a compliance/ranking mechanism. 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. It functions on a principles-based approach, and continues the multi-stakeholder process. This article conducts the empirical analysis on Asia-Pacific corporations listed in the DJSI, specifically in the area of Triple Bottom line and the robustness within the TBL approach as well as the robustness of the selection criteria of the DJSI. 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. These concerns rarely fit into the social, economic or ecological categories. One of the first scholars to initiate the requirement of social initiatives for corporate enterprises was Bowen (1953). 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). However, the social cost comes only from tree planting, ignoring other social activities. 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. October 31, 2022. The company has not only complied with the nine dimensions of the DJSI, but also gone beyond and attempted to establish its own metrics in the area of health, safety and also on environmental fines as a proxy for misbehaviour. They impact on individuals and communities differently. Corporations use indicators such as dollars and Co2e values in their economic, environmental and social inputs. In addition, the objectivity and reliability of the values obtained through measurement is doubtful. The main function of the TBL approach is to make corporations aware of the environmental and social values they add or destroy in the world, in addition to the economic value they add (Henriques and Richardson 2004; Elkington 1997; Berger et al. 2023 Springer Nature Switzerland AG. This method is closely linked to full-cost, or . Gray, R. (2002). This leads to the next criticism of effective integration which is absent in all forty reports. The TBL approach is often accompanied by an assumption that sustainability is about balancing (Hacking and Guthrie 2008), which contradicts both the key insights concerning the interdependence of factors and the need for mutually supporting advances on all fronts (Archel et al. Profit In a capitalist economy, a firm's success most heavily depends on its financial performance, or the profit it generates for shareholders. Corporations should incorporate their economic, environmental and social requirements into their core values (Brown 2005; Dunphy et al. 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. Brown, B. C. (2005). Systems thinking is not evident anywhere in the sample. As identified in the criticism of TBL, the integration of the three principles are absent in the literature. 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. An other advantage of replacing "profit" by "prosperity" is that it draws the attention away from profit being a . An important - but not insurmountable - obstacle is the measurement of a Triple Accounting based system. The Organizational and Operational Boundaries of Triple Bottom Line Reporting: A Survey. Kaplan, R., & Norton, D. (2004). While a few corporations conducted environmental accounting to make an attempt at integrating the three principles of TBL, there is absolutely no summary page to make sense of what the entire report has been about. In addition, it rates its customers and suppliers. (2004). Still, it is increasingly becoming best practice, with penalties for non-compliance. (2007). The Triple Bottom Line: Does it all Add Up? 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). 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. However, the sustainability reports say otherwise. Lehman, G. (1999). London: Routledge. Net Balance Management Group, 332, Kent Street, Sydney, NSW, 2000, Australia, Australian Catholic University, 8/20 Napier Street, NR House, North Sydney, NSW, Australia, 2060, You can also search for this author in 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). The first discussion point is the importance of the dimension criteria weighting of the DJSI (Fig. To date, they have not taken this step. Sydney. For example, Ricoh uses a formula dividing the gross profit by the total social cost to provide a ratio of profit to social cost. The survey intends to see how many corporations emphasize their certifications to see if there is a link between being compliant and being ranked. California Management Review, 49, 132157. 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. Business Ethics: A European Review, 15, 352364. The money raised goes toward transportation safety, environmental protection and social welfare programs. More specifically, companies that follow the TBL business model claim to equally prioritize three pillars (or "bottom lines"): people, planet and profit. Companies can . If any interactions between the parts are win-lose, one will, by definition, sub-optimize the whole. Triple bottom line reporting as social grammar: integrating corporate social responsibility and corporate codes of conduct. For example, economic empowerment or income equality between men and women is a more outcome focused statistic that is useful for measuring social impacts arising from being a good employer. More attention should be paid not only on how to measure but also how reliable are the values once obtained. Sustainability Accounting and Accountability. Henriques, A., & Richardson, J. 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. Business Ethics Quarterly, 17, 111114. Although, the market moves up or down sharply after a close below the upper trend line. An Institutional Understanding of Triple Bottom Line Evaluations and the use of Social and Environmental Metrics. Sheffield: Greenleaf Publishing. While developing a common metric to measure social performance of corporations can be difficult, it certainly isn't impossible. These guidelines have inherent limitations as a one size fits all approach doesn't bode well for different corporations. Elkington, J. In addition, can the data be measured in reliable and objective manner, especially around the social dimension? Social impacts cannot always be precisely defined, or quantitatively valued. Norman, W. & Macdonald, C. (2003). Corporate Environmental Studies, 9, 193207. 3BL is a . This concept came into existence due to increasing awareness of social and environmental issues. 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). However, the extent to which these activities are being measured as part of the company's sustainability performance is unclear due to the lack of social accounting principles that exist today. Business Strategy and the Environment, 15, 296308. Disadvantages of Triple Bottom Line. Nautral Capitalism: The Next Industrial Revolution. 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. Hence, all forty corporations provide evidence that corporations do not see the need to provide summaries that bring different parts of information to provide a coherent picture, as they are all uniform in their approach in terms of providing a summary or discussion of the TBL results in their sustainability reports without a guide for future performance or initiatives. The argument is that integration of social, economic and ecological considerations are the essence of the concept of sustainability and must be a central consideration in the design and implementation of sustainability-based assessment. Towards the sustainable corporation: Win-Win-Win Business Strategies for sustainable development. We want to investigate whether corporations tend to highlight their certifications prominently throughout their sustainability reports. Figure4 illustrates the Dunphy framework: Dunphy et al's work shows a pathway to a more sustaining approach. Anyone you share the following link with will be able to read this content: Sorry, a shareable link is not currently available for this article. United Kingdom: EarthScan Publications Ltd. Hawley, A. If the reporter was informed that an indicator assumed global operation, it would be better placed to make materiality decisions with its stakeholders. 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. We seek to explore the three criticisms of the TBL approach by drawing out five questions from the criticisms and conducting a review of sustainability reports to investigate and provide answers for the questions. 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). Use the Previous and Next buttons to navigate the slides or the slide controller buttons at the end to navigate through each slide. BHP Billiton, which calls its sustainability report as Resourcing the Future, is information rich. Version for Public Comment.2 January 200631 March 2006. . The company's desire to be as transparent as possible in all areas of its sustainability pursuits gives them an edge on the ecological dimension. 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. 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. Article All corporations ranging from Asahi Breweries to Woodside Petroleum report dollar values to their economic performance and carbon dioxide equivalent emissions (CO2e) to their environmental performance. Hence, corporations show separate data on each of the three principles and assume that they are doing a favour to the external environment, when the data is hard to understand as there is no systems thinking here. While each company needs to measure indicators that directly apply to it, corporations like NAB don't mention anything about its suppliers. It has been seen that in trading where the market is in consolidation a triple bottom can be produced. Getting to the Bottom of Triple Bottom Line. 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. As businesses become more socially and environmentally conscious, they are likely to engage less in activities that generate pollution. According to Pava (2007), the market is seen as an institution that is a socially constructed system that consists of rules, and these rules govern the economic exchanges within the market itself (Pava 2007). Over the past three decades the works of Capra and Sterling have put pressure on environmentalists to adopt a systemic approach when trying to understand and cope with environmental issues (Capra 1975, 1996; Sterling 2001, 2005). 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. Unlike economics, where cost benefit analysis and other methods return dollar values in turn providing for simple decisions, the social indicator points to outcomes that are shared rather than accumulated (von Kutzschenback and Brown 2006). Based on past research, the amount of reporting done on social aspects of corporate responsibility is significantly lower than reporting done on environmental issues (Adams 2002; Kolk 2003). 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. A further avenue for research would be incorporate corporations from various sustainability indexes, and those that are listed as well as not listed. Abdul Kaium Masud, Alicia Girn, Amirreza Kazemikhasragh, Eva Panetti, Ivo Hristov, Antonio Chirico & Francesco Ranalli, Mushtaq Ahmed, Muhammad Shujaat Mubarik & Muhammad Shahbaz, Asian Journal of Business Ethics Friedman, T. (1999). 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. Accounting, Corporations and Society, 24, 217241. A more interesting finding here is the lack of certification among Australia corporations in the index. This differs from traditional reporting frameworks as it includes ecological (or environmental) and social measures that can be difficult to assign appropriate means of measurement. Companies are geared to making profits and typically focus on the impact of their actions on their bottom line, or earnings. New York: Macmillan. This raises a paradox as to the true intentions not only of the corporations that pursue ISO certification, but also of ISO's standards and how rigidly they are enforced. Their inclusion is primarily based on DJSI attaching the industry average to their economic performance. (1999). Corporations and businesses alike are in fact concerned with the nature of these aspect inherently in the standard operation of business. TBL claimed on assigning a number to items in the social and ethical dimensions of reporting. The forty listed corporations in our sample choose to be compliant as a means to achieve powerful accreditations. Hacking, T., & Guthrie, P. (2008). Pava, M. (2007). These three elements are financial, environmental, and social. procedure, there is always resistance. Moneva, J., Archel, P., & Correa, C. (2006). 2023 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. We faced a choice of how we should select a sample of large corporations. Bishop, L., & Beckett, R. (2000). New York: Free Press. Kolk, A. 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). Enter the Triple Bottom Line. & Weber, K. (2006). This is an international standard on Environmental management systems; it provides requirements with guidance for use and does not provide requirements for specific performance. Capra, F. (1975). 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. 2006). Michael Borowitz, CPA, Columbus shareholder at Clark Schaefer Hackett, says . One way for corporations to tackle compliance is to adopt an approach that grows out of their business practices. Corporations are vigorously creating and publishing TBL reports in order to showcase an image of care for the economic, environmental and social dimensions of social responsibility (Raar 2002; Morland 2006; MacDonald and Norman 2007; Robins 2006). Corporations believe that following a TBL format would make them similar or compliant with formats that most other corporations use (mimetic & normative). The reason behind a majority of these problems is the lack of systems thinking in the TBL reporting system. Japan Tobacco Inc. is the least compliant corporation against DJSI criteria. For example, Google has committed to operating carbon-free by 2030, Walmart has promised to reach zero emissions by 2040, and . 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. As a ratio, it provides balance but not interrelationships. The TBL approach fits poorly with the concerns commonly expressed by citizens who are the intended beneficiaries of strategic and project level undertakings. The efforts to achieve rationality with uncertainty and constraint lead to homogeneity of structure (institutional isomorphism) (DiMaggio and Powell 1983). However, future measurable results have not been factored into the reporting system. The model was developed by John Elkington, in his 1994 book SustainAbility. 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. (2004). Hence, TBL can be seen as an institution that uses its institutional powers and pressures to change corporate behaviour. Sustainability and Stakeholder Management: Need for New Corporate Performance Evaluation and Reporting Systems. Have to compete with commercials 2. (1997). 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. Strict Rules and Regulation 3. In short, normative institutional theory asserts that institutions will react to changes in the environment by initiating reforms and welcoming greater complexity. Jeroen Kraaijenbrink. A sustainable form of thinking is the best way to develop a systemic, effective and efficient solution. Rescuing the baby from the triple bottom line bathwater: A reply to Pava. 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. This approach has some disadvantages. The lack of systems focus in TBL approach is perhaps the fundamental flaw that negates the basic premise of the approach. The Challenge of TBL: A Responsibility to Whom? Economic and environmental impacts tend to subject themselves well to a positivist approach. While TBL may be the official benchmark for many corporations, as a measurement system, it is an ill-structured, poorly defined measure. The number of indicators in corporational performance is growing showing a need for diversity and plurality (Schoenberger-Orgad and McKie 2005). There are currently three sets of indicators: core, additional and sector-specific (which could, for that sector include core and additional). 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. Institutions and economic theory. The Aggregation Claim will be mentioned more in the next sub-section. This paper presents a criticism of the TBL approach that adds to the limited information on the pervasiveness of this approach. Elkington (1997) states that the three components, including the social area of the TBL approach can and need to be measured. (2003). A number of sustainability indexes as well as internationally recognized standards and frameworks such as the Global Reporting Initiative (GRI) exist today.