disadvantages of triple bottom line
The benefits of any social and environmental actions that a business engages in are likely to emerge over the long term. It has formed the framework for many a policy, strategy and sustainability report for the past 15 years. (2004). 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. 2002). Hence they can be in competition with their peers and major multinationals in other industries doing TBL. Measuring Organizational Performance: Beyond the Triple Bottom Line. The TBL approach substitutes three bottom lines for a single bottom line of financial performance. 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). Public Relations Review, 31, 578583. In order to get ranked on the Dow Jones Sustainability Asia-Pacific index, corporations have to comply with nine indicators (Fig. To get a sense of the review, we present an analysis of the company that had the highest level of compliance (BHP Billiton), with the company that had the lowest level of compliance (Japan Tobacco Inc). The revelations from this study show how TBL as an institutional theory has shaped the thinking of the corporations in our sample to be compliant. This means that the ability to quantify impacts with respect to these two components is possible. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. 1 and 2.Footnote 1 The key questions were the basis of analysis, and they are shown in each column of the figures below. Key Disadvantages:-Marketing Tool - Often CSR initiatives can come across a simply marketing . 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. 3BL is a . The Role of Analogy in the Institutionalization of Sustainability Reporting. A sustainable form of thinking is the best way to develop a systemic, effective and efficient solution. 3BL is a state of thinking not an outcome. (2003). Strict Rules and Regulation 3. The Triple Bottom Line (TBL) is a conceptual tool that companies use to prioritize sustainability and social betterment. The accounting framework takes into account a social, ecological and financial dimension. New York: Anchor Books. 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). 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. Corporations use the template/benchmark of the DJSI to get ranked, but there is little evidence to show that they push themselves to go further in ways that could see them evolve toward the Dunphy ideal of the sustaining corporation. Savitz, A. Business Strategy and the Environment, 18, 177191. Boston: Shambhala Publication. A mere 6years after Elkington's coining of the term, the search engine Google would reveal 52,400 web entries concerned with the topic, and as of 9th September 2009, the number of hits is 1,190,000. Eco-friendly practices like recycling waste may cost the firm higher than normal. 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. (1968). Figure4 illustrates the Dunphy framework: Dunphy et al's work shows a pathway to a more sustaining approach. 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. 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. 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. In addition, the objectivity and reliability of the values obtained through measurement is doubtful. Two examples are provided below of a social initiative undertaken by a corporation that can lead to results in the future that are measureable: In April 2008, the company established the Magokoro Fund which is a fund made up of monthly contributions of 100 yen deducted from the salaries of participating employees with matching funds from the company. 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. While creating a social measurement is not impossible, the best method of determining how to measure this needs to evolve. This leads to the next criticism of effective integration which is absent in all forty reports. TBL is a way of following the trend of other corporations in terms of sustainability reporting. 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. 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. They do not show that these impacts have occurred. Sterling, S. (2001). More specifically, companies that follow the TBL business model claim to equally prioritize three pillars (or "bottom lines"): people, planet and profit. There are certain parameters that the companies use to measure and account triple bottom line. 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. 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. Corporate social responsibility (CSR) as practised in Europe and American theater has been well documented with over a thousand articles while only 35 articles are dedicated to the Asia-Pacific region (ProQuest). This approach has some disadvantages. 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. This paper has not attempted to deconstruct the TBL from the perspective of putting a nail into its coffin. 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. The web of life: a new scientific understanding of living systems. Next we convert the criticisms into five questions and use forty reports from acknowledged listed corporations to inform out answers to these questions. An Empirical analysis of Triple Bottom-Line reporting and its determinants: Evidence from the United States and Japan. 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. A corporation that makes charitable donations or provides voluntary hours from employees is partaking in the social enrichment of the community. (2003) have created an evolutionary path which they represent as a Phase model. 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. https://doi.org/10.1007/s13520-012-0019-3, DOI: https://doi.org/10.1007/s13520-012-0019-3. Norman, W. & Macdonald, C. (2003). Corporations that may lack in their environmental/social reporting can highlight the fact that they are certified by certain industry standards showing their desire to be compliant with requirements of the DJSI, which in turn gets them ranked. The Tao of Physics: an exploration of the parallels between modern physics and Eastern mysticism. Whole Systems Thinking as a Basis for Paradigm Change in Education: Explorations in the Context of Sustainability. Scott, P., & Jackson, R. (2002). Hence, TBL can be seen as an institution that uses its institutional powers and pressures to change corporate behaviour. The ISO has different standards, one of which is ISO 14001:2004. As we can see from Fig. 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. 4 separately, then the integration necessary to create a sustaining corporation is absent. It has been seen that in trading where the market is in consolidation a triple bottom can be produced. An Institutional Understanding of Triple Bottom Line Evaluations and the use of Social and Environmental Metrics. However, if the corporation takes a systemic view, then the stage of sustaining corporation is attainable. Corporate Communications: An International Journal, 7, 169183. Environmental Impact Assessment Review, 28, 7389. Available: http://www.grig3.org [Accessed 30/07/2009]. Economic and environmental impacts tend to subject themselves well to a positivist approach. 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. For the sake of this paper, we will only argue that TBL promised aggregation and failed to deliver. 2003; Bishop and Beckett 2000). Dunphy, D., Griffiths, A., & Ben, S. (2003). London: Earthscan. However, how does spending $100,000 in the community affect the corporation from a sustainability perspective? For example, there exist national differences in law that could make human rights performance indicators less relevant to a reporting entity operating in one jurisdiction. Social impacts cannot always be precisely defined, or quantitatively valued. (1994). Environmental initiatives: Towards Triple Bottom Line reporting. Measuring What Counts. There is insufficient guidance in G3 of the reasons why indicators were considered to be core or not. Hawken, P., Lovins, A., & Hunter Lovins, L. (1999). New York: Macmillan. However, the weightings of each indicator vary which gives corporations leeway as to the methodology they use to get ranked on the index. Communicating sustainable development initiatives. Corporations like POSCO and Ricoh measure community involvement and voluntary days under their social performance. Sydney. Macdonald, C., & Norman, W. (2007). The Committee established the Asahi Breweries Group's Basic Philosophy for Promotion of Moderate and Responsible Drinking and Drinking Rules. People, Planet, Profit TBL is sometimes referred to as "People, Planet, Profit." London: Routledge. Corporate Environmental Studies, 9, 193207. Adams, C. A. Japan Tobacco gets into the DJSI by focusing heavily on the economic performance, and getting certifications from recognized industry standards. Elkington, J. 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. While many different approaches to, and tools for, integration are available, no one method or process component is likely to be sufficient. This concept came into existence due to increasing awareness of social and environmental issues. Slider with three articles shown per slide. 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). 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. 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. The American Economist, 36, 37. Hence, the TBL approach from a corporate reporting perspective has raised questions and confusion in terms of what is profit maximization. Democratic Governance. 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 However, not all this focus touts Triple Bottom Line as a viable or even, a desirable solution to the serious and immediate problems our planet faces. 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. Pava, M. (2007). Boston: Little, Brown & Co. Hawken, P., Lovins, A., & Lovins, L. (1999). Environmental Management, 41, 106117. United Kingdom: EarthScan Publications Ltd. Hawley, A. For example, higher weight is given to compliance with governance codes than environmental reporting or social reporting. 2007) have arisen to help focus the concerns of those seeking to make business more accountable, transparent and sustainable. The goal of becoming a sustaining corporation requires an awareness of the system. The Aggregation Claim will be mentioned more in the next sub-section. If any interactions between the parts are win-lose, one will, by definition, sub-optimize the whole. For example, how does one monetize the death of a worker on the job? A number of sustainability indexes as well as internationally recognized standards and frameworks such as the Global Reporting Initiative (GRI) exist today. 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. 1.Economic or financial Sales, Profit, ROI Taxes paid Supplier relations Cash flows Job created 2.Environmental or ecological Pollutants emitted Product impacts This is evident in the growth of independent watchdog agencies, while more traditional institutions are also taking appropriate steps, particularly in support of corporate governance initiatives. Elkington, J. Gray, R. (2002). The second limitation found in the TBL approach is a lack of ability to aggregate the results across the three principles of TBL. However, they meet only six of the dimensions of the DJSI criteria. Triple bottom line is a balancing act. TBL does not provide a systemic view of thinking. Essentially, it is an accounting framework consisting of three elements as opposed to just one in conventional accounting. The necessity for corporations to disclose information about its social and environmental performance is growing (Ho and Taylor 2007). However, they could have a short-term negative impact on profits. The TBL approach fits poorly with the concerns commonly expressed by citizens who are the intended beneficiaries of strategic and project level undertakings. As a ratio, it provides balance but not interrelationships. Kaushik Sridhar. 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. Business and Society Review, 111, 114. Firstly, corporations that wish to put on a facade of compliance and showcase themselves as embracing the sustainability movement can use any one of the current reporting systems to mask themselves from the external pressure to be more sustainable (Etzion and Ferraro 2009). Etzion, D., & Ferraro, F. (2009). Hubbard, G. (2009). Elkington (1997) states that the three components, including the social area of the TBL approach can and need to be measured. 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. 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.