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Date: 2024-07-15 Page is: DBtxt001.php txt00023504


Open PDF: The-Triple-Bottom-Line-by-Venkatasamy-23504 .pdf
Peter Burgess COMMENTARY

Peter Burgess
THE TRIPLE BOTTOM LINE ATTEMPTING TO REGULATE CORPORATE PERFORMANCE AND ENSURE SUSTAINABLE DEVELOPMENT Written by R. Venkatasamy (PhD) ... EnviroSolutions Ltd., Mauritius ABSTRACT Efforts to regulate .any unsustainable activities of businesses did not take shape until the advent of Elkington’s Tripple Bottom Line (TBL) 25 years ago, although there have been earlier attempts to induce businesses to move away from the single bottom line of profit, which has historically been their objective and guiding principle, and consider two further bottom lines, People and Planet, to ensure sustainability on all of these three fronts equitably. Some 10 years later, the Rio World Summit of 1992 concluded that sustainability in all its aspects should be at the forefront of all human activities. Thus was born the Rio Declaration and Agenda 21. It took another 10 years for organizing a second World Summit, in 2002 in South Africa, to revisit the Rio 92 recommendations, and perfect them. At almost the same time, The Earth Charter, with its guidelines, was made official in 2000, but somehow relinquished to the background. With the advent of the TBL guidelines, several other guidelines and mechanisms were formulated, including Sustainability Indicators (SI), Key Performance Indicators (KPI), of which the Global Reporting Guidelines (GRI) became the most popular; and so did several others from other organizations. And rather leave it to the non6business sectors to dictate to them, businesses have also made the effort to regulate themselves with the establishment of the International Integrated Reporting Framework (IRRC). And now Responsible Investment (RI) and Environmental, Social, and Governance (ESG) appear to be dealing the death blow to previous independent frameworks. But the bottom line of all these efforts remains that they are all voluntary, in other words, soft laws that cannot be enforced. And almost 40 years of struggling in regulating unsustainable activities from both private and the public sectors, and after 25 years of the adoption of Elkington’s TBL, the post6mortem of achievements presently reveals that People and Planet have not fared well, whereas Profit has been getting healthier, returning the movers and shakers of business sustainability back to the discussion forum, analysing whether all efforts, have so far failed to induce businesses to have a solid commitment to being responsible and sustainable. Sustainability6Corporations6Responsibility6Governance6Accountability6 Performance6Tripple Bottom Line6 CSR Reporting6Environment6Society. INTRODUCTION At the time when businesses were being analysed and questioned about their responsibilities, Milton Friedman (1970), an eminent economist of his time, was one of the most outspoken opponents of the emergent concept of Corporate Social Responsibility (CSR), and in his publication of 1970, argued that: ‘The social responsibility of business is to increase its profits.’ And Friedman further argued that:
  1. Application of CSR would impose an unjustified and fundamentally undemocratic taxation on business shareholders,
  2. Its implementation costs would outweigh any potential tangible benefits, and, consequently it would constitute a misallocation and misappropriation of valuable company resources (Friedman, 1970; 2002).
That was at the time when the three pillars of corporate governance were: transparency, accountability and security, in other words, purely profit6centred. All three were considered critical in successfully running a company and forming solid professional relationships among stakeholders, including board directors, managers, employees and most importantly shareholders. The philosophy of Friedman, that businesses should only be doing business to make a profit, remained the main objective of those who believed that “there is one and only one social responsibility of businesses: to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game,” with the rules of the game not clearly elaborated upon, but concentrating in engaging in open and free competition without deception or fraud. Obviously these “rules of the game” were solely devised by businesses to suit their own objectives. But these mindsets were soon to change when Gray (1990; 1992) and Lehman, (1995) argued that there also exist moral and ethical obligations for businesses to incorporate environmental and social guarantees within their activities, and to provide additional environmental and social information in publishing their accounting reports. Based on these suggestions, Donaldson (2001) questioned the validity of the entrenchment of businesses into their own set of rules, ethics and beliefs, and further supported the suggestion of additional considerations that should include society at large and the environment, and Gray (1992) endorsed the concept of accountability as being: “the right to receive information and the duty to supply it.” It is common knowledge that market capitalism centres on self interest and the desire for profit, and necessarily leads to a lack of concern for the environment and the community at large. Gray (1992) pointed out that since it has been recognised that the environment was in crisis, urgent solutions were needed, otherwise natural resources on which businesses and the whole of humanity depend will be quickly exhausted, the natural environment polluted to levels too harmful to be reversed, with the ensuing negative effects on people. The same arguments were stressed upon earlier in the UN’s report “Our Common Future,” (1987), and embedded in the Earth Charter (2000). Similarly, Miller and Ahren (1988) had argued that businesses should not run solely for the interests of the stockholders (profit), but should also have a social responsibility that requires them to consider the interests of all parties (stakeholders) affected by their actions. Hence the birth of the concept of Corporate Responsibility (CR), to be extended into Corporate Social Responsibility (CSR), and further into Corporate Social Environmental Responsibility (CSER), together with an array of other tools and instruments, of which the Triple Bottom Line (TBL), and the Global Reporting Initiative (GRI) have proved to be adequate to supply guidelines for CSR, and allow monitoring and verifications. Consequently, corporations around the world have found themselves forced into struggling with a new role, which is “to meet the needs of the present generation without compromising the ability of the next generations to meet their own needs.” Business organizations are beginning to be more alert, and to take a new responsibility for the ways their operations impact societies and the natural environment. And as elaborated upon by Grundey (2008) and Hale (2008), they are also being asked to apply sustainability principles, be transparent, and be accountable to the ways in which they conduct their business. There has, however, always been a feeling or risk that CSR may be nothing more than an opportunity for publicity, as discussed by Barnett (2007). L’Etang (1994) further argued that since businesses wish to look good and be seen to be doing good through various environmentally or socially appealing initiatives, they may be engaged in activities without actually making systemic changes that will have long6term positive effects. Carrying out superficial CSR efforts that merely cover up undisclosed agendas contrary to the ethics of CSR and sustainability, and acting simply for the sake of public relations would be dubbed as greenwashing, and such practices have been thoroughly discussed by Laufer, (2003); Vos, (2009); Gallicano, (2011); and Stoll, (2015), and have eventually tainted the reputation of those practicing such unethical strategies and practices. To ensure that businesses actually put in place CSR policies that are in conformity with prescribed requirements, there must be mechanisms that will ensure both sustainability and transparency, and one of these is the Triple Bottom Line (TBL), which has today been widely accepted and adopted, together with the Global Reporting Guidelines (GRI), and the benefits of both have been critically reviewed by Adams et al. (2004), and Siew (2015). It has become the time now to assess whether all strategies put in place to regulate corporations and ensure development that is sustainable, have actually achieved the set objectives and produced positive results. To understand the essence of corporate responsibility and the many implications, and the strategies for sustainable development, it is necessary to understand the background to the principles and mechanisms involved, and elaborate on the strategies of TBL and GRI Guidelines. CORPORATE RESPONSIBILITY, SUSTAINABLE DEVELOPMENT AND CORPORATE PERFORMANCE Over the last 4 decades, corporations have generated much attention in the global sustainability debate, and the discussion of Cannon (1994) gives us an insight into the need for development of the CSR concept, and that was further elaborated upon by Elkington (2004), and Mark6Herbert et al. (2010). Earlier discussions and suggestions mainly concentrated on the responsibility of business and their many negative impacts on the environment and on societies. The debate has continued unabated since, as elaborated in the recent works of Lozano (2008) and Krechovská and Procházková (2014), and the review of Wong (2017). Lonzano (2008) further proposed the consideration and adoption of both an 4 integrational perspective (economic, environmental and social), together with an inter6 generational perspective, that is including the time dimension into corporate responsibilities. And since 1987, discussions about corporate responsibility have had as anchor the declaration of the WCED: “a need for satisfying the needs of today’s societies without compromising the needs of tomorrow’s societies” (WCED, 1987), inferring a time dimension as important. Corporate social responsibility (CSR), which has also been called “Corporate Conscience,” “Corporate Citizenship,” “Social Performance,” or “Sustainable Responsibility,” is basically a form of corporate self6regulation integrated into a business model. CSR policy functions as a built6in, self6regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. To achieve that, several elements in terms of concepts, mechanisms, and sometimes checks have had to be included to ascertain the objectives of CSR become clear and measurable for accountability, and these are further discussed. The Concept of CSR and CSER Corporate Responsibility, a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis, has been recently variously discussed by Chen. (2011), Gonzalez6Perez (2013), Tai and Chuang (2014) and reviewed and discussed by Aguinis and Ante (2012), Abernathy et al, (2017) and Al Halbusi and Tehseen (2017). The general consensus is that corporate responsibility is about enterprises deciding to go beyond minimum legal requirements and obligations and address societal and environmental needs as well. Both environmental and societal needs are evolving with new issues arising, and new demands being made on businesses, and it is expected that the obligations of businesses will have to evolve accordingly. Corporate Social Responsibility (CSR) has a longer history than what is generally believed. The concept of CSR, which dates back centuries, is rooted deeply in the notion of “social contract” which, according to (Steiner, 1972), is “a set of generally accepted relationships, obligations and duties between the major institutions and people.” Donaldson (2001) and Byerly (2013) have discoursed on and presented an outline of old and new social contracts applicable to businesses. These authors argued that in addition to the old contract between business and society emphasising the delivery of goods and services, jobs and income, dividends and interests, business today also has social obligations towards several emerging modern times issues, necessiting a new social contract. As it is believed today, modern CSR has been developed over the last decades from a narrow, irrelevant, often relegated and self6contradictory issue to a complex, multifaceted and universally recognised notion influencing managerial decision6making, and these facets, complexities and issues have been discussed by McWilliams et al.(2006), Cochran, (2007), Lee, (2008), and recently reviewed by Abernathy et al (2017). Discussions about a CSR concept, perhaps not quite as it is today, started in the mid61950s, with the initial recognition that corporations should have bigger goals to accomplish than just profit. Social progress was considered be one of these goals, and philanthropy should be more in support of social causes related to culture, education, health, or other forms of social commitments. The earlier concept initially operated along only 2 pillars, Economic and Social. According to Spencer and Butler (1987), Bowen (1953) is believed to have coined the modern notion of CSR, and in those days he argued in favour of CSR by highlighting that business has a responsibility to “pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society”. Obviously these objectives and values were those of the society of those times, much different from present day situations and needs. There was still an earlier view by Barnard (1938), who argued that apart from responsibilities to shareholders, businesses ought to be also socially responsible, the environmental aspects not having caught attention in those days. In general, three main CSR positions, in the following order of priority, have been discussed:
  1. Corporate philanthropy (Porter and Kramer, 2003; Smith, 2003);
  2. A more broadly based approach to stakeholder responsibilities from a social perspective (Avi6Yonah, 2005; Hopkins, 2002; Reinhardt, 2005); and
  3. Integration of environmental concerns (Carroll, 1999; WBCSD, 2002).
Since then, many CSR definitions have appeared, from which the key points addressed include: stakeholder engagement and participation (Holme and Watts, 2000); product impact, health and safety, and dealing with corruption, (Montero et al. 2009); human rights and freedom of association (UNGC, 2011; Lozano, 2012; Connolly and Kaisershot, 2015); communication, reporting, disclosure, and transparency (Kolk, 2008; Young and Marais, 2012); and environmental protection and management of resources (Elkington, 2002; Maignan and Ferrell, 2004). There is also a strong view that Milton Friedman (1970) inadvertently laid the foundation of modern CSR by outlining the nature and scope of social responsibility of businesses in his momentous article titled, “Social responsibility of Business is to increase its profit”, which triggered enormous controversies with regards to the definition and dimensions of CSR. Friedman took a conservative position by arguing that business is a single6dimensional entity devoted to only profit making within the legal framework. Friedman (2002) continued his line of argument in spite of bitter criticism of this approach, even after 32 years of publication of his controversial paper, affirming that: There is a very real social responsibility, and that is to make and that is to make as much money as they (businesses) can However, in spite of Friedman’s preaching, the concept of CSR has gone through various stages of development and improvement since, and the original dimensions were reorganized in the early 1980s to consider 4 pillars: Economic, Legal, Ethical and Philanthropic. The general feeling, especially among environmental activists and the public, was that CSR included activities and practices purely aimed at public relations. The consensus was that companies must be held accountable for any acts of omission that also affect the natural environment, or biodiversity at large. Consequently there was a need to include the natural environment within the pillars of responsibility, and hence the concept of CSER. During the past decades, CSR has been defined in a multitude of ways, and according to Dahlsrud (2008), there have been some 37 definitions floating around. These definitions range from performing standard ethical practices, to enhancing the welfare of society. Some even propose that the concept of CSR had become void of meaning (Cheers, 2011; Ahen and Amoah, 2018). Others claim that the varying definitions of CSR are congruent, with each of the definitions relating to the effects of a business on its stakeholders. One of the most complete and frequently cited definitions comes from Carroll (1979):
The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of organizations at a given point in time.

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