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:
- Application of CSR would impose an unjustified and fundamentally undemocratic taxation on business shareholders,
- 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:
- Corporate philanthropy (Porter and Kramer, 2003; Smith, 2003);
- A more broadly based approach to stakeholder responsibilities from a social perspective (Avi6Yonah, 2005; Hopkins, 2002; Reinhardt, 2005); and
- 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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