TBL organizational management


Organizational management is given the responsibility over society's economic resources which consist of natural and human resources. Natural systems provide the sustenance for social systems and, therefore, must be nurtured and sustained. Social systems provide the context and purpose of economic systems. Business professionals and regulatory agencies facilitate and investigate organizational management in carrying out their responsibility. By accepting the right to control society's economic resources, organizational management accepts the responsibility to be held accountable for their use of these assets. Upon exercising the right to grant organizational management control over its economic resources, society accepts the responsibility to hold organizational management accountable for their use of these assets. Throughout the world, publicly held corporations control and transform natural and social resources into economic goods and services. Publicly available information is a prerequisite for responsible resource stewardship and management. Thus, the relevance and integrity of information contained in, and made available by, measurement and accountability systems holds a place of central importance in the ability to hold accountable those granted the responsibility for society's resources.

The corporate world has demonstrated a willingness to respond to public pressure for improved performance on non–economic issues by embracing Triple Bottom Line (TBL) principles. The “triple bottom line” (TBL) is a simple and increasingly popular way to organize thoughts and action on sustainability. The triple bottom line provides both a model for understanding sustainability and a system of performance measurement, accounting, auditing and reporting (Elkington, 1997, Vanclay, 2004). This sets the scope of TBL reporting as part of a broader framework of change management for integrating sustainability into business management decisions (Suggett and Goodsir, 2002). Recent research indicates that for a variety of reasons, companies adopting TBL reporting are making changes to the way they do, or at least think about, business (Kimmett and Boyd, 2004). The triple bottom line is conceived as a popular reporting tool describing corporate social, environmental, and economic performance. In the simplest terms, the TBL agenda is to focus corporations not just on the economic value that they add, but also on the environmental and social value that they add – or destroy (Elkington, 1997). “The apparent novelty of 3BL lies in its supporters' contention that the overall fulfillment of obligations to communities, employees, customers, and suppliers (to name but four stakeholders) should be measured, calculated, audited and reported – just as the financial performance of public companies has been for more than a century” (Norman and MacDonald, 2003). By creating triple bottom line statements, an organization shows an image of concern and sensitivity to the three dimensions of responsibility: economic, environmental, and social. As it evolved, triple bottom line reporting has been employed by organizations for a number of purposes. Some argue that the primary application is no more that a means for enhancing the organization's public image (Schilizzi, 2002). Others (Cheney, 2004) argue that it is a method for the organization to show its engaging in legitimate environmentally and socially responsible activities. A third application is an acknowledgement and representation of tradeoffs made among the three components (CICR, 2004). In the maelstrom of interrelated concepts and competing concepts, the TBL has arguably established itself with the widest adoption by business, public agencies, NGOs and the general public (Berger et al., 2007, Henriques and Richardson, 2004, Morland, 2006). Triple bottom line has had a huge impact on changing companies' thinking. Many companies are searching for ways to understand the boundaries of their non-market accountabilities and responsibilities and to engage with those stakeholders that matter to their business. Triple bottom line presents one approach for companies to consider.

Aim of the paper

The aims of the paper are to provide a literature review on the TBL approach and also provide criticisms of the approach. TBL has been institutionalized as a way of thinking for corporate sustainability. However, TBL is a conservative approach to sustainability. TBL must incorporate social and natural sciences in order to become more effective at promoting organizational sustainability. There is a lack of systematic thinking in TBL which is also required if it is going to develop sustainability in organizations. The gaps in the knowledge around these areas have been explained in detail in this paper.

Evolution of Environmental sustainability

Environmental sustainability involves the preservation of resources without compromising the needs of the present and future generations. In the 1960's and 1970's there was a widespread, although by no means dominant, recognition that human activities, including corporate activities, had great and potentially disastrous impacts on the natural environment. Although the root of the world's sustainability problems may well be cultural and political (Hart, 1997) corporations and their activities have a significant impact on the environment. As society began to demand cleaner water, cleaner air, fewer toxins, and the other benefits of environmentally thoughtful stewardship, corporations, however reluctantly, initiated improvements in their environmental behavior (Hoffman, 2000). In the 1990s leading thinkers in the environmental movement as regards corporations began to talk about environmental sustainability. Without addressing the reality or sincerity of the sustainability initiatives undertaken by corporations, it is significant that many corporations began to acknowledge at least the notion of environmental sustainability.

However, in the early and mid 1990's it became increasingly apparent to a variety of thinkers and organizations that environmental sustainability was unlikely to be achievable without addressing issues of social sustainability as well. For example, The Natural Step (A non-profit environmental education organization working to build an ecologically and economically sustainable society) introduced social awareness as an integral component, identifying four “system conditions” required to achieve a sustainable society: 1) nature must not be subjected to systematically increasing concentrations of substances extracted from the Earth's crust, 2) nature must not be subjected to systematically increasing concentrations of substances produced by society, 3) nature must not be subjected to systematically increasing degradation by physical means, and 4) the ability of humans to meet their needs worldwide must not be systematically undermined (Robèrt, 2003). A casual reading of the four conditions presents a picture of three rigorously conceived (although not necessarily rigorously implementable) environmentally related conditions and one vague condition relating to social issues. The first three states that “nature must not be subjected to…” followed by specific, if complex, requirements. It is possible, from the conditions themselves, to determine whether an action, if sufficiently understood, violates the condition. The fourth, dealing with social systems, states that the object of the condition is not impaired…without any real reference to what that may mean. To know whether an action violates the condition, we must not only understand the action but also must come to some common agreement about what it means to impair the ability of humans to “meet their needs.” This leads to concern that the issue of social sustainability is either weakly conceived or has been attached to the framework as an afterthought (Monevaa et al., 2006). Alternatively, perhaps the social systems are so fundamentally different from environmental systems such that we cannot create social system conditions analogous to the environmental system conditions. For businesses, the idea of social sustainability, if recognized at all, is narrowly and conveniently conceived and likely to be interpreted as the ability to continue to stay in business through good relations with supply-chain partners, employees, and unions, an interpretation that is rather limited, and possibly destructive (Adams and Frost, 2008). Rather than expanding the scope of their public interest responsibilities, managers focus on reducing social resources to monetary terms, measuring, and maximizing it. Hawken et al. (1999) attempt to broaden this perspective they refer to as human or social capital by including it as one of four primary “types” of capital: natural, manufactured, financial, and human. When the stocks and flows of these objectified concepts are managed effectively, organizations become sustainable (Hawken et al., 1999). Social capital, by implication at least, represents another factor of production and a profit generator for the organization. Hence, social sustainability is completely different to environmental sustainability. The focus of social sustainability differs from environmental sustainability in that the measurement of social indicators becomes harder to define. This leads to the concept of the TBL approach and how the triple bottom line attempts at measuring all three dimensions.

TBL and the environmental/social sustainability

Elkington articulates the lower position of the social dimension in his initial description of the triple bottom line. “We felt that the social and economic dimensions of the (environmental) agenda…would have to be addressed in a more integral way if real environmental progress was to be made” (Elkington, 2004). The interesting issue here is that the social and economic issues are subordinate to the environmental agenda. Not surprisingly, researchers find that issues relating to reporting social aspects of corporate responsibility generally lag behind the reporting of environmental issues, in terms of both timing and quality (Kolk, 2003, Adams, 2002, KPMG, 2002). The conclusion is that social sustainability reflects an awkward afterthought (e.g. The Natural Step Framework), an objectification through mechanistic management (e.g., social capital), and a subordinated and imprecise objective within an enhanced reporting initiative (e.g. triple bottom line).

Triple Bottom Line- Literature Review

Considerable tension is building between practical management and the goals and aspirations of business as promoted in texts such as the Chrysalis Economy (Elkington, 2001) and Cannibals With Forks (Elkington, 1997). Windsor highlights the societal tightrope that must be walked balancing the goals of economic development (e.g., reducing poverty worldwide) with the societal and environmental consequences of the same economic development (Windsor, 2002). During the last 15 years many proposals have been advanced to integrate and overcome the focus upon the financial dimensions of the organization as the sole indicator of the firm's health, future prospects and alleged contribution to the well-being of society. 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). The balanced scorecard, intellectual capital assessment, environmental and social audits and, in general, the tools of social accounting and social impact analysis (Epstein and Birchard, 1999, Scott and Jackson, 2002, Unerman et al., 2007) have arisen to help focus the concerns of those seeking to make business more accountable, transparent and sustainable. Performance codes address a range of environmental efficiency based criteria, while implicitly raising broader questions about social responsibility. This is occurring at a time of heightened scrutiny of corporate and public administration practices, and the increasing power of independent watchdogs. There is a growing awareness of the necessity for a company to disclose information about its social and environmental performance (Ho and Taylor, 2007). The market is viewed as an institution in that it is essentially a socially constructed system of rule-based economic exchange (Pava, 2007). This institution is under pressure to evolve. The reporting formats range from providing a “dashboard” of measures (Epstein and Wisner, 2001) to attempts to monetize all three perspectives (Richardson, 2004).

The notion of “Triple Bottom Line” (3BL) accounting has become increasingly fashionable in management, consulting, investing, and NGO circles over the last few years. Not only has the TBL become the dominant approach to public sector accounting and a mainstay in private sector firms who wish to demonstrate virtue as a sustainable organization (Robins, 2006, Savitz and Weber, 2006), but the concept has been widely diffused and adopted by the public and by scholars. A mere six years after Elkington's coining of the term, the search engine Google reveals 52,400 web entries concerned with the topic, and as of 9th September 2009, the number of hits are 1,190,000. The Global Reporting Initiative has 507 participating organizations, including some of the world's largest companies (Bishop and Beckett, 2000, Raar, 2002, von Kutzschenback and Brown, 2006). One of the key issues Elkington (1997) has identified from conducting extensive research in reporting systems and sustainability is around the area of Transparency. A medium like the internet makes information easily accessible, and the information makes companies transparent. Companies, with their reputations at stake, need to better track their environmental impact. Measurement tools are available but many of them conveniently lack the ease of use. Today, organizations are developing more sophisticated views of their relationship with the community which requires a customized approaches to reporting based on the firm's own view of itself and its place.

Bottom line as a metaphor

The great achievement of the triple bottom line is as a metaphor that frames environmental and social achievements in a form easily acceptable to the business mind. The main symbol of the bottom line is the net income reported on the financial statements of publicly held corporations. Net income is the difference between the revenues of a period generated by selling the organization's products or services and the costs of producing and selling those products or services and captures the organization's inflows and outflows in a single . As a metaphor, the bottom line represents information capture of a collection of activities enabling the synthesizing of the effects in a concise representation (Morland, 2006). The triple bottom line is a reporting technique that applies the bottom line metaphor to the social and environmental aspects of a business organization. However, an organization that operates purely from an economic perspective, i.e. profit maximization creates a question of legitimacy in terms of how the social and environmental accounting is conducted. Triple bottom line has become a new mindset. In institutional terms it has institutionalized a behavior that creates three separate outcomes. This is a mental barrier to systems thinking.

TBL as an institutional theory

TBL ideas are clearly embedded in theoretical frameworks that challenge the virtues of unrestricted capitalism. Rather than regulating companies, the TBL is seen as a vehicle for channelling social pressures to economics and modifying corporate behaviour through institutional pressure and self-regulation. One can therefore look to institutional theory with confidence to explain TBL's current influence on the market, and see if it helps to predict change in the way the market is likely to be reconstructed over time. Nobel laureates in economics, March & Olsen see institutions as: “the rules of the game of a society, or more formally, are the humanly devised constraints that structure human interaction (March and Olsen, 1995). They are composed of formal rules (statute law, common law, regulations), informal constraints (conventions, norms of behaviour, and self imposed rules of behaviour); and the enforcement characteristics of both” (North, 1992). In short, normative institutional theory asserts that institutions will react to changes in the environment by initiating reforms and welcoming greater complexity. 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. For example, the release of the Australian stock exchange's 75 page guideline blueprint in 2000 was an attempt to give guidance to self-regulation, emerging as it did from the turmoil of corporate scandals and collapses. Various articles have taken a critical view on the usage of TBL principles and practices, and taking a critical view will help clarify not only what it is, but its limitations. Deegan et al (2000) have looked at why some Australian companies have markedly improved the disclosure of information in their annual reports, and found that it can be traced to major social and environmental incidents (Deegan et al., 2000). From the results of this study it is reasonable to assume that “management considers annual reports to be a publicity device that may reduce the adverse perceptions of some sections of the community toward modern corporations” (Owen and Lehman, 2000). As Paul Greenfield and Tor Hundloe (2000) explain, this type of capitalism “encompasses the variety of institutions and behaviours that go to form a society” (Greenfield and Hundloe, 2000). They explain that “some types of institutions and arrangements tend to work better than others in promoting social harmony and, as a consequence, greater economic and environmental well-being” results (2000:5). Reporting on the progress towards harmonizing industry with its human and natural environment is therefore seen by many TBL advocates as a worthwhile thing to do. TBL has been embedded into the corporate culture as a form of institution, and hence the way businesses think when it comes time to reporting has changed as well. A majority of companies' sustainability reports have been clearly divided into three sections: environment, economic, and social. This shows how the TBL as an institution has become embedded in corporate culture.

TBL and systems thinking

One of the deficiencies still present in the current sustainable reporting system is the lack of systems thinking, especially when trying to link management interrelation occurring within the organization on one or other dimensions of sustainability, or a cause-effect sequence between inefficiencies in HR and ecological sustainability. For example, the Global Reporting Initiative (GRI) has an indicator for HR. The impact of investing in an organization's HR has been theorized to have an impact on the organization's ecological sustainability/footprint (Dunphy et al., 2003). However, there is no measurement system that captures this correlation. Watson Wyatt have a Human Capital Index, which shows that if an organization is doing better with its human capital, it will also be better in its returns for its shareholders,.

However, the investment in HR is linked to the economic returns to the organization and not other elements of the TBL. Royal & O'Donnell have developed a set of qualitative HR indicators. While qualitative research into human capital is currently not being systematically adopted by securities analysts, it can illuminate the working of an organization in a way that primary financial data on its own cannot achieve. They report action research projects in the works that add qualitative HR data to financial analysis. When assessing which organizations are sustainable, a truly complementary approach requires both qualitative human capital analysis and traditional, financial, quantitative analysis. In essence, an integrated approach is needed for the purpose of making more transparent investment recommendations (Royal and O'Donnell, 2008). Their project will eventually link these qualitative indicators to sustainability outcomes, but to date such a connection has yet to be achieved.

The triple bottom line is an approach that drives decision makers to recognize their obligation to accept some responsibility for conserving the environment and enhancing the social outcomes of all their organizational activities. It stresses the importance of the interdependence of economic, social, and environmental factors in meeting the needs and expectations of the community (Downes et al., 2002). However, in practice, the TBL focuses on the co-existence of the 3 bottom lines but doesn't show their interdependence. The early sustainability literature consistently referred to the need for people to think holistically and explore the interrelationships and patterns within our natural and social systems. This was a development of systems theory (Tilbury and Wortman, 2004). In very simple terms, systems theory is the understanding that a system comprises interrelated parts and is greater than the sum of its parts. Over the past three decades the works of Capra and Sterling have challenged environmentalists to think more about systems when attempting to understand and respond to environmental issues (Capra, 1975, Capra, 1996, Sterling, 2001, Sterling, 2005). A system consists of parts that can be understood separately, but the whole cannot be understood completely without recognizing the relationships among its parts. In essence, sustainability is about healthy systems. Issues of environmental sustainability are complex and becoming increasingly more so as the human population and the need for resources grows (Bartlett, 1997). A balanced system includes healthy, win-win interactions between its parts, ensuring that all will thrive and will continue to thrive over the longer term. Balance is the secret to the health of the system. If any interactions between the parts are win-lose, one will, by definition, sub-optimize the whole. To grasp the complexity of environmental issues, one needs to look beyond individual, isolated issues towards a more holistic perspective, where an individual issue is seen as part of and in relation to a coherent whole (Tilbury and Wortman, 2004). Hawken, Lovins & Lovins (1999) introduced Natural Capitalism that proposes four core shifts which must be the constitutive elements of a strategy for sustainability for any enterprise. According to Hawken et al, each must be pursued if the enterprise's (or industry's) aim is long-term harmony with natural systems (Hawken et al., 1999). Doppelt (2003) provides both an easy to understand explanation and practical methods for transforming our climate-damaging, unsustainable ways into sustainable thinking and behaviors. Effective solutions will emerge only when new, sustainable forms of thinking emerge (Doppelt, 2003). Sustainable thinking requires a clear understanding of the systems humans are part of. Systems thinking could therefore be seen as interrelated thinking that entails the ability for grasping more complex relations, interactions and situations which include, but go beyond, simple cause-and-effect relationships. In this way, systems' thinking also helps in building more accurate mental models for understanding complex phenomena.

Effect of TBL principles on behaviors and activities of the organizations

The top portion of the shows actual resource flows into and out of a business organization. Both natural and social systems provide resource inputs to the organization and both are impacted by its resource outputs. These inputs from the natural and social world inform the economic system of the organization, and influence its behaviors and activities. In turn, the behaviors and activities of the business impact the natural and social world. The lower portion of 2 shows information flows. The organization's information systems and measurements identify, filter, and measure inputs from the organization's actions, the natural system, and the social system. These inputs are then used to create, among other communications, triple bottom line reports.

Information flows between the organization and the social and natural systems as well as throughout the organization itself. The “accounting” systems inform the organizational strategies that ultimately motivate changes in the organization's behaviors. So, ultimately, the process that produces organizational reports relies on information systems that collect information designed for, and controlled by the organization that takes a predominately economic perspective in collecting and analyzing information related to the natural and social systems. The major problem indicated in the diagram and found throughout this paper is the issue of measurement and integration. When information flows from the social, economic, and natural conditions to the measurement systems, it is calculated individually, without being connected to consideration of other elements of the system. The three separate boxes in the Measurement/Information systems area needs to find a way overlap or integrate to make more sense of the information inflow.

Can TBL reporting lead to change?

Recent analyses of corporate reports have shown that the outputs of reporting processes have more to do with impression management than creating any major change. Much of the critical literature uses “organizational legitimacy” as an analytical framework (Dowling and Pfeffer, 1975), implying that organizations use their public reporting mechanisms to justify their “social license” to continue operating, especially when confronted by public criticism. Such legitimacy is often assessed by comparing the information provided by the organization about its social and environmental impacts with how the media reports on these impacts, in order to identify gaps in portrayal (Neu et al., 1998, Adams, 2004, Deegan et al., 2002). Results suggest that most corporate reporting is little more than public impressions management, and leads to speculation that corporations use it to exercise greater control over the sustainability debate (Neu et al., 1998, Ogden and Clarke, 2005, Tregidga and Milne, 2006). The critical role of learning and public participation in the development of sustainability is widely recognized (Scott and Gough, 2003, Meppem and Gill, 1998, Buckingham-Hatfield and Percy, 1999). However most evaluation of social and environmental reporting has focused on report content, creating an obsession with how reports are to be presented and which performance indicators to make public. Such a preoccupation is likely to deflect attention away from the reflection and learning required to enhance sustainability, and the use of indicators to nurture greater public engagement. Hence, to increase the potential for TBL reporting to lead to change, it might be more effective to focus evaluation on the ongoing and cyclical process of reporting: the capacity- and relationship-building that can occur, and how this in turn might impact on TBL outcomes. Building on principles of “civil learning” and “conversational corporations” (Zadek, 2001), Zadek has come up with a number of criteria upon which to evaluate the quality of social and ethical reporting that corporations might initiate. There has also been an effort by some researchers to develop theoretical approaches through which to examine the link between reporting processes and their outcomes (O'Dwyer, 2005, Adams and McNicholas, 2007). One approach to theorizing the link between reporting processes and outcomes has been to see reporting as a learning process through which hidden assumptions that govern prevailing discourses within an organization and among its external stakeholders can be revealed and confronted (Thomson and Bebbington, 2005). The inability to uncover hidden assumptions can be one of the main constraints on change, especially when these assumptions are an inherent part of corporate responses to such a complex and conflict-ridden concept as sustainability (Milne et al., 2006). Thomson and Bebbington (2005) advocate a collaborative educative process in which an organization and its stakeholders work together to reveal the hidden assumptions that constrain efforts to progress towards sustainability. This approach is consistent with organizational learning theory (Argyris and Schon, 1996) and provides a useful framework to analyze the link between reporting and learning (Gond and Herrbach, 2006, Berthoin Antal and Sobczak, 2004). Another approach was used to examine how organizations changed after they adopted environmental accounting initiatives (Larrinaga-Gonzalez and Bebbington, 2001, Larrinaga-Gonzalez et al., 2001, Ball, 2007). Looking for evidence of change, researchers found that, for the most part, such initiatives did not result in substantive organizational change, but rather “institutional appropriation”, meaning that “the radical intent behind environmental accounting [was] lost, or swallowed up by corporate hegemony, with the result that the issues which environmental accounting [sought] to address [remained] unaddressed” (Larrinaga-Gonzalez and Bebbington, 2001). However, Ball's (2007) study suggested that the potential for organizational change may be strengthened when internal stakeholders align their aspirations with those of external social movements committed to environmentalism and/or social justice. Other studies examining the process of reporting on sustainability have focused on developing sustainability indicators as a means to engage communities and stakeholder groups in planning processes (Bell and Morse, 2004, Gahin et al., 2003, Potts, 2004). These studies recommend the use of collaborative learning and participatory approaches to facilitate discussion about how to enhance sustainability (Bell and Morse, 2004, Eckerberg and Mineur, 2003, Rogers, 2005). Sustainability indicators used in these approaches is therefore about empowering communities and stakeholders to identify what needs to be done to enhance sustainability rather than simply be part of the green washing movement.

The Present and Future of TBL

The core characteristics that companies display when embracing triple bottom line are accepting accountability and being transparent (Elkington, 1997). In practice, companies indicate that there is no ‘right way' to identify or measure and report on non-financial inputs or outcomes. Moreover, businesses prefer approaches that grow out of their own priorities and commercial logic. The motivation for greater company transparency and accountability is considerable. However, companies throughout the world are experiencing unprecedented challenges. The boundaries of measurement for an organization are still not clear. The amount of responsibility that an organization should take for the impact of its external factors, such as suppliers, and the extent to which it should take control of these impacts is visible. The concept of social license is essential to a company's decision to more socially responsible. “The social license is based not on compliance with legal requirements upon the degree to which a corporation and its activities are accepted by local communities, the wider society, and various constituent groups” (Gunningham et al., 2002). The social license, by punishing or rewarding firms in terms of reputation capital, can induce firms to take ‘beyond compliance' measures of the ‘good citizenship' variety, that is, they entail expenditures which are not justified in terms of traditional, quantitative analyses for assessing likely profitability; rather, they are justified on the grounds that enhancing the firm's reputation for good environmental citizenship will in the short or long run be good business. BHP Billiton is a great example of a company driven by a high level of social license. The company recognizes the fact that although they have a basic right to the resources needed to operate, such as human capital, they have to see the conditions within which they are operated. Companies like BHP aim to maintain faith with communities in terms of their best practices. Hence, the embracing a social license is beneficial to an organization's reputation in the community.

Forces are reshaping the context for business success as companies face increased global competition and the imperative of adapting to technological change (Elkington, 1997). As business structures and activities in the post-industrial era will barely resemble those of earlier periods, so too will business responsibilities and accountabilities be transformed. Against this background, there are more immediate pressures that focus attention on the nature and quality of the relationship between business and society at large. Companies are now asked by many more stakeholders for information about their impacts on the environment, the economy and the society, and to attest to the ethical conduct and sound governance of their business. For example, the procurement policies of companies like Toyota and Wal-Mart are generating a radical shift whereby the sustainability of the suppliers play a key role in determining their winning the bids or losing a contract for supply. Companies are faced with deciding whether to resist these questions, or respond with available data, or whether to seize the opportunity to gain deeper insight into the impact of their own practices, as well as to become truly transparent and accountable.

Triple Bottom Line- Criticism

While TBL maybe the official benchmark for many organizations, as a measurement system, it is an ill-structured, poorly defined measure. It does not focus on improving or clarifying key measures of organizational well-being. The concept is rooted in politics and social change. It is an effort to appease a growing public concern that organizations, particularly business firms, are failing to live up to their claims to act ethically and as good corporate and environmentally responsible citizens. Growing recognition that sustainability is assisted by a systems perspective (Tilbury and Wortman, 2004). Dunphy et al (2003) has proposed the phase model where a company moves in stages, from rejection all the way to Sustainaing Corporation. 3 illustrates this process:

Compliance is the stage most companies that are ranked in the DJSI follow. The stage of strategic proactivity is where systems thinking become salient. Ultimately, the goal of every organization should move into this stage or to the final one called sustaining corporation. Yet, TBL does not present interrelationships between its 3 components that are essential to corporate health. The key question is how TBL gets companies beyond compliance. Slavish adherence to the triple bottom lineis only holding companies back from developing themselves to the next level. A much more comprehensive approach will be needed that involves a wide range of stakeholders and coordinates across many areas of public policy.

Many limitations or problems of the TBL approach can be articulated (Freudenberg and Keating, 1982, Burdge and Vanclay, 1995, Dale et al., 1997, Vanclay, 1999). The essence of all these issues is that the social indicator of TBL is not, nor can be, nor should be, a decision algorithm. Unlike economics, where cost benefit analysis and other methods return dollar values providing simple decisions, the social indicator points to outcomes that are shared rather than accumulated. Social impacts cannot always be precisely defined, or quantitatively valued. They impact on individuals and communities differently. Sustainability reports by organizations in the Dow Jones Sustainability Index showcase this problem explicitly. Social information is squeezed. For example, Toyota, one of the more sustainable organizations, has a section of its report dedicated to Social Performance. They measure number of employees, turnover rate, employee satisfaction etc. The reason for this is to not only to comply with the GRI but also to get ranked in the DJSI, these indicators are a necessity for inclusion. However, these are HR indicators reframed to be social by representing the companies' value to the community as a good employer. Companies like Toyota don't focus on final social outcomes, e.g. what the lack of turnover does for local employment levels and how it boosts the social capital of the community. For the social indicator to be truly effective in its role of minimizing impacts and maximizing benefits through development and mitigation mechanisms, it needs to be simplified, and has to be considered as a process of management change. TBL is seen as a decision algorithm and therefore fails to deal with the process issues.

Impact assessment

The sustainability accounting requirements have meant that there is a preoccupation with identifying indicators. TBL is ignorant of the field of impact assessment, especially social impact assessment and environmental impact assessment (Vanclay, 2004). While TBL certainly doesn't improve the social or the environmental indicators, it doesn't cooperate with the impact assessment indicators either. These approaches provide a comprehensive and well tested framework for the assessment and approval of developments and the assessment of impacts in order to mitigate negative affects (Vanclay and Bronstein, 1995). However, SIA in particular is rarely fully integrated in the planning and implementation stages and in assessing alternatives (Slootweg et al., 2001, Vanclay and Bronstein, 1995). However, both the EIA and SIA are frameworks for measuring into the future, while TBL is a reporting system for measuring the past, and on a continuous basis. A possible overlap between TBL and EIA/SIA would be a good solution towards developing a more robust framework or reporting system.

EIA and SIA emerged from a regulatory framework put in place to check environmental damage at a time when there was arguably little environmental or social awareness or responsibility in industry. It created a system of checks and balances, imposed from outside. The recent emergence of TBL from within the private sector creates a space for social and environmental imperative to be integrated in design, and to stimulate proactive responses, rather than reaction to external pressures and ‘externalities' (McDonough and Braungart, 2002). Such integration requires a commitment to sustainable trajectories, to developments that operate in a sustainable manner (in relations to inputs and outputs), and lead to sustainable processes and institutions. The test is whether TBL can be used to evaluate and predict the trajectories of developments, to question the desirability of developments on the basis of social and environmental considerations, and to guide trajectories towards social and environmental goals. To do this, TBL would need to look beyond individual and direct impacts and responsibilities and consider the futures associated with directions for development (Bossel, 1998, Lowe, 1999).


The measurement of TBL is complex. Measurement of intangible assets such as reputation and employee loyalty is difficult, and it is hard to attribute changes in these areas to discrete activities in the short term. The reality in companies is that the benefits or costs will ultimately be tested against their financial position. In implementing wider measurement and reporting, companies consistently outline the choices they have to make: where they draw the line in terms of the resources required; whether to use external guidelines or to develop a process that is integral to their business; or how they select the techniques for measurement. The state of play is such that there are few very experienced companies that can advise on these questions and companies mostly are in the position of trial and error. There are two main claims that need to be tested, which are the measurement claim and the aggregation claim (Elkington, 1997). The Measurement Claim states that components of “social performance” or “social impact” can be measured in relatively objective ways on the basis of standard indicators. The Aggregation Claim is basically a social “bottom line” – that is, something analogous to a net social “profit/loss” – can be calculated using data from indicators made in the measurement claim, and then, a relatively uncontroversial formula that could be used for any firm.

Social and environmental performance is unique to each organization, or at least industry, and is difficult to quantify (Hubbard, 2006). Part of the problem is that it is difficult to make quantitative assessments of how good or bad some action or event is; and partly it is that we seem to be dealing with qualitative as well as quantitative distinctions when we evaluate the social impact of corporate activities (Norman and MacDonald, 2003). One suggestion would be to look at social programs of governments using program evaluation. Program evaluation is a systematic program for collecting, analyzing, and using information to answer basic questions about projects, policies and programs (ACF, 2006). Program evaluation is used in the public and private sector and is taught in numerous universities. Evaluation became particularly relevant in the U.S. in the 1960s during the period of the Great Society social programs associated with the Kennedy and Johnson administrations. Extraordinary sums were invested in social programs, but the impacts of these investments were largely unknown.

Potter (2006) identifies and describes three broad paradigms within program evaluation. The first, and probably most common, is the positivist approach, in which evaluation can only occur where there are “objective”, observable and measurable aspects of a program, requiring predominantly quantitative evidence. The positivist approach includes evaluation dimensions such as needs assessment, assessment of program theory, assessment of program process, impact assessment and efficiency assessment (Rossi et al., 2004). The second paradigm is that of interpretive approaches, where it is argued that it is essential that the evaluator develops an understanding of the perspective, experiences and expectations of all stakeholders (Potter, 2006). This would lead to a better understanding of the various meanings and needs held by stakeholders, which is crucial before one is able to make judgments about the merit or value of a program. The evaluator's contact with the program is often over an extended period of time and, although there is no standardized method, observation, interviews and focus groups are commonly used. Potter (2006) also identifies critical-emancipatory approaches to program evaluation, which are largely based on action research for the purposes of social transformation. This type of approach is much more ideological and often includes a greater degree of social activism on the part of the evaluator. Because of its critical focus on societal power structures and its emphasis on participation and empowerment, Potter argues that this type evaluation can be particularly useful in developing countries.

In 1999, the Centers for Disease Control and Prevention (CDC) published a six-step framework for conducting evaluation of public health programs. The publication of the framework is a result of the increased emphasis on program evaluation of government programs in the US. The six steps are: Engage stakeholders; Describe the program; Focus the evaluation; Gather credible evidence; Justify conclusions; Ensure use and share lessons learned. This is a stepping stone in trying to understand or define a particular beneficiary set when attempting to measure social impacts. Instead of placing $ s to charitable donations meaninglessly in sustainability reports, having a measureable reasoning as to why and how this donation impacts the community can provide a more powerful argument for the TBL approach. Program Evaluation addresses the question of what are the results. It is common to speak of short-term outcomes and long-term outcomes. For example, in an exercise program, a short-term outcome could be change knowledge about the health effects of exercise, or it could be a change in exercise behavior. A long-term outcome could be less likelihood of dying from heart disease.

A common unit of account

TBL offers no means of prioritizing among the requirements of different stakeholder groups. It provides no method or reporting system that can integrate across the TBL principles. It does not provide a unit of account or qualitative summary for summing across all three bottom lines ((Robins, 2006). The introduction of the TBL into the framework of profit maximization, introduces risk and potential confusion. TBL substitutes three bottom lines for a single account of financial performance. The single objective of profit is replaced by three different objectives. Theoretically, this has the potential to cause business to lose focus and pursue plural and possibly inconsistent objectives. In this event, the outcome is likely to be inefficiency.


This paper has not attempted to deconstruct the TBL from the perspective of putting a nail into its coffin. TBL and other reporting systems that currently exist provide a pathway for organizations to easily ignore or bypass key sustainability issues for couple of reasons. Firstly, organizations 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. Due to the absence of mandatory standards, organizations 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 organization in terms of their sustainability initiatives. Secondly, and more directly towards the TBL reporting system, a lack of integration exists among the TBL principles as each principle is independent from the other in terms of its measurement. The pressure on companies to show links or inter-relationships between these three principles and how one can affect the other is absent. Hence, companies show separate data on each of the 3 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.

Effective integration

Should, can and how might researchers help to integrate social, economic and environmental considerations into planning process? These questions arise from the recognition that TBL reporting is not an end in itself. If reporting frameworks of this kind are to gain a practical credibility, they must be seen to effectively enhance the planning process. Effective integration of the major interdependent considerations in sustainability assessment is likely to be frustrated by the established capacities of experts trained separately in social, economic and ecological fields, by the habitual collection of data separately under these categories, and by the common division of government mandates into separate social, economic and ecological authorities (Gibson, 2006). This makes the three pillars approach a poor fit with intertwined sustainability problems, which by definition do not fit tidily into any one of the three pillars and which demand responses that seek multiple, mutually reinforcing contributions to a positive shift in practice. Recognition that TBL reporting does not end with data collection and analysis but extends into the planning process arises from the straightforward observation that planning sustainable development is a process, not a singular event. 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. This process is open to research that in turn offers the prospect of facilitating the integration of social, environmental and economic reporting. Such research should be undertaken because without it, the outcomes may be remote from anything that could be described as a collective interest. The consequences include not just an absence of integrative expertise, data and authority, but an entrenched tendency to neglect the profound interdependence of these factors, and to see them as likely to be conflicting rather than potentially complementary. 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. It also encourages an emphasis on making trade-offs, which may often be necessary but which should always be the last resort, not the assumed task, in sustainability assessment.

TBL will be around for some time to come. It is a convenient tool for competitive business operating in an environment characterised by progressive learning. The benefit to be gained from TBL approach is not so much in the reporting, but in the understanding of the meaning of what is being reported. The current theoretical orientations and methods of organisational learning might actually be contributing to the growing turbulence in ecological, economic and social domains across the globe. 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. This applies at the strategic as well as project level and through all stages of deliberation and decision (Gibson, 2006). 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. Einstein states that no problem can be solved from the same level of consciousness that created it. The problems associated with sustainability will not be solved by conventional economic and organisational theories.


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