Friday, February 07, 2014

The Unsustainability Of The Triple Bottom Line

The article below by a professor of accounting (Markus J. Milne) and a professor of social and environmental accounting (Rob Gray) is a fine endorsement of SOYMB's position on the impossibility of making capitalism work in the interests of all the world's inhabitants and their one and only environment. The most important bottom line in capitalism does not allow this.

From here 

The triple bottom line is a term coined in the late 1990s by the influential business thinker and consultant, John Elkington.
It captures a very neat idea, namely that a modern organisation has three broad areas of impact: economic, social and environmental. While we measure one of these through financial profit, we have no systematic means of measuring the other two. A “triple bottom line” would therefore capture not just the financial bottom line (the profit or loss) but the social and environmental impacts of activity as well, although not necessarily as an amount of money. So far so good.
The influence of the triple bottom line, both positive and baleful, is considerable. Indeed, it is almost ubiquitous, especially in and around discussions of what sustainability means for business.

But the concept is employed in two quite different ways. First, it suggests a good manager should manage the business to optimise the three bottom lines. Such an ambition is virtually impossible as the three are often measured in quite different and incommensurate ways, and the financial bottom line will always dominate a commercial entity.
Through a disturbing sleight of hand, the argument then mutates into the dangerous nonsense that there is no conflict between managing social issues, managing environmental impacts and managing for shareholder wealth. Of course there is. Even if there are a number of win-win opportunities for good managers to exploit, maximising financial return will never minimise environmental impact and is unlikely to generate unqualified social good. Such arguments go to the heart of what a modern corporation is, what capitalism is and what our planetary society and ecology entail. These are not trivial or simple matters.

The second use of the triple bottom line is more plausible – it suggests that an organisation should be accountable for its financial, social and environmental performances. For instance, this notion would see the annual report of a company containing three broadly equal sections. Each would be produced to similar and mandated standards, each would be independently audited, and each would discharge the appropriate social, environmental and financial accountability of the organisation.
This is an outstanding, democratic ideal and one which is both practicable and in keeping with business claims to be responsible, transparent and accountable.
Unfortunately, almost no organisation of which we are aware produces anything which looks even remotely like such accountability. This is all the more tragic because the essential idea behind the highly influential Global Reporting Initiative (GRI) has been to encourage organisations to produce triple bottom line reports, albeit voluntarily. But by any reasonable measure a “good” GRI report is still a very pale imitation.

So after nearly 25 years of voluntary initiatives, cajolery and claims that business can get its own house in order, the triple bottom line remains a most attractive but unfulfilled notion.
Maybe, you might say, progress is slow; but it is still progress. Yes and no. Unfortunately, the GRI claims to be helping develop sustainability reports. Companies do not report on their triple bottom line performance but on, they would have you believe, their sustainability performance. And managers now manage, we are told, for sustainability – not for the triple bottom line. But even a really good triple bottom line report tells you exactly nothing about the sustainability of the entity, or the social and ecological systems on which it relies.

There are three basic reasons for this. First, sustainability means little unless it refers to the planetary level: there seems no question that mankind’s ways of organising are very clearly not sustainable. We are not leaving future generations with the equivalent possibilities that we inherited.
Second, and perhaps most substantially, sustainability is a systems-level concept and exceptionally difficult to apply at a single organisational level. The triple bottom line, however, is an organisation-level concept: the two need joining up and this is very difficult, if not impossible.

Finally, all the data suggests that, in all likelihood, most, if not all commercial organisations are actually contributing to unsustainability. A proper sustainability report would indicate the broad extent of an organisation’s contribution to unsustainability: something a triple bottom line is very unlikely to be able to do.




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