disadvantages of triple bottom line

This concept suggests that a company and its business have to sustain themselves for a longer time. London: Earthscan. & Weber, K. (2006). Based on past research, the amount of reporting done on social aspects of corporate responsibility is significantly lower than reporting done on environmental issues (Adams 2002; Kolk 2003). Business Ethics Quarterly. TBL claimed on assigning a number to items in the social and ethical dimensions of reporting. The consequences include a tendency to ignore the profound interdependence of these factors, and to see them as likely to be conflicting rather than potentially complementary. 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. Sustainability and Stakeholder Management: Need for New Corporate Performance Evaluation and Reporting Systems. The model in Fig. Hence, TBL can be seen as an TBL and other reporting systems that currently exist provide a pathway for corporations to easily ignore or bypass key sustainability issues for couple of reasons. (2002). 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. 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. 2007; Morland 2006). (2004). The GRI offers a high number of indicators which makes it hard for corporations to determine the materiality or importance of their key issues and its relation to the indicators. (1968). 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. While each company needs to measure indicators that directly apply to it, corporations like NAB don't mention anything about its suppliers. All corporations ranging from Asahi Breweries to Woodside Petroleum report dollar values to their economic performance and carbon dioxide equivalent emissions (CO2e) to their environmental performance. Isomorphism is simply a constraining process that coerces one actor within a population to mimic the other actors, as long as they face the same set of environmental forces or conditions (Hawley 1968). Elkington's Triple Bottom Line model is an influential model that has helped share the corporate social responsibility agenda. The main function of the TBL approach is to make corporations aware of the environmental and social values they add or destroy in the world, in addition to the economic value they add (Henriques and Richardson 2004; Elkington 1997; Berger et al. The different levels of parameters and indicators allow corporations to handpick those that are important to them leading the issue of selective reporting (Moneva et al. Unlike economics, where cost benefit analysis and other methods return dollar values in turn providing for simple decisions, the social indicator points to outcomes that are shared rather than accumulated (von Kutzschenback and Brown 2006). Corporational Change for Corporate Sustainability: A Guide for Leaders and Change Agents of the Future. Over the past three decades the works of Capra and Sterling have put pressure on environmentalists to adopt a systemic approach when trying to understand and cope with environmental issues (Capra 1975, 1996; Sterling 2001, 2005). Some sectors and industries are unique, and the environmental and social performance can only be understood if a certain level of alignment to the issues and problems present in that industry context is mapped out in the guidelines of the GRI. 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 TBL as an approach has multiple flaws and it is necessary for corporations that want to become more sustainable to identify these flaws and eliminate them in the course of creating their sustainability report. A number of technology tools that are helping to optimize a company's performance -- from traceability technology to supply chain analytics -- can also be used to boost sustainability efforts. Von Kutzschenback, M., & Brown, C. (2006). triple bottom line (3BL): The triple bottom line (3BL) is an expanded version of the business concept of the bottom line that includes social and environmental results as well as financial results. An other advantage of replacing "profit" by "prosperity" is that it draws the attention away from profit being a . One of the key areas that they include in their sustainability report is recycling. 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. Sustainability Accounting and Accountability. Disadvantages of triple bottom pattern: There are some disadvantages to using a triple bottom pattern. The short video below provides an overview of Elkington's Triple Bottom Line model and there are some additional study notes below the video. A businesss management traditionally aims to maximize returns to shareholders. (2003) have created an evolutionary path which they represent as a Phase model. Most shareholders are more geared to the short-term profits than to long-term results. Corporate Communications: An International Journal, 7, 169183. Getting to the Bottom of Triple Bottom Line. Not only financial needs, triple bottom line concept also takes environmental and social requirements into consideration. Being committed to the social bottom line entails treating employees in an ethical and fair manner, as well as engaging in equitable compensation. Corporations believe that following a TBL format would make them similar or compliant with formats that most other corporations use (mimetic & normative). The three major criticisms of the TBL approach are in its measurement approach, its lack of integration across the three dimensions and its function as a compliance mechanism. People, Planet, Profit TBL is sometimes referred to as "People, Planet, Profit." The company emphasizes obtaining the ISO 14001 throughout their report which seems to be a major achievement for them. New York: Macmillan. ), International Encyclopedia of the Social Sciences. Corporations should incorporate their economic, environmental and social requirements into their core values (Brown 2005; Dunphy et al. Raar, J. Next is the criticism of measurement. While TBL guides corporations to have a framework or rigor around reporting to make sure what areas need to be reported on in terms of achievements in each area and demonstrate compliance, that's about all it does. 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). These three elements are financial, environmental, and social. For example, Google has committed to operating carbon-free by 2030, Walmart has promised to reach zero emissions by 2040, and . If corporations that are responsible for the deaths of millions of their clients can get international certifications, then the motive behind being compliant and sustainable comes into question. Social impacts cannot always be precisely defined, or quantitatively valued. (2007). In short, normative institutional theory asserts that institutions will react to changes in the environment by initiating reforms and welcoming greater complexity. For example, Canon has instilled as their corporate philosophy Kyosei which means harmony between mankind and earth. Dunphy, D., Griffiths, A., & Ben, S. (2003). Sheffield: Greenleaf Publishing. Corporations look at stakeholders and the business and see what issues is material to both parties and focus on them. Administrative Science Quarterly, 27, 169198. The Relevance section in the framework could be expanded or a Materiality section added to describe why a particular indicator was considered to be important to one or more stakeholder groups. Corporate citizenship and the communicator: communication's role in developing the triple bottom line in the new economy. (2006). 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. The corporation conducts heavy analysis on its products and its life cycle and how resources can be saved as well as improved. Disadvantages of a Social Enterprise 1. (1997). This is a limitation because TBL promised in its aggregation claim to provide a social profit and loss number, whereby the claim states that the social metric can be quantified into a single number using various formulae, for any firm (Norman and MacDonald 2003). TBL ideas are ingrained in various theoretical frameworks that challenge the notion of unrestricted capitalism. While the GRI Sustainability Reporting Guidelines (G3) is the leading reporting standard for the TBL approach, the analysis in this paper was centred more around the robustness of the TBL approach and the robustness around the ranking criteria of the DJSI (criteria centred around TBL) used for the analysis, to understand how TBL and the selection criteria put forth by sustainability indexes are used by corporations in order to get ranked and recognized for their efforts. In spite of gaining worldwide prominence, corporations like British American Tobacco and Japan Tobacco are ISO 14001 certified. (1999). A system consists of individual parts that can be looked at individually; the whole cannot be entirely defined without recognizing the relationships among those parts. The meaning of this question lies in the ability to properly measure a social investment, or a social undertaking by a corporation. Triple Bottom Line Reporting. Corporations can use this loophole to get ranked in the index despite not completely adhering to the three principles of the TBL framework. Correspondence to Corporations are vigorously creating and publishing TBL reports in order to showcase an image of care for the economic, environmental and social dimensions of social responsibility (Raar 2002; Morland 2006; MacDonald and Norman 2007; Robins 2006). Pava, M. (2007). The pressure on corporations to show links or interrelationships between these three principles and how one can affect the other is absent (Hubbard 2009). A review of empirical research on its determinants and implications, Overcoming current practical challenges in sustainability and integrated reporting: insights from aSwiss field study, Disentangling the Bidirectional Relationships Across the Corporate Sustainable Development Indicators, An emerging economy perspective on corporate sustainability reporting main actors views on the current state of affairs in Pakistan, Sustainability Reporting and Firms Economic Performance: Evidence from Asia and Africa, Corporate strategies oriented towards sustainable governance: advantages, managerial practices and main challenges, Factors affecting the outcome of corporate sustainability policy: a review paper, Whats wrong with integrated reporting? However, this should not be the major driver for social measurement. Firstly, it's hard to quantitatively assess the goodness or bad of a problem, and secondly, when dealing with social impacts, both quantitative and qualitative distinctions need to be made (Norman and MacDonald 2003). Every single company measures each of the TBL indicators separately, but fails to tie them together at the end and makes no comment on intermediate causeeffect relations at levels above the bottom line. Another question, not particularly related to TBL, but relevant for the analysis is the issue of certification. The model was developed by John Elkington, in his 1994 book SustainAbility. The GRI consists of a number of guidelines listing reporting principles, parameters and provides 79 performance indicators for quantitative and qualitative reporting of non-financial information (GRI 2006). The number of indicators in corporational performance is growing showing a need for diversity and plurality (Schoenberger-Orgad and McKie 2005). Tepco is one of the few corporations that have included nonconformity disclosure criteria in its sustainability report. Henriques, A., & Richardson, J. Theory and practice of integral sustainable developmentan overview. Sydney: Premiers Executive Development Program Report. 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. Difficult to Quantify While a company may quantify financial aspects such as earnings, revenues and costs, it is difficult to quantify social and environmental aspects. 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. The company has not only complied with the nine dimensions of the DJSI, but also gone beyond and attempted to establish its own metrics in the area of health, safety and also on environmental fines as a proxy for misbehaviour. What are the boundaries for corporations in terms of what they choose to measure? In addition, can the data be measured in reliable and objective manner, especially around the social dimension? The Organizational and Operational Boundaries of Triple Bottom Line Reporting: A Survey. Asian J Bus Ethics 2, 91111 (2013). Unerman, J., Bebbington, J., & O'dwyer, B. The reason behind a majority of these problems is the lack of systems thinking in the TBL reporting system. Enter the Triple Bottom Line. Capra, F. (1996). TBL mentioned the need for integration between the economic, environmental and social areas as this provides a better picture to the community in terms of impacts (Downes et al. Coercive pressures come from other corporations in which they are dependent upon; mimetic is the process of imitation; and normative is simply following a framework or rule that is the benchmark or standard. From third world to first. Whole Systems Thinking as a Basis for Paradigm Change in Education: Explorations in the Context of Sustainability. Google Scholar. While environmental accounting measures environmental performance (excluding economic and social), TBL claims to measure all three. As a ratio, it provides balance but not interrelationships. We want to investigate whether corporations tend to highlight their certifications prominently throughout their sustainability reports. In addition, it rates its customers and suppliers. According to Pava (2007), the market is seen as an institution that is a socially constructed system that consists of rules, and these rules govern the economic exchanges within the market itself (Pava 2007). However, the TBL approach works as a band aid to environmental accounting. A response to Getting to the bottom of Triple Bottom Line. Dunphy et al. Profit In a capitalist economy, a firm's success most heavily depends on its financial performance, or the profit it generates for shareholders. 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. While the first question dealt with the integration of the TBL principles, the final question here is whether the reports have a discussion at the end that summarizes the overall performance/sustainability based on the tracking of the social/economic/environmental performance from the report. Companies can . Key Disadvantages:-Marketing Tool - Often CSR initiatives can come across a simply marketing . Journal of International Financial Management and Accounting, 18, 123150. Advantages & Disadvantages The bottom line consists of both good and bad points influencing a business. For the sake of this paper, we will only argue that TBL promised aggregation and failed to deliver. Sustaining edges: CSR, postmodern play, and SMEs. Democratic Governance. Sustainable EducationRe-visioning learning and change. However, the extent to which these activities are being measured as part of the company's sustainability performance is unclear due to the lack of social accounting principles that exist today. There are three major criticisms of TBL in this paper: TBL's measurement, TBL as a non-systemic approach, and TBL as a compliance/ranking mechanism. the Triple Bottom Line (TBL) is a method of pushing social problems and pressures towards economics and changing corporate behaviour through institutional pressure and self-regulation. Companies that focus on the social bottom line of their business, the second bottom line in the triple bottom line philosophy, are often rewarded with decreased employee turnover. This concept came into existence due to increasing awareness of social and environmental issues. Dimaggio, P., & Powell, W. (1983). Environmental and social factors are increasingly impacting the market in complex ways. Finally, the sum total of the empirical analysis leads to the conclusion that TBL as an institutional lever for sustainability performance needs to be improved. Under Economic indicators, governance, risk management and codes of conduct are the three important constituents. Friedman, T. (1999). Corporations need to acknowledge their negative impacts from the social space. Trends in sustainability reporting by the Fortune Global 250. Business Strategy and the Environment, 12, 279291. NAB does have a rigorous policy with their suppliers but fail to deliver the data on their procurement policies in their CSR report. Elkington, J. Jeroen Kraaijenbrink. 3, DJSI gives heavy importance to the economic dimensions of TBL, and not economic outcomes. There is no quantitative or qualitative summary that is aggregated or provided across the three legs of TBL (Robins 2006). To communicate the need for a more holistic depiction of performance, we should rename TBL as IBL or integrated bottom lines. Abdul Kaium Masud, Alicia Girn, Amirreza Kazemikhasragh, Eva Panetti, Ivo Hristov, Antonio Chirico & Francesco Ranalli, Mushtaq Ahmed, Muhammad Shujaat Mubarik & Muhammad Shahbaz, Asian Journal of Business Ethics