9 Triple Bottom Line - Quadruple and Quintuple?

A concept gaining ground in company accounting is the Triple Bottom Line (TBL). Others are even now moving to the Quadruple Bottom Line (QBL).  

The TBL is an expanded baseline for measuring performance, adding social and environmental dimensions to the traditional monetary / financial yardstick.  Practically an enterprise must balance economic growth, environmental quality and social equity.  Besides the gain of cost saving, other gains that can be achieved through TBL reporting include:
- a values-driven culture underpinned by sound corporate governance and ethical systems throughout the organisation;
- enhanced management systems and monitoring of performance that reduce the risk profile;
- enhanced communication with key stakeholders;
- ability to benchmark performance both within an organisation and between organisations;
- a high calibre staff attracted by the focus on a sustainable future. 

Recall the idea that economics, community and environment are an integral system. One cannot be abstracted from the others.

Likewise, businesses produce three kinds of value – financial value, social/community value and ecological/sustainability value. The key concept in the theory of TBL is that, in order to be sustainable, a business must have positive balances in all three areas. The triple bottom line is a way of accounting for the net value added in each of the three areas, financial, social and environmental.

Many big multinational companies are now interested in and are practicing triple bottom line accounting.  Big companies are being pushed in this direction in order to protect their image. A survey indicates that around 30% of consumers in the UK will boycott companies that they believe have policies which damage the environment or exploit poorer nations. In short companies are being forced to recognise that they have a social responsibility. Milton Friedman belongs to the past!  Friedman stated that business enterprises have no social accountability.  In Proutist thinking this is considered a derangement due to lack of social and elevated ethical vision.

In 2002 Shell Oil undertook a reanalysis, which found its way into 'The Shell Report 2002'.  Contents of the report included:
- Economic performance;
- Environmental performance; and
- Social performance. 

Shell undertakes particular projects with NGOs (Non Governmental Organisations) and conservation groups in Africa.  Perhaps part publicity, part social responsibility?  We may not know - much depends on the calibre of persons in leadership and management roles and their ability to take a neo-humanistic view.  A neo-humanistic view is one that develops the human being and collective consciousness in all three aspects: physical, mental and spiritual.  It means expansion of mind and developing one's higher nature.

However, we do know that Shell's report and outcomes have been audited by two internationally respected auditing firms to see how it meets its performance benchmarks and targets, including environment and social performance.

A lot of academic attention has been given to the problem of accurate and useful social reporting. The concept of a social auditing cycle is supposed to parallel the equivalent financial auditing cycle. Typically the term "social auditing" also covers the environmental aspects as well as the social.  

KPMG Global Sustainability Services 2002 / KPMG International of Corporate Sustainability Reporting 2002 ran a recent survey which found that 45 percent of the world's top 250 companies now publish a separate corporate report with details of environmental and/or social performance, up from 35 percent in 1999. However, the survey found the incidence of reporting varies markedly across the world. Of the top 100 companies in each of 19 countries surveyed, Japan has the highest percentage of companies producing corporate environment or social reports (72 percent), followed by the UK (49 percent), USA (36 percent) and the Netherlands (35 percent), with Australia ranked 12th on 14 percent. Whilst direct comparison is difficult due to the different make up of the various countries top 100 companies, this data suggests that Australian companies may be missing out on the significant organisational gains potentially achieved through TBL style reporting.

The report concludes that "good environmental stewardship and social responsibility are clear examples of good management and there is no disputing the clear link between good management and business performance".
 
It is now accepted that phasing in reporting on the environmental aspects of the operations of an enterprise will enable it to:
- maintain cost savings through more efficient use of resources; and
- seek initiatives to address the environmental impacts of their activities. 

Two key areas of academic research on TBL accounting are reporting and auditing. 

Reporting requires:
- define values
- define social and environmental objectives / targets
- identify stakeholders (all those affected by a business or enterprise)
- account for all components of your social objectives
- report the accountability results
- have the report independently audited by qualified social auditors
- set new targets and detail how to improve performance

International reporting standards in this field include those of the Global Reporting Initiative (GRI) established 1997. The steering group includes: 
- U.N. Environment Program; 
- World Business Council for Sustainable Development; 
- New Economics Foundation.

The other major issue is auditing standards.  Good work is being done in this area.  International auditing standards have been developed by 'AccountAbility' for the Institute of Social and Ethical Accountability. This revolves around the AA1000 Assurance Standard (2002).

However, what is a useful and meaningful report? Statements such as "we improved the environment" are meaningless. The key problem is to identify relevant measurable quantities that are also meaningful in terms of quality of life.  The TBL report of a small credit union in Maleny, Australia is a useful example. Note that there is a focus on the three bottom lines and the attempt to report quantitative data for each.  Qualitative data is also important.

Importantly, an enterprise must have developed and accepted a sound governance policy, which includes sustainability objectives in relation to financial, social and environmental sustainability. This governance policy directs the operations of the enterprise. 

Where do we go next? The quadruple bottom line adds in culture as an accountability, reporting and auditing requirement.
It recognises that businesses can promote and learn from indigenous cultures - thereby creating economic, social, environmental and cultural benefits.  For example, in Aotearoa (New Zealand) the Prime Minister (Helen Clark) has called
for the global community to add a fourth pillar, the cultural, alongside the economic, environmental and social pillars of
sustainability.  In this regard, it is necessary to ‘protect and revitalize traditional knowledge coming from local and indigenous communities, leading to the protection and recognition of natural and indigenous territories that have for
generations and centuries been the core of wisdom and knowledge on the natural environment and its sustainable use’.

These extensions to the bottom line recognise a spiritual aspect (the fifth or ultimate bottom line).

The quintuple bottom line looks at how an enterprise works cooperatively and how the cooperative itself promotes social equality or social parity across the whole of society. Enterprises should aim to achieve a society free from all social inequalities with the human race moving in unison in its diverse and elevated expressions.  This means removing social disparities and social complexes.  For example to achieve social parity, Unity: Journalists of Color Inc demands that by 2008 minority journalists should comprise no less than 20% of American newsrooms, and at least 15% of newsroom managers.

Accordingly, the type of business enterprise (and really the only type of structure) that can achieve this is the cooperative model.  Cooperatives achieve social parity in day-to-day interaction and working life.  They are the main means of ensuring rational distribution of profits to workers and / or shareholders in the local economy. They aim for social equality and equal locus standi.  The cooperative system is capable of ensuring the social welfare of all citizens in the local economy.

To achieve social parity and implement the principle of social equality requires a broad outlook and universal view. This is the proto-spiritual mentality. In this way limiting geo-sentiments and socio-sentiments can be easily surmounted.  The movement is toward neo-humanism - respect for all humans, animals & plants and their worlds. A Gaian nature-friendly ethic and practice.