Moving Beyond the “Triple Bottom Line”
(From The Ecozoic Reader, edited by Herman Greene, Fall 2006)
By John Marc Dreyfors
Increasingly, business schools, corporations and consultants have been joining the movement to “green” their image through promotion of the “triple bottom-line.” This concept attempts to balance social and environmental goals and considerations along with economic sustainability in decision-making, programming and corporate structures. Importantly, this comes at a time when globalization is changing the social, economic and environmental landscape; and multinational corporations are coming under greater scrutiny as “engines of change.” In addition, conservatives, corporate lobbyists and trade officials have pushed for less regulation, to emphasize the use of free-market, trading systems to solve our social and environmental ills. The goal of triple bottom-line thinking is to soften the ravages of capitalism and corporate controlled society, by shifting from “bottom-line” driven motivations of profit and greed, towards more benign models, inclusive of other, important societal values that have been excluded to date. This model, however, is also flawed and requires a more thorough review of its strengths and weaknesses.
Programs, such as the Center for Sustainable Enterprise at Kenan-Flagler School of Business at UNC-CH, one of the world’s most highly respected alternative business programs initially led by Dr. Stuart Hart (an Advisory Board member of CES), have adopted this model of the triple bottom-line. At first glance, it has much appeal in convincing upper and middle management of the need to include broader goals that represent community and worker issues as well as environmental sustainability into the decision-making processes. These concerns have been neglected, as return on equity, shareholder value, market position and other economic indicators that are a function of profit have been primary to the point of exclusion.
It has been relatively easy for corporate leaders to accept the idea of triple bottom-line accountability. Yet, given the history of near “psychopathic” corporate actions (see the documentary, The Corporation, or Who Killed the Electric Car?), “green-washing” for marketing and public relations sake, and the duplicitous tendencies to say one thing and do another (for example, publish environmental code of ethics in stockholders’ annual reports, while conducting lobbying efforts to undermine environmental regulations, or conduct field operations with unabashed ruthlessness), it remains to be seen whether this accountability will result in changed behavior.
At times it would seem to be for their advantage. For example, research shows that improving labor benefits and working conditions actually increases worker productivity and loyalty. In a tight labor market, this makes sense. Globalization has, however, actually increased downward pricing pressures on costs of labor, as corporations seek to improve profitability and competitiveness, and with outsourcing likely to take a greater portion of both manufacturing, high-tech and even professional positions in the future.
This economic, or single bottom-line pressure may negate a corporation’s good intentions. Yet, some corporations have “seen the light” and truly believe in being good corporate citizens, as represented in foundation donations without “strings attached.” The self-interested sensitivity to public sentiment may drive this, particularly for those corporations that depend on their corporate name, brand or image for marketing. While many come to social responsibility through crisis management and public relations manipulations, some have seen the value in doing more for their workers and communities. Research has shown that people matter, and there is immediate connection and growing interest with consumers and customers to issues of fair trade.
As far as environmental sustainability, this may be a much harder target. Certainly, corporations have come along way from the days of point source, command-and-control, and regulatory pollution prevention. Today, engineers design systems that produce less waste and use less energy. Wastes are now traded or recycled. And conservation of energy and other resources have resulted, to the chagrin of some executives, in improved margins, immediate cost reductions and long-term efficiencies that have benefited the economic bottom-line, and shareholder value. Sadly, most corporations have had to be brought to these solutions under legal threat or action, while attacking regulatory branches, lobbying for tax relief, paying off politicians and/or avoidance through endless litigation in the courts. Such delaying strategies are often accepted as part of the cost of doing business.
A few companies have taken leadership positions in their markets by moving their business model to one that looks less at “production of goods” and more at the providing of services, maintaining control over the “life-cycle” of a product from “cradle to grave,” or even better, as Bill McDonough advocates, “cradle to cradle.”1 Businesses will need to mimic life-systems 2 to be competitive in the future, moving beyond efficiency models to becoming restorative. Inspired chiefly by Paul Hawken’s book, The Ecology of Commerce, 3 Ray Andersen of Interface carpets had an epiphany in the early 1990’s, and since, has been an outstanding leader in this movement to achieve these goals. 4
Each component of the triple bottom-line has been promoted as creating a simple web of interaction that can be optimized to maximize value and will result in doing the “right thing,” while making money too (“doing well, by doing good”). This has been an “easy sell” that it seems blissful- “having our cake and eating it too.” Yet, there is something missing–a disconnect in perception that is obvious and very disturbing in its simplicity as it is in its apparent oversight. This triangular model fails to recognize that natural systems are the bottom-line. Natural capital, as Hawken and the Lovins have so well written, is “the source from which all other forms of capital are created.”5 All aspects of the economy, whether finance, capital, labor, or technology, are dependent on the planet for their formation and recycling in the closed loop model that is our natural world.
If, in the triple bottom-line calculation, the environment is balanced against the other two variables, what are seen as optimum values may in fact be unsustainable. For instance, nuclear energy has a high probability of having no optimum level if the costs of waste disposal are pushed far enough into the future (taking into account the intergenerational effect). The short-term benefits of electricity, employment, and so forth, with a low carbon “footprint” may be outweighed by the burdens to human and environmental health. The nuclear power industry ultimately may need to end, as the Princeton Professor, Dr. Ted Taylor, an activist against both nuclear power and weapons, has come to realize.6 Investors, employees, vendors may all to lose their jobs and source of income as we transition away from similar foolish and decadent economies. And does such logic extend to the fossil fuel, defense and petro-chemical industries? Can they really optimize a triple bottom-line?
This concept of the triple bottom-line may be more manifestation of the neo-classical economic theory that has been dominating our policies for decades. Neo-classical economics has produced excellent econometric models of various components of our socio-economic interactions. Yet, it is notoriously remiss in leaving out inputs, like natural resources, and outputs, such as waste pollutants, from Classical Economics or other models. These failures have been most thoroughly exposed by Herman Daly, Professor Emeritus of Economics at the University of Maryland and ex-World Bank economist and Robert Costanza in their books on “ecological economics.” 7
Ultimately, there is no triple bottom-line, but only one bottom-line, that of our closed Earth systems, where it is impossible to continuously “grow our economy,” and where there are limits to carrying capacity and non-renewable resources. We may be able to “transform” economies, but it is physically impossible to continuously grow in a closed Earth system where entropy and the other laws of thermodynamics dominate. 8 Many would say that this smacks of “eco-imperialism,” as we remove people from parks and protected areas, limit population growth, and production and consumption in alignment with the capacities of our planet. “Freedom,” they cry, “to produce and consume what they want.” But our current model is the real imperialism, the real “utopia,” which degrades our ecology and will sink our economy. 9
We are already seeing the impacts from statistics related to GNP and GDP, in comparison those generated from National Income Accounting systems. Fundamental global and national development policy based on unsustainable production and consumption can no longer be the dominant paradigm. Corporations will have to adjust to offer products and services of sustainability. This will require governments’ involvement to create a “level playing field” to allow competition to work to increase desirable outcomes in markets where externalities are internalized. This can be best done with greatest efficiency by internalizing externalities to the market, such as clean air and water, reduced carbon emissions, moral values of increased time with family, the importance of good teachers and a host of other ethical and moral values to which we can agree. Using market trading systems in conjunction with command and control regulatory systems as well as improved and efficient market information for consumers can go a long way to achieving these goals. Topped with an investment in education (and education in investment), great things can be achieved that will allow us our perceived “freedoms,” provide employment and opportunity.
If these changes are made, we can no longer expect that the increasing wealth of the industrialized will trickle down to the poor to the benefit of all. The wealthy economies, and the vehicle of our cultural domination, the Corporation, must be willing and be able to transfer the needed technologies to help the South and lesser-developed nations achieve a standard of living where there is no want of basic needs. Advanced industrial societies must also learn that simply “less stuff is more” and promulgate this cultural value in a way that others want to emulate it (the real “war of ideas”). We all must do more to: “live simply, so that others may simply live,” and develop the system of “sustainable livelihoods.” 10 We, as employers, consumers and shareholders must make the decision to move our economies towards sustainability, and build and demand those systems of measure and accountability. Though the triple bottom-line may be viewed as an important incremental movement toward a “green” economy, we need nothing less than a “sea change” in the way we do business. The sooner we realize this, the faster we will get there.
Though this essay uses economic valuations, these are simply an imaginary system of measure to which most can agree for argument and debate. It is certain that purely economic arguments will not be enough to bring about the degree of change needed in our societies. Spiritual changes are needed and are well described by the works of Thomas Berry, who teaches “intimacy with the natural world,” of Earth being a “communion of subjects, not a collection of objects,” and that we are a part of the interconnectedness of Earth’s life systems and unfolding creation. 11
These ideas are critical as we move from our macro- to our micro-economies of where we work and even the economies of our homes, as we move from our head to our heart to a place of balance and connection.
Footnotes:
1 William McDonough, Cradle to Cradle: Remaking the Way We Make Things (North Point Press, 2002).
2 See Janine M. Benyus, Biomimicry: Innovation Inspired by Nature (William Morrow, 1997).
3 Paul Hawken, The Ecology of Commerce: A Declaration of Sustainability (HarperCollins, 1993).
4 See Ray Andersen, Mid-Course Correction: Toward a Sustainable Enterprise: The Interface Model (Peregrinzilla Press, 1999).
5 Paul Hawken, Amory Lovins and L. Hunter Lovins, Natural Capitalism: Creating the Next industrial Revolution (Little, Brown and Company, 1999).
6 See Joe Holley, “Theodore Taylor Dies; Tried to Redirect Nuclear Power” available at http://www.pugwash.org/reports/nw/taylor.htm; Internet; accessed October 13, 2006.
7 See, for example, Steady State Economic: The Economics of Biophysical Equilibrium and Moral Growth, 2nd ed. (Island Press, 1991); Robert Costanza, Ecological Economics (Columbia University Press, 1991).
8 See Nicolas Georgescu-Roegen, The Entropy Law and the Economic Process ( Harvard university Press, 1971); Herman Daly, Beyond Growth: The Economics of Sustainable Development (Beacon Press, 1996).
9 See Wolfgang Sachs, Planet Dialectics: Explorations in Environment and Development (Zed Books, 2000).
10 See, for example, Livelihoods Connect at www.livelihoods.org; Internet; accessed October 13, 2006.
11 See Thomas Berry, The Great Work: Our Way into the Future (Bell Tower, 2000).