People, planet, profit

Martin Ashcroft investigates the concept of sustainable development, or the triple bottom line, as it applies to business in North America. The triple bottom line, also known as TBL, 3BL or ÔÇÿpeople, planet, profitÔÇÖ, has broken the mold of how organizations measure themselves. The addition of people and planet to the bottom line shows that organizations are now measuring their achievements in terms of social and environmental criteria as well as economic. Whether they like it or not, the major corporations of the world are reporting on their social and environmental impact, and the momentum of corporate social responsibility is cascading throughout the economy like a snowball rolling down hill. The first official definition of sustainability was provided by the Brundtland Commission of the United Nations in 1987, formerly the World Commission on Environment and Development (WCED). Published by Oxford University Press in 1987, The CommissionÔÇÖs report, Our Common Future, contains the oft-quoted sentence, ÔÇ£Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.ÔÇØ Inherent in the definition is the understanding that sustainable development contains three distinct constituent parts: environmental sustainability, economic sustainability, and socio-political sustainability.The phrase ÔÇ£triple bottom lineÔÇØ was born in 1994, courtesy of John Elkington, who later expanded on it in his 1998 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business. The concept of TBL requires a company to be responsible to ÔÇ£stakeholdersÔÇØ rather than shareholdersÔÇöstakeholders being everyone who is influenced, either directly or indirectly, by its actions. Under stakeholder theory, the business should be a vehicle for coordinating stakeholder interests, rather than maximizing shareholder profit alone.This requires a huge mind shift for the Western businessman. Early interest in sustainability was understandably cloaked in marketing rhetoric. Companies had to be seen to embrace the new concept publicly, but they were nervous about spending a lot of money on it. People and the environment were certainly worthy causes, but the bottom line was still the bottom line. Companies of all sizes and sectors, however, have gradually begun to realize that becoming greener can create new forms of business value that are not initially measured in dollars, but might eventually affect the financial bottom line through an enhanced reputation earned through quality improvements, recruitment and retention of talented people, or becoming a preferred supplier. Once a way has been found to turn the sustainability ethic into a business opportunity, the serious effort can begin.On the people issue (or human capital, as itÔÇÖs sometimes known in this context), a business following triple bottom line principles will seek to be fair and equitable towards its own labor force and the community in which it operates. If itÔÇÖs a mining or resources company, it is likely to be experienced in this already, through agreements with first nation peoples. In other sectors, solutions to this challenge are not so obvious, but usually start internally with programs aimed at motivating people to enjoy their work and become involved in improving performance. ThereÔÇÖs nothing more rewarding for an employee than to have an idea for an improvement taken up by the employer, and to be praised afterwards for the results achieved. This may not immediately be accompanied by a financial reward, but it stands to reason that an improving business is likely to be a growing business, and a growing business will provide opportunities for people with ideas to develop their careers. Sustainability can be a virtuous circle.The planet aspect of TBL, also known as natural capital, relates to sustainable environmental practices. This is by no means a new concept, as we already have the ISO 14000 standards which were developed after the1992 Rio Summit on the Environment. Again, itÔÇÖs a subject that initially caused great consternation in companies that saw it as a bottomless pit of costs without benefits, but as the concept has matured ideas have been developed which promise to combine economic and environmental interests and produce one of the biggest business transformations in years.It is also fair to say that early initiatives on the environment were driven by regulations, particularly emanating from Europe, like ROHS (restriction of hazardous substances directive) and WEEE (waste electrical and electronic equipment directive), which US and Canadian companies had to plan for if they intended to sell their products into Europe. While legislation can often be a blunt instrument as an economic driver, one must wonder if we would have had hybrid-powered automobiles quite as quickly as we have, without emissions legislation, or whether the ethanol industry would have grown to its current size without governmental support. Other aspects of environmental importance, such as careful management of energy consumption and non-renewable resources, and reducing manufacturing waste, carry such clear economic incentives that their adoption is a no-brainer. As an example, a recent report by the US Environmental Protection Agency said the energy consumption of servers and data centers has doubled in the last five years. Data centers now account for 1.5 percent of all US electricity consumption. No surprise then, that Hewlett Packard, Dell, Intel and Microsoft, among others, are involved in initiatives to improve the performance of hardware. When consumers benefit from the efforts of manufacturers, the efforts pay off in increased sales, and the planet also benefits, as a result.But while energy savings can easily be quantified, many ingredients in the sustainability mix remain stubbornly intangible. Dixon Thayer of CHD Meridian Healthcare told me recently when we were talking about value, ÔÇ£if youÔÇÖre going make something your priority, you better make sure you can measure it.ÔÇØ But measuring social responsibility in any meaningful way is problematic, because it tends to rely on subjective judgments. How often has it also been said, ÔÇ£if you canÔÇÖt measure, it, you canÔÇÖt manage itÔÇØ? In an effort to create some kind of consistent standards in sustainability reporting, the Global Reporting Initiative (GRI) was formed in 1997 by the US-based non-profits Coalition for Environmentally Responsible Economies (CERES) and Tellus Institute, with the support of the United Nations Environment Program (UNEP). The first full version of the Sustainability Reporting Guidelines was released in 2000, and the organization has now become a permanent institution, with its headquarters in Amsterdam, Holland.The GRIÔÇÖs mission is to make sustainability reporting as routine and comparable as financial reporting. Its guidelines represent the most commonly used reporting framework in the world, with more than 1000 organizations from 60 countries using them to produce their sustainability reports. Like the companies it has been set up to assist, the GRI has multiple stakeholders, which is perhaps why it has established its popularity. The guidelines are the result of the collaboration of representatives from a broad cross section of societyÔÇöbusiness, civil society, labor, accounting, investors, academics, governments, and others, from all around the world. An analysis of the guidelines is beyond the scope of this article, but they can be viewed on the organizationÔÇÖs website http://www.globalreporting.org/. Every business should look for ways it can conserve energy and improve its green credentials. ItÔÇÖs not just about the feel good factor, although that should not be ignored. If being green makes you feel good, helps you to attract and retain employees, become a preferred supplier, and reduce costs at the same time, itÔÇÖs just good business.