Triple Bottom Line Overview and Analysis

Subject: Business Ethics
Pages: 6
Words: 1654
Reading time:
7 min
Study level: PhD

The business world is characterized by a wide-scale discussion of ethical issues and the concept of responsibility. Businesses now strive to become corporate citizens that follow the principles of sustainability (Schwab, 2008). Corporate social responsibility (CSR) has become a norm or rather a goal to reach. Scholars and practitioners have also tried to come up with an efficient measurement tool to evaluate companies’ performance as well as the level of their sustainability. Triple bottom line (TBL), developed in the 1990s, was meant to become one of these tools (Slaper & Hall, 2011). At the same time, researchers and practitioners argue that there is insufficient clarity concerning the method. More so, other impact assessment tools have been widely utilized. This literature review unveils the major aspects scholars and practitioners focus on when considering TBL as compared to other impact assessment types.

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Literature Review

Definition

First, it is necessary to note that researchers pay a lot of attention to defining the concept of the triple bottom line. Vanclay (2004) provides a number of definitions and states that the concept entails three major elements: social, economic and environmental. Thus, TLB is used to measure the impact on economic, social and environmental spheres. Dhiman (2008) refers to the elements of the triple bottom line as “sustainability of products, people, and planet” (p. 51). Researchers also note that, in the corporate world, TBL is seen as “a valuable management tool” that “defines a company’s ultimate worth in financial, social, and environmental terms” (as cited in Norman & MacDonald, 2003, p. 245).

Importantly, there is no agreement on the nature of TBL as some see it as a philosophy and approach while others view it as a specific methodology and an assessment tool. For instance, Vanclay (2004) emphasizes that triple bottom line is a philosophy rather than a particular methodology. Slaper and Hall (2011), on the contrary, consider it as an effective framework that can be used to measure company’s performance within the three areas. Freeman and Hasnaoui (2011) examine the way CSR, as well as TBL, are viewed in a number of western countries. The researchers state that the definition differs slightly as people in different countries tend to focus on a bit different aspects or have rather differing approaches. For instance, in France, governmental is actively involved in the business world, and social and environmental responsibility are deemed to be the governmental rather than public concern. In other countries, the public and, hence, companies focus on the three aspects (economic, social and environmental).

Measurement

One of the major aspects criticized by both scholars and practitioners is concerned with the lack of clarity and precision in the use of triple bottom line. As has been mentioned above, there is no detailed description of particular tools within the TBL paradigm. Slaper and Hall (2011) claim that there is no “universal standard method for calculating the TBL” (p. 5). At that, the researcher states that economic performance can be measured with the use of such indexes as income, organization’s size, job growth, revenue and so on. It has been acknowledged that social and environmental impact is more difficult to assess. Slaper and Hall (2011) note that calculation of social the environmental impact can be associated with measuring pollutants (nitrogen oxides or sulfur dioxide and so on) concentration, natural resources consumption, change in land use, electricity consumption, waste management and so on. As far as social measures are concerned, the researchers mention unemployment rate, people’s median income, different groups’ (females, ethnic minorities, immigrants, people with disabilities and so on) labor force participation, violent crime rate, life expectancy, and so on (Slaper & Hall, 2011). At the same time, the researchers add that there are other possible measurements used in organizations.

Norman and MacDonald (2003) are less positive about the TBL paradigm and state that there is no sound model to measure social and environmental bottoms. The researchers stress that proponents of the triple bottom line approach simply postulate the need to measure three domains without providing particular tools. Norman and MacDonald (2003) mention such measurements as labor force participation, charity donations, toxic emissions, and some other. The researchers also emphasize that practitioners are free to choose their own measurements, which makes the tool rather inefficient and uninformative.

Limitations of TBL

The literature reviewed shows that many researchers and practitioners focus on the limitations of the TBL paradigm. Notably, all the sources reviewed include the criticism concerning the lack of precision and particular measurement tools. At that, researchers tend to pay attention to other aspects as well. For instance, Vanclay (2004) states that the focus on the corporate environment is a significant drawback of the model. Vanclay (2004) also adds that instead of measuring three domains, impact assessment models should focus on manifold aspects including economic, social, environmental, political, cultural, natural and so on. Lederwasch and Mukheibir (2013) mention another limitation associated with the language and the philosophical underpinnings of the model. The researchers emphasize that organizations should not strive for harm reduction but should concentrate on improvement and progress.

Besides, researchers and practitioners tend to see TLB as another term for corporate social responsibility, which is seen as a drawback. It is widely agreed that TLB is simply another word for CSR as well as existing impact assessment methods. Freeman and Hasnaoui (2011) explore the way the principles of CSR are employed in four countries and conclude that TBL is similar to other impact assessment methodologies with their opportunities and drawbacks. Vanclay (2004) is even more critical as regards the use of TBL since the researcher notes that triple bottom line paradigm only identifies the three areas of assessment, but the model could benefit greatly if it adopted tools used in other impact assessment paradigms.

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Conclusion

On balance, it is possible to note that the triple bottom line paradigm has attracted a lot of attention among scholars and practitioners. Proponents of the model claim that it enables companies to measure their performance and their impact on the society while many practitioners and scholars argue that there are no particular tools to employ. The lack of clarity and precision makes the triple bottom line model rather inapplicable when measuring organizations’ impact. However, the discussion of the model’s limitations can result in the development of a more sophisticated paradigm that will equip practitioners with specific tools to measure organizations’ manifold impact on the society. It can also change the way impact assessment is viewed in the society. Practitioners and scholars may stop seeing it as a way to reduce the adverse impact and concentrate on improvement, maintenance, and progress.

Response to the Questions

Any multinational organization operating globally utilizes the triple bottom line model or another impact assessment paradigm to follow the principles of corporate social responsibility. Being an oil and gas production company, my organization also measures its impact and reports about it to remain transparent. The focus is often on the environmental domain as companies extracting natural resources are often associated with a significant harmful impact on the environment (Lederwasch & Mukheibir, 2013). At that, the company is operating in many countries, which brings to the fore another important aspect to focus on. Different cultural, as well as legal, norms unveil numerous issues related to the corporate culture. Thus, operations in African countries are associated with practices that can be viewed as illegal or unethical (for example, bribery) in western countries while they are regarded as facilitation methods in these areas.

It is possible to note that the TBL model can become an important tool that will help managers to make decisions when interacting with local governmental bodies, partners as well as communities. Thus, it is clear that companies can potentially use any locations to extract natural resources or expose wastes if the corresponding facilitation method is utilized. At that, managers may employ the TBL to assess the potential impact on the three domains mentioned. Slaper and Hall (2011) provide a number of measurements that can be used to measure the impact. Thus, managers should estimate the economic gains of every operation and decision (for example, revenue input), environmental impact (acres of lands used, location of the land (whether it could be used for farming or dwelling), pollutants), and social indexes such as the change of the employment rate in the community, household income, affordability of healthcare services and so on. It is important to make sure that there is a balance between these domains. If such balance exists, the facilitation is possible in some African countries.

At the same time, managers can face certain difficulties when applying the model. For example, it can be difficult to estimate the impact of a particular operation and even organization as there is always a set of factors affecting the environment and society. More importantly, it is nearly impossible to find the balance between the major domains mentioned as it is difficult to estimate the weight of each area. In simple terms, it is difficult to decide whether the increase in employment rate can outweigh the increase in pollutants emissions and the lack of access to healthcare services. Therefore, practitioners still have to rely on the corporate culture as well as their own experience and ethical paradigms.

On balance, it is possible to note that the TBL model provides some tools and a helpful framework for practitioners. However, there are many gaps to be filled to make the approach effective and universally applicable. The potential of the model is significant as it can help managers to make decisions in a more efficient way. These decisions will be ethical and universally beneficial for nature, society, and the organization. Nonetheless, practitioners should try to develop sound metrics to make sure that the measurements used are appropriate. Cultural peculiarities of people living in different regions may become barriers to the development of a universally accepted set of measurements, which should be taken into account by scholars and practitioners.

References

Dhiman, S. (2008). Products, people, and planet: The triple bottom line sustainability imperative. Journal of Global Business Issues, 2(2), 51-57.

Freeman, I., & Hasnaoui, A. (2011). The meaning of corporate social responsibility: The vision of four nations. Journal of Business Ethics, 100(3), 419-443.

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Lederwasch, A., & Mukheibir, P. (2013). The triple bottom line and progress toward ecological sustainable development: Australia’s coal mining industry as a case study. Resources, 2(1), 26-38.

Norman, W., & MacDonald, C. (2003). Getting to the bottom of “Triple Bottom Line”. Business Ethics Quarterly, 14(2), 243-262.

Schwab, K. (2008). Global corporate citizenship: Working with governments and civil society. Foreign Affairs, 87(1), 107-118.

Slaper, T.F. & Hall, T.J. (2011). The triple bottom line: What is it and how does it work? Indiana Business Review, 86(1), 4-8.

Vanclay, F. (2004). The triple bottom line and impact assessment: How do TBL, EIA, SIA, SEA and EMS relate to each other? Journal of Environmental Assessment Policy and Management, 6(3), 265–288.