The basics, and what they bring to companies
CSR and the triple bottom line are ideas that go together, so this piece is given over to explaining them. For a while now, the term corporate social responsibility has become a fairly common one. Even so, companies should bear the following in mind:
- Economic, since shareholders expect financial returns at the lowest possible risk.
- Social, in line with what society asks for: greater safety at work, better working conditions, and other concerns besides.
- Environmental, the calls to control the impact of business activity and to build the circular economy into it.
All of which leads us to think that a company will survive only if it is economically viable, socially responsible and environmentally sustainable — the three strands of the triple bottom line, a term coined by John Elkington in his 1997 book Cannibals with Forks, where he sets out the need to attend to the various groups of stakeholders through a triple account of results: economic, social and environmental.
CSR as a philosophy
A number of factors have led companies to build CSR into their foundations: society’s growing awareness in the wake of one social scandal after another, and business reasons such as better working conditions, less waste and lower energy consumption.
There are today various kinds of CSR standards, norms and codes. Companies should put these measures in place to contribute to social and environmental improvement, while keeping up a constant dialogue with their stakeholders.
It is understandable that the economic side should be paramount for any company, since its very existence depends on it. It is worth stressing, too, how much the employees matter in achieving that aim, because they feel part of the organisation. That makes it more likely that of their own accord — whatever the salary — they will choose to collaborate, to lend support and to be more productive in their work. This is why the triple bottom line places value on all three: people, planet and profit.
What is the triple bottom line?
The idea of the triple bottom line first appeared in 1997, though it was not until 2008, with the financial crisis and climate change, that ethics and CSR began to come into their own. That was the moment when companies started to see “business as usual” in a different light.
For a company, changing the way it operates to reduce risk and tackle climate change takes a great deal of time and money. Even so, investing in sustainability is vital if the climate problem is to be solved. A study by MIT found that the companies which adopted CSR as their philosophy were the ones that profited most that year.
Whether the triple bottom line succeeds as a foundation of CSR depends on talented employees. They need to know how to take this triple account of results from theory into practice. They also need a grounding in accounting and economics and in environmental science, along with leadership skills and the ability to take strategic commercial decisions.
Why measuring the triple bottom line matters
Demonstrating the results of what a company does is worthwhile, because it lets all its stakeholders analyse and understand the benefits those activities generate — economic, social and environmental alike. That in turn improves the company’s reputation, deepens the commitment of its employees, and wins the support of public institutions.
Finally, measuring these activities matters because it brings to light the good practices as well as the poor or middling ones. This new approach to a company’s philosophy builds trust and strengthens the value chain. There are, however, two strands of thinking about the practice. On one side are those who hold that reducing environmental impact is a way of “washing the company’s image” — greenwashing. On the other are those who believe the approach will make a greater difference to society.
Carolina Sánchez, student at CMI.
