Pushing the triple bottom-line

This column was started in January 2005 on the premise that business does not exist only to profit shareholders but also to benefit the common good. There was nothing new about this idea since it is enshrined in the Constitution and was the rationale for the Corporation Code of 1980. For some time, though, most senior managers and board directors have not adopted this point of view.

Some years ago, I remember giving a talk on business ethics as part of a mandated seminar on corporate governance for board directors. After painstakingly explaining the importance of looking at the interest of stakeholders of the company in addition to those of its shareholders, I was asked by an incredulous board veteran, “You’re pulling our leg right?”

Fortunately, the idea has been gaining some traction due to a convergence of initiatives coming from government, civil society groups, educational institutions and even businesses themselves. In addition, the growing use of the “triple bottom line,” or TBL concept has been a big help in pushing the broader agenda of business. The phrase was first used by John Elkington in his 1994 article for the California Management Review entitled “Towards the sustainable corporation: Win-win-win business strategies for sustainable development.” Elkington and his colleagues later on added the 3P formulation of “people, planet and profits” which some have found to be even easier to remember.

The triple bottom line phrase has become simple and easy-to-remember shorthand for the sustainability movement in business. It has also been trickling into educational institutions, supported in part by the Commission on Higher Education’s requirement that “Social Responsibility and Good Governance” be a required course in the business curriculum.

But business is a pragmatic field and concepts like TBL, no matter how promising, will make little progress without mechanics and believable users. After all, the standard financial statements with only one bottom line have been around for more than a century. As far as mechanics is concerned, the Global Reporting Initiative fits the bill.

The Global Reporting Initiative (GRI), according to its web site, “is a network-based organization that has pioneered the development of the world’s most widely used sustainability reporting framework and is committed to its continuous improvement and application worldwide.” Further, the web site explains that “sustainability reporting is a process for publicly disclosing an organization’s economic, environmental, and social performance.”

What about users? The Ayala group of companies leads the local field. Manila Water Company has been publishing a TBL report based on GRI standards since 2005. But recently, other Ayala companies have followed suit. Jaime Zobel de Ayala explained that “the sustainability report is widening the framework so that on the economic front, we’re saying it’s not just about profits. It’s also about employment statistics; it’s about the taxes we pay, the capital expenditures and investments we’re making. [It is also about] the social impact, how we’re affecting communities and finally there’s environmental impact. We’re taking this new way of looking at the business engagement and it deserves its own report.”

What would happen if more of the top business organizations in the country begin to publish TBL reports? Petron has already started doing so. My prediction is that, in time, the public will become more aware of the sustainability performance of companies they patronize and will be more discriminating in their choices.

This will begin to hit companies where they can feel it. When that time arrives, a much-needed tipping point will occur, making many socially and environmentally questionable practices among the largest Philippine companies a thing of the past.