Triple bottom line, which measures the social, environmental and financial impact of business, may have seemed like a fad a decade ago, but the growing number of sustainability reports issued by large corporations show that this fad is here to stay.
Michael Borowitz, CPA, Columbus shareholder at Clark Schaefer Hackett, says companies still spend more time and effort worrying about the financial bottom line because being able to pay employees and make shareholders happy is a constant pressure. But that’s not the only factor.
“A company’s ability to articulate its social and environmental bottom lines can be a differentiator in the marketplace,” he says.
Smart Business spoke with Borowitz about triple bottom line and what it may mean for your business.
Why do organizations look to measure and improve social and/or environmental impacts, in addition to the financial bottom line?
Some companies will invest in the social and environmental bottom lines because they see a strong correlation with the financial bottom line. Often, this is because they see their customers making purchasing decisions in part based on social and environmental issues. Companies have also experienced the negative financial impact of associating with businesses that negatively impact society or the environment.
Another reason is the knowledge gain. As organizations start to think about their social and environmental connections differently, it can spark innovation. If, for example, one initiative is to reduce waste, a business may find software or a process that eliminates a significant amount of paper. This may have the added effect of making them more efficient, which adds to their profitability, in addition to lessening their negative impact on the environment.
Very few large corporations haven’t at least had an internal conversation to determine where they stand on these topics. Whether they’ve got a plan in place will depend on the organization. Those wanting to work with the largest companies will need to be able to answer the question, “What are you doing about your environmental and social impact?”
What do you see the most successful companies do when utilizing sustainability standards or triple bottom line?
There’s a huge variance in terms of how much time, materials and money go toward making changes in social and environmental impacts. The goal isn’t universally specific; it’s about constant measurement and constant improvement.
Organizations need to always be looking out to the future, finding the next strategy for increasing their economic, environmental or social bottom line. They must have a process that continuously evaluates and refines what they’re doing.
Is it hard to measure this?
Measurement is the often the most difficult piece, even though technology is increasing our ability to detect and measure different variables. Today, however, there are a lot of factors that aren’t easily measured, which leads to a significant element of estimation.
How can businesses get started?
Start small, so you can get your mind around it. Don’t pull a sustainability report from a large publicly traded company and expect to duplicate it as a first step.
Pick a small boundary, possibly a segment of your business, to start with. You will likely find that you already perform some sustainability activities, e.g., a recycling program.
Triple bottom line is very scalable. Beyond the initial brainstorming, you’ll need to create a baseline by measuring your current status. Then, develop an improvement plan.
Tackling the low-hanging fruit gets your people aligned and thinking methodically about it. Once you get your feet wet and learn how to make a plan, execute the plan and revise the plan, then you can more easily expand the boundaries of your plan into different areas.
Insights Accounting is brought to you by Clark Schaefer Hackett
