PROUT Institute of Australia

Triple Bottom Line - Quadruple and Quintuple?

A concept gaining ground in company accounting is the Triple Bottom Line

(TBL). Others are even now moving to the Quadruple Bottom Line (QBL).

The TBL is an expanded baseline for measuring performance, adding social

and environmental dimensions to the traditional monetary / financial
yardstick. Practically an enterprise must balance economic growth,
environmental quality and social equity. Besides the gain of cost
saving, other gains that can be achieved through TBL reporting include:
- a values-driven culture underpinned by sound corporate governance and
ethical systems throughout the organisation;
- enhanced management systems and monitoring of performance that reduce
the risk profile;
- enhanced communication with key stakeholders;
- ability to benchmark performance both within an organisation and
between organisations;
- a high calibre staff attracted by the focus on a sustainable future.

Recall the idea that economics, community and environment are an

integral system. One cannot be abstracted from the others.

Likewise, businesses produce three kinds of value - financial value,

social/community value and ecological/sustainability value. The key
concept in the theory of TBL is that, in order to be sustainable, a
business must have positive balances in all three areas. The triple
bottom line is a way of accounting for the net value added in each of
the three areas, financial, social and environmental.

Many big multinational companies are now interested in and are

practicing triple bottom line accounting. Big companies are being
pushed in this direction in order to protect their image. A survey
indicates that around 30% of consumers in the UK will boycott companies
that they believe have policies which damage the environment or exploit
poorer nations. In short companies are being forced to recognise that
they have a social responsibility. Milton Friedman belongs to the past!
Friedman stated that business enterprises have no social accountability.
In Proutist thinking this is considered a derangement due to lack of
social and elevated ethical vision.

In 2002 Shell Oil undertook a reanalysis, which found its way into 'The
Shell Report 2002'. Contents of the report included:
- Economic performance;
- Environmental performance; and
- Social performance.

Shell undertakes particular projects with NGOs (Non Governmental

Organisations) and conservation groups in Africa. Perhaps part
publicity, part social responsibility? We may not know - much depends
on the calibre of persons in leadership and management roles and their
ability to take a neo-humanistic view. A neo-humanistic view is one
that develops the human being and collective consciousness in all three
aspects: physical, mental and spiritual. It means expansion of mind and
developing one's higher nature.

However, we do know that Shell's report and outcomes have been audited
by two internationally respected auditing firms to see how it meets its
performance benchmarks and targets, including environment and social
performance.

A lot of academic attention has been given to the problem of accurate

and useful social reporting. The concept of a social auditing cycle is
supposed to parallel the equivalent financial auditing cycle. Typically
the term "social auditing" also covers the environmental aspects as well
as the social.

KPMG Global Sustainability Services 2002 / KPMG International of

Corporate Sustainability Reporting 2002 ran a recent survey which found
that 45 percent of the world's top 250 companies now publish a separate
corporate report with details of environmental and/or social
performance, up from 35 percent in 1999. However, the survey found the
incidence of reporting varies markedly across the world. Of the top 100
companies in each of 19 countries surveyed, Japan has the highest
percentage of companies producing corporate environment or social
reports (72 percent), followed by the UK (49 percent), USA (36 percent)
and the Netherlands (35 percent), with Australia ranked 12th on 14
percent. Whilst direct comparison is difficult due to the different make
up of the various countries top 100 companies, this data suggests that
Australian companies may be missing out on the significant
organisational gains potentially achieved through TBL style reporting.

The report concludes that "good environmental stewardship and social

responsibility are clear examples of good management and there is no
disputing the clear link between good management and business
performance".

It is now accepted that phasing in reporting on the environmental

aspects of the operations of an enterprise will enable it to:
- maintain cost savings through more efficient use of resources; and
- seek initiatives to address the environmental impacts of their
activities.

Two key areas of academic research on TBL accounting are reporting and
auditing.

Reporting requires:
- define values
- define social and environmental objectives / targets
- identify stakeholders (all those affected by a business or enterprise)
- account for all components of your social objectives
- report the accountability results
- have the report independently audited by qualified social auditors
- set new targets and detail how to improve performance

International reporting standards in this field include those of the

Global Reporting Initiative (GRI) established 1997. The steering group
includes:
- U.N. Environment Program;
- World Business Council for Sustainable Development;
- New Economics Foundation.

The other major issue is auditing standards. Good work is being done in
this area. International auditing standards have been developed by
'AccountAbility' for the Institute of Social and Ethical Accountability.
This revolves around the AA1000 Assurance Standard (2002).

However, what is a useful and meaningful report? Statements such as "we

improved the environment" are meaningless. The key problem is to
identify relevant measurable quantities that are also meaningful in
terms of quality of life. The TBL report of a small credit union in
Maleny, Australia is a useful example. Note that there is a focus on the
three bottom lines and the attempt to report quantitative data for each.
Qualitative data is also important.

Importantly, an enterprise must have developed and accepted a sound

governance policy, which includes sustainability objectives in relation
to financial, social and environmental sustainability. This governance
policy directs the operations of the enterprise.

Where do we go next? The quadruple bottom line adds in culture as an

accountability, reporting and auditing requirement.
It recognises that businesses can promote and learn from indigenous
cultures - thereby creating economic, social, environmental and cultural
benefits. For example, in Aotearoa (New Zealand) the Prime Minister
(Helen Clark) has called
for the global community to add a fourth pillar, the cultural, alongside
the economic, environmental and social pillars of
sustainability. In this regard, it is necessary to 'protect and
revitalize traditional knowledge coming from local and indigenous
communities, leading to the protection and recognition of natural and
indigenous territories that have for
generations and centuries been the core of wisdom and knowledge on the
natural environment and its sustainable use'.

These extensions to the bottom line recognise a spiritual aspect (the

fifth or ultimate bottom line).

The quintuple bottom line looks at how an enterprise works cooperatively

and how the cooperative itself promotes social equality or social parity
across the whole of society. Enterprises should aim to achieve a society
free from all social inequalities with the human race moving in unison
in its diverse and elevated expressions. This means removing social
disparities and social complexes. For example to achieve social parity,
Unity: Journalists of Color Inc demands that by 2008 minority
journalists should comprise no less than 20% of American newsrooms, and
at least 15% of newsroom managers.

Accordingly, the type of business enterprise (and really the only type
of structure) that can achieve this is the cooperative model.
Cooperatives achieve social parity in day-to-day interaction and working
life. They are the main means of ensuring rational distribution of
profits to workers and / or shareholders in the local economy. They aim
for social equality and equal locus standi. The cooperative system is
capable of ensuring the social welfare of all citizens in the local
economy.

To achieve social parity and implement the principle of social equality

requires a broad outlook and universal view. This is the proto-spiritual
mentality. In this way limiting geo-sentiments and socio-sentiments can
be easily surmounted. The movement is toward neo-humanism - respect for
all humans, animals & plants and their worlds. A Gaian nature-friendly
ethic and practice.