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From Corporate Responsibility to Triple Bottom Line

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Introduction

The introduction of triple bottom line business model has become popular in every kind of business over the last decade. And there was a good reason for this. The ultimate success of corporations could not be measured just by the traditional financial standards. It had to include ethical and environmental performance.

In the past corporations focused mostly on their profits. In the best case they could consider some social responsibility. Corporate social responsibility (CSR) is a business model that based on corporate self-regulation. It considers legal policies and international norms. But in the mid-1990s another business model emerged. It has developed social responsibility beyond its compliance with CSR standards and the interests of companies. The companies took initiative and made steps to advance social good. They adopted the triple bottom line framework – a very progressive business model that made a difference in many societies.

The term ‘three bottom line’ was created by John Elkington, a well-known authority on sustainable business. He offered a proposal that companies had to prepare three bottom lines. The first bottom line was financial. It considered the corporate profit – the balance of the profit and loss. The next bottom line was social one, the concern with the account of people involved in company’s business. It was a measure of social responsibility that the firm showed throughout its operations. Finally, the third bottom line was the environmental account. It was an indicator of corporation’s environmental performance and responsibility. Therefore, the triple bottom line included people, profit and planet (The Economist, 2009).

This essay will argue in support for the triple bottom line business model. It will explain the difference between corporate social responsibility and the concepts of triple bottom line. The essay will also discuss the issues of distributive justice and the current distribution of wealth.

The Importance of the Triple Bottom Line Model

Triple bottom line view-point is that a corporation should combine its vision of financial prosperity with considerations of social justice and environmental stewardship. Since this approach consists of three parts – people, planet and profit, it requires three-dimensional thinking.

People

For the critics this model may seem naive. To change their mind they have to consider the trends that support the necessity for corporations to be socially responsible and well-disposed. Many companies are interested to hire and retain good people as the success of their business depends on employees’ characters. To understand the importance of people involved in business it is good to think of media organizations or successful sports teams. It is people – the stars, who earn big amount of money, but not the shareholders. Those organizations do not have another option but to be socially responsible and well-disposed towards people.

It is also important to note that there are not very many good and responsible people necessary for the. For example, Baby Boomers tend to go for retirement, and there are fewer people of their generation now. If corporations decide to limit their care of the workforces they may soon have shortage of workers they need.

Critics of triple bottom line business model should also consider the fact that other generations may be less tolerant towards poor conditions at work. They are more likely to be searching for more attractive offer. If they do not find meaningful work they will move on.

Finally, today people who look for job have more options than in the past. Often they make their choices based on ethical attitudes of large corporations. By the way, consumers also base their purchase decisions on ethical issues. The worst case scenario for a company that does not care for people is the response of the whole community (Mind Tools, n.d.).

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Therefore, companies take into consideration the impact of their actions on potential recruits and customers. They do not exploit their employees by violating wage and child labor laws. Instead, companies try to care for their employees offering opportunities for advancement, good working hours and health care. It is also important to note that the process of triple bottom line can enable external stakeholders and employees to learn more about their corporation, and thus to extend their relationships with other stakeholders who work in it (Jackson, Boswell & Davis, 2011, p.57).

Planet

Companies that hold triple bottom line also take actions to remove any ecological effects from their activity. They make efforts to reduce any manufacturing waste and manage their consumption of energy carefully by using energy sources that can be renewed. Triple bottom line companies avoid producing products that can harm people and the environment. Moreover, the corporations have an ecological agreement with the communities and often give reports of their achievements in impacting sustainability and the areas that require attention. This approach demonstrates a tendency to be transparent before the communities. It also lessens concerns of the stakeholders on issues that can be hidden. Furthermore, companies that try to build a sustainable environment become increasingly motivated in protecting the natural resources. They are also more open for alternative energy sources (Jackson, Boswell & Davis, 2011, p.56).

Profit

The financial bottom line is common for all companies, including those that are not using triple bottom line business model. However, for the critics of this approach it is important to remember that profits of the triple bottom companies will be used for empowering and sustaining local communities. It means that people and environment, not just shareholders and chief executive officers, will benefit of these profits. When companies consider their social and environmental responsibilities they have responsible people. As a result, triple bottom line companies benefit, too.

Triple Bottom Line Argument against Conventional Measurement of Success

In conventional business accounting a major indicative of success is profit. The supporters of this model think only in terms of profit or loss. This bottom line is recorded on their companies’ statement of revenue and costs. Over the last decades, people concerned with social justice and environmental issues have tried to bring to public awareness a broader understanding of the concept of bottom line. This concept included full cost accounting – the cost that corporations could provide in their papers. For example, while corporation’s profit would be considerable, its chemical plant would cause cancer or lung diseases among the employees. The chemical plants can also pollute the natural environment. Needless to say, that conventional business would not look for any social enterprise attempting to provide opportunities to handicapped people for education and jobs.

Those companies that hold a triple bottom line would take initiative to establish a social enterprise and offer opportunities for people with disabilities. For example, triple bottom line corporations in the United Kingdom managed to organize a charity organization called “Recycling Lives”. This social welfare charity aims to help some handicapped people with the employment and independent living (Recyclinglives, n.d.). The social welfare in such organizations is a meaningful employment of people with disabilities. It also helps to reduce disability costs from the governmental funds.

The triple bottom line companies care about environment. For example, the company Johnson & Johnson has set environmental goals for over 15 years. The corporation has a purpose to protect the environment and improve the health and well-being of people. It does not just operate in compliance with regulations but tries to reduce its environmental impact (Johnson & Johnson, n.d.). Starbucks Coffee Company attempts to reduce its environmental footprint by promoting reusable cups, and thus to decrease the amount of waste associated with cups and packaging. The corporation also conserves the water and energy purchasing and using renewable resources (starbucks.com, n.d).

The companies that adopt three bottom line model will eventually become more successful than conventional businesses. Since such corporations look for reduction of their environmental impact they deliver greater efficiency in their stewardship. Their approach sparks innovation and makes them more competitive. Over time this will lead to a better performance and profitability.

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The Difference between Social Corporate Responsibility and the Triple Bottom LineConcepts

Corporate social responsibility and triple bottom line concepts are very similar and sometimes they are used interchangeably. However, there is a difference between these two concepts.

Corporate social responsibility is a business model that considers the social, environmental and financial impacts of decisions and actions a company is involved in. Any corporation that sets goals for long term sustainability takes corporate social responsibility very seriously. However, responsible business does not aim to measure the positive impact of its performance (Failte Ireland, n.d., p. 3).

The triple bottom line model goes beyond the standards of corporate social responsibility. It includes the criteria of measurement of company’s success. It covers social, environmental and financial or economic areas. The social performance is difficult to measure. The criteria of social performance evaluation take into account that impact a company has on people who work in a company and on the local community. Corporations that apply the concepts of triple bottom line will make their decisions and actions to benefit the local communities and will try to prevent any exploitation of people and endangerment in their activities. Therefore, social factors that triple bottom line model includes are working conditions, high labor utilization standards and consideration of the communities’ needs.

Environmental performance includes a total impact of a company on the environment. Companies that hold triple bottom line approach set goals to improve the environment where it is possible, or if it is not, they will try to reduce their negative impact (Failte Ireland, n.d., p. 4).

Distributive Justice as a Part of Corporate Social Responsibility

Distributive justice refers to the idea that decisions and actions of a company or organization are just. It is based on assumption that people should receive their fair rewards in exchange for their work. However, in reality, many corporations set their primary goal in increasing profits. Their activity includes consumption of natural resources and the use of people as a workforce. To maximize their profits many corporations try to avoid their social responsibilities towards people and environment. Very often shareholders and chief executive officers benefit the profits. Distributive justice is that part of corporate social responsibility that attempts to maintain the balance between corporate and community’s welfare. For decades, people concerned with social justice and environmental issues have struggled to bring to public awareness the necessity of corporate social responsibility. They succeeded only in part. There emerged the companies that understood the importance of social and environmental responsibility and implemented triple bottom line principles in their practice. They contribute to the communities from their profits and try to improve the environment where it is feasible. Many of their practices have been already described before. However, the majority of corporations, especially those that do their business in countries of the third world, are not concerned with the social and environmental responsibilities.

Conclusion

The triple bottom line business model has become increasingly popular for the last decade. It goes beyond corporate social responsibilities. This approach does not only consider social, environmental and financial issues, but attempts to measure companies’ success according to these criteria. Triple bottom line companies have a better future than those that do not hold this principle. Their approach sparks innovation and makes these corporations more competitive. Over time this will lead to a better performance and profitability.

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