Another way to view the Triple Bottom Line

We often imagine the Triple-Bottom Line (TBL) as a three legged stool. While that metaphor works on one level, it really isn’t all that helpful. A TBL organization needs to think about and manage all three-legs successfully but it must be noted that each of the three legs are unique with different goals and objectives.

It is my experience that most business organizations tend to focus on the profit and ecological legs of the stool with a lesser focus on the people side. I think this is partially due to the pressing and well known ecological concerns as well as the relative simplicity of measuring, monitoring and making changes to the environmental forces. Dealing with people is always more complex and challenging.

When I think about the TBL, I think of each leg uniquely.

I think about the profit leg as fuel. Like a rocket, we go nowhere without fuel in our current capitalistic society. Revenues and profits are only relevant because they provide the necessary resources. In the future, when we’ve figured sustainability out and are living in a different paradigm, I’m not convinced this leg of the stool will still exist.

I think of the people leg as the reason d’etre for a business organization. Why else are we here and engaged if it isn’t to make lives better. Ideally, the purpose of any human endeavor would be the advancement of human wellbeing while creating zero to little negative environmental impact. That is how a sustainable society would operate. Humans have always had an economy and the purpose of a human economy is to meet the social, spiritual and material needs of people. Why operate a business if it isn’t to improve the lives of your employees, the community and other stakeholders?

I think of the environmental leg as the constraint leg. Our society must operate and live within the ecological limits of the planet. The planet is just fine by itself and doesn’t need anything from us except for us to stop doing damage. This should be the goal of every person and business: No damage. The economy must operate within the physical constraints of the Earth, which is a closed-system (except for sunlight).

Therefore, the goal of a TBL firm is to use profits and revenues to meet the social, spiritual and material needs within their community while minimizing any negative environmental impacts. What can your firm accomplish while holding environmental impact at zero?

In my next post I’ll share some examples of how we implement this at TriLibrium.

Storytelling

Accounting is the language of business.  As a CPA, one of my skills is the ability to read and interpret financial statements.  While most people look at just a couple numbers, to a trained expert, the financial statements are like topographical maps telling a complex and multidimensional story.

While thumbing through The Fifth Discipline Fieldbook, I came across the following:

"Accountants are the architects of an organization’s nervous systems.  They design the way the organization will sense what is going on inside and outside itself.  They create a context that determines the relevant questions to ask.  They search for ground where the organization can position itself for maximum strength and flexibility."

I love this paragraph.  Our firm designs and installs a significant number of accounting systems and this really captures the essence of my work:  The architecture of a firm’s nervous system.

The accounting system design will differ depending upon the values and goals of the system.  A triple-bottom-line mentality requires different reporting systems to capture and respond to the data and feedback.

An accounting system provides feedback to the organization and as they say, what we measure matters.  The current financial reporting framework reflects what matters to investors without saying much if anything to employees, customers, the community and other potential stakeholders. 

What if we redesigned the central nervous system to provide feedback on sustainability?  How would that influence behavior?

As you may recall from my earlier blog posts about system thinking, the key leverage points in any system are:

1. Change the dominant mind-set out of which the current system arose
2. Rearrange the parts of the system
3. Alter the goals of the system
4. Restructure the rules of engagement of the system
5. Shift the flows of information and communication of the system
6. Correct the feedback loops of the system
7. Adjust the parameters of the system

What story is your accounting system telling?  How would your company be different with a Triple-Bottom Line monitoring system?

Transparency and reporting

I have been super busy wrapping up the end of school but really wanted to follow up on my last blog entry. While doing a GHG inventory is the first step towards climate and emissions sustainability, the obvious question is what's next for the business owner?

As a reminder, at one level, the process looks like this:

1. Measure your GHG emissions (conduct a footprint analysis)
2. Take steps to reduce your GHG emissions
3. Purchase carbon credits to offset the remainder

While that is a high level overview, their is another equally important aspect of this process: Reporting and transparency.

As we move towards sustainability, transparency is vital to the success of the journey and reporting is part of this effort. By reporting your results, you build trust and credibility with your stakeholders and you allow yourself to be benchmarked for comparison.

Just as a public company reports financial results, the information gleaned from a triple-bottom line reporting needs to be communicated to help stakeholders make decisions.

A GHG footprint is your baseline measurement

I was speaking with the owner of a successful progressive business. His company is environmentally conscious and plays an active role in the sustainable community here in Portland. Founded in 2001, they have been steadily building their business. Our discussion turned to triple-bottom line accounting and he acknowledged their business didn’t have many, if any, non-financial measurements. Like most individuals and organizations, they didn’t know their greenhouse gas (GHG) emissions footprint.

A GHG footprint analysis is a measurement of an organization’s direct and indirect GHG emissions. Greenhouse gases contribute to global warming through the greenhouse effect. They include carbon dioxide, methane, nitrous oxide, ozone, CFCs and water vapor. A GHG report will measure an entity’s direct and indirect emissions of the various gases, and then convert the data to CO2 equivalents. The final result is the tons of CO2 equivalents released over the year. This is a number to be managed.

As the old saying goes, “What gets measured get’s managed”. The GHG reduction process is a 1, 2, 3 process beginning with measuring emissions, then reducing and finally, offsetting the GHG emissions that can’t be eliminated. The first step in this process is the measurement. Every business should begin this measurement process now. Businesses can download free tools to get started at http://www.ghgprotocol.org/. Individuals might want to start here: www.nature.org/initiatives/climatechange/calculator.

Performing a GHG inventory will allow you to understand the source of your emissions. I was on a team who performed the first GHG inventory for the Bainbridge Graduate Institute (http://www.bgiedu.org/) and it was eye opening to see that well over half the annual emissions was from air travel by a small percentage of students, faculty and staff. We wouldn’t have known this without performing the footprint analysis.

For a great list of the Top 10 things businesses can do to reduce their emissions you can start here: http://www.carbonconcierge.com/act/top-10-things-businesses-can-do.

Individuals can start here for a similar list: http://www.carbonconcierge.com/act/top-10-things-businesses-can-do.

Having done a GHG inventory, I can assure you they aren’t that hard. There are experts who can help if you don’t have the time or skills. I actually offer reduced rates for this type of work because I want to help.

The process will engage your employees and could help you develop a competitive advantage. Customers, especially in the green community, will increasingly be asking about your footprint. I predict it won’t be long before a business that doesn’t know its footprint will be in the same boat as a company that doesn’t recycle – unattractive to customers, employees, regulators and the community.