Corporate Social Responsibility vs. Triple Bottom Line

Introduction: CSR and the Triple Bottom Line Compared

Picture two companies: Company A and Company B. Company A manufactures chemical products and has been on the receiving end of criticism and public outcry over the air and water pollution caused by its chemical manufacturing plant. Due to increased pressure, Company A devises a strategy to start a project that will enable all farmers in the neighboring areas to access clean water — an effort to give back to the community and reduce negative publicity. Company B is a nonprofit organization that employs visually impaired and handicapped individuals to conduct research on strategies that communities and corporations can apply to conserve the environment. Company B uses Braille technology and has developed a variety of green strategies for both businesses and government.

The community benefits from both companies, but they operate on different frameworks. Company A embraces corporate social responsibility by providing clean water to farmers, while Company B applies the Triple Bottom Line approach by employing individuals that other companies might overlook and simultaneously contributing to environmental conservation. So which approach is more important? Is it the public's social perception of a company as a responsible business, or is it the integration of social, environmental, and economic sustainability into a company's mission and daily activities? This paper argues that companies should aim to be Triple Bottom Line companies rather than limiting themselves to strategies that target social responsibility alone.

Key Differences Between CSR and the TBL Approach

Corporate social responsibility (CSR) is a form of self-regulation for companies. It requires entities not only to pursue profits, but also to engage in actions that benefit the community, comply with laws and legal procedures, and adhere to ethical standards. The Triple Bottom Line (TBL) approach, by contrast, requires that in addition to CSR, companies focus on long-term sustainability — weighing actions according to economic, social, and environmental considerations (Matteson and Metivier, 2015). First used by John Elkington in 1994, this approach adds two additional bottom lines — social and environmental — on top of the traditional economic one used in accounting. In other words, it measures profit, benefits to people, and impact on the planet: the three "Ps."

There are notable differences between CSR and the TBL approach. While CSR mainly targets the relationship between the community and the firm, the TBL approach clearly distinguishes a company's responsibilities toward people and toward the environment. The TBL approach is also more effective at encouraging innovative ideas that are profitable, beneficial to the community, and attentive to populations that might otherwise be ignored. Companies must look beyond the common CSR measures that the majority of firms apply, because both the social and environmental dimensions must be accounted for. In terms of measurement, it is easier to quantify the portion of finances directed toward a community project under CSR, since comparing the "planet" and "people" dimensions using the TBL approach can prove difficult. Nevertheless, the TBL approach should be understood as an improvement upon CSR — the two frameworks complement one another. Companies seeking to expand their outreach to the community and advance environmental conservation should aim to become Triple Bottom Line companies, as this will benefit them more in the long run.

Why TBL Companies Outperform Socially Responsible Companies

There is a common misconception that companies which have acknowledged there is more to business than profit automatically embrace genuine social responsibility. This is not always true. According to Scott (2012), in 2002, Dell took advantage of the fact that computer recycling was mandatory in the European Union and began recycling computers there at a fee, while failing to do so in the United States, where no such laws existed. During the recycling process, Dell was also accused of using conscripted prison labor. Eventually, the company was required to recycle all computers without discrimination, but its reputation had already been damaged. This case illustrates how companies can misuse CSR for selfish gain.

A second reason TBL companies are superior is that corporate sustainability is more profitable in the long run. Companies that genuinely embrace CSR and go the extra mile to consider economic, social, and environmental sustainability will achieve stronger competitive advantage (Scott, 2012). This advantage is driven by the enhanced brand reputation that results when customers recognize and appreciate a company's commitment to their well-being and the health of their environment.

TBL companies are also effective at identifying new markets and developing creative ways to expand existing ones. By taking a long-term view of profitability, these companies recognize that any harm to people, profits, or the planet will ultimately affect their operations significantly. Given the accelerating rate of global warming and the dynamic changes in the business environment, social responsibility alone is no longer sufficient. The public may rate a company highly for CSR, but over time it is the three Ps that will have the greatest impact.

By taking a holistic approach to CSR, the TBL framework engages all stakeholders in the pursuit of sustainability, since everyone benefits in the long run. Research has shown that companies whose employees are committed to sound profits, social responsibility, and environmental conservation are the most effective at implementing these strategies. The TBL approach accounts for all three bottom lines, enabling all stakeholders to see the tangible results of their efforts in financial reporting — which in turn improves morale. Savitz (2006) also argues that the three Ps are more likely to facilitate the creation of employment opportunities, because TBL companies have a genuine interest in helping society thrive.

Conclusion

The key to developing strategies that satisfy the needs of a company and those of all its stakeholders is to focus on the factors that will guarantee long-term sustainability. Economic sustainability addresses the company's need for profit; social sustainability requires the company to consider its impact on labor and society as a whole; and environmental sustainability directs it to conserve and protect the natural environment. Together, these dimensions make it easier for companies to meet their ethical obligations.

Returning to the opening example, Company B is the superior model because it puts all three Ps into consideration. The strategies of Company A may yield results in the short term, but they will not prove beneficial over time and the company will eventually struggle. All companies are encouraged to aspire to become corporate honeybee organizations — making a genuine commitment to sustainability and putting in the effort and hard work necessary to achieve all three bottom lines. This confirms that it is not enough for a company, multinational or otherwise, to simply be socially responsible.

References

Henriques, A. & Richardson, J. (2004). The Triple Bottom Line: Does It All Add Up? Sterling, VA: Earthscan.

Matteson, M. & Metivier, C. (2015). Corporate Social Responsibility and the Triple Bottom Line. Business Ethics. Module 3. Retrieved 17 February 2015 from

Savitz, A. (2006). The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success and How You Can Too. San Francisco, CA: Wiley & Sons, Inc.

Scott, R. (2012). The Bottom Line of Corporate Good. Forbes Magazine. Retrieved 18 February 2015 from