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Getting to the Bottom of “Triple Bottom Line”

  • Wayne Norman and Chris MacDonald

In this paper, we examine critically the notion of “Triple Bottom Line” accounting. We begin by asking just what it is that supporters of the Triple Bottom Line idea advocate, and attempt to distil specific, assessable claims from the vague, diverse, and sometimes contradictory uses of the Triple Bottom Line rhetoric. We then use these claims as a basis upon which to argue (a) that what is sound about the idea of a Triple Bottom Line is not novel, and (b) that what is novel about the idea is not sound. We argue on both conceptual and practical grounds that the Triple Bottom Line is an unhelpful addition to current discussions of corporate social responsibility. Finally, we argue that the Triple Bottom Line paradigm cannot be rescued simply by attenuating its claims: the rhetoric is badly misleading, and may in fact provide a smokescreen behind which firms can avoid truly effective social and environmental reporting and performance.

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Much of the preliminary research for this paper was carried out while Wayne Norman was a Visiting Scholar at the Center for Social Innovation at the Graduate School of Business, Stanford University, and we thank the Center for its generous support. We are also grateful for numerous challenges and suggestions from audiences at the Conference on Developing Philosophy of Management, St. Anne’s College, Oxford; and the Université de Montréal. Special thanks go out to Christopher Cowton, Jim Gaa, Marya Hill-Popper, and Bryn Williams-Jones, as well as to the referees of this Journal.

1. According to a comprehensive poll conducted for Business Week magazine’s issue of September 11, 2000, fully ninety-five percent of respondents agreed with the following claim: “U.S. corporations should have more than one purpose. They also owe something to their workers and the communities in which they operate, and they should sometimes sacrifice some profit for the sake of making things better for their workers and communities.” By contrast, only four percent agreed with the position most closely associated with Milton Friedman in his oft-reprinted article, namely that: “U.S. corporations should have only one purpose—to make the most profit for their shareholders—and their pursuit of that goal will be best for America in the long run.” The poll was conducted by Harris, with a sample of over 2000 respondents and a margin of error of plus or minus three percent.

2. Enron’s code of ethics (July, 2000) runs to over sixty pages. According to Helle Bank Jørgensen of PricewaterhouseCoopers, seventy percent of the British FTSE 350 report on their environmental and social performance. According to KPMG’s International Survey of Corporate Sustainability Reporting 2002, forty-five percent of the Fortune global top 250 companies (GFT250) are now issuing environmental, social or sustainability reports in addition to their financial reports. The number of companies participating in the Global Reporting Initiative now numbers “in the thousands.” (Trust Us: The Global Reporters 2002 Survey of Corporate Sustainability Reporting, 2002)

3. Trust Us, 4.

4. John Elkington, Cannibals With Forks: The Triple Bottom Line of 21st Century Business (Stony Creek, Conn.: New Society Publishers, 1998).

5. Search conducted in February 2004. This number has doubled in each of the past two years.

6. There is now a huge annual “Triple Bottom Line Investing” conference ( The Washington, D.C.-based Social Investment Forum ( claims that in 2001 there was more than $2 trillion in professionally managed investment portfolios using social and environmental screening.

7. Bob Willard, The Sustainability Advantage: Seven Business Case Benefits of a Triple Bottom Line (Gabriola Island, B.C.: New Society Publishers, 2002).

8. Elkington, p. 20.

9. From AT&T, at

10. Quotes in these last three sentences from Helle Bank Jørgensen of Pricewaterhouse-Coopers from an article published in 2000 on

11. Luciano Respini (President, Dow Europe). “The Corporation and the Triple Bottom Line,”

12. Patricia Panchack, “Editor’s Page: Time for a Triple Bottom Line,” Industry Week, 1 June 2002.

13. The collapsing of the categories of “ethical,” “socially responsible,” “social performance,” etc, in many discussions of CSR raises serious conceptual issues. In particular, judging the extent to which one is ethical or responsible can rarely be reduced to a calculation of net impact. We will address some of these problems toward the end of this article.

14. Dave Mowat, “The VanCity Difference: A Case for the Triple Bottom Line Approach to Business,” Corporate Environmental Strategy: The International Journal of Corporate Sustainability 9(1) (2002): 24.

In an article in the on-line magazine,, 13 August 2002, Arianna Huffington writes that the “key idea” of 3BL is “that corporations need to pay attention to both their stockholders and their stakeholders—those who may not have invested money in the company but clearly have a de facto investment in the air they breath, the food they eat and the communities they live in.” In other words, put this way, it is nothing more than the idea that corporations have obligations beyond maximizing shareholder value. One of the problems with this overly loose way of framing the idea of 3BL is that it is completely at odds with the ubiquitous claim that 3BL is a new concept and a new movement. Huffington echoes this spirit in the same article when she reports that “More than a hundred companies in America are seeking to redefine the bottom line—moving away from conventional corporate accounting, where the only consideration is profit, to one that also includes the social and environmental impact the company is having. It’s called the Triple Bottom Line.”

15. R. Edward Freeman, Strategic Management: A Stakeholder Approach (Boston: Pitman, 1984). A recent survey article (Thomas M. Jones, Andrew C. Wicks and R. Edward Freeman, “Stakeholder Theory: The State of the Art,” in The Blackwell Guide to Business Ethics, ed. N. Bowie [Oxford: Blackwell, 2002], 21–22), traces the insights of the stakeholder approach in mainstream management theory back as far as the 1930s. PricewaterhouseCoopers’s Global CEO Survey, released in January 2002, shows sixty-eight percent of responding CEOs agreeing that corporate social responsibility is vital to the profitability of any company. For an excellent summary and critical evaluation of the so-called business case for ethics and corporate social responsibility, see Lynn Sharp Paine, Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance. New York: McGraw-Hill.

16. For a critical evaluation of the “movement’s” progress, see Rob Gray, “Thirty Years of Social Accounting, Reporting and Auditing: what (if anything) have we learnt?” Business Ethics, A European Review 10(1) (January 2001), pp. 9–15; and David Owen and Tracey Swift, “Introduction: Social Accounting, Reporting and Auditing: Beyond the Rhetoric?” Business Ethics, A European Review 10(1) (January 2001), pp. 4–8. For something of a how-to guide, see Simon Zadek, Peter Pruzan, and Richard Evans, Building Corporate Accountability: Emerging Practices in Social and Ethical Accounting, Auditing and Reporting (London: Earthscan Publications, 1997).

17. The GRI provides an instructive contrast to 3BL. With the agreement of hundreds of corporations and other organisation, this standard identifies a large array of minimal standards that corporations should meet without any attempt to aggregate or to rank or score companies on how far they exceed some of these minimal standards. A similar approach is defended in Georges Enderle and Lee A. Tavis, “A Balanced Concept of the Firm and the Measurement of Its Long-term Planning and Performance,” Journal of Business Ethics 17 (1998): 1129–1144; see especially pp. 1135–1136. By focusing on standards that are both agreed-upon and minimal, this rival approach makes it easier for outsiders to identify “rearguard” firms that fail to meet some of the minimal standards. But it does this at the cost of not being able to identify or to guide the strategic deliberations of “vanguard” firms, since most “mainstream” firms can expect to meet the minimal standards. All of the rhetoric of 3BL advocates suggests that they could never be satisfied with the less ambitious approach taken by the GRI. At any rate, this rival approach is completely at odds with the metaphor of bottom lines and the inherent idea of continual, measurable improvement.

18. We limit our claim here to the current generation of writers, consultants and activists who are explicitly endorsing a 3BL paradigm. There are surely some very valuable lessons for this generation in the generally unsuccessful attempts of a previous generation—largely from within the accounting profession—to develop a calculus of social accounting that could attach values to social benefits and losses. In addition to the articles cited in the preceding note, see Rob Gray, Dave Owen, and Carol Adams, Accounting and Accountability: Changes and Challenges in Corporate Social and Environmental Accounting (Prentice Hall, 1996). We are grateful to Christopher Cowton and Jim Gaa for drawing out attention to these earlier debates.

19. Elkington (p. 72) writes that “the metrics are still evolving.” AccountAbility describes social and environmental accounting as “embryonic.” See AccountAbility’s “Triple Bottom Line in Action,”

20. It really should be noted that the income statement, with its famous “bottom line,” is but one of the principal financial statements used to evaluate the health of a firm. The others include the balance sheet, the statement of cash flows and the statement of owners’ equity. For the sake of charity, we are assuming that when 3BL advocates speak of traditional management preoccupations with “the bottom line” they are using this as shorthand for the use of all of the major financial statements—including the details revealed in the footnotes to these statements.

21. Reported in The Shell Report 1999: People, Planet and Profits, p. 18.

22. Another kind of methodology for evaluating performance would be a rating scheme that assigned scores to various levels of performance on certain key indicators. For example, a rating organisation might score firms out of 100 with, say, ten of those points derived from data about charitable contributions as a percentage of the firm’s profits. Perhaps a firm would get two points for each half-percent of its profits donated to charity up to a maximum of ten points. Similar scores could be assigned on the basis of the percentage of women and minorities in senior positions, and so on. Schemes like these are sometimes used by firms that screen investment funds on ethical grounds, and one is described in detail and employed in a book produced by the ethics consultancy EthicScan, Shopping with a Conscience (Toronto: John Wiley & Sons, 1996). Now any such scheme will be loaded with inherently controversial value judgments about how morally worthy these various factors are; and for this reason, such schemes are unlikely ever to receive the kind of widespread support and legitimacy that is enjoyed, say, by most of the basic accounting standards. Our point here, however, is simply that ratings schemes like this constitute a very different paradigm for evaluation than the one used in financial accounting; and not simply because they are more controversial. Not surprisingly, none of the major organisations that has tried to develop international, cross-sector standards for reporting and auditing social performance has gone this route of trying to develop an overall rating scheme. Nor have the major (“Final Four”) accounting firms who are lining up to sell 3BL auditing services.

23. We do not wish to imply that setting “ordinary” accounting standards is an uncontroversial process; but simply that inherently moralistic social accounting will be significantly more controversial.

24. Two of the other basic assumptions are the “separate entity” assumption (the assumption that the economic events measured can be identified as happening to the entity in question, an entity separable from other individuals or organizations for accounting purposes), and the “time period” assumption (the assumption that the economic events measured occur within a well-defined period of time). For these assumptions, see Thomas Beechy and Joan Conrod, Intermediate Accounting, Volume 1 (Toronto: McGraw-Hill Ryerson, 1998), among other sources. These three assumptions sometimes go by different names, and are often accompanied by other assumptions not named here.

25. Utilitarians might object in principle to these claims that there is (a) no common “currency” for evaluating the impact of corporate activities, and (b) no overarching formula to justify trade-offs involving different values affecting different individuals. In its most straightforward, classical formulations, utilitarians believe that “utility” is this currency, and that anything of value can ultimately be judged in terms of its impact on the amount of utility. We will ignore the fact that utilitarianism is no longer especially popular among academic moral philosophers. Even if it were in some sense the best moral theory, it would hardly rescue the 3BL model of social accounting. The theory itself does not provide any objective formula for extrapolating “utility impact” from the kinds of data that are typically reported in social reports (again, see Appendix 1 for examples of typical social indicators). Any two reasonable and well informed utilitarians would be just as likely to disagree about the net social impact of a firm’s many operations as would two non-utilitarians.

26. In a longer critique of 3BL and CSR it would be worth trying to identify just how much of the basic logic of these views is a reiteration of act utilitarianism. For a good summary of some of the stock criticisms of utilitarianism—particularly in the context of measuring social development—see Amartya Sen, Development as Freedom (Oxford: Oxford University Press, 1999), pp. 54–61.

27. It must be said that the brute notion of “social performance” or “social impact” also seems to flatten out the concept of responsibility. In effect, for advocates of CSR, the most socially responsible corporation is the one that has the greatest net social impact. But this erases many important “deontic” categories that are relevant for determining the nature of specific obligations. We are not always obliged to maximise “social impact.” There are good and noble actions that we are not obliged to do (sometimes called supererogatory duties); other things that we are permitted to do but not obliged to do; other things that we are obliged to do even if they do not improve welfare; and so on. For a much richer notion of responsibility than the one implied in most writings on 3BL and CSR, see Enderle and Tavis, op. cit., pp. 1131–7.

28. For example, a hockey broadcaster summed up a game in which team A defeated team B with the remark, “the bottom line is that team A out-hustled team B tonight.” But surely in sports if there is a bottom line, it is reflected in the final score, not in the explanation for the score!

29. Of course, post-Andersen, accountancy looks rather less hard-headed and legitimate than it did in 1997.

30. Elkington is co-founder of the consultancy SustainAbility, and played a key role in the production of Shell’s 3BL report, “Profits and Principles—does there have to be a choice?” (1998).

31. Business for Social Responsibility in the USA has many hundreds of corporate members, most of which are small- to medium-sized enterprises.

32. See, e.g., John Brown, “International Relations: the new agenda for business,” Elliott Lecture, St Anthony’s College, Oxford, 1998; or Mark Moody-Stuart, “Forward” in Responsible Business (London: Financial Times, 2000).

33. David Henderson, Misguided Virtue: false notions of Corporate Social Responsibility (Wellington: New Zealand Business Roundtable, 2001); Robert Halfon, Corporate Irresponsibility: is business appeasing anti-business activists? (Social Affairs Unit, Research Report 26, 1998).

34. See, e.g., Elkington, pp. 10, 48, 125, 176.

35. It is a bad sign when a report begins with an entire glossy page used to announce that “This BP Australia Triple Bottom Line Report is printed on environmentally conscious paper.” What exactly is “environmentally conscious paper,” and how much of it is being used to make this announcement? Fortunately, the report, which was published in November 2001, is rather more specific when it comes to data on social and environmental performance.

36. Some, but not all, are available on the homepages of 3BL-friendly firms mentioned throughout this article.

37. We now have a couple of decades worth of experience with the widespread use of corporate ethics codes, and a number of studies suggest that most are neglected by corporations and have very little impact on their culture or operations. See, e.g., P. E. Murphy, “Corporate Ethics Statements: Current Status and Future Prospects,” Journal of Business Ethics 14 (1995): 727–740; and P. M. Lencioni, “Make Your Values Mean Something,” Harvard Business Review (July 2002).

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Business Ethics Quarterly
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