As companies across the globe navigate uncertain economic times, sustainability – the concept that businesses can achieve economic, social and environmental success – is the magic watchword. The sustainability of resources affects people, the planet and company profit by creating economic benefits for stakeholders while still positively affecting the environment and improving the lives of people who work with and for the company. This triple bottom line – people, planet, profit – fosters the marketplace and the businesses operating within it.
The triple bottom line is not a new business model, but it is one that is more important than ever as resources are stressed and stretched to unprecedented limits. In an effort to share insight into this operating system, Alverno College and its dean of the School of Business, Dan Horton, asked principals from across business sectors to discuss “Triple Bottom Line” at a recent Alverno Forum held at the College.
In what would be one of the most popular Forums of the year, representatives from R.W. Baird, We Energies, Johnson Controls and SysLogic, Inc. participated in an open panel discussion by sharing their thoughts and offering insight into the decision-making process especially as it relates to balancing choices.
“The impetus to convening the forum was a desire on behalf of the College to reach our community and encourage dialogue,” Horton said. “The ‘3 Ps,’ as the triple bottom line is called, is a complex matrix of weighted and balanced factors. The theory is part of the business curriculum at Alverno in the undergraduate program, but is covered most extensively in the MBA program. Students will have grasped the concept as they enter the marketplace.”
The College assembled a panel with diverse perspectives so various angles could be examined.
“We asked our panelists what was important to them,” Horton said. “For Baird, it’s service to their clients. We Energies’ focus is balancing a number of factors rather than just focusing on the environment. Tina Chang of SysLogic, Inc. needs to make a profit to sustain her small company.”
People + Planet + Profit
“The panel represented public companies, private partnerships and entrepreneurs,” said Allen Leverett, executive vice president of Wisconsin Energy Corp., the parent company of We Energies. “It was a way to have practitioners speak to the real-world impact, bringing theory into practice.”
For 10 years, We Energies has employed triple bottom-line reporting. “There is a link between financial performance, the environment and people. We look at safety for our employees, environmental performance and sustainability. We are in the business of producing and delivering electricity and delivering natural gas to our customers; we recognize that the production of electricity can have a significant impact on the environment,” explained Leverett who sat on the Alverno Forum panel. He said the company ties incentives to achieving triple bottom-line goals. We Energies enforced environmental controls long before it was required by law. It is a business model of being proactive, not reactive. “There is profit in doing business that way. It’s good for the shareholder and for our customers.”
It is difficult to monetize the environment and people, but the mindset of investors are changing. This is not near-term investing – it’s long-term, Horton said. “Investors are moving away from the shareholder status to become stakeholders. They are investing in a triple bottom line that factors the sustainability of its key resources. We are looking for continuous improvement when balancing stock prices, environmental considerations and people.”
Companies look to attract and retain good employees because it costs resources to continually hire and train employees. “You want your employees to learn and grow. There are considerations of compensation and lifestyle benefits. There are social justice issues too,” Horton said. He cited the well-publicized controversy involving Apple’s overseas facilities where employees work long hours for low wages in unsafe environments, assembling a technology they will never afford.
While the environmental portion of the triple bottom line may be the most difficult to measure, it still requires consideration. In other words, two legs of a three-legged stool cannot be overtly stressed before it falls on itself. Gone are the days of build, buy, bury. “There is air and water pollution to consider. Those are costs we may not immediately realize,” Horton said. In many instances imported goods may be less expensive, but one must also consider the added cost of environmental waste, along with pollution due to manufacturing and transportation.
To further compound the environmental challenges is the emergence of the middle class in China, India and Brazil. A new – and very large – segment of the world’s population has more buying power, so the planet is being stressed in ways not previously seen. “We need to do things in new and different ways in a more effective manner, both in packaging and manufacturing,” Horton explained.
There is a value chain to every product and service, he said. “We need to analyze products and understand what goes into making them and getting them to market.” The carbon footprint of a product involves every component from producing and packaging to product transportation and after-use waste, which all contributes to the bottom line. The most traditional measure of corporate success – and the third component of the triple bottom line – is profit, which relates to whether a company makes money or suffers a loss. Therefore, corporate decision-makers must determine if there is profit – or lack thereof – connected to preserving wetlands, protecting a species or being conscious of social justice when doing business.
Companies need a long-term view when judging the impact on the monetary bottom line, Horton said. “We want products and services to enrich our lives, as well as the lives of future generations.”
In fact, despite the recent economic setbacks, consumers are still concerned about the environment. According to the 2009 Cone Consumer Environmental Survey, “Thirty-four percent of American consumers indicate they are more likely to buy environmentally responsible products,” while “Seventy percent of Americans indicate that they are paying attention to what companies are doing with regard to the environment, even if they cannot buy until the future.” These statistics point to the fact that there are profits in the triple bottom line.
The importance of triple bottom-line reporting is also realized through the emergence of non-profit organizations such as the Global Reporting Initiative (GRI). Assisted by a global network of 30,000 individuals and experts, GRI offers a sustainability reporting framework to companies and adds transparency for investors who look to be stakeholders. “Every business comes to the 3 Ps with a different perspective, depending on your viewpoint, but the dialogue must begin,” Horton said. “It is a moving target. The world changes every day.”