Triple Bottom Line in Market Tangiable.

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T R I P L E B O T T O M L I N E

M E A S U R E M E N T A N DREPORTING IN AUSTRALIA

Making it Tangible

Dahle Suggett and Ben Goodsir

TRIPLE

BOTTOMLINE

MEASU

REMENTANDREPORTING

IN

AUSTRALIA


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This study was funded by:

Prime Ministers Community Business Partnership

Suite 2, Level 12

3 Spring Street

Sydney NSW 2000

Website: www.partnership.zip.com.au

Department of Industry, Tourism and Resources

20 Allara Street

Canberra ACT 2601

Website: www.industry.gov.au

This study was prepared by:

The Allen Consulting Group

Level 4, 128 Exhibition Street

Melbourne VIC 3000

Website: www.allenconsult.com.au

ISBN: 0-9578337-2-5

Environment Australia

John Gorton Building

King Edward Terrace

Parkes ACT 2600

Website: www.ea.gov.au

Cisco Systems

80 Pacific Highway

North Sydney, NSW 2060

Website: www.cisco.com.au

Commonwealth of Australia 2002

Information presented in this document may be reproduced in whole or in part for study or training purposes or to provide wider dissemination for public

response, subject to inclusion of acknowledgment of the source and provided no commercial usage or sale of the material occurs. Reproduction for purposes

other than those given above requires written permission from Prime Ministers Community Business Partnership, Environment Australia, and Department of

Industry, Tourism and Resources.

Disclaimer

The views and opinions expressed in this publication are those of the authors and do not necessarily reflect those of the Commonwealth.

While reasonabl e efforts have been made to e nsure that the content s of this publication are factually correct, the Commonwealth does not accept responsi-

bility for the accuracy or completeness of the contents, and shall not be liable for any loss or damage that may be occasioned directly or indirectly through the

use of, or reliance on, the contents of this publication.

Reference to any company, product or service in this booklet should not be taken as Commonwealth endorsement of that company, product or service.

Design and printing by DPA Document Printing Australia www.dpa.com.au


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Triple Bottom Line Measurement and Reporting in Australia: Making it Tangible

This project was funded and supported by a range of public-sector departmentsand private-sector organisations, with the Prime Ministers Community

Business Partnership as the main sponsor. Its purpose was to explore current

strands of thought and action in Australian companies about triple bottom line

measurement and reporting, and to document existing and emerging practices.

An international perspective was also included with input from companies in the

United Kingdom.

The project sought to draw on the everyday experience of companies and

record their sense of priorities, benefits and challenges. We did not necessarily

want the study to mount a case for adopting triple bottom line reporting, rather to

portray companies thinking and experiences so more companies could develop a

critical understanding of the questions to be considered and the business benefits

to be gained.

The Prime Ministers Community Business Partnership, in particular, has an

objective to encourage strong and active collaboration between the community

and business sectors to achieve mutual goals, develop creative solutions to region-

al and local problems, and to strengthen community ties. In exploring business

practices in triple bottom line measurement and reporting we were able to take a

further step towards that goal.

The project partners were:

The Prime Ministers Community Business Partnership, Commonwealth

Government: Geraldine Skinner and Amanda Steele;

Environment Australia, Commonwealth Government: Judith Kendrick; David

Saywell; Alex Fearnside; and Anne Close;

Department of Industry, Tourism and Resources, Commonwealth Government:

Bob Bennett; Andrew Harvey; and Jo Arnold;

Cisco Systems:Kip Cole and Katherine Baddeley;

The Business Council of Australia:Steven Munchenberg;

Shell Australia:John Simpson;

The Body Shop:Chris Childs;

Westpac Investment Management:Shaun Mays.

The Allen Consulting Group undertook the research led by Dahle Suggett, with

Ben Goodsir, Dr Steve Hadfield Dodds, Troy Hey and Dr Sasha Courville.

On behalf of the project partners, I wish to thank the many executives from

Austral ian and British companies and organisations who contributed their

thoughts, time and resources to assisting in this project.

Geraldine Skinner

Chief Executive Officer

Community Business Partnership

Foreword

iii


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Foreword iii

Index of Companies vii

Executive Summary viii

Chapter One

Definitions, Context and Drivers 1

Introduction 2

Triple bottom line defined 2

How triple bottom line works 6

Reshaping business priorities: Drivers of change 9Conclusion 16

Chapter Two

Triple Bottom Line: A Work in Progress 17

Introduction 18

The current foundations 18

Taking the next steps 19

Evolution of reporting 21

Wait and see 22

Packaging information for community right to know 26

Stakeholder alignment as the starting point 30

Guided by sustainability principles 37

Culturally and philosophically driven operations 45

Conclusion 48

Chapter Three

Indicators and Assessment 51

Introduction 52

Performance indicators 52

Environmental indicators 54

Social indicators 63

Economic indicators 79

Partnering with third parties and disclosure 82

Conclusion 84

Table of Contents

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Chapter Four

Determining The Value 85

Introduction 86

Benefits: Looking for the value added 86

Measuring benefits 91

Challenges to implementation 93

Management improvement versus external accountability 93

Off-the-shelf indicators versus company- or sector-owned indicators 96

Global or national versus local reporting 97

Benchmarks versus snapshots 100

Conclusion 101

Chapter Five

Conclusion: Strategies for Achieving Greater Clarity 103

Introduction 104

Role of government 104

Meeting interest group and consumer needs 105

Relationship with industry associations and codes of practice 106

Conclusion 107

Appendix A

Research Methodology 108

Consultation List 110

Other Organisations Cited in the Document 112

Forums Where Triple Bottom Line Issues

Have Been Explored 112

Appendix B

Standards, Guidelines and Other UsefulResource Material 113

Table of Contents (continued)

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Chapter Two

AMP Ltd

ANZ Banking Group Ltd

AXA Asia Pacific

British Airports Corporation

Commonwealth Bank of Australia

Co-operative Bank UK

Fosters Brewing Group Ltd

Leighton Holdings Ltd

Medibank Private Ltd

MIM Holding LtdOrica Ltd

Qantas Airways Ltd

Rio Tinto Ltd

Shell International Ltd

Telstra Corporation Ltd

The Body Shop

Unilever plc

Visy Industries

Wesfarmers Ltd

WestpacBanking Corporation

WMC Resources LimitedWoolworths Ltd

Chapter Three

Alcoa World Alumina Australia

BP Australia Ltd


Diageo


Normandy Mining Ltd

Orica Ltd

Rio Tinto Ltd

Telstra Corporation Ltd

The Body Shop

Unilever plc

Visy Industries

Wesfarmers Ltd


WMC Resources Limited

Chapter Four

AMP Ltd

BHP Billiton Ltd

British Airports Corporation

Cable and Wireless Optus

Commonwealth Bank of Australia



Henry Walker Eltin Group Ltd

Incitec Ltd

Normandy Mining Ltd

Rio Tinto Ltd

Shell Australia Ltd

Unilever plc

Visy Industries

Wesfarmers Ltd


WMC Resources Limited

Index of Companies

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Transparency and accountability for economic, environmental and social cor-porate performance are the core notions embedded in the triple bottom line.

While relatively few companies formally issue triple bottom line reports in

Australia, a groundswell of interest is now evident across Australian business. The

next few years will see a increase in business planning and reporting to take

account of this new sense of accountability although practices will vary widely

according to the sector and context of the company.

This research examined the views and practices of 29 Australian companies

and seven overseas companies, as well as consulted with a range of industry bodies

and non-government organisations. An important objective was to look behind

the big ideas to illustrate current practices for measuring and reporting corporate

performance and to explain the benefits and challenges that companies identify.

Care was taken to avoid a didactic approach to how corporations should or should

not behave. Instead, the focus has been on understanding the business logic for

companies practices. This enables other companies to benchmark their experi-

ence and identify tangible options for adoption. It also enables government and

other interested corporate stakeholders to better understand the business ratio-

nale and see where they might work with companies.

Triple bottom line has clearly caught the imagination of many companies

and others in the community. Triple bottom line, a phrase coined in the 1980s,

encapsulates the three major dimensions of sustainability economic, social and

environmental and proposes that a companys performance and impact can and

should be measured and communicated to stakeholders. Many companies are

searching for ways to understand the boundaries of their non-market accountabil-

ities and responsibilities and to engage with those stakeholders that matter to their

business. Triple bottom line presents one approach for companies to consider.

Core characteristics

The core characteristics that companies display when embracing triple bottom

line are: accepting accountability and being transparent probably the most

powerful ideas embodied in the triple bottom line and fundemental to good gover-

nance; integrated planning and operations where a companys contributions

to economic prosperity, environmental quality and social well-being are reflected

in strategic planning and management systems; a commitment to stakeholder

engagement; and multi-dimensional measurement and reporting.

In practice, companies indicate that there is no right way to identify, measure

and report on non-financial inputs or outcomes. Moreover, businesses prefer

approaches that grow out of their own priorities and commercial logic. Some

companies incorporate elements of internationally recognised reporting frame-

works such as the Global Reporting Initiative, The Institute of Social and Ethical

Accountabilitys standard and others listed in Appendix B.

Groundswell of interestbut few public reportsto date

Study portrays thebusiness logic thatunderpins companiesapproaches to triple

bottom line

Three major dimensionsof sustainability

Characteristics:

accountability,transparency, integratedplanning and operations,stakeholder engagement,multi-dimensionalmeasurementand reporting

No right way: not aprecise measurementtechnology

Executive Summary

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The motivation for greater company transparency and accountability is con-

siderable. Companies throughout the world are experiencing unprecedented

challenges. Forces are reshaping the context for business success as companies

face increased global competition and the imperative of adapting to technological

change. The pursuit of sustainable development meeting the needs of the pre-

sent without compromising the ability of future generations to meet their ownneeds is endorsed by the Business Council of Australia as an important, legiti-

mate and fundamental aspect of business responsibilities. As business structures

and activities in the post-industrial era will barely resemble those of earlier peri-

ods, so too will business responsibilities and accountabilities be transformed.

Against this background, there are more immediate pressures that focus atten-

tion on the nature and quality of the relationship between business and society at

large. Simply put, companies are now asked by many more stakeholders for infor-

mation about their impacts on the environment, the economy and the society, and

to attest to the ethical conduct and sound governance of their business.

Companies are faced with deciding whether to resist these questions, or respondwith available data, or whether to seize the opportunity to gain deeper insight into

the impact of their own practices, as well as to become truly transparent and

accountable.

Triple bottom line measuring and reporting:a work in progress

F

ive broad categories capture the current diverse state of play in performance

measurement and reporting in Australia. (Some British companies were also

included to illustrate the additional dimensions that will probably develop in

Australian companies over the next few years.) All these practices are valid and the

categories are not judgemental. The five categories are more to show the varied

business rationales and interpretation of community expectations for triple

bottom line measuring and reporting.

1. Wait and see is the category where companies are satisfied with their

present approaches to communication and accountability, such as Fosters and

Woolworths. Either a change is not a business priority and not on the radar,

or there is a sense of potential benefit, but it is far too early to proceed without

understanding more about the context and the directions for the rest of business.

2. Other companies make a commitment to their stakeholders to be open and

transparent, observing the community right to know principle and endorsing

the notion of greater accountability to the community for their performance.

To meet this commitment they assemble and package internal information for

an external audience. This information reveals the standards they seek to meet,

how well they perform against those standards and a description of their activ-

ities. Some companies in this area are international leaders in environmental

reporting such as Wesfarmers and Orica. They continue to develop their data

collection, reporting and verification approaches, but do not see that a change

in approach to embrace social or economic dimensions to the same extent

would necessarily yield additional business benefits.

Unprecedented challengesin a globally competitiveenvironment

Choices forAustralian companies:resist communitypressure or benefitfrom transparency

Five main categories ofcompanies: wait and see,packaging informationfor community rightto know, stakeholderalignment, endorsing coreprinciples and a holistic

cultural perspective

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3. A few companies have started from scratch and systematically seek alignment

between stakeholders expectations and corporate strategy. This approach

requires establishing new management systems and is a long and often

resource-intensive approach. WMC is an example of a company that seeks to

continue to develop in this direction and a number of other companies have

embarked on the first steps, such as Westpac, and others are poised to go downthis track, such as ANZ.

4. A few companies, mostly international, such as Rio Tinto and Shell, shape their

response to stakeholder expectations into principles that guide their business

activity: sustainability principles or partnership principles for example. This

approach is directed at embedding these principles into management practices

again an intense and, for some, a problematic journey. AMP has recently initi-

ated processes to proceed in this direction.

5. Finally, some companies, mostly in private ownership, define their business

purpose and their commitment to sustainability values and accountability as

fully integrated their business success depends on this cultural perspective.The Body Shop is the often-quoted example and the Cooperative Bank in the

United Kingdom, but also Visy Industries in Australia embraces this holistic

approach.

Developing indicators and assessment

Developing high-quality indicators is an enormous challenge, and there is noone easy or correct way to develop and report them. While some companiesare successfully adopting the Global Reporting Initiative and other frameworks,

others take a more eclectic approach where they review indicators used by other

companies and adopt the most appropriate from various sources.

In general, companies develop indicators that are most relevant to the issues

they face and the concerns of key stakeholders, but, perhaps more importantly,

they are choosing indicators that are useful for informing strategic decisions with-

in the business the extent to which environmental and social factors are

integrated into management decisions does however vary. Within this context, sev-

eral indicators are comparable within and across industry sectors: the common

environmental ones tend to be the amount of energy consumed and its origin,

resource and material usage, emissions, and effluents and waste management; the

common social indicators relate to health and safety and community involvement;

and economic indicators beyond financial results are, for example, taxation paid

and estimates of wealth created by the company.

While companies have adopted a variety of qualitative and quantitative

approaches to measure their performance, there are several common main features

such as: the mix of input, output and outcome measures; the use of performance

targets; and benchmarking practices and verification processes (see Box E.1).

Designing indicatorsto inform strategicmanagement

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Creating value

Uncovering the value creation of triple bottom line or making the businesscase operates at two levels. There is a soft but nevertheless compelling busi-ness case that concerns management and performance improvement through the

use of data, reputation enhancement, market differentiation and greater social

legitimacy or the securing of the licence to operate. Companies are adamant

about the value of these benefits, especially when triple bottom line is part of

a more holistic view of corporate citizenship and sustainability. Identifying more

tangible financial benefits shareholder value, revenue, access to capital andmarket growth is not yet settled. Positive links between sustainable development

and financial results are being identified in research so, again, if triple bottom line

reporting is truly reflective of a companys adherence to sustainable development

practices, more tangible financial benefits should become apparent.

In the minds of Australian businesses, triple bottom line measurement and

reporting is not a precise measurement technology; it is more a clever concept for

establishing a new vision for a range of corporate responsibilities.

Adopting more transparent and accountable practices must be built on a busi-

ness case that is widely discussed and understood in the company. To achieve

enduring benefits companies need to own their own approach, one that is built

on well-conducted research and rigorous execution. Changes of this sort need to

be well integrated into core management systems including planning, operations,

employee relations, and management appraisal and reward systems.

In looking forward, many companies believe there is a role for government that

includes facilitating discussion, especially around the characteristics of an envi-

ronmental, social and economic vision for Australia what are the communitys

environmental, social and economic goals that should inform business objectives?

There are many current regulatory and administrative instruments that already

include public consultation and reporting (such as the National Pollutant

Inventory). As a first step, the impact of these should be considered in the light of

triple bottom line expectations.

Soft benefits throughuseful data, licence tooperate and reputation.Extent of financial benefitsnot agreed

Not a precisemeasurement technology

Companies need toown the process toreap the benefits

Government andindustry bodies havea role in facilitation

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Main features of performance measures adopted by companies include:

input measures are the least difficult to develop and hence are the most common, whereas outcomes measures are rare;

performance targets are used to varying degrees. Most do not set targets but compare incremental performance improvements

over time, and set short to medium-term targets (objectives) and assess performance against these. A few companies set

aspirational targets and measure performance against these over the long term;

few companies explicitly link performance measures with the social, environmental or economic impact of the measured processes

or events;

while there are few opportunities for companies to benchmark performance against key competitors (except in the resource sector)

some companies are benchmarking against legal licence limits (that is, emissions and so on);

indicators are verified in a variety of ways, the most common are external verification and systems incorporating external input.

There are several leading companies verifying indicators based on feedback from readers and program recipients. While

environmental indicators are increasingly externally verified, this is more difficult for social indicators; and

leading companies enable data to be disaggregated to the local level and customised through web-based reporting. A few

companies are going live with their data, which challenges the status of the more static traditional paper based reporting.

Source: The Allen Consulting Group

BOX E.1 MAIN FEATURES OF PERFORMANCE MEASURES


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Industry groups have an important role in taking triple bottom-line thinking

further. There is no one-size-fits-all approach but most industry sectors are well

placed to develop approaches that suit groups of like-minded companies such

as occurred with the chemical and minerals industries in developing codes of

practice in the 1990s.

The findings of this review are reported as follows: Chapter 1 provides definitions of the terms used in this field of discussion, an

overview of the main forces or drivers for companies paying attention to triple

bottom line considerations and a visual map to aid a conceptual understand-

ing of the varied elements.

Chapter 2 portrays the highly diverse state of play by presenting 20 case

studies (16 Australian and four British) of companies thinking and practices

grouped into five broad developmental categories. This essentially addresses

the why and how dimensions.

Chapter 3analyses the environmental, social and economic measurement and

reporting techniques employed by companies in their current practices. Chapter 4discusses the business case and the implementation challenges that

companies face in determining their triple bottom line activity and the benefits

that they anticipate.

Chapter 5raises some strategies that may be employed in further clarifying the

way that companies could best meet the new community expectations.

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1

S N A P S H O T

CHAPTER 1

Definitions, Context

and Drivers

Characteristics

Triple bottom line is a clever term for highlight-

ing the non-market and non-financial areas

of corporate performance and responsibility:

environmental, social and economic. The core

characteristics of triple bottom line include:

accepting accountability: triple bottom

line is founded on the assumption that

companies are accountable not only to

shareholders for generating returns but also

to stakeholders;

being transparent: companies have an

obligation, within commercial limits, to be

transparent about their activities and

impacts beyond financial performance;

integrated planning and operations: fora company to contribute to economic

prosperity (including returns to sharehold-

ers), environmental quality and social

well-being it is necessary that these dimen-

sions be reflected in strategic planning;

committed to stakeholder engagement:

interacting with internal and external stake-

holders is a process that informs business

objectives and is developed from a base of

rigorous research and dialogue; and

multi-dimensional measurement and report-

ing: systematic analysis and verification

of economic, environmental and social

performance, together with structured com-

munication on the results, is most often the

main mechanism for making concrete what

a company stands for, how it behaves and

how it delivers on its promises.

Context and drivers: Reshaping

business priorities

Community and employee expectations: the

traditional relationship between business

and society is being reshaped and this is

altering our common understanding of

business responsibilities.

Scrutiny related to socially responsible

investment: the recent growth of socially

responsible investment in the United

Kingdom is indicative of what companies

might experience in Australia over the next

few years.

Reputation-ranking industry: there is con-

siderable public interest in more generalised

reputation-ranking and this is also drivingmany companies to collect the data for the

reports they are being asked to produce.

Changing voice of the not-for-profit sector:

the not-for-profit sector is attracting interest

worldwide and, in particular, the Australian

sector is changing its interface with govern-

ment, the community and industry.

Regulation and certification: there are few

regulatory requirements in Australia that

aim to increase or improve corporate disclo-

sure on their social and environmental

behaviour. The more dominant influence on

corporate behaviour, particularly for social

issues, is self-regulation and third-party

regulation (certification).


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The focus on howand why

One concept amongmany describingthe balance betweenshareholder value addedand societal value added

2


Introduction

Triple bottom line is a clever term for highlighting the importance of non-market and non-financial areas of corporate performance and responsibility.This chapter explains the characteristics, drivers and benefits of triple bottom line

measurement and reporting, and its relationship to other key concepts in the

expanding lexicon for describing wider corporate responsibilities.

Triple bottom line defined

All companies consulted for this study are searching for ways to understand theboundaries of their non-market role and the non-financial outcomes forwhich they are accountable. However, there is no single or correct response.

Variations among companies occur according to industry sector whether there

is exposure through a brand, a service or operations company structure, size,

corporate philosophy or even management disposition. A few actively use the term

triple bottom line to delineate those boundaries, while others prefer to describe

their approaches in terms of corporate citizenship, or being a good neighbour, or

they refer to their sustainability principles or commitments to the community.

Triple bottom line measurement and reporting represents one important

process to assist companies in this search; just one part of the mosaic of corporate

change strategies for embracing more than traditional market signals. The triple

bottom line, as discussed in this study, is also a relatively concrete and observable

process. As a result, drawing on the practices that are observable in companies is

a pragmatic way to define triple bottom line and to assist others in developing a

better understanding of the processes and benefits.

Triple bottom line

The term was coined by John Elkington in the early 1980s:

The triple bottom line focuses corporations not just on the economic value

they add, but also on the environmental and social value they add and

destroy. At its narrowest, the term triple bottom line is used as a framework

for measuring and reporting corporate performance against economic,

social and environmental parameters.

Elkington, J. (1980). The Ecology of Tomorrows World

Economic performance encompasses issues conventionally reported in a compa-

nys annual financial report, but also considers matters such as: the ratio of market

capitalisation to book value, investments in human capital and research and

development, wages and benefits paid, community development initiatives, and

the value and location of outsourced goods and services.

Environmental performance includes factors such as: the amount of energy

consumed and its origin, resource and material usage, emissions, effluents and

waste management, land use and management of habitats.

Social performance addresses interactions between an organisation and its

community. It includes such issues as: employee relations, health and safety, ratioof wages to cost of living, non-discrimination, Indigenous rights, impact of com-

munity involvement and customer satisfaction.


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The contribution of the term is in conveying a strategic idea in a simple way: a

company enhances short and long term value through successfully managing its

economic, environmental and social performance and impact so as to create

greater opportunities and reduce risks. Not only does the company derive value

but the companys wider influence also delivers community benefits. The three

spheres of activity are measurable and their contribution to organisational andcommunity value should be communicated to internal and external audiences

who have a stake in the results.

A caution is that the financial accounting image of the bottom line should not

be taken literally. A triple bottom line is not a quest for a new bottom-line metric

but rather an approach to management and performance assessment that stresses

the importance and interdependence of economic, environmental and social per-

formance. However, the relevant dimensions of corporate performance are not

always neatly divided into these three categories, with some companies already

talking about a fourth pillar in corporate governance and ethics. Triple bottom line

is therefore best seen as a metaphor that encapsulates the task of managing, mea-suring and publicly reporting multi-dimensional corporate performance.

Triple bottom line also needs to be understood in relation to other related con-

cepts about the role and responsibilities of the corporation and its performance.

While there are many conceptual frameworks that seek to redefine the role and

responsibilities of business, three related concepts that regularly arise in discus-

sion with companies are: sustainable development, corporate social responsibility

and good corporate citizenship, and stakeholder engagement.

Sustainable development

Economic development, social development and environmental protection areinterdependent and mutually reinforcing components of sustainable develop-

ment. The definition of sustainable development adopted by the Bruntland

Commission is:

Development seeking to meet the needs of the present generation without

compromising the ability of future generations to meet their own needs.

The World Commission on Environment and

Development, Our Common Future, 1987.

This definition has been widely accepted and incorporated into the commitments

of most major business organisations around the world. The Business Council of

Australia endorses this definition and commits to excellence in the management

of the financial, environmental and social dimensions of all activities, products

and services.

The World Business Council for Sustainability (WBSCD) regards eco-efficiency

which combines environmental and economic performance and corporate

social responsibility as the core business contributions to sustainability.

Adopting a way of measuring and reporting progress towards sustainability

through a triple bottom line approach is clearly of benefit to the business itself and

to those audiences who are seeking to evaluate progress.

An approach tomanagement andperformance assessment;a metaphor rather thana new accounting metric

A fourth pillar: governance

and ethics

Sustainable development;corporate socialresponsibility andcorporate citizenship; andstakeholder engagementare complementary notcompeting concepts

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Corporate social responsibility and good corporate citizenship

According to the WBCSD, corporate social responsibility concerns the continuing

commitment by business to behave ethically and contribute to economic develop-

ment while improving the quality of life of the workforce, their families, as well as

the local community and society at large.1 Being socially responsible means going

beyond compliance with legal expectations to investing in better management of

environmental impact, employee well-being and community benefits. A major

mechanism in achieving this is identifying and responding to stakeholders expec-

tations and incorporating this understanding into corporate values, business

strategies and measurement of the outcomes of company performance.

Importantly, this calls for an integrated approach to management; one where

wider social, environmental and economic responsibilities impact on the strategic

planning of the company and not only serve as add-ons in a defensive strategy.

Stakeholder engagement

The WBCSD provides a long list of stakeholders for business to take into account

including: trade unions, churches, Indigenous peoples, interest groups, not-for-profit

organisations, government and non-government organisations, and academics.

Another way of defining stakeholders is to see some as primary stakeholders

(those who exert a direct economic influence on the company and, in turn, are

directly influenced by the companys performance) and secondary stakeholders

(those who have a less direct relationship with the economic base of the company,

but have significant expectations).2 Primary stakeholders would be customers,

suppliers, employees, creditors, investors and shareholders. Secondary stakehold-

ers would include media, government, local communities, interest groups,

not-for-profit organisations and the general public. In some companies, inputfrom their primary and secondary stakeholders is the basis for: planning to deliver

on the triple bottom line; understanding stakeholders expectations and how to

meet them; and how to measure and report on performance outcomes.

The idea of stakeholder engagement is not about exposure to narrow interest

groups as some businesses fear. Rather, stakeholder engagement can become a

core management strategy for enhancing and sustaining the shareholder and soci-

etal wealth-creating capacity of the enterprise.3

Not an either or

The core role of business is generating and distributing wealth. The expanding size

and impact of corporations in the globalised economy has, however, reconfigured

their role and responsibilities to embrace additional environmental and social

visions. The new paradigm for delivering on these wider responsibilities that are

embedded in concepts such as sustainable development or good corporate citi-

zenship is not an either or of financial performance or environmental excellence

or social responsibility. Rather, the new paradigm is about and also.

Primary andsecondary stakeholders:understanding andmeeting theirexpectations;measuring andreporting on outcomes

4


1 Watts, P. and Lord Holme (1998). Meeting Changing Expectations: Corporate Social Responsibility,

World Business Council for Sustainable Development, Geneva, Switzerland.2 Post, J. (2000). Meeting the Challenge of Global Corporate Citizenship, Boston College for Corporate

Community Relations, Boston College, MA.

3 Post J., Preston, L., and Sachs S. (Forthcoming). Redefining the Corporation: Stakeholder Management

and Organisational Wealth, Stanford University Press.


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As BP Australia said:

In the oil industry, concern for the environment and societal development

does not mean that people have become tired of demanding cheap, reliable

and safe energy. No, it means they want all that andenergy, which is clean,

has a creditable provenance and delivers a positive legacy.

Fliedner, I. (2000)4

The considerable challenge that this presents for business is to deliver equally well

on all dimensions: to remain globally competitive and to be environmentally and

socially responsible and accountable.

Triple bottom line: Core characteristics

What are the observable characteristics of triple bottom line? In its widest sense,

triple bottom line is a philosophy that guides overall corporate performance. In a

narrower sense and the one that applies in this study it refers to the approaches

adopted for measuring and reporting on business performance beyond the finan-cial dimension and towards an integrated view of business processes and impacts

in environmental, social and economic (including financial) domains. While strat-

egy and management practices feature to some extent in this study, the focus

concerns why companies might consider publicly reporting on non-financial

matters and how that is being achieved.

The following points represent the essential behaviours and attitudes that are

manifest in those companies that seek to manage and report according to the idea

of the triple bottom line.

Accepting accountability:triple bottom line is founded on the assumption that

companies are accountable not only to shareholders for generating returns but

also to stakeholders for contributing, within their context and capabilities, to

sustainable development. Endorsing this notion of accountability most often

features in the vision or core beliefs of a company.

Being transparent:companies also have an obligation, within commercial lim-

its, to be transparent about their activities and impacts beyond financial

performance. Recognising the legitimacy of stakeholders right to know and

disclosing multi-dimensional results and impacts is a powerful idea embodied

in the triple bottom line and is most often reflected in the core beliefs of a

company, its dialogue practices with stakeholders and in the actual content of

its public reporting. Transparency is essential for sound governance.

Integrated planning and operations:for a company to contribute to economic

prosperity (including returns to shareholders), environmental quality and

social well-being requires all these dimensions to be reflected in strategic

planning, the range of operational management systems and reward schemes.

In other words, building these economic, environmental and social considera-

tions into the core processes that drive a company is a precondition for

measuring and reporting according to the triple bottom line.

Commercially competitiveas well as socially andenvironmentallyresponsible

Core characteristics:

accountability;

being transparent;

integrated planningand operations;

stakeholderengagement; and

multi-dimensionalmeasurement andreporting.

5


4 Fliedner, I ., Stakeholder Reporting in BP: In Search of the Triple Bottom Line , Presentation, Centre for

Corporate Public Affairs, Melbourne 16th August 2001.


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Committed to stakeholder engagement:interacting with internal and external

stakeholders is a process that informs business objectives and is developed

from a base of rigorous research and dialogue. A commitment to considering

stakeholders perspectives and to developing strategies for engagement is

embraced as a core business strategy that adds value.

Multi-dimensional measurement and reporting:systematic analysis and veri-

fication of economic, environmental and social performance, together with

structured communication on the results, is most often the main mechanism

for making concrete what a company stands for, how it behaves and how it

delivers on its promises.

A triple bottom line report: The content

As well as the rich variety of new and traditional communication methods that

companies already have at their disposal (for example, community advisory

panels, stakeholder dialogue, performance disclosure on a website and pamphlets),

the role of a triple bottom line report is to focus on greater transparency and

accountability across all major aspects of company performance and impact.

The content of those reports typically comprises:

multi-dimensional performance and outcomes information: economic,

environmental and social;

descriptions of corporate management principles and practices: including

values, vision and strategy; stakeholder identification; governance and

ethical dimensions;

systematic assessment or measurement of the impacts of company performance;

a basis for identifying benchmarks and assessing trends; and

third-party input, verification or assurance.

How triple bottom line works

There are many entry points to a triple bottom line approach to measurementand reporting company performance. Figure 1.1 provides a visual frameworkof triple bottom line to illustrate how business decisions are sequenced, where

tools for assisting business processes might be applicable and where information

flows could occur.

Subsequent chapters describe the drivers for change in a number of compa-nies, their business case for embracing triple bottom line, and the strategies and

techniques employed for measurement and reporting. While there is great varia-

tion among companies, it is possible to show a theoretical sequence of planning

and implementing triple bottom line. The framework below offers a way to under-

stand where a company may currently be focusing attention and where it wishes to

be in the future.

The stem and centre circles of the framework illustrates a simple linear

sequence in decision-making. The outer circles provide examples of the tools or

content that may be applied to those decision-making stages. The outer down-

ward-pointing arrows are illustrative of the many possible feedback loops forcommunication and engagement.

The focus onaccountabilityand transparencyis a powerful driverof the content

Great variation amongcompanies, but also atypical planning sequence

6



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It is also possible with Figure 1.1 to consider points of interaction or interven-

tion by specific stakeholders such as investors, business groups, government,

interest groups and the not-for-profit sector. Their influence could be seen

laterally: industry bodies for example, frequently take a role in developing codes

of conduct and defining issues companies face, whereas they do not advise on

management systems.

A visual framework

In order to improve economic, environmental and social performance, and to

communicate this to internal and external stakeholders, there are a number of

steps that a company would go through, represented in the centre column of inner

circles. This is shown in a linear format to ensure simplicity but, in reality, moving

between the different stages is an iterative process.

Company business strategyis located in an environmental, economic and social

(and political) context. It signals the strategic direction a business adopts, the val-

ues it upholds, the medium and long term objectives, and is supplemented by the

business plan for the short term. A fully developed triple bottom line approach

would have objectives that range over all the dimensions, as well as the core finan-

cial and commercial goals. It would have tools and systematic processes to

determine the values and specific expectations of shareholders.

Strategy and values in anenvironmental, economicand social context

7



FIGURE 1.1 TRIPLE BOTTOM LINE VISUAL FRAMEWORK


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Management systemsare often proprietary to individual companies, as they are

a source of competitive advantage, and vary in the degree of formality and detail.

Irrespective of the nature of the management systems, a triple bottom line mea-

surement and reporting process arises from and feeds back into the management

or business systems of the company: strategic planning, human resource manage-

ment, information management, environmental management and communityinvolvement are some key areas.

Indicators function as a measuring stick, by which companies can evaluate

how they are accomplishing explicit goals. Indicators also need to be placed within

a wider context of key economic, environmental and social issues and objectives.

Indicators should simply communicate complex information about performance

to an audience who wants to understand more about the company or make deci-

sions on the basis of that information.

Key contextual issues, relevant to individual companies or wider industry

sectors, are often identified and formalised through the development of codes of

conductor sets of principles. These are sets of issues that are considered importantto address in the context of that industry sector, such as in the case of the

Australian Minerals Industry Environmental Code of Conduct, the gaming indus-

trys Responsible Gaming Code or the Australian Bankers Associations Banking

Code. This could also comprise a network of international associations represent-

ing business, non-governmental organisations, trade unions and the United

Nations, such as in the case of the Global Compact. Issues faced by companies

that are not formally translated into codes are also highly relevant, such as agricul-

tural production techniques and salinity.

There are a number of possibilities for assessment. Where the company

has developed its own set of issues and indicators, the assessment process is

performed in-house. To ensure greater transparency, independent verification of

the results could be obtained. Furthermore, if a widely accepted set of issues or a

code were available and relevant, the company could be audited or inspected

against these criteria through an independent third-party system. Systems such as

Social Accountability Internationals SA 8000 standard based on ILO labour con-

ventions or eco-labelling function in this way. Some triple bottom line tools, such

as ISO 14001 or the Building Greenhouse Rating Scheme, can either be used simply

as internal tools for improving performance and management systems or as tools

for external communication to stakeholders through an optional independent

verification and certification process.

Certification systems will become increasingly popular as market-based regu-

latory tools. Questions then arise of who will monitor the monitors. The most

sophisticated certification systems also have accreditation systems, whereby the

certification body is accredited to a higher level organisation that oversees the

integrity of its operations (for example, JASANZ is a body in Australia that accred-

its many certification bodies).

Reportingcan be directed to external stakeholders and regulators, to internal

audiences, and serve in management improvement. While the reporting process

will vary depending on the target audience, a main goal is to move towards closer

alignment of values between external and internal stakeholders and decision-

makers. This engagement is most appropriate during the stages of identifying coreissues to address and at the assessment stage to ensure that the results are credible

and transparent. With respect to the internal feedback loop (as outlined in Figure 1),

Triple bottom linereporting arises fromand feeds back intomanagement systems

Indicators simplycommunicate complexinformation on outcomes

Sectoral issues,often translated intocodes, are a further

performance parameter

Assessment technologiesare in-house or

externally set

Reporting is alignedbetween stakeholders andbusiness decision-makers

8



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this integrates the results into the companys management system with the goal of

improving performance against economic, environmental and social benchmarks.

This is also important as a lever for cultural change within the company.

Reshaping business priorities:Drivers of change

Companies throughout the world are facing unprecedented challenges. Forcesare reshaping the context for business success in Australia, as elsewhere, withcompanies facing more global competition and the imperative of adapting to

technological change. The knowledge economy highlights the importance of tacit

knowledge or the know-how of employees so that the intellectual capital of a

company is increasingly a key competitive factor. As well, the pursuit of sustain-

able development meeting the needs of the present without compromising the

ability of future generations to meet their own needs is a principle endorsed byall major business organisations, including the Business Council of Australia, as an

important and legitimate aspect of business responsibility.

Against the background of the global business environment, there are addi-

tional features of the business context that are directed more at the nature and

quality of the relationship between business and society: heightened community

(and employees) expectations of business performance and responsibility in

Australia, scrutiny arising from the growth of socially responsible investment, the

rise in importance of corporate reputation and the growth of a reputation-ranking

industry, the changing voice of the not-for-profit sector, and the shifting role of

regulation and certification. These are themes raised in consultations for this

review that may explain the growing interest in the triple bottom line.

Community and employee expectations

The traditional relationship between business and society is being reshaped and

this is altering our common understanding of business responsibilities. This is par-

ticularly the case in Australia where changes in government functions have altered

the position of Australian industry from being highly protected and regulated to

one that is called on to be a partner with government and the community in serv-

ing a wider range of areas for the public good. Many areas of service provision and

economic activity are now privatised, and public companies and the not-for-profitsector are active in areas of the economy previously reserved for government.

Business in Australia, unlike the United States, is not use to this level of visibility

and accountability.5

Also, intense global competition has refocused business strategy and relations

with employees. Most companies report that improving relationships with

employees and meeting their expectations is a strong for some the most powerful

driver for changing corporate activity to better serve a social role. A study of the

benefits of greater corporate community involvement revealed that meeting

employee expectations was one of the most important and new drivers of change. 6

Business success redefined

Australian business morevisible and accountable

Employees bring theirvalues to the workplace

9


5 See a discussion with business and community leaders in Dilemmas in Competitiveness, Citizenship

and Community(2000).The Cranlana Programme, the Myer Foundation, Melbourne.

6 Centre for Corporate Public Affairs in conjunction with the Business Council of Australia (2000)

Corporate Community Involvement: Establishing the Business Case.


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Consultations with companies in this review support this conclusion. Companies

tie the need for culture change and for competing as the employer of choice, to

being seen by employees as meeting community expectations. Younger employees,

in particular, are seeking a workplace environment that brings community and

personal values to the foreground.

Young employees are championing the cause of a triple bottom line

approach bottom up from a variety of disciplines: marketing; investor

relations; human relations; and product development.

Industry body, The Allen Consulting Group Consultations

Community standards have lifted for environmental and consumer protection,

and economic growth is challenged with creating gaps between the haves and the

have-nots. There is a rising concern for ethics and values and ethical hypernorms

such as transparency, disclosure and responsibility for managing risk, which now

impinge on all business activity.7

Data consistently demonstrate growing community expectations for sociallyresponsible company performance. For example:

a recent survey found that the majority of Australians (90 per cent) want large

companies to go beyond a one-dimensional role of making profits, and con-

tribute more broadly to social and environmental goals. A worldwide survey of

over 25,000 average citizens in 23 countries showed that Australians had the

highest expectations of companies.8 Environmental concerns for 71 per cent of

Australians related to both global as well as domestic environmental problems;

citizens are expressing their views about corporate behaviour in many different

forms, including as investors, consumers, employees and community advo-

cates. A recent British study demonstrated the impact of company reputation

on consumer purchasing, with good companies being rewarded and poor com-

panies being penalised 17 per cent of the population boycotted a companys

product on ethical grounds, 19 per cent had chosen a product/service because

of a companys ethical reputation and 28 per cent had done both;9

similarly, a study in 2000 for the inaugural conference of the Ethical Investment

Association found that 7585 per cent of people had purchased products on the

basis of social and environmental attributes in the previous year;10 and

other Australian studies have found that around 60 per cent of all consumer

decisions are made with an awareness of environmental impacts, and 73 per

cent of consumers state that they would change brands, given equivalent qual-

ity, to support a product associated with a good cause.11

Business is at times sceptical of the strength of these sorts of findings regarding

everyday actions such as purchasing decisions flowing from corporate reputation.

Irrespective, companies do realise that their social context has altered and that

the taken-for-granted link between business success and perceived community

The majority wantAustralian business to gobeyond making profits

The taken-for-grantedlink between financialsuccess and reputationhas been broken

10


7 Post, James, (2000). Meeting the Challenge of Global Corporate Citizenship, Boston College, Centre

for Corporate Community Relations, Boston, MA.

8 Environics International Ltd, The Millennium Poll on Corporate Social Responsibility, Executive

Briefing, 1999. Website: www.environics.net/eil/millennium/MPExecBrief.pdf9 MORI, www.mori.com/consumer/index.shtml

10 Presentation by KPMG, Ethical Investment Association Conference, Sydney Stock Exchange, May 2000.

11 State Chamber of Commerce NSW (2001) Taking the First Steps: An Overview of Corporate Social

Responsibility in Australia, The Common Good Program.


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benefit has been broken for many in the community. Being a financially successful

company is no longer a guarantee of community (or government) support.

The search for legitimacy and a good reputation is occupying the minds of

many company leaders. Business is uncertain about what negative community

pressure might lead to greater regulation is a concern for some sectors such as

banking or gaming, consumer backlash for the service sector, or constraints ondevelopment for the resource sector or the telecommunications sector.

Scrutiny related to socially responsible investment

While socially responsible investment (SRI) is still a very small part of the market in

Australia, there has been considerable growth in the United Kingdom and Canada

over the past 18 months. This growth will most likely be replicated in Australia.

Major firms such as Challenger, Westpac, Rothschild and AMP have been releasing

new investment products and developing instruments for analysis of company

performance. On the demand side, some superannuation trusts, in particular,

have entered the SRI market and others are exploring their options.

A recent baseline study issued by the federal government concluded that there

are $10.5 billion in socially responsible assets in Australia. 12 SRI managed funds

grew by 86 per cent between 2000 and 2001, 12 times that of managed funds as a

whole. Since 1996, SRI managed funds assets in this country have achieved a

growth rate of over 500 per cent.

The international experience in SRI is important in understanding its potential

impact on companies in Australia. The market is mature in the United States, but

Australian developments in SRI do not appear to be moving in the same direction.13

Although the dollars in the United States that are reported to be invested according

to ethical criteria is high one in every eight dollars under professional manage-ment anecdotal evidence does suggest minimal influence on companies. There

is a longstanding emphasis on exclusions for gambling, alcohol and tobacco.

While criteria such as the environment are well represented, others such as women

in management are very new and only included in relatively boutique vehicles. The

Dow Jones Sustainability Group Index is expanding and evidence of performance

demonstrates an equal if not better outcome than for conventional investment.

The recent growth of socially responsible investment in the United Kingdom is,

however, more indicative of what companies might experience in Australia over

the next few years. Screened investment in the United Kingdom grew by almost

380 per cent from $A1.9 billion to $A7.2 billion between 1994 and 2000.14

In the United Kingdom, contemporary values feature more significantly; for

example, human rights, the environment, employment practices and community

involvement. In particular, the government is a strong advocate for socially

responsible investment as part of its program to promote corporate social respon-

sibility, and an infrastructure for screening companies is rapidly building to service

this form of investment. SRI is newsworthy and companies are subject to a vastly

The mature US marketis mainly due to theexclusion of sin stocks

UK growth is indicativeof the future of sociallyresponsible investment

in Australia

11


12 Ethical Investment Association (2001) Socially Responsible Investment in Australia 2001:

Benchmarking Survey (http://www.ea.gov.au).13 For a discussion of the nature of the market in Australia, see The Allen Consulting Group (2000).

Socially Responsible Investment in Australia.

14 Greene, D. (2001). A Capital Idea. Realising Value from Environmental and Social Performance,

Commonwealth Government, Australia.


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increased number of surveys and the like wanting to access data on companys

environmental and social performance. Indeed, the impact of the screening

devices seems of greater importance in companies minds than the potential flow

of capital:

I used to spend 5 per cent of my time answering questions, now it is

50 per cent.

Resource company, United Kingdom.

The Allen Consulting Group Consultation

I can show you 20 surveys that I have received in the past few months all

from organisations serving socially responsible investment. Its an explosion.

Consumer goods company, United Kingdom.

The Allen Consulting Group Consultation

In Australia, recent amendments to the Australian Financial Services Reform

Act will increase the disclosure of the extent to which superannuation funds and

investment managers incorporate environmental and social issues in their invest-

ment decisions, and this will inevitably increase discussion of the parameters of

socially responsible performance. Under the Socially Responsible Investment

disclosure requirements of the Financial Services Reform Act 2001, the Product

Disclosure Statement for financial products that have an investment component

will be required to state the extent to which labour standards, environmental,

social or ethical considerations are taken into account in the selection, retention

or realisation of the investment. As occurred in the United Kingdom under a simi-

lar requirement, this will produce a ripple effect not only in the investment

community but also throughout listed companies as organisations classify and

record their socially responsible activities.

Shareholder democracy is also becoming more prominent in Australia. As more

and more Australians become shareowners (Australians are reputedly the highest

direct and indirect owner of shares), they are beginning to look more closely at the

actions of the companies they invest in.15 Interest groups are also recognising that

introducing shareholder resolutions at company annual general meetings is a

mechanism to call management attention to issue. The Corporations Law 249D

was amended in 1998 to allow at least 100 registered shareholders to call a general

meeting of the company. The union campaign against Rio Tintos labour relations

practices was reputedly the first to be conducted through shareholders at their

Annual General Meeting.

Environmental and social risk assessment

Also, more generally, there are reports of increasing pressure from lenders, insurers

and investors on companies to improve their performance, although the current

influence appears to be low. Banks and insurance companies increasingly recog-

nise the importance of good environmental management to reduce their future

risks and some banks overseas have begun to look more closely at environmental

management when considering business loans. Most have implemented

environmental risk criteria as part of their corporate and project lending activities.

Additional scrutiny of

companies performanceand reputation is thecurrent major impactof socially responsibleinvestment

Pressure fromshareholder democracy

Increasing pressure fromlender and insurers

12


15 Address Richard Humphry, CEO and MD, Australian Stock Exchange, Annual Oration, Australian

Centre for Corporate Public Affairs, Melbourne July, 2001.


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Currently though, environmental assessments tend to be once only and are not

monitored for the duration of the loan period, although this is expected to change

over time.16

Overall, the extent of detailed investment analyst scrutiny of companies envi-

ronmental and social performance (other than for socially responsible investment

purposes) is thought to be very low in Australia especially in a climate of eco-nomic and corporate instability. For example, a recent survey of 25 Australian

stockbrokers found that their key concern when analysing and recommending

a company to clients was its financial performance. Some did indicate that they

provide an ethical analysis if a client requests or if the company actively markets

itself as an ethical company.17 Even in the United Kingdom, where the profile of

the issues is much higher, the trend is similar. One survey found 9 per cent of

analysts saw environmental and social issues as important non-financial indica-

tors, compared with 20 per cent of investors and 23 per cent of journalists.18

Those companies advocating a higher standard of environmental and social

performance hope that the investment market learns to differentiate betweencompanies on these criteria.

Reputation-ranking industry

There is considerable public interest in more generalised reputation ranking and

this is also driving many companies to collect the data for the reports they are

being asked to produce. Many large Australian companies endorse the notion of

stakeholder scrutiny and the obligation of the company to make information freely

available in a transparent and accessible form, endorsing the notion of communi-

ty right to know. Rio Tinto, WMC, Telstra, Shell and National Australia Bank are

examples of companies with external stakeholder forums. Many large companiesalso see that surveys by external parties are a new and legitimate technique for

assessing companies.

The more recent surveys such as the Good Reputation Indexappearing for the

second time in 2001 in The Age and Sydney Morning Herald raises a number of

important issues for companies. While more traditional conventions for ranking

each companies reputation, such as by the global business press Fortune 500in

the United States, the Most Admired Companies for Asian Business or Business

Review Weeklyspolls draw on business to business reviews, the second wave of

reputation assessment draws on community or stakeholder attitudes across a new

set of criteria. Often, the sources for advice are stakeholder groups that are not

supportive of industry and the relationship can be oppositional and combative.

Whereas earlier reputation reviews were structured around conventional busi-

ness indicators such as leadership, product quality, service standards, investment

strategy and community relations, the newer features of a good reputation have

a different focus. Second-wave reviews might include items such as employee

relations, respect for diversity, community involvement, and environmental

programs and ethics, thus reflecting the changing profile of corporate reputation

as an intangible resource (see Box 1.1).

Data are needed forsurveys that rankcorporate reputations

First-wave reviews wereconventional businesssuccess indicators;second-wave reviews aremore combative and focuson stakeholder interests

13


16 PriceWaterhouseCoopers (2001). The Role of Australias Financial Sector in Sustainability.17 The Allen Consulting Group Stockbroker Survey (2000). This involved a national survey of

25 mainstream stockbrokers, the results were based on a 40 per cent response rate.

18 Data from Investing in the Futurequoted in press release for Business in the Community, London,

24 May 2001.


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Westpac refers to the emerging concept of corporate reputation as:

The net perceptual representation of our past actions and future prospects;

it represents our appeal to all our stakeholders.

Purcell, N. (2001)19

The media clearly believe that there is public interest in corporate reputations,and companies are increasingly sensitive about appearing in the front pages of

newspapers rather than only in the business pages. Companies anticipate that the

number of second-wave reputation surveys will increase, and are confronting the

requests for data and the implications of this on their reputations.

The changing voice of the notforprofit sector

The not-for-profit sector is attracting interest worldwide and, in particular, the

Australian sector is changing its interface with government, the community and

industry.20 It is now the recipient of considerable funds to deliver services to the

community on behalf of government. The sector is in partnership with many

Australian companies to assist them in their community involvement endeavours,

and it continues to recruit people who have a strong sense for serving the public

good and pursuing a sustainable and cohesive Australian society.

Not surprisingly, the voice of this sector is growing in its profile in the

Australian community. Moreover, the language of the triple bottom line is increas-

ingly being used across the sector to describe companies social responsibilities. As

companies come to this sector to strike partnerships and alliances and seek assis-

tance in developing sustainable environmental and social activities, they will find

many organisations, like The Smith Family or the Brotherhood of St. Lawrence,

well versed in the varied dimensions of corporate performance.

The not- for-profit sectoris well versed in thenew dimensions ofthe corporate sector

14


19 Purcell, N. Managing New Accountabilities, Corporate Public Affairs, vol. 11, no. 2, 2001, Centre For

Corporate Public Affairs, p. 26.

20 Lyons, M. (2001). The Third Sector: The Contribution of Non-profit and Cooperative Enterprises in

Australia , Allen and Unwin, Sydney.


2nd WAVE REVIEWERS: SUPPORTIVE AND OPPOSITIONAL STAKEHOLDERS

Corporate governance Corporate citizenship Disclosure and reporting

Environmental performance Ethics Sustainability

Employee relations Stakeholder involvement

1st WAVE REVIEWERS: BUSINESS TO BUSINESS PEERS

Quality of management Quality of products and services Financial soundness

Attraction of talent Use of corporate assets Business acumen

Community responsibility

BOX 1.1 EXAMPLES OF REPUTATION CRITERIA


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The experience and concern of some major not-for-profit organisations is that

companies do not understand what the key social concerns are for Australian people:

Australian companies want to be socially responsible but many do not

know how to go about it because they do not know what the key concerns

are of the Australian public. In this context it is hard to develop a structured

sustainable approach.

The Smith Family, The Allen Consulting Group Consultations

Many interest groups and organisations are interested in having deep dialogue

with companies to assist them in identifying public concerns:

We are interested in having conversations with business to, amongst other

things, build trust between the two parties so that we can work productive-

ly together and address shared problems.

The St James Ethics Centre, The Allen Consulting Group Consultations

When asked what they would expect from companies who seek to measure and

report on the social dimensions of their performance, the Australian Council of

Social Services (ACOSS) similarly sees an opportunity for building trust and two-

way relationships:

Triple bottom line reporting and stakeholder relationship building should

be genuinely reflective. Reporting needs to be based on evidence and there

needs to be assurance that the results will be acted on; reporting needs to be

part of an ongoing two-way relationship.

ACOSS, The Allen Consulting Group Consultations

Certification: peer and customer pressure

An important influence on corporate behaviour and public reporting, particularly

for social issues, is self-regulation and third-party regulation through certification.

Certification systems (for example, ISO 14001, Greenhouse Certification Program,

Forest Stewardship Council and Social Accountability International) routinely

comprise a set of rules, principles or guidelines, and a monitoring and reporting

mechanism. In that sense, they are logically linked to triple bottom line reporting,

providing important substantive information and verification.

Certification schemes can create incentives for companies to improve their

social and/or environmental performance by rewarding successful companies

with a mechanism for differentiation in the market or, alternatively, through peer

pressure to conform to commonly accepted and explicit standards. They can also

provide consumers or industrial customers with a mechanism for making

informed purchasing decisions.

Certification has appeared in almost every major international industry target-

ed by environmentalists and human rights activists, including the chemical,

coffee, forest products, oil, mining, nuclear power and transportation sectors.

Certification is also increasingly prevalent in the apparel, diamond, footwear, and

toy industries, to name a few. A recent inventory by the Organisation for Economic

Co-operation and Development (OECD) listed 246 codes of corporate conduct.

Dialogue is needed tobuild trust between sectorsthrough accountabilityand transparency

Certification providesan incentive anda framework formeasurementand verification

15



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Conclusion

Triple bottom line is not a precise measurement or accounting technology buta way of thinking about the integrated nature of business planning and perfor-mance across environmental, social and economic dimensions. The focus in this

study is on the measurement and reporting practices of triple bottom line rather

than the underpinning business philosophy. The intention is to provide insight

into current practices, particularly in Australian companies, and practical advice

for those wishing to go forward. The current environment for Australian business

is complex, with strong commercial pressures as well as social drivers for change.

While each company perceives these pressures in their own way according to sector,

location or size, there are increasingly common understandings emerging, pro-

pelled by the interest from government, community and the not-for profit sectors.

The drivers of change for corporate communication and reporting discussed

here were drawn from consultations and there would, of course, be others that

could be mentioned. The intention has been to illustrate those pressures that are

currently top of mind for Australian business in setting a context for understand-

ing triple bottom line measurement and reporting.

A way of thinking aboutintegrated planningand performance

16



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17

S N A P S H O T

CHAPTER 2

Triple Bottom Line Reporting:

A Work in Progress

Understanding the real world for companies

Beyond the annual report, other popular

mechanisms for communicating with stake-

holders include: community or stakeholder

consultation panels, local letterbox drops of

flyers on environmental initiatives, regularnewsletters to employees and their families, and

regular communication with politicians and

non-government organisations on matters of

interest to them.

The challenge for companies is in establishing

what would be gained by extending these

options to include more structured, targeted

and reflective information in a triple bottom

line report.

Taking the next steps

Very few Australian companies have produced

stand-alone or substantial environment and/or

social reports. Of the top 50 companies listed in

Australia ten have produced environmental

reports half of these companies are in the

resource sector. Six of the top 50 companies

have produced social reports.

Rationales and approaches differ

In general, there appear to be five broad

categories that capture the evolution of triple

bottom line management, reporting and infor-

mation distribution. While these distinctions are

not mutually exclusive they are indicative of the

primary approach of enterprises and provide a

useful way to illustrate the different rationales

and emphases.

Wait and seeis where companies are mostly

satisfied with their present approaches to

communication and accountability. Either a

change is not a business priority and not on

the radar or, there is a sense of potential

benefits, but it is far too early to proceed

without understanding more about the

context and the directions for the rest

of business.

Other companies make a commitment to

their community to be open and transparent

observing the community right to know

principle and endorsing the notion of

greater accountability to the community for

their performance. To meet this commitment

they assemble and package internal

information for an external audience.

A few companies start from scratch and

systematically ask stakeholders what they

want to know about the company. The

information they then generate is driven by

the goal of aligning with stakeholders

expectations.

A few companies, mostly international,

shape their response to stakeholder

expectations into principlesthat guide their

business activity sustainability principles

or partnership principles for example.

Finally, some companies, often in private

ownership, define their business purpose

and their commitment to sustainability

values and accountability as fully integrated

their business success depends on this

cultural perspective.

Conclusion

Reporting that is oriented to triple bottom line

characteristics has a range of seemingly

common features including: the scope and

presentation of information; reference to

management systems and commitments; the

extent to which stakeholders are identified and

social, economic and environmental impacts

and benchmarks are identified; and the

engagement of third parties to develop and

monitor reports.


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Introduction

This chapter seeks to portray the current thinking and experiences of a range ofAustralian and British companies that are grappling with the idea or practiceof triple bottom line measurement and reporting. There is wide variation and each

case study tells a different story due to sector, size, location or simply management

culture. The common thread is that they recognise the changing status of business

and the new challenges that this presents.

Many companies are quick to point out that the range of communication chan-

nels they have available for discussing company performance is already wide and

they prefer to exercise their choice of medium to fit the purpose and audience. On

the other hand, many companies are looking for something additional that facili-

tates a deeper engagement with stakeholders and the issues that matter to them.

The current foundations

The vast majority of company annual reports in Australia routinely includeshort descriptive coverage of environment and safety, our people, and sup-porting our community. These themes supplement coverage of corporate strategy,

business achievements and corporate governance that, in turn, support the direc-

tors report, financial report, governance accountabilities and stock exchange and

shareholder information. The values or broad aspirations of a company are usual-

ly covered in the managing directors or chairmans report. Many global companies

operating in Australia also issue a version of an annual report without the direc-

tors and financial reports.

Beyond the annual report, other popular mechanisms for communicating with

stakeholders include: occasional publications on social, employee or environmen-

tal activities; community or stakeholder consultation panels; local letterbox drops

of flyers on environmental initiatives; regular newsletters to employees and their

families; regular communication with politicians and non-government organisa-

tions on matters of interest to them; and so on. Some of these approaches are

specifically geared to achieving transparency and accountability goals, while oth-

ers lean towards one-way communication and managing stakeholders

expectations rather than dialogue and engagement.

Companies are not always confident in their approach to communication. The

Australian Conservation Foundation (ACF) has found that the majority ofAustralias top 100 companies have introduced environmental initiatives such as

recycling programs and energy saving initiatives, but many have not taken this

process a step further to report on their broader environmental performance and

impacts.21 Companies that do not report publicly indicate they are unaware of the

potential audience that would be interested in such behaviour and furthermore

they are unsure of the most effective way of reporting it as much of it is not con-

sidered appropriate in the annual report.

Environmental andsocial descriptions arefamiliar content forannual reports

A rich set ofcommunication mediaused by companies

Evidence of a lack of

confidence in reporting orpromoting environmentalinitiatives

18


21 Australian Conservation Foundation (2000).A Different Look at the Performance of Australias Top

100 Companies (www.acfonline.org.au/camp

Triple Bottom Line in Market Tangiable.

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