7 Towards Reporting on the Triple Bottom Line: Mirages, Methods and Myths – The Triple Bottom Line

Chapter 7

Towards Reporting on the
Triple Bottom Line:
Mirages, Methods and Myths

Rob Gray and Markus Milne


Are individual companies sustainable? Are they contributing to or detracting from the planet's ability to sustain life and to provide fair access to environmental resources for both current and future generations? Are we to believe them when they say, for example, that they place the principles of sustainable development and/or social responsibility at the heart of their strategy? Who could really know?

What we do tend to know about organizations – with a fairly high degree of reliability – is the extent to which they are acting with appropriate financial probity. And we know this because organizations are required to provide full statements about their financial performance and these statements are subject to a usually fairly rigorous audit. only when most organizations of substance are equally required to produce complete, competent and complex statements about their social, environmental and sustainability performance will society be in a position to answer our opening questions. Until that time, we will remain almost entirely ignorant of the extent to which (if at all) organizations are performing to the highest standards of social and environmental stewardship and are being truthful with their claims to probity and propriety.1

Thus, in this chapter we wish to briefly address three aspects of the triple bottom line (TBL) debate. Firstly, we wish to consider why reporting and real accountability are essential and why this will require legislation, not voluntary action. Secondly, we want to explore what triple bottom line reporting really should be aiming for – a sort of first pass at what it would look like. Finally, we want to explain why TBL and sustainability reporting are not synonyms and thus speculate on some of the things that will be necessary if sustainability reporting is to develop.

Voluntary? Reporting?

The idea of social and environmental reporting is certainly not a new one.2 However, not only was there very little systematic social and/or environmental reporting by organizations less than two decades ago, but companies, in particular, were actively keen to prevent such issues from being discussed.

The exceptional and innovative upsurge of environmental reporting during the early 1990s (and the less enthusiastic re-emergence of social reporting from about the mid 1990s)3 provided a platform (albeit a partial and shaky platform) on which moves towards TBL and/or sustainability reporting could be built.4 The developments in reporting brought very significant changes with them. It became fairly commonplace to hear chief executive officers (CEos) and boards discussing social responsibility, sustainability, triple bottom line sustainability and so on. So much so that one could almost believe that we have arrived in the promised land – a land where the very highest goals of human aspiration (justice, decency and the maintenance and respect for the planet) are at one with the very core values of leading capitalistic enterprises. Without detracting from the achievements of the leading reporting organizations – and, indeed, without detracting from the well-deserved accolades that they have received – there are a number of reasons why such a conclusion would, we suggest, be more than a little premature.

Firstly, companies have successfully opposed the introduction of mandatory social and environmental reporting (for example, in the UK during the 1970s and in New Zealand during the 1990s). They can just as successfully withdraw their support now should current fashion for 'stakeholders' change (see, for example, Mayhew, 1997; Beder, 1997). This is because reporting is currently a voluntary phenomenon in most countries.5 voluntary regimes of reporting only achieve widespread high-quality and permanent changes if the volunteers include most of the population and can be relied upon to remain fully and permanently committed (we are unaware of any evidence to encourage such optimism); or the regulatory authorities – whether governments, stock exchange authorities or even accounting regulators – can be relied upon to bring substantive regulation into being if the voluntary initiative fails.6 There is little persuasive evidence of this either.

Secondly, while we very properly celebrate and reward the leading reporters on a worldwide basis, such reporting is only maintained as a regular (annual or biannual event) by very few companies. The total number of companies that have reported at all remains relatively small. The vast majority of companies simply do not report and (all the evidence suggests) will not do so until a firm and substantial regulatory framework is in place – preferably through law. voluntary systems are only best if, and only if, everybody is willing to volunteer.

Thirdly, the quality – and, especially, the completeness – of such social, environmental and sustainability reporting as exists has remained, with a few notable exceptions, fairly low. Environmental reporting has mostly remained partial in scope, rarely covering matters such as ecological footprint, total resource use and so on. The leading edge of reporting has not advanced much beyond the standards set by the pioneers in 1990.7 Modern (post-1990) social reports cover few stakeholders, tend to cherry-pick elements of news and generally ignore the major social issues that arise from corporate activity, such as lobbying, advertising, increased consumption, distributions of wealth and so on.8 And, as we shall discuss below, sustainability reports have long had the principal failing that they say little – or, more usually, nothing – about sustainability.

Poor standards of reporting mean that a reader cannot assess to what extent – if at all – an organization has discharged its responsibilities to the environment and to society. indeed, such reports are, in fact, misleading and certainly do not discharge accountability.

in fact, matters are worse still as reports ignore issues of complexity and context. in other words, the 'social responsibility’ of an organization makes no sense taken out of the context of capitalism, local laws and culture. Equally, environmental performance only really makes environmental sense in the context of the state and the functioning of wider environmental systems. Current forms of reporting can verge on the meaningless as they are both too simple and devoid of context.

So that, fourthly, and finally, when we hear CEos and boards openly discussing issues of social responsibility, accountability and sustainability, for example, we are forced to ask: why should anybody believe such statements, claims and assertions? And what is in the mind of people – what do they actually mean – when they use these words?

The belief factor is important. Industrial society sensibly regulates companies, directors and, especially, financial reporting and disclosure. it requires the reporting to be subject to an expert attestation. Even so, financial information can prove to be misleading, unreliable or just plain lies. A sensible society would not, therefore, necessarily accept the directors' word when they talk of social or environmental matters. Careful and thorough regulation and auditing of social and environmental information is no less crucial than for financial information. Yet, the evidence is that the quality of attestation normally applied to social and environmental reports (usually voluntarily) is significantly weaker than that applied to financial reports (see, for example, Ball et al, 2000; Milne et al, 2001; Owen et al, 1997; 2000; 2001).9

Responsibility, accountability and meaning

So, what do organizations mean when they talk of 'responsibility’, ‘accountability’, 'sustainability’ and so on?

Social responsibility has proven to be an exceptionally elusive concept for many years (see, for example, Frederick, 1986; McGee, 1998). In essence, if it is defined in a way that suits business (for example, according to what is possible within the current activities and goals of business), it ends up fairly trivial or tautological. if it is defined as an individual would understand it, the concept is clearly unattainable by a financially successful business because responsibility runs against the principles of self-interest upon which most notions of business are predicated. indeed, it is of note that the two greatest students of capitalism, Karl Marx and Milton Friedman, were in fairly close agreement on this: companies cannot be socially responsible. it is, in all probability, entirely unreasonable to ask companies to act in socially responsible ways – they operate in a system (capitalism) that largely penalises non-economic (socially responsible) action when that socially responsible action is in conflict with economic dictates. it is only through the use of laws passed by a civilized society that the organs of capitalism are made to act in 'responsible’ ways. Complying with a sensible set of laws then becomes (as Milton Friedman so famously noted) the principal responsibility of business. However, such a restricted sense of responsibility only makes sense if, and only if, the companies themselves have little or no influence on the legal process. it is hardly a responsibility worthy of admiration if the organs of capitalism are proud to comply with the rules that they, themselves, established.

The same is true of sustainability. It looks exceptionally likely that the current form of capitalism is not sustainable – it is, after all, based on private property rights, growth and expansion, competition, maximizing consumption of non-essentials, maximizing returns to shareholders and directors and so on (see, for example, Gladwin et al, 1997). These are not the characteristics of a sustainable economic system in the Brundtland (UNWCED, 1987) sense of the word. it seems profoundly implausible that an individual company could be sustainable (or responsible) in an unsustainable (or irresponsible) system (see, for example, Thielemann, 2000).

This is where accountability comes into play in such an important manner. Accountability is the principle of providing to society the information about which it has a right to know. Society has a right to know about the extent to which its principles and tenets are being complied with and how its environmental resources are being looked after. These are fairly basic rights in any democracy. However, organizations, in general, and business, in particular, by making claims that, for example, they are acting in entirely responsible ways and/or that society and the environment are safe in their hands, are challenging society's right to legislate over these issues. In doing so, businesses are, by default, establishing that society has a right to know the extent to which these claims are valid ones.

Reporting – and especially triple bottom line reporting and sustainability reporting – is about the discharge of that accountability. Such reporting, most importantly, will allow society – and the stakeholders, in particular – to judge the extent to which large organizations, in particular, are meeting the duties placed upon the organization (typically the law) and the extent to which they are – or are not – meeting the standards that they set for themselves or claim for themselves. Social and environmental accountability will demonstrate the extent to which large organizations cannot be socially or environmentally responsible or sustainable as a result of, for example, a conflict between moral and financial criteria.

Few organizations are willing, voluntarily, to undertake this sort of reporting. However, without such reporting, it is not at all obvious that society can sensibly re-examine its laws in order to reconsider whether the system – the rules of the game – are, indeed, those that produce a just society.

Triple bottom line

The triple bottom line (Elkington, 1997) captures a simple but important idea: if an organization is, indeed, a social and environmental entity, as well as an economic/financial entity, then it needs to report upon (if not control) its social and environmental activities in the same way as it reports upon its financial activities. The result of a real TBL report would be an annual report of a company comprising equal sections on financial, social and environmental accountability – giving the social and environmental interactions equal billing with the financial.

At the heart of the idea of TBL reporting is a subtle tension: it is virtually impossible to imagine many situations in which a conflict of interests between financial expedience and social or environmental responsibility will result in the social or environmental being given precedence over the financial. indeed, an organization in modern capitalism is designed to follow the financial; to the extent that it does not, it will be ‘penalised by the market’. Fineman (1994; 1996; 1997), for example, examines how corporate executives in the automotive, chemical, power and supermarket sectors are dealing with environmental issues. He suggests that the bureaucracy of corporations translates environmental issues into public relations issues, engineering problems, legal challenges, matters for accounting or marketing projects. The environment in the corporation is ‘everywhere and nowhere’. He concludes that:

Corporate environmentalism as an ethically green cultural response is largely a myth. It fits uneasily into the current realities of trading and corporate governance. ‘Business and the environment is often a gloss that disguises practices which are more like ‘business or the environment (Fineman, 1994, p2).

A company must be managed for the financial bottom line, otherwise there will be no company and the well-intentioned directors will be looking for another job. The social and environmental dimensions of the business will be – and, indeed, can be – introduced only within:

  • zones of discretion;10
  • where there is no apparent conflict with the financial; or
  • where social and/or environmental issues actually have positive financial benefits (the win–win situations; Walley and Whitehead, 1994).

A TBL report that was honest and complete would expose this tension and the fact that the financial does – and must – dominate.

So, a triple bottom line report – to be worth anything at all beyond public relations puff – must contain a substantial and believable social report and a full and audited environmental report.11 Only in this way can these conflicts and trade-offs be exposed and, ultimately, their causes explored and solutions considered.

A full social report can be approximated through the stakeholder model. It has been argued elsewhere (see, for example, Gray et al, 1997) that it is relatively easy to make an initial specification of an organization's potential accountabilities through the application of the stakeholder model. Then, for each organization–stakeholder relationship identified, several levels of information are required to approach a full accountability. These levels are, at their simplest:

  • descriptive information about the relationship between the organization and the stakeholder (for example, numbers and categories of employees);
  • the accountability that society requires through law and quasi-law (for example, health and safety data);
  • the accountability that the business wishes to express (for example, the activities of employees outside work); and, finally,
  • the accountability that the stakeholders themselves wish to see (for example, the state of those made redundant).

Each party – company, society and stakeholder – is thus given a voice in the process.

A full environmental report can be approximated through the application of a broad eco-balance to the reporting organization. This records all inflows, outflows and leakages and thus captures most – if not all – environmental interactions. Coupled with the reporting of ecological footprints (see, for example, Wackernagel and Rees, 1996), this will provide a fairly substantial picture of the organization's environmental stewardship.12

Such reports, together with the traditional (or possibly even simplified)13 financial statements, would, we believe, bring us as close to triple bottom line accountability as we can currently achieve.

The TBL remains an ideal that shows us where real accountability – so widely discussed – might actually lie. Unfortunately, the TBL report remains something of a mirage, and will continue to be so as long as the debate about, and the practice of, social and environmental reporting continue to owe more to rhetoric and ignorance than to practice and transparency.

Sustainability? Reporting?

What social and environmental reporting, TBL or otherwise, cannot tell us is the extent to which the organization is contributing to, or detracting from, sustainability. A full social report might indicate stakeholders' preferences for dialogue, for example; but it does not tell us to what extent the organization has increased or decreased income inequality, freedom of access to environmental resources and so on. Equally, a full environmental report may tell us about the overall footprint of the organization; but while this may give us a clue, it does not tell us directly about whether or not environmental sustainability is better or worse off as a result of the organization's activities for the year.

A TBL report may be a necessary condition for sustainability reporting; but it is not a sufficient condition. it can only be the most oblique approximation of a sustainability report.

Elsewhere (Gray and Milne, 2002) we have argued that sustainability reporting requires a systems level of thinking and analysis that most economically driven organizations will find impossible to accomplish. Sustainability, as we understand the concept, implies the need to consider the scale of development relative to the available resource base; the fairness with which access is provided to those resources and the outputs from them, both among current generations and between current and future generations; and the efficiency with which resources are used (see, for example, Daly, 1992; Wackernagel and Rees, 1996). While organizations can adapt to issues such as eco-efficiency (for example, resource management), they find it much more difficult – even impossible – to address issues of equity, social justice (Gray and Bebbington, 2000) and the scale of their development.

As Paul Hawken (2002) illustrates with reference to the Global Reporting Initiative (GRI) report from McDonald's Foods:

The question we have to ask is what is enough? Is it enough that one in five meals in the US is a fast food meal? Does that satisfy McDonald's?... Does McDonald's want to see the rest of the world drink the equivalent of 550 cans of soda pop as do Americans?... They won't answer those questions because that is exactly their corporate mission... A valid report on sustainability and social responsibility must ask the question: what if everybody did it? What would be the ecological footprint... What is McDonald's footprint now? The report carefully avoids the corporation's real environmental impacts. It talked about water use at the outlets, but failed to note that every quarter-pounder requires 600 gallons ofwater. An honest report would tell stakeholders how much it truly costs society to support a corporation like McDonald's.

A serious sustainability report would have to include a report on the organization's contribution to/detraction from environmental sustainability; and a report on the organization's contribution to/detraction from social sustainability.

The work of Bebbington and the Centre for Social and Environmental Accounting Research (CSEAR) (Bebbington et al, 2001; Bebbington and Gray, 2001; Gray and Bebbington, 2001; Bebbington, 2001) and, more recently, Forum for the Future (Howes, 2001), for example, has shown real progress towards measures that can be used to estimate the degree of environmental unsustainability of an organization's activities. Although such methods expose the difficulties inherent in attempts to measure something this complex and, indeed, suggest that succinct, single-point estimates of such measures are unlikely to be possible, they do demonstrate what we more or less knew – companies are not currently sustainable and probably cannot be sustainable under the current system of economic and financial organization.

Social sustainability is altogether more difficult to conceptualize and estimate. it is also a great deal more obviously political as it rests on nothing less than interpretations and explanations of the relationships between modern capitalist activity and social justice – the probability of a consensus on this area seems slim, indeed. Nevertheless, it is just such fundamental relationships that need to be explored and discussed if sustainability is ever to be a serious goal.14

There is a more basic problem, though, in that there must be some doubt over the extent to which the concept of sustainability can actually be applied at the organizational level.

Sustainability is primarily a global concept – to isolate the contribution to/detraction from that state by individual economic units – although reflecting the current nexus of power and control requires a calculus of such awesome complexity as to rather defy belief. it may well be that we can think of sustainability, to a degree at least, as relevant at local ecosystem level and examine factory/site and organizational impact at that level. But such excursions must be, at best, crude estimates. More significantly, it is, of course, not the impact of individual organizations that matters but the interactions and total impacts that a range of organizations has on an ecosystem's carrying capacity. This requires a level of analysis that is quite different from the analysis assumed by organizational reporting, and one that requires decision-taking and action to be operable at, for example, local, ecosystem and/or national level – not at the level of organization itself.

This means that if sustainability is really our goal, then the place for the principal control over resources, their use and their distribution is not the company or other organization, but some other geographic or community level. There is currently no political will or wherewithal to set about wresting power from corporations and returning it to communities and ecosystems! Consequently, we do well to remember that while we may, eventually, be able to account at the organizational level for elements of unsustainability and for contributions to/detractions from social justice, a full account of sustainability may simply make no sense at an organization level.


We live in exciting, if confusing, times. This is not least because we are involved (or we hope we are involved) in the great experiment to make modern, European-based, capitalist societies less unsustainable and, if the gods smile upon us, to make our ways of economic and financial organization sustainable.

In terms of social and environmental TBL and sustainability reporting, we conclude that there are five developments that would advance the cause of sustainability and accountability through, primarily, seeking to match the level of informed discussion and the level of activity with the level of hopeful rhetoric and optimistic assertion.

In the first place, we need to develop a more analytical and sceptical understanding of what is meant by 'social responsibility’, ‘environmental stewardship’ and 'sustainability’. Until reporting organizations use these, and related, terms in the ways in which they are more commonly understood, hubris, confusion and just plain deception will dominate over transparency and clarity.

Secondly, we need firm, sensible and comprehensive legislation requiring all large organizations to report fully and honestly. This will take the burden off the few leading-edge companies and make comparable and reliable social and environmental reporting the norm as opposed to the exception.

Thirdly, we need to formally recognize that TBL reporting is a potentially achievable – but very rarely achieved – goal. We now know enough to define what a first pass at a TBL report would look like. But progress towards this goal is not helped by empty rhetoric. Only when the practice of TBL reporting becomes widespread will we learn about the substance of the reporting issues and the challenges that such a development will make on regulators, reporters and stakeholders.

Fourthly, there is good work being done in trying to establish some of the parameters of sustainability at the organization level. This ‘good’ work contrasts crucially with other, entirely misleading, work that has no connection with any concept of sustainability with which we are familiar.15 Such capture and emasculation of sustainability is a crucial impediment to any real progress. More commentators need to explicitly recognize this distinction and keep it to the fore of all discussions of social and TBL reporting.

Finally, we need to learn that sustainability is a systems – not an organizational – concept. our current systems of financial and economic organization lead us to try and relate all important matters to the level of current organizations because it is here that power and decision-making seem to lie. But nature and ecology know nothing of our companies and institutions. if we are to return to some notion of harmony with our ecological roots, we will need to reconceptualize our decision-making and probably our institutions and organizations along ecological lines. Ecology, clearly, will not reconfigure along our modern institutional lines.

Above all, we need to try for more clarity and more honesty, and (for this to happen) we need to start to regulate our economies in ways that privilege life, justice and the environment and to see economics and finance only as a means, not as the end. Because if we don't, they will be!


1Most prominent among these claims are, inter alia, the World Business Council for Sustainable Development (WBCSD) and the Dow Jones Sustainability Index, which invariably seem to suggest that not only is reporting in good shape, but that regulation of such reporting would be an entirely unnecessary infringement of the wealth-making activities of business. Such suggestions are not just misleading; they are also dangerous in that they can lull stakeholders, society and regulators into a false sense of complacency – when there is, by definition, no evidence on which to base such a complacency! To illustrate the point, consider the following quotes taken (and not out of context) from the Dow Jones Sustainability Group Indexes Report Quarterly 3/99:

The performance of companies implementing sustainability principles is superior because sustainability is a catalyst for enlightened and disciplined management... The concept of corporate sustainability has long been very attractive to investors because of its aim to increase long-term shareholder value.

These statements are perniciously, outrageously and blatantly untrue; but there they are, out in the public domain, in a widely distributed and widely followed and admired indexing system. The statements seem to be accepted when, at best, there is no evidence to support them and, at worst, they are breathtakingly untrue.

2ASSC (1975) and see Gray et al (1996) for a summary.

3See ACCA (2002). For an historical overview, see Gray and Bebbington (2001) or Gray et al (1996).

4See, for example, Gray et al (1995) and Hackston and Milne (1996) for reviews of reporting developments.

5See UNNGLS and UNRISD (2002) for more detail on developments in regulation.

6This is a sceptical view of voluntary regimes that suggests that their success should not be measured in changes in reporting practice but in changes in the appearance of reporting practice and in their ability to persuade regulators that regulation is not necessary.

7See, in particular, the ACCA reporting awards and the Report of the Judges, 2001, on the ACCA and Sustainability CD-ROM published in 2002.

8This is one of the major difficulties that the GRI has failed to overcome. Most social reports are not social reports at all, they are ‘employee reports' or, in some cases, ‘employee, consumer and local community reports’. (See, for example, owen et al, 1997; 2000; 2001).

9Social and environmental attestation fees are only rarely disclosed, so we have to rely on circumstantial and hearsay evidence to understand the work levels that are undertaken. Consultants, in addition to being untrained, are probably not sufficiently remunerated to undertake appropriate levels of work within the organization.

10Where there is sufficient economic ‘elbow room’ to take ‘uneconomic’ choices. These will often be very small relative to the organization as a whole, and smaller for quoted companies.

11Audit is a necessary, but not sufficient, condition for a reliable report. The fact that financial audit and the current state of social and environmental report 'verification’ are poor simply tells us about the quality of auditing, not the principles of auditing (see, for example, Ball et al, 2000).

12A related concept is the ‘carbon footprint’, whose reporting is becoming more common.

13increasing the importance of social and environmental statements may involve reducing the importance of – and emphasis given to – financial statements.

14See Henriques (2001) for one approach.

15Paul Hawken (2002) is especially expansive on this point in relation to McDonald's and the GRI.