There are three major criticisms of TBL in this paper: TBL's measurement, TBL as a non-systemic approach, and TBL as a compliance/ranking mechanism.
Criticism #1—The measurement of TBL
The measurement of TBL is complex. The measurement systems a company uses to measure intangible assets such as loyalty or reputation can be hazy, and it is a challenge to link changes in these areas to separate activities in the short term. In order to expand their measurement and reporting systems, corporations constantly and consistently state the different choices they have to make: whether it's in developing a reporting process that is integral to their business alone or to use external guidelines; where is the limit in terms of how much resources are used; what techniques or methods are best in terms of measurement. In addition, the objectivity and reliability of the values obtained through measurement is doubtful. More attention should be paid not only on ‘how to measure’ but also ‘how reliable are the values once obtained’.
The first limitation of the TBL approach revolves around social measurement. Before discussing this limitation in detail, the advent of the Global Reporting Initiative (GRI) and their guidelines needs to be discussed to uncover how the framework has tried to overcome this limitation. The Global Reporting Initiative is arguably the largest and most widely accepted framework for corporate sustainability reporting. A 2008 survey by KPMG showed that more than 75 % of 250 sustainability reports surveyed adhered to the GRI guidelines. The GRI consists of a number of guidelines listing reporting principles, parameters and provides 79 performance indicators for quantitative and qualitative reporting of non-financial information (GRI 2006).
GRI has put out the G3 guidelines which can be applied to corporations of different sizes and locations. It functions on a principles-based approach, and continues the multi-stakeholder process. There are currently three sets of indicators: core, additional and sector-specific (which could, for that sector include ‘core’ and ‘additional’). The distinction between core and additional is based on different presumptions of materiality. There is insufficient guidance in G3 of the reasons why indicators were considered to be core or not. The ‘Relevance’ section in the framework could be expanded or a ‘Materiality’ section added to describe why a particular indicator was considered to be important to one or more stakeholder groups. For example, there exist national differences in law that could make human rights performance indicators less relevant to a reporting entity operating in one jurisdiction. If the reporter was informed that an indicator assumed global operation, it would be better placed to make materiality decisions with its stakeholders. The GRI offers a high number of indicators which makes it hard for corporations to determine the materiality or importance of their key issues and its relation to the indicators. The different levels of parameters and indicators allow corporations to handpick those that are important to them leading the issue of selective reporting (Moneva et al. 2006).
The G3 guidelines would benefit by including clearer guidance with regards to the interrelationship between the different principles and how each principle applies to the reporting indicators. This would assist users to understand why the division has been made between principles primarily relating to content and primarily relating to quality (although many are relevant to both). Potential and probable conflicts between the different principles are not covered adequately. These guidelines have inherent limitations as a one size fits all approach doesn't bode well for different corporations. Some sectors and industries are unique, and the environmental and social performance can only be understood if a certain level of alignment to the issues and problems present in that industry context is mapped out in the guidelines of the GRI.
Social performance from a TBL perspective
Social and environmental performance is unique to each corporation, or at least industry, and is difficult to quantify (Hubbard 2009). There are two main claims about TBL and social performance that are central to the criticism of TBL: the measurement claim and the aggregation claim (Elkington 1997). Elkington's Measurement Claim states that metrics of social performance and impact can be measured in relatively objective ways. The Aggregation Claim will be mentioned more in the next sub-section. Firstly, it's hard to quantitatively assess the goodness or bad of a problem, and secondly, when dealing with social impacts, both quantitative and qualitative distinctions need to be made (Norman and MacDonald 2003). Elkington (1997) states that the three components, including the social area of the TBL approach can and need to be measured. Economic and environmental impacts tend to subject themselves well to a positivist approach. This means that the ability to quantify impacts with respect to these two components is possible. However, the social impact through TBL requires a more interpretevist approach or a more qualitative approach in measurement. While both the approaches are valid, they cannot aggregate into a single number, at least as far as the social dimension is concerned.
Based on past research, the amount of reporting done on social aspects of corporate responsibility is significantly lower than reporting done on environmental issues (Adams 2002; Kolk 2003). Unlike economics, where cost benefit analysis and other methods return dollar values in turn providing for simple decisions, the social indicator points to outcomes that are shared rather than accumulated (von Kutzschenback and Brown 2006). Social impacts cannot always be precisely defined, or quantitatively valued. They impact on individuals and communities differently. Sustainability reports by corporations in the Dow Jones Sustainability Index showcase this problem explicitly. All corporations across our sample of reports that we review in this study can do to embrace TBL in their reporting system is to indicate that certain areas will experience one type of impact, while other sections or areas will undergo a different issue or impact. They do not show that these impacts have occurred.
Aggregation through TBL
The second limitation found in the TBL approach is a lack of ability to aggregate the results across the three principles of TBL. This is a limitation because TBL promised in its aggregation claim to provide a social profit and loss number, whereby the claim states that the social metric can be quantified into a single number using various formulae, for any firm (Norman and MacDonald 2003). The required aggregation involving the goals to be sought, the costs of achieving them and the availability of resources to meet the costs in the future is seldom if ever provided. For the sake of this paper, we will only argue that TBL promised aggregation and failed to deliver.
Firstly, TBL offers no means of prioritizing among the requirements of different stakeholder groups. Secondly, it provides no method or formula in its framework that can aggregate across the TBL principles. There is no quantitative or qualitative summary that is aggregated or provided across the three legs of TBL (Robins 2006). Hence, the TBL approach from a corporate reporting perspective has raised questions and confusion in terms of what is profit maximization. The TBL approach substitutes three bottom lines for a single bottom line of financial performance. Hence, the single objective of profit is replaced by three different objectives due to the TBL approach. These multiple objectives can cause corporations to pursue multiple objectives and thus become inefficient. For example, from a financial perspective, money can be arguably used as a common unit of measurement whereby expenses can be subtracted from revenues. However, no such common unit of measurement exists for the social indicator of the triple bottom line reporting system, thus making the aggregation principle that much harder to execute. A social bottom line can possibly be deciphered in a qualitative manner; however a calculation of this bottom line still remains a mystery. Hence, TBL has been a catalyst for confusion in measurement through a lack of aggregation as it had promised.
Questions arising from Criticism #1
Question #1—How many DJSI reports evaluate company performance against social goals? Does the report measure social impacts or merely social effort?
A corporation that makes charitable donations or provides voluntary hours from employees is partaking in the social enrichment of the community. However, the extent to which these activities are being measured as part of the company's sustainability performance is unclear due to the lack of social accounting principles that exist today. The survey aims to find social activities by corporations that are meaningful and have potential to be measured as part of a corporation's overall performance.
Question #2—How many DJSI reports have a way of aggregating results from the TBL measurement?
The survey intends to find out if corporations have a summary page that tells us whether the method of aggregation of the three bottom lines is giving the reader a proper understanding of how the company is performing from a sustainability perspective. While integration is perhaps the stepping stone to answer this question, a meaningful analysis (quantitative or qualitative) is required to put all the data under the three principles into one easy-to-read summary page.
While developing a common metric to measure social performance of corporations can be difficult, it certainly isn't impossible. TBL claimed on assigning a number to items in the social and ethical dimensions of reporting. However, this should not be the major driver for social measurement. For example, how does one monetize the death of a worker on the job? This is extremely difficult. Frameworks like AccountAbility 1000 have made progress in the area of social measurement and with the advent of the GRI, social measurement is not an illusionary goal but in fact, a realistic evolution.
Criticism #2—TBL as a systemic approach
People and corporations need to develop the idea of thinking holistically and look for interrelationships among the Earth's natural and social systems. This was a development of systems theory (Capra 1975, 1996). Systems theory is the understanding that a system comprises of interrelated parts and is greater than the sum of its parts. Over the past three decades the works of Capra and Sterling have put pressure on environmentalists to adopt a systemic approach when trying to understand and cope with environmental issues (Capra 1975, 1996; Sterling 2001, 2005). A system consists of individual parts that can be looked at individually; the whole cannot be entirely defined without recognizing the relationships among those parts. In essence, sustainability is dependent upon healthy systems. If any interactions between the parts are win-lose, one will, by definition, sub-optimize the whole. Natural Capitalism is a systemic theory that provides four core movements which constitute the foundation of the strategic elements for any corporation's sustainability journey (Hawken, Lovins and Hunter Lovins 1999). According to Hawken et al., each must be pursued if the enterprise's (or industry's) aim is long-term harmony with natural systems (Hawken, Lovins and Lovins 1999). A sustainable form of thinking is the best way to develop a systemic, effective and efficient solution. Systems thinking entails the ability for grasping more complex relations, interactions and situations which include, but go beyond, simple cause-and-effect relationships (Doppelt 2003). In this way, systems' thinking also helps in building more accurate mental models for understanding complex phenomena.
TBL's lack of integration
The third limitation found in the TBL approach is the lack of integration. Firstly, the integration between the three dimensions of TBL will be hard as people are trained to be experts in each of the three dimensions and not across all of them, and this leads to the data collection within each area separately (Gibson 2006). TBL mentioned the need for integration between the economic, environmental and social areas as this provides a better picture to the community in terms of impacts (Downes et al. 2002). In practice, the TBL focuses on the co-existence of the three bottom lines but doesn't show their interdependence. The consequences include a tendency to ignore the profound interdependence of these factors, and to see them as likely to be conflicting rather than potentially complementary. The TBL approach is often accompanied by an assumption that sustainability is about balancing (Hacking and Guthrie 2008), which contradicts both the key insights concerning the interdependence of factors and the need for mutually supporting advances on all fronts (Archel et al. 2008). In addition, the TBL approach does not necessarily address the concerns that are usually expressed by citizens who are the intended beneficiaries of strategic and project level undertakings (Ho and Taylor 2007). These concerns rarely fit into the social, economic or ecological categories.
Question arising from Criticism #2
Question #3—How many DJSI reports provide information in ways that integrate the three dimensions of TBL?
As identified in the criticism of TBL, the integration of the three principles are absent in the literature. We want to measure the extent to which the lack of integration is present in the forty sustainability reports that are surveyed.
Criticism #3—TBL as a compliance mechanism
The third criticism/fourth limitation found in the TBL approach is the desire to be compliant and whether TBL, as an institutionalized norm, pushes corporations to be compliant or go beyond compliance. The concept of institutional isomorphism is a useful tool for understanding the politics and ceremony that pervade much modern corporational life (Carroll and Delacroix 1982). Corporational structure, which was created from the rules of efficiency in the market, now arises from the institutional codes and constraints that are put in place by states and the professions. ‘The efforts to achieve rationality with uncertainty and constraint lead to homogeneity of structure’ (institutional isomorphism) (DiMaggio and Powell 1983). Isomorphism is simply a constraining process that coerces one actor within a population to mimic the other actors, as long as they face the same set of environmental forces or conditions (Hawley 1968). According to DiMaggio and Powell (1983), there are three types of isomorphism: coercive, mimetic and normative. Coercive pressures come from other corporations in which they are dependent upon; mimetic is the process of imitation; and normative is simply following a framework or rule that is the benchmark or standard. While sustainability reporting and TBL for that matter is not related to certification that is required for the validation of a management system, TBL is a vehicle for allowing corporations to adopt a set of criteria that gets them recognition on sustainability indexes such as the DJSI. Corporations are to a certain extent, influenced by coercive, normative and mimetic isomorphism when adopting TBL as their reporting framework. Government pressures, regulatory standards, stakeholder pressures (coercive) are examples of why and how TBL came into corporate reporting (Yew 2000; Friedman 1999). Corporations believe that following a TBL format would make them similar or compliant with formats that most other corporations use (mimetic & normative). Hence they can be in competition with their peers and major multinationals in other industries doing TBL. TBL is a way of following the trend of other corporations in terms of sustainability reporting. Corporations need to acknowledge their negative impacts from the social space. As a majority of corporations are value driven, the corporations' culture needs to be built around those values. While TBL guides corporations to have a framework or rigor around reporting to make sure what areas need to be reported on in terms of achievements in each area and demonstrate compliance, that's about all it does. Moving beyond the three legged stool and reporting on more areas material to corporations is a move beyond compliance as the traditional TBL framework is simply not adequate. Corporations look at stakeholders and the business and see what issues is material to both parties and focus on them. In order to think beyond compliance, corporations need to think of how the definition of sustainability evolves, and also how as an organization, how the reporting evolves from TBL to a more holistic approach. Question #4 investigates how many corporations comply with the DJSI selection criteria (based on the TBL approach) and whether corporations have stuck to the three dimensions or have attempted to go beyond the TBL requirements and also beyond compliance, in a manner of speaking. In this question, coercive forces come in the form of the sustainability index through their selection criteria, mimetic forces comes from the similarities in TBL reporting among the corporations, and normative forces is displayed through the norm that is TBL reporting and whether corporations have moved on from this framework or not.
Certification and compliance (not particularly related to TBL)
Another question, not particularly related to TBL, but relevant for the analysis is the issue of certification. One way for corporations to tackle compliance is to adopt an approach that grows out of their business practices. Some corporations incorporate elements of internationally recognized reporting frameworks such as the GRI and The International Corporation for Standardization (ISO). The ISO has different standards, one of which is ISO 14001:2004. This is an international standard on Environmental management systems; it provides requirements with guidance for use and does not provide requirements for specific performance. In spite of gaining worldwide prominence, corporations like British American Tobacco and Japan Tobacco are ISO 14001 certified. This raises a paradox as to the true intentions not only of the corporations that pursue ISO certification, but also of ISO's standards and how rigidly they are enforced. If corporations that are responsible for the deaths of millions of their clients can get international certifications, then the motive behind being compliant and sustainable comes into question. TBL does not provide a systemic view of thinking. While TBL may be the official benchmark for many corporations, as a measurement system, it is an ill-structured, poorly defined measure. The concept is rooted in politics and social change. It is an effort to appease a growing public concern that corporations, particularly business firms, are failing to live up to their claims to act ethically and as good corporate and environmentally responsible citizens. We want to investigate whether corporations tend to highlight their certifications prominently throughout their sustainability reports. This would in turn allow us to claim whether such prominence in certifications shows a culture in the organization that also embeds TBL reporting as part of its reputation enhancement mechanism.
Question arising from Criticism #3
Question #4—How many DJSI reports comply with the TBL/DJSI criteria?
In order to get ranked on the Dow Jones Sustainability Asia-Pacific index, corporations have to comply with nine indicators (Fig. 4). However, the weightings of each indicator vary which gives corporations leeway as to the methodology they use to get ranked on the index. For example, higher weight is given to compliance with governance codes than environmental reporting or social reporting. Corporations can use this loophole to get ranked in the index despite not completely adhering to the three principles of the TBL framework. This will be investigated in the survey.
Question #5—How many corporations listed in the DJSI has product/environment certifications such as ISO, OHSAS?
Corporations that may lack in their environmental/social reporting can highlight the fact that they are certified by certain industry standards showing their desire to be compliant with requirements of the DJSI, which in turn gets them ranked. The survey intends to see how many corporations emphasize their certifications to see if there is a link between being compliant and being ranked.