Exploiting CSR & Triple Bottom Line for Future Business

Published by MBA Skool Team, Published on February 05, 2016

The year 1972 saw the inception of a major document that emerged from the halls of the body that was formed post world war two to maintain peace and harmony in the world. The United Nations released the Declaration on the Human Environment- the first document through which the international community recognised the environmental problem at hand, and the need for a sustainable development process. Much deliberation, insightful arguments and future oriented action plans led to the birth of such a document that would govern mankind. Recognition of the problem was a major first step, formulating a means to prevent the impending dangers and its implications were the major iceberg. The phenomenon of Corporate Social Responsibility was brought in to ensure companies across the globe bring in a major aspect into their business; the aspect of social awareness and indulgence of companies towards the betterment of society.

According to the World Business Council for Sustainable Development – “Corporate Social Responsibility is the continuing commitment by a business to behave ethically and contribute to the economic development, while improving the quality of life of the workforce and their families as well as the local community and society at large.”

Image: pixabay

A corporation practicing CSR strives to comply with the laws and regulations, make a profit, be ethical and provide social accountability. It is responsible for the wider impact on society and not just the return of investments to stockholders alone. Changing business practices and internal operations is considered vital for those organizations practicing CSR. In 1998 John Eklington coined the term “Triple Bottom Line” which is a coincident approach to that of CSR and an integrated concept under the umbrella of Social Responsibility. The “Triple Bottom Line” approach is a means for corporations to achieve the adequate level of Corporate Social Responsibility which is necessary in the age of sustainable development for future generations.

Also termed as the 3P approach- People, Planet, Profit, the TBL considers CSR as an investment rather than a method of achieving sustainability. It focuses on the three aspects of-

• People-

The workforce of an organization directly has an impact on its development and growth. It does affect the bottom line of a company where it may not come up in the balance sheet of the profit and loss account, but work in the underlying layers of the engine that propels the organization forward. For example, a company that focuses on efficient succession planning ensures there is no impact on the company’s profitability as no time is wasted in finding a leader. Nurturing talent, supervising their development and encouraging the bright minds of the future helps a company retain its employees, which in turn contributes to productivity. The false notion that engaging employees is considered a waste of resources has been shattered. Organizations are increasingly engaging their employees to build them and oversee their endogenous growth that curtails the fall in productivity. Community engagement has taken a major leap forward as it is good for the brand image of the company and signals positive intentions to its stake holders and the world, labelling them as good ‘corporate citizens’.

• Planet-

The ‘planet’ account is a crucial measure of sustainability and of how environmentally responsible your company is. The intricate link between the underlying profits of a company and its sustainable methods of development and growth need to be identified and built on. Furthermore, cost reduction will lead to greater client satisfaction and loyalty. An instance maybe, higher utilisation of renewable energy resources which reduces ones dependency on non renewable sources of energy, hereby reducing the impact of fluctuating prices which creates instability. Presently many organizations are increasing the usage of fly ash, a waste generated from power generation. Around 55% of fly ash produced in the country is used in construction which helps in reducing the overall cost.

• Profit-

No Company would like to sacrifice their profit for sustainable development. Without adequate profit an organization cannot survive in the increasingly competitive world, leading to its destruction. However the means of attaining profit are saliently parcelled with the planet and people approach. Economic sustainability in the long term should be the primary objective for a company.

The TBL measures the performance of companies traversing beyond the traditional measures of profits, return on investment and shareholder value- it encompasses environmental and social dimensions as well. Ambiguity lies in measuring the TBL as there is no fixed unit of measure. A prescribed solution is the measurement of TBL as an index, where one eliminates the incompatible units issue and allows for comparisons between entities. The pivotal point is the acceptance of a universally accepted accounting method. The measures that go into the index are classified below-

• Economic measures:

1. Personal income

2. Cost of underemployment

3. Establishment sizes

4. Job growth

• Environmental measures:

1. Sulphur dioxide concentration

2. Concentration of nitrogen oxides

3. Electricity consumption

4. Fossil fuel consumption

• Social measures:

1. Unemployment rate

2. Female labour force participation rate

3. Relative poverty

4. Percentage of population with a post secondary degree or certificate

“Like the iceberg, most CSR activity is invisible ... It is often an active attempt to increase corporate domination rather than simply a defensive ‘image management’ operation.”

Enough advocating the implementation of CSR, the real question that pertains to the dimensions of sustainable responsibility is that ‘Does CSR have any ulterior motive’? Perceived to be a win-win situation, the conundrum is ‘Who wins’? Let us delve deeper in to the nitty gritty of the twisted fate of CSR. Diverting from the real issues CSR helps organizations avoid regulation, gain legitimacy and shift the ground towards privatisation of public functions.

A few domains to focus on with this regard-

• A public relations ‘stunt’: Appealing to customer’s goodwill and conscience it helps build brand loyalty. Corporate charity tie-ins facilitate a gain in a target market and an involvement in this grants the company greater power and leverage. Helping to green wash the image of the company it cleverly covers up the negative impacts by saturating the media with CSR credentials that drip with positivity.

• Avoiding regulations: Companies are using CSR as a shield to protect them from the sword of government regulations by stressing that regulations will hamper and deter the positive work they are doing under the purview of CSR. Why should a socially responsible corporation avoid regulation if it has nothing to hide? If regulations distract from bad practices, companies must not be acting ‘responsibly’ because they believe it to be morally right to do so. Curbing the abusive powers of corporations via regulations is the only way a democratic society controls what is acceptable and unacceptable in corporate behaviour.

• Morality eludes the market: ‘Are decisions made in one’s self interest through market mechanisms, good for all’? Asserting that the market will solve social problems is a dangerous assumption. Reducing consumption, paying prices that reflect true costs and extending regulations are a few solutions to pressing social and environmental problems.

Preventing exploitation of CSR and the TBL will require an adept framework of policies and structural dimensions that focus on certain ideals and values. To successfully fulfil the goals of CSR coupled with performance indication by the TBL using the different measures as mentioned above, organizations must follow a set of principles or steps towards sustainability and success.

• Realism and context – Understanding the scale of the challenge, and the opportunity

• Growth and differentiation – Turning sustainability to advantage and value creation

• Value and performance – “What gets measured gets managed”

• Technology and innovation – “New models for success”

• Partnerships and collaboration – “New challenges, new solutions”

• Engagement and dialogue – Broadening the conversation and scope of the principle

• Advocacy and leadership – Shaping the future through facilitating business in leading the way

The above seven steps towards a greater effort of sustainability and success in the long run can be ensured if apt government regulations confirm with the requirements, red tape measures prevent crippling of organizations, preventions of Machiavellian means to use CSR as a facade rather than a weapon and conforming with the social and environmental needs of the community, country and nation that would lead to better practices furnishing profit as the end product.

Let us not carry out CSR in a way which crumples the fabric of sustainability, rather, bringing a better tomorrow for the vibrant future.

This article has been authored by Joshua Mark David from XIMB


• Ajay Kapur( M.D CEO Ambuja Cement), Why a sustainable approach to business is important for your bottom line, businesstoday, October 2015;

• Corporate Social Responsibility and the Triple Bottom Line, Business Ethics, 2014

• Timothy F.Slaper and Tanya J.Hall, The Triple Bottom Line: What it is and how does it work?, Indiana Business Review, Spring 2011;

• What’s wrong with Corporate Social Responsibility? : The arguments against CSR, Corporate Watch, 2014

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