Fi­nance: Triple bot­tom line re­port­ing ...............

Re­port­ing on more than the fi­nan­cials is now de rigueur for many of the world’s largest com­pa­nies

Element - - CONTENTS - By Andy Ken­wor­thy

The idea of the “triple bot­tom line” was first coined in 1994 by UK con­sul­tant John Elk­ing­ton. In essence it is an at­tempt to en­hance our eco­nomic sys­tem by in­creas­ing the range of ways that busi­ness ac­tiv­i­ties are mon­i­tored and eval­u­ated. Elk­ing­ton’s ar­gu­ment was that in ad­di­tion to re­port­ing on the most fa­mil­iar ‘bot­tom line” of fi­nan­cial ac­count­ing, com­pa­nies should be pre­par­ing a ‘peo­ple ac­count’ mea­sur­ing so­cial re­spon­si­bil­ity, and a ‘planet ac­count’, mea­sur­ing en­vi­ron­men­tal re­spon­si­bil­ity. Busi­nesses do­ing this would take into ac­count their en­tire im­pact on the world, and could then make a real­is­tic as­sess­ment of all the costs and ben­e­fits as­so­ci­ated with their ac­tiv­i­ties. This kind of think­ing has spread rapidly, and to­day some form of en­vi­ron­men­tal and so­cial re­port­ing is be­com­ing the norm among big busi­nesses, and has even be­come manda­tory in many coun­tries.

In­ter­est­ingly, it is of­ten the same ma­jor ac­count­ing firms that have tra­di­tion­ally han­dled cor­po­rate fi­nan­cial ac­counts that are now pro­mot­ing this much broader ap­proach, show­ing just how main­stream this kind of think­ing has now be­come.

Ju­lia Hoare, a part­ner with PWC says: “For some busi­nesses it just makes good busi­ness sense in terms of things like en­ergy ef­fi­ciency, for some it is about re­main­ing rel­e­vant to their mar­ket, and for oth­ers it is about in­tegrity and staff re­ten­tion.”

She added that New Zealand has his­tor­i­cally lagged be­hind on this, although many top NZ com­pa­nies are now tak­ing it se­ri­ously. This may be partly driven by pres­sure from our key ex­port mar­kets: en­vi­ron­men­tal and so­cial mon­i­tor­ing is now com­pul­sory for sup­pli­ers to many Euro­pean su­per­mar­ket chains for ex­am­ple, par­tic­u­larly in France and the UK, where th­ese higher val­ues have been driven by in­creas­ing con­sumer con­scious­ness.

There is now a pro­lif­er­a­tion of mon­i­tor­ing sys­tems for com­pa­nies to mon­i­tor their sup­ply chains, cov­er­ing ev­ery­thing from an­i­mal test­ing to in­dige­nous rights. While gen­er­ally pos­i­tive, this can make it dif­fi­cult to ac­cu­rately as­sess the rel­a­tive mer­its of dif­fer­ent busi­nesses and sec­tors: is a com­pany whose wood is cer­ti­fied by the For­est Ste­ward­ship Cer­ti­fied (FSC) wood bet­ter or worse than one whose wood is cer­ti­fied by the Pro­gramme for the En­dorse­ment of For­est Cer­ti­fi­ca­tion (PEFC)? Can we trust one or­ganic cer­ti­fi­ca­tion more than the next?

Cur­rently two great shifts in busi­ness mon­i­tor­ing are hap­pen­ing, both of which should make things clearer in the long run. Firstly, com­pa­nies are in­creas­ingly us­ing in­de­pen­dently mon­i­tored and ex­ter­nally au­dited stan­dards like FSC and PEFC, rather than their own in­ter­nal sys­tems. This means that those cer­ti­fy­ing the ac­tiv­i­ties have a vested in­ter­est in the in­tegrity of the cer­ti­fi­ca­tion, rather than just the prof­its of the com­pa­nies con­cerned. Se­condly, pro­gres­sive com­pa­nies are not sim­ply pro­duc­ing sep­a­rate sus­tain­abil­ity and cor­po­rate so­cial re­spon­si­bil­ity re­ports, but in­te­grat­ing the in­for­ma­tion into a com­pany’s an­nual report and strat­egy doc­u­ments, where they are more likely to be more widely read and con­sid­ered.

The big ques­tion, of course, is whether this all adds up to real pos­i­tive change.

Hoare says: “There is change, although it is slow.”

“...com­pa­nies should be pre­par­ing a ‘peo­ple ac­count’ mea­sur­ing so­cial re­spon­si­bil­ity, and a ‘planet ac­count’, mea­sur­ing en­vi­ron­men­tal re­spon­si­bil­ity.”

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