Some of you may remember my tweets and Fb updates on the subject a couple of months ago, when I participated in a panel discussion at National Geographic’s Green Conclave. I got busy soon after, and couldn’t post a blog. Yesterday a friend asked for some material on triple bottom line, and I decided to write it now…
There are two arguments on what a good Corporate Citizenship is. One argument views business enterprises as pure economic citizens. The other, a position taken by ITC, sees them as Socio-economic Citizens.
Pure Economic Citizen argument says enterprise accountability starts with earning profits and ends with paying taxes; that the responsibility towards social and environmental aspects is best left to other organs of society viz Government and Civil Society Organisations. Further that the focus of Business Enterprises should be on satisfying the shareholder desire for a return on their financial investment to the exclusion of non-financial stakeholders.
Essentially, the argument is that the Corporates, as artificial entities, should have no social responsibility; people or real individuals must have social responsibilities. Generating profit by servicing consumers in a competitive environment is considered the most socially responsible act of an economic enterprise.
On the other hand, ITC views enterprises as socio-economic citizens and therefore as accountable to today’s & tomorrow’s society and environment from which it is drawing resources, besides to its financial shareholders. The expectation from socio-economic citizens is that the core business activities must be implemented with broader responsibility towards ALL the stakeholders. In other words, enterprises must demonstrate positive economic, social and environmental performance over long term. This is called Triple Bottom Line approach.
Of course, the trade-offs in the value created for multiple stakeholders make Triple Bottom Line approach a difficult path to follow. ITC has creatively enmeshed the interests of shareholders, the poor, and environment to build business models that overcome the trade-off challenge. ITC eChoupal initiative, Social Farm Forestry programme in Bhadrachalam area and Agarbatti business linked to women self help groups are some examples of Triple Bottom Line approach by ITC.
Other panelists argued that such enmeshing isn’t easy and the trade-offs are inevitable, pushing companies to be profit focused or compromise on profits. I proposed that Government could do four things and create a market mechanism to deal with such a trade-off challenge.
- Make TBL reporting mandatory. Peer group and market pressure will then automatically broaden accountability of enterprises
- Define TBL accountability metrics clearly along outcomes lines. For example, Water Positive and Carbon Positive Corporates…
- Create tradeable instruments from such metrics. TBL then becomes a source of economic advantage
- Deepen the market for these social credits by mandating threshold TBL for bidding in Govt projects. Non TBL enterprises can buy credits to be able to bid