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Beyond the numbers: The triple bottom line

More and more companies are measuring and reporting nonfinancial ethical performance, focusing on people and planet in addition to financials. 
April 4, 2022

By Karen Helderman, CPA, CISA, PMP

As CPAs, we are experts at calculating and reporting on the financial bottom line, but we may not be familiar with a growing reporting trend that measures a company’s nonfinancial ethical performance, known as the triple bottom line (TBL). The triple bottom line is a phrase coined by John Elkington in his 1998 book, “Cannibals with Forks: The Triple Bottom Line of 21st Century Business,” and he suggests that a business’s success depends on its positive influence through three bottom lines: profits, people and planet. (1) Triple bottom line reporting is also known as sustainability reporting or corporate social responsibility reporting, and has been increasing in popularity as consumer and investors seek out brands and companies that align with their social values. This includes companies having an ESG (environmental, social and governance) focus.

In TBL reporting, profit represents the traditional financial bottom line as well as disclosures about financial-based initiatives, such as procurement practices and anti-corruption policies. The people bottom line includes reporting about an organization’s social responsibility and activities that improve the lives of its employees, customers and citizens. Often, this bottom line will disclose information about employment, diversity, nondiscrimination, human rights, occupational safety and customer health. The planet bottom line focuses on environmental responsibility and may include information on how an organization replenishes raw materials used during production and reduces energy usage, emissions and waste, as well as how it complies with environmental regulations.

TBL reporting has been popular in Latin America and Europe for more than 20 years, with usage growing in the United States as our culture focuses more on the environment, ethics and sustainability. According to “The KPMG Survey of Corporate Responsibility Reporting 2017,” 93 percent of the world’s largest 250 corporations report on TBL, representing a significant rise from 35 percent in 1999 when KPMG first measured this metric. (2)

Some popular U.S.-based companies that use TBL reporting include Starbucks, Johnson & Johnson and The Walt Disney Company, to name a few. Many Virginia-based companies, including Genworth, Capital One and Altria, regularly report on TBL, and the City of Richmond has created a sustainability office that provides an online sustainability dashboard to its citizens.

'Profit' bottom line

Most profit bottom line reporting occurs in the traditional annual financial report, which includes the financial statements and footnotes. However, companies like Capital One have chosen to enhance these traditional disclosures by including additional information in its TBL or social responsibility report.

Specifically, Capital One’s Corporate Social Responsibility (CSR) Report for 2017, available on the Capital One website, links the reader to the annual financial report, discloses its philanthropic giving, quantifies its number of locations and associates, describes its business segments and explains its governance and business practices. The governance and business practices section is especially compelling, as it describes the corporate culture as being based on the values of excellence and doing the right thing, and provides links to its Code of Business Conduct and Ethics. Information in the profit bottom line section of Capital One’s CSR report is similar to information one might find in a governmental entity’s Management’s Discussion and Analysis.

People bottom line

Capital One’s CSR report contains two sections devoted to its people bottom line. The first section focuses on its employees and provides demographic breakdowns about the composition of its workforce, such as by sex, race and ethnic background. This section also describes interesting programs that employees may participate in, like one that elevates women in technology and another that empowers frontline associates to share feedback and ideas. It also features information about its campaign to build and foster a diverse and inclusive culture of employees through various business resource groups. As Capital One states in this section, the business resource groups it sponsors “are linked to Capital One’s goals of recruiting, retaining, and developing diverse talent and leveraging differences and connections to contribute to the success of the organization.”

The second section of Capital One’s people bottom line focuses on its impact to the community and includes information about its outreach programs through volunteerism, grants, loans and business policies. A significant portion of this section is devoted to its $150 million, five-year investment to help people in the community prepare for future jobs and to benefit small businesses, and includes stories and videos about people who directly benefited from the investments. It also describes community initiatives that are relevant to Capital One’s line of business, such as financial literacy programs, grants for credit counseling, low-income housing loans and supplier diversity.

In contrast, Genworth has chosen to take a cleaner approach in its 2017 Corporate Social Responsibility Report, also available on its website, as it focuses less on detailed descriptions of programs and more on outcome statistics that are measured for each goal. Genworth’s people bottom line focuses on its employees and reports on how many employees participated in its people-based initiatives. Genworth’s CSR describes its approach to the people bottom line as such: “At Genworth, we’re committed to creating an inclusive work environment that fosters camaraderie, rewarding work, community involvement, and a focus on our employees’ wellbeing. We seek out our employees’ unique and common perspectives and talents, and work together to help each other and the Company succeed.”

Planet bottom line

Capital One’s CSR report includes a comprehensive section on its planet bottom line and describes its commitment to the environment by using renewable energy, constructing LEED-certified buildings and achieving less waste. For each commitment, the report provides information about various programs underway, such as using water efficient fixtures, compositing and recycling and providing electric vehicle charging ports. Capital One also provides statistics to highlight some of its most significant achievements, such as tons of paper recycled and percentage of renewable energy used to power the company.

In contrast, Genworth’s report focuses on high-level statistics in its planet bottom line, detailing that it has decreased its emissions for air travel by 32 percent and reduced paper usage by 26 percent, for example. The website offers readers detailed information about its efforts, gives transparency to its environmental policies and describes the role of its Sustainability Committee.

Triple bottom line reporting is not isolated to just corporations, however — it can also be found in the government sector. The City of Richmond’s Sustainability Office is a good example. The Sustainability Office was created in 2010 to set triple bottom line goals, generate savings and have a positive environmental impact through the implementation of the RVAgreen Sustainability Plan. The Plan includes 55 initiatives that the Sustainability Office groups and presents in an interactive Sustainability Dashboard, making the reporting experience both interesting and intuitive for the user.

Users can click on an icon, such as “Alternative Transportation” or “Air Quality,” and use visual cues to evaluate the city’s progress on each initiative. These visual cues include arrows pointing upward and downward to signify positive and negative results, as well as graphs that show historical trends, all of which allows users with various educational backgrounds to quickly understand the information.

Things to consider before adopting TBL reporting

A 2010 research paper from Ernst & Young, “Seven Questions CEOs and Boards Should Ask About Triple Bottom Line Reporting,” explores this topic and provides thoughtful information to companies interested in TBL reporting.(3) There are pros and cons to consider before embarking on TBL reporting. One pro is that TBL reporting gives important information to stakeholders, such as ethical investors and consumers, who are interested in and value corporate sustainability matters. Various researchers have found that millennials and others are willing to make purchases that support a cause, will pay more for an environmentally sustainable product and want to use their skills to make a difference. Consequently, reporting TBL activities may be imperative to remain competitive and attract these consumers and investors.

An obstacle to implementing TBL, however, is that it requires significant effort beyond simply preparing the report. Including people and planet bottom lines in addition to financial data commits the company to a culture of sustainability, which goes a lot deeper than just reporting on it. The company must commit itself to adopting principles that focus on people and planet, and to rethinking its strategic plan and business practices to have positive effects on all three bottom lines. This is not easy. Simply donating more money to the local community may not be a solution for improving a people or planet bottom line, because doing so may have a negative impact on the profit bottom line.

Ideally, a company would carefully select its sustainability initiatives to have positive outcomes on multiple bottom lines. For example, a manufacturing company may consider optimizing its production methods, which would improve its planet bottom line by reducing the amount waste sent to the landfill, while also having positive outcomes on the profit bottom line. As seen earlier with Capital One and Genworth, each selected planet bottom line initiatives to reduce office waste and minimize emissions associated with travel. Achieving these initiatives benefits the profit bottom line by reducing the amount of paper these companies purchase and avoiding travel costs by opting for virtual rather than physical meetings.

Global reporting initiative

The approach to preparing a profit bottom line is deep rooted in accounting standards and best practices, and CPAs know what they must do to opine on its fair representation. However, TBL reporting standards have not yet made their way into the traditional accounting and auditing standards, so corporate accountants may be confused about what to report and how. The best source of information and guidance on this topic is the Global Reporting Initiative (GRI), an independent international organization that provides the first and most widely adopted global standards for TBL reporting. Their standards cover a range of topics in the profit, people and planet categories and are free to download at globalreporting.org. GRI’s mission is focused on four areas: 

  1. Create standards and guidance to advance sustainable development: Provide the market with leadership on consistent sustainability disclosures, including engaging with stakeholders on emerging sustainability issues.
  2. Harmonize the sustainability landscape: Make GRI the central hub for sustainability reporting frameworks and initiatives, and select collaboration and partnership opportunities that serve GRI's vision and mission.
  3. Lead efficient and effective sustainability reporting: Improve the quality of disclosures made using the GRI standards, reducing reporting burden and exploring reporting processes that aid decision making.
  4. Drive effective use of sustainability information to improve performance: Work with policy makers, stock exchanges, regulators and investors to drive transparency and enable effective reporting.

The GRI standards represent voluntary guidelines and offer suggestions as to what information a company should report. Generally, GRI recommends that companies provide information that is accurate, understandable and shows both positive and negative performance. A consistent theme throughout the standards is that reporting should focus on what is material to the company, what would be of interest to its stakeholders and what areas of sustainability are most relevant to the company. For example, a manufacturing company’s planet bottom line reporting should likely focus on emissions and environmental compliance whereas that information would not be pertinent to an insurance provider’s planet bottom line reporting.

Additionally, although TBL reporting is gaining in popularity there are not yet any requirements that an independent body provide assurance on the relevance, reliability and completeness of the reported people and planet bottom lines. This is particularly concerning when considering GRI’s fourth focus area, described above, which recognizes that policymakers, stock exchanges, regulators and investors may rely upon sustainability information. Currently, these bodies must take companies at their word, which leaves this reporting open to errors, omissions and exaggeration. Ernst & Young’s 2010 research paper suggests that as TBL reporting matures, stakeholders will come to expect an independent body to provide assurance on the reported information. This could open up a new business line for CPAs who can give such assurances and may provide an interesting career path for business-minded students who have an interest in nonfinancial ethical reporting.

In summary, triple bottom line reporting is a relatively immature reporting model that is growing in popularity as citizens demand transparency about nonfinancial ethical initiatives. This type of reporting is voluntary and the GRI is the only body that has released standards that companies can use as reporting models. Accountants may assist in preparing people and planet bottom line disclosures, but currently there is no requirement that an independent reviewer provide assurance that the reported information is materially relevant, reliable and complete. CPAs should continue to monitor trends in TBL reporting as it may mature to the point that consumers demand independent assurance on the presented information and this may generate authoritative standards and open up new business opportunities.

Karen Kyte Helderman, CPA, CISA, PMP, is the executive director of audit and compliance services at Virginia Commonwealth University.  She has extensive experience directing financial, compliance and performance audits of state agencies and universities throughout the Commonwealth and is a member of the Disclosures Editorial Task Force.

1. Elkington, John. “Cannibals with Forks: The Triple Bottom Line of 21st Century Business.” British Columbia, Canada : New Society Publishers. 1998.
2. KPMG (2017) The KPMG Survey of Corporate Responsibility Reporting 2017.
3. Ernst & Young. “Seven Questions CEOs and Boards Should Ask About Triple Bottom Line Reporting.” 2010.

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