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March 10, 2015

The Third Bottom Line Approach- Mulling Over Sustainability

After mulling over the whole concept for three days with college students (economics and commerce) at Shri Ram College Of Commerce, I feel immense pride and honour to explain the whole concept to you. Basically third bottom line was the term used to exaggerate a company's deeds towards the environment and society. But today the scenario has changed.

WHAT IS A BOTTOM LINE?
A bottom line is defined as the profit or capital of the company. Now, when we talk about the literal meaning of bottom line, it means the base reason for doing something (here opening a corporation). In the history, the base reason for opening a corporation was profit and hence, it is defined as profit. But today we have a third bottom line concept introduced by the United Nations Global Compact which says that other than profit, a corporation should have two more bottom line that is people and planet.

Talking about people and planet, UNGC wants to promote an environmental and social responsibility which was much ignored by corporations. The third bottom line approach is about a tomorrow where taking care of environment and society will be considered as a responsibility of the corporations also. When the third bottom line approach was introduced, as I said before, companies used this term to promote their goodwill and trustworthiness. Much of the situation prevails with some change. Also, am abbreviation was made to make the tedious and complicated TBL approach more attractive. This abbreviation was 3Ps- Profit, People and Planet.


Going into the depth of each topic, profit as we all know is still the prime motive of the companies. Today companies are called large on the basis of their profit and capital but the TBL approach is about a tomorrow where companies will be considered large on the basis of their contributions towards people and planet. But isn't it a start when portraying a company as a responsible one has become a trend? When we talk about people, it not only means a corporation's responsibility towards the shareholders or towards the customers but also towards the laborers and about every person who is effected by the corporation's functioning. If I talk about the "Jago Re" campaign by TATA tea, it is one of their contributions towards society, whatever way it is (this time it is by spreading awareness about voting). The happiness and spiritual state of mind of workers and employees and all the people living or working near any office or plant of the company also lies in the responsibilities of the corporation. Taking about Planet, it is today a topic of concern. It is considered that corporations are crossing their limits in terms if pollution, whether it is throwing of waste in water bodies or environmental pollution. The automobile sector is hunting for a cleaner fuel and the energy generators are searching for cleaner technology. All these facts above, have today made sustainability a necessity, not much like a situation in the history. However, still a lot of barriers lay in the smooth implementation of TBL. Today also, when TBL has been universally accepted implementation remains a grave problem. In this post I will try to highlight some of the major problem and the solution regarding TBL implementation.

SMOOTH TBL IMPLEMENTATION- PROBLEMS AND SOLUTIONS

  • Lack Of An Universally Accepted Format for Measuring Sustainability- We currently lack an universally accepted format for measuring sustainability. Now what do I mean by a format for measuring sustainability? For example, if I talk about financial accounting, then all the business firms follow a standard method to calculate their total profit i.e. the simple credit minus debit method. But the case is a lot different about sustainability. Different companies follow different methods of measuring sustainability. Some companies display their social goods and social bad and then assess them. Some companies calculate the total funds spent. The failure of the development of a format doesn't allow us to compare two companies. Now because we can't compare, we can't set benchmarks on the basis of sustainability, we can't create some kind of a competition among companies on the basis of sustainability and we can't even give grades to companies because we can't convert the social goods method to the funds spent method. Therefore, the need of the hour is the development of a format that can measure sustainability. Now, how do you measure your deeds? Well I would like to use a simple assessment theorem over here, to assess anything first priority should be outcome and the second priority should be input. Now, in terms of pollution we can measure the output by the carbon footprints. So, if a company starts using cleaner technology which is a sustainable move, then the output can be measured by the positive impact on the carbon footprints. However, if we take a campaign such as the "Jago Re" campaign, then we can't exactly measure the impact of "Jago Re" on the vote count because if we simply compare votes before the campaign and after the campaign then the difference may or may not be due to the "Jago Re" campaign (surveys would cost a lot and a lot of workforce will be needed). Therefore, we can measure such campaigns by their inputs. Though I have not exactly prepared a model for the measurement of sustainability but a vague picture is what I would like to make in front of you. Second point is that today though we have a format for measuring financial face, its different worldwide. For example, companies in USA follow the GAAP accountability standard but in India they follow the IFRS accountability standard. That again makes us unable to compare Walmart and Reliance by just seeing their annual reports. Though conversion can take place but the more simpler it is, the better it would be. Therefore, even if we develop a format for measuring sustainability, its world wide implementation would still be a problem.
Image result for pollution caused by factories
  • Mobilizing the Third Bottom Line Approach- Today the scenario is such that when the TBL approach is being followed in aware and richer countries, the weak African nations still remain unaware. Some companies don't know about the TBL. TBL might bring about a greater change when it is spreads to the root level. Therefore, we'll have to localize this global approach. The organizations promoting sustainability and the UNGC should sponsor and encourage the development and growth of local business networks. The local business network spreads awareness, holds social events and conducts frequent training session for professionals. This might turn out to be a strong way of localizing this approach. Inspired from a TED talk by the Milinda Gates, here NGOs and other organizations can learn from CocaCola. What CocaCola does is it connects Coke with happiness. Whether it is the "Give Me Freedom" commercial in Brazil or it is the "Umeedon Wali Dhoonp" commercial in India, what lays common is happiness. However, Coca Cola success lies in the fact that it has localized the approach of spreading happiness in each country's terms! So can't sustainability-promoting-organizations connect sustainability with long term profits. 
  • Lack of Drivers and Incentives- Companies must be given an encouragement for following a sustainable pattern. Today, if a company is following a sustainable pattern, it gets no appraisal, nothing different, which discourages the company to follow a sustainable pattern. Won't awards by an organization as dignified as the UNO encourage the companies to move towards sustainability? definitely yes. Then why not? Let us have awards not only on global scale but also on regional scale and an award for the country which has won maximum sustainability awards. Secondly,if UNGC wants to reach all the corporations in the world, it will have to lower down its membership fee. According to my research, UNGC membership costs a large sum of money which cannot be afforded by smaller and medium-sized companies. Also, frequent training sessions and conferences must be held where professionals can be told about innumerable advantages of sustainability.`
  • 2nd P Is the Much forgotten People- One of the 3Ps is People which includes company's responsibility towards its labourers and employees. Involuntarily making labourers work overtime and making children work is an exploitation of their fundamental rights as stated by UNHRC and hence, applicable universally (almost). Though this can be caught by the Labour Union Reports but today, these reports are frequently manipulated by the company officials. Also, in companies related with scams and corruption, the financial reports are manipulated. Hence, the intervention of an independent creditable third party appointed by the UN or the Government of the country for auditing the reports would be suggestible. Also, company officials might be told that spending a little bit extra on employees might increase the productivity of manufacturing as the more experienced employees compare two offers not only on the basis of salary but also happiness. Hence, spending that extra might let the company's more experienced official to stay and work in the company. More is the experience of workers higher is the quality of the product and productivity at work.  
  • The Upwards Theory of Transition and Change- (Well, that's no theory ) If we want to bring about a change then we need to start from the bottom level. Hence, change will occur from schools, colleges, institutes and universities. Why can't we add chapters about the Third Bottom Line Approach and sustainability? Ethical Accountancy can be made a sub-topic in Accountancy so that the upcoming Chartered Accountants lay major emphasis on sustainability and know how to measure it! Secondly, regular training sessions can be held for the already pass-out and working Chartered Accountants under an Ethical accountancy funding program. However, this can be done only when have a format for measuring sustainability.           

A MESSAGE FOR FIRST WORLD COUNTRIES- WHAT NEXT? 
We are living in a world where very high economic inequality prevails. While the United States and China are considered as the rich or rather the richest nations, the under developed African nations are so poor that people suffer of starvation. This economic inequality has also ranged to social, cultural and political inequality. Just because the African nations are poor they don't lie in the global picture. Just because Sierra Leone is a poor country, it isn't a member of the Security Council and just because China is developed and rich it has the VETO powers. Similar inequality lies in the case of sustainability. Today, USA says that it is working towards a cleaner tomorrow, participates actively in the Rio Conferences and talks positively about sustainability but then isn't this an irony that the United States is the latest contributor to pollution? This is how the United States double speaks. A simple question that remains unanswered is that when the US wants to contribute to reduction in pollution then why does it not ratify the Kyoto protocol? Maybe the reason is it fears it's inability to reduce the greenhouse gas emission as asked to by the Kyoto protocol.

Image result for child labour in JAPANJapan is one of the highly industrialized countries in the world. However, what remains unnoticed is that high level child labor prevails in Japan. Recent cases in the Apple plant have shown that labourers are being forced to work overtime. Russia's pollution is limitless and even Russia hasn't ratified the Kyoto protocol. Therefore, I would not like to press any allegations on any country but all the examples stated above clearly show that its the first world countries majorly responsible for the overall pollution and human rights exploitation by any corporations. Some reports have even shown that Chinese corporations are supplying arms to the ISIS. Now, because these nations are actually the reason for high level pollution then they should payback more than the under developed countries and developing ones. Though US has been talking since a long time about reduction of pollution and greenhouse gases, but what lacks is action! Another solution is the opinion and suggestion of all the countries of the world are considered equal irrespective of their economic, political, cultural and social status. This might empower the not-so-developed nations to ask the US, Russia, China to reduce pollution as it is ultimately harming the whole world.  

HOW DOES THE UNGC WORK?
The Triple Bottom Line is a concept introduced by the United Nations Global Compact and it is the UN body which promotes sustainability. UNGC is a UNO committee that was formed by the United Nations General Assembly. Because of its non-political approach towards sustainability it is of utmost importance and an ideal model for every Non Profit Organization. I recently met two people namely Mr. Abhinav Verma and Ms. Abhilasha Banerjee in my Delhi visit who worked for the UNGCNI that is the network of UNGC in India and they helped me understand the working of UNGC in depth. Now what happens is that the UNGC has its network in each of its member countries. So if a company for instance WIPRO India wants to join the United Nations Global Compact then it won't contact the UNGC but it would contact the United Nations Global Compact Network India (UNGCNI). Now, these networks connect to the companies on a more localized scale. The objective and aim of these networks is to popularize the UNGC world wide and work for its cause at a more local level. These networks conduct frequent social events, meetings and seminars for the professionals to participate in. These events firstly allows the employees in a member company to meet new people and connect to people, secondly promote the sustainable approach for tomorrow and involve as many companies as possible to promote and use a sustainable corporate pattern by using the brand name of United Nations. Also, these national networks are further localized into regional or local networks which further localize this approach by sponsoring the NGOs and other business networks. 

The name of an organization as dignified as the UN is used to reach the smallest of corporations regarding sustainability. How sustainability can be made popular is by associating and involving maximum people. Hence, the UNGC tries to make its global approach more and more local. Companies, NGOs and business networks can get affiliation to the UNGC which can be a strong marketing tool. Also, all the affiliated companies and networks can be seen on the website of the UNGC. 

Now, these local networks have a representative for regional networks which have a representative for national networks and these national networks also have a representative for international network that is the UNGC. Hence, in UNGC it is not exactly the delegate of a country representing the country but it is the representative of the network representing the country. This is very important and positive as due to the representative of the network representing the country, it gives the whole a committee a non-political approach and a major scenario change can be noticed. What usually happens in a UN committee is that the delegates put allegations against each other however just because the representative of the local network is not responsible for any step taken by the government of the nations, allegations are much forgotten of and everyone thinks about progress. Usually resolutions are passed unanimously and all the people in the council have an equal say irrespective of their country. Therefore, a United Nations Global Compact committee session is not dominated by four or five countries and neither do the P5 nations have some special power as in UNSC. This prevents the economic inequality or the political inequality to influence the social and cultural inequality (as mentioned above). In a mock UNGC which I have attended, I learnt that the whole structure is an ideal one as the major aim of this committee is not to change a country but to change the world. In this mock UNGC I attended and participated in, our resolution was passed unanimously by all the 50-60 countries present which I consider in itself is an achievement. I also understood that however hard the US tried to make its opinion influential, it remained just an opinion as it did for Uganda (for instance).      

A LONG TIME TO GO.....
Concluding, I still consider that when people have been made aware of the Triple bottom line approach, when most companies are following a sustainable approach, when sustainability is sub topic in every economics book I have picked up, when almost all companies conduct social events and outings for their employees and when companies are becoming more and more creditable, we still have a long time to go. To sum up with everything, firstly, economic equality and current structure of the UNO, secondly, the dominance of the First World Countries over the world, thirdly, the lack of an universally accepted format for measuring sustainability and fourthly, the innumerable barriers in the smooth implementation of the TBL as highlighted above are the reasons why we still have a long time to go! Last but not the least, if UNGC wants to reach every corner of this world, wants to involve all the corporations of this world, it definitely will have to lower its unaffordable membership fee. But the kind of efforts and groundbreaking advancements that have been made in the field of sustainability gives me immense confidence and assurance that the the future is illuminated and bright.    


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