I just got a bulk e-mail ad for yet another conference on so-called Triple Bottom Line Investing. Triple Bottom Line Investing is just one more incarnation of the more general "Triple Bottom Line" (or 3BL) notion.
(Wayne Norman and I wrote about the 3BL back in the April 2004 issue of Business Ethics Quarterly, pointing out problems with the concept, the lack of academic attention to those problems, and the concept's seemingly inexorable rise in popularity. Since we began tracking usage of the term in 2002, its popularity — based on Google hits — has continuted to grow exponentially.)
The "Triple Bottom Line" is roughly the idea that corporations can, and should, measure performance not just according to the good-old-fashioned financial bottom line, but also according to two more "bottom lines," namely the social and environmental bottom lines.
This idea is of course ridiculous. It's ridiculous not because companies can't or shouldn't track performance in those areas — they can, and they should. It's not even ridiculous because such performance can't be quantified — many environmental and social impacts can be measured, and companies' performance on various measures can be tracked from year to year.
No, the problem with the 3BL is that it's a terribly misleading metaphor. It's an accounting metaphor, used in domains that don't satisfy some of the basic assumptions that make financial accounting work. (In my Critical Thinking class, this is what we call the "False Analogy" fallacy.)
In particular, the 3BL implies two things beyond the idea of measuring and tracking social & environmental performance.
- 3BL assumes that social and environmental plusses & minuses of different kinds can be totalled up, the same way income & expenditures can. This, of course, is false. It is practially difficult, and indeed probably conceptually impossible.
- 3BL implies that the social & environmental "bottom lines" generated for one company will be amenable to comparison with the social & environmental "bottom lines" of other companies. This, too, is false. Without accounting's "common unit of measure" assumption, comparisons across companies are impossible.
I've had the opportunity to talk to a couple of 3BL consultants (consultants who help companies implement a 3BL system/strategy/whatever). Both caved in almost immediately when pressed on the meaningfulness of the term. One admitted that it was "just a metaphor," and that of course her practice didn't actually calculate social & environmental "bottom lines." The other consultant I talked to reassured me that costing out (i.e., putting dollar figures on) social & environmental impacts was relatively straightforward — in other words, he admitted that his group doesn't actually believe in three bottom, lines, but rather in 2 additional sets of factors (social & environmental impact) that can be bundled into the one, traditional, financial bottom line.
In sum: tracking and reporting on social & environmental performance is a good trend. Thinking that managing such matters can be reduced to a form of accountancy both understates the complexity of social and environmental performace, and overstates the reach of the field of accounting.
