Corporate social responsibility: the triple bottom line

Corporate social responsibility (CSR) is a company’s voluntary commitment to operate in line with ethical standards, international norms and the spirit as well as the letter of the law. The triple bottom line turns that broad commitment into three dimensions of performance: financial value, contribution to people and communities, and stewardship of scarce planetary resources.

When to use it

• Use it to examine the organisation’s responsibilities to stakeholders beyond shareholders.

• Apply it to identify and account for the social and environmental costs of using natural resources.

• Use it to find opportunities where business performance and stakeholder welfare can improve together through shared value.

Origins

The responsibilities of business have occupied economic thinkers for centuries. Karl Marx viewed business profit as extraction from workers, while Thomas Malthus worried that growth would outstrip finite natural resources. Debate intensified after the war. Milton Friedman argued that society benefits when companies maximise profit while obeying the law; opposing views asked business to respect the law’s spirit and the interests of all stakeholders. “Corporate social responsibility” entered wider use in the 1960s and became central to large-company strategy during the 1980s and 1990s. Related language includes corporate citizenship, sustainability, stakeholder management, responsible business and shared value. John Elkington proposed the triple bottom line in 1994. Today, large firms address CSR through both voluntary initiative and pressure from communities and organisations such as Greenpeace and Friends of the Earth.

What it is

CSR encompasses actions that go beyond current legal requirements, with larger firms often more active because of their resource use, social reach and visibility. Practice also varies by country, including differences often drawn between Continental European and Anglo-Saxon traditions.

Three approaches are useful. Corporate philanthropy donates money or aid to communities and non-profits but may leave core operations unchanged. Risk-management CSR invests in affected communities or partners and can shape operations; resource companies may support training and local development to protect their licence to operate. Creating shared value treats company success and social welfare as interdependent: a healthy, educated workforce, capable government and sustainable resources support long-term competitiveness. In practice, the boundaries blur. A company may claim shared value while critics see only the minimum investment required to manage risk.

How to use it

Translate the responsibility agenda into stakeholder outcomes, measures and decisions. Social accounting adapts accounting systems to capture CSR investment and consequence. The triple bottom line is one such framework, adding social and environmental dimensions to the conventional financial bottom line—the three Ps of people, planet and profit.

Define material outcomes for each dimension, establish baselines and targets, and specify who is affected. Use recognised measurement approaches where available, but report uncertainty and avoid combining unlike impacts into a meaningless total. A further-education college, for example, could report jobs secured for disadvantaged citizens and its carbon footprint alongside standard financial results. Review trade-offs explicitly and use the results to change resource allocation, not merely to create a report.

Top practical tip

Inventory current initiatives, consult affected stakeholders and choose a recognised framework they understand. Concentrate resources on a small set of material opportunities where the organisation can produce measurable shared value.

Top pitfall

Do not use a visible initiative to imply that the underlying business has changed when it has not. Prevent greenwashing by publishing specific investments, methods, outcomes and limitations that outside observers can verify.

Further reading

• Elkington, J. (nineteen ninety-seven). Cannibals with Forks: The Triple Bottom Line of Twenty-First Century Business. Capstone.
• Porter, M.E. and Kramer, M.R. (two thousand and six). “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility.” Harvard Business Review.