Has Tripple Bottom Line Managed to Keep Up With Climate Change

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Has Tripple Bottom Line managed to keep up with climate change? Dieter Dambiec explores the question. Impact of global warming on validity of triple bottom line reporting The triple bottom line (TBL) process involves identifying, assessing and reporting anorganisation’s activities in terms of their impact on the environment, society, and theeconomy (Elkington 1980). TBL covers ‘planet, people and profit’ (de Gruchy 2006). InTBL it is important to use environmental, social and economic parameters when it comesto measuring an organisation’s activities and impacts. Only by understanding and actingin relation to all three of these parameters, can an organisation enhance its short and longterm interests, thereby creating greater opportunities and reducing risks. Accordingly, aTBL approach ensures the organisation’s success.That success (or failure) must now take place in the era of global warming. Globalwarming can be defined as “the observed increase in the average temperature of theEarth's atmosphere and oceans in recent decades and its projected continuation” (Effects-of-Global-Warming.com 2007). TBL bolstered by reporting indicators To support the ‘three pillars’ of TBL and to ensure they are viable and useful, a range of related concepts come into play which need to be considered by an organisation. Theseinclude corporate governance, corporate ethics, corporate social responsibility or corporate citizenship, and importantly sustainability or sustainable development.Sustainable development is that which seeks to meet the needs of the present generationwithout compromising the ability of future generations to meet their own needs (WCED1987). Sustainability reporting will always include a forward-looking and holisticapproach (de Gruchy 2006). This is evident (GRI 2006:1) in the SustainabilityReporting Guidelines (Guidelines) issued by the Global Reporting Initiative (GRI), whichis the leading approach in this area, aiming at a worldwide framework for sustainabilityreporting.

Part of these Guidelines oblige organisations to report on how they aim to contribute inthe future to the improvement (or deterioration) of environmental developments andtrends at the local, regional or global level (GRI 2006:1, 11). This concept is oftenarticulated in terms of limits on resource use and pollution levels (GRI 2006:1, 11).Clearly, with the advent and recognition of global warming, the impetus and ability toreduce greenhouse gas emissions, which is a major cause of global warming, as well asozone-depleting substances and other significant air emissions, are measures to take intoaccount in sustainability reporting.To assist in reporting of measured outcomes, the Guidelines include the EnvironmentPerformance Indicators (GRI 2006:1 28; GRI 2006:2), the aspects of which are structuredto reflect the inputs (e.g. energy), outputs (e.g. emissions), and modes of impact that anorganisation has on the environment (GRI 2006:2 3). In this regard, indicator EN16 (GRI2006:2 22) deals with total direct and indirect greenhouse gas emissions by weight, andgenerally sets out methodologies for use of data and making calculations on this matter for sustainability reporting purposes. Direct emissions are those owned or controlled bythe organisation. Indirect emissions are those resulting from activities of the organisation but are generated at sources owned or controlled by another organisation. Indirectemissions are also further covered by indicator EN17 (GRI 2006:2 24).This type of reporting should assist in an understanding of, and positively change, anorganisation’s practices thereby leading to significant reductions in emissions. Indicator EN18 (GRI 2006:2 25) then deals with reporting on the setting and monitoring of reduction targets. All of indicators EN16, 17 and 18 of the Guidelines seem to supportthe United Nations Framework Convention on Climate Change (UNFCC) to protect theclimate system for present and future generations and the subsequent Kyoto Protocol tolimit and reduce greenhouse gas emissions in order to promote sustainable development. While the Guidelines and their environmental performance indicators are fairly general, itshould be remembered that these and related initiatives such as greenhouse gasaccounting and reporting practices are still evolving (WRI & WBCSD 2004). Since TBLwas espoused the concept of public environmental reporting has emerged and evolvedfrom the United Nations Conference on Environment and Development held in Rio deJaneiro in 1992, followed by the GRI’s Guidelines. The basic principles and aspects of methodology have been established through a collaborative process involvingstakeholders from a wide range of environmental, technical and accounting disciplines.This has lead to an even more developed corporate accounting and reporting standard for greenhouse gas emissions called The Greenhouse Gas Protocol: A Corporate Accounting

and Reporting Standard (WRI & WBCSD 2004). Linked to this is The Greenhouse GasProtocol: The GHG Protocol for Project Accounting which is a guide for quantifyingreductions from greenhouse gas mitigation projects (WRI & WBCSD 2005). These documents seek to help organisations represent a faithful, true and fair account of their greenhouse gas emissions and reductions, while ensuring consistency andtransparency (WRI & WBCSD 2004 3, 6; WRI & WBCSD 2005 5). This goal is in linewith generally accepted accounting principles. Accordingly, the validity of TBL has been bolstered by these initiatives, as the point has been reached whereby certain practicalcomponents of implementing TBL (in relation to a particular environmental matter) have been integrated into the mainstream accounting framework. From that perspective it canhardly be said that TBL has rendered itself invalid since the recognition of globalwarming as an important and high priority environmental and socio-economic phenomena that has to be grappled with.In Australia, the Federal Government has also produced its Triple Bottom Line Reportingin Australia: A Guide to Reporting Against Environmental Indicators (EnvironmentAustralia 2003). Similarly, this Guide calls for transparency and accountabilityconcerning environmental impacts produced by organisations, and states that non-financial disclosure is likewise important, not just financial disclosure (EnvironmentAustralia 2003 6). The Guide contains simple methodologies to enable organisations tomeasure performance against environmental performance indicators. Thesemethodologies are either developed or widely used or adapted to Australia (EnvironmentAustralia 2003 11). Again this shows that serious consideration is given to the validity,and to both the substance and form, of TBL reporting in terms of a particular country’scircumstances and requirements. This demonstrates that TBL is a flexible mechanism.Such flexibility makes it dynamic, allowing it to evolve over time and withstand the passage of time. TBL and economic modelling To ensure robust outcomes, TBL has to be applied to particular environmental impacts.In regard to the impact of greenhouse gas emissions (the major cause of global warming)or their reductions, economic modelling can be used to try to verify results in some kindof ‘real’ terms. Economic modelling has been developed to produce two basicapproaches to calculating the value of incremental emissions reductions. These are the‘direct damage estimation’ and the ‘cost of abatement’ methods (Koomey & Krause 1997

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