Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 27

Triple Bottom Line Reporting: An Analytical Approach for Corporate Sustainability

Puneeta Goel
Department of Management
Acharya‟s Bangalore B- School
Bangalore, India
Email: puneetagoel@gmail.com

ABSTRACT

The growth and interest in corporate accountability issues has in part emerged from recurring

examples of corporate irresponsibility and scandals. Voluntary efforts and statutory obligations

are required to ensure that companies assume appropriate responsibility and transparency for

various human rights and environmental obligations. Triple bottom line reporting as per global

reporting initiative can act as an instrument to define the indicators of social, economic and

environment activities. Transparency and accountability for economic, environmental and social

corporate performance are the core notions embedded in the triple bottom line. While relatively

few companies formally issue triple bottom line reports, the interest is now evident across the

business community. An analysis of sustainability reporting by Jubilant Organosys Ltd.

concludes that inspite of having a separate report on sustainable reporting they only account for

on an average 60% of the performance indicators as per the global sustainability reporting

indicators.

Keywords: Triple Bottom Line, Sustainable Reporting, Corporate Social Responsibility, Global

Reporting Indicators
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 28

INTRODUCTION

Corporate Governance has become the latest buzzword today. Almost every country has

institutionalized a set of Corporate Governance codes, spelt out best practices and has sought to

impose appropriate board structures. Despite the „Corporate Governance revolution‟ there exists

no universal benchmark for effective levels of disclosure and transparency. There are several

corporate governance structures available in the developed world but there is no one structure,

which can be singled out as being better than the others. As competition increases, technology

pronounces the death of distance and speeds up communication. The environment in which

companies operate in India also changes. In this dynamic environment the systems of corporate

governance also need to evolve. The recommendations made by different expert committees will

go a long way in raising the standards of corporate governance in Indian companies and make

them attractive destinations for local and global capital.

The next few years will see an increase in business planning and reporting to take account of this

new sense of accountability – although practices will vary widely according to the sector and

context of the company. In practice, companies indicate that there is no „right way‟ to identify

measure and report on non-financial inputs or outcomes. Moreover, businesses prefer

approaches that grow out of their own priorities and commercial logic. Some companies

incorporate elements of internationally recognised reporting frameworks such as the Global

Reporting Initiative.
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 29

REVIEW OF LITERATURE

The National Stock Exchange of India undertook a review of the corporate social responsibility

initiatives of 50 large companies included in the Exchange‟s broad based index in January 2003.

The study found that monitoring and reporting on social and environmental issues by India‟s

largest companies was limited. Whereas environmental assessments and audits are undertaken in

some cases, there is almost no evidence of social audits taking place. Very little systematic

documentation of corporate social responsibility initiatives is available. While this study reflects

the stock exchange‟s interest in corporate social responsibility reporting it has not, as yet,

resulted in any recommendations for improved disclosures.

Sustainability reporting, which has already become popular in developed countries, is gradually

gaining acceptance in India too...Sustainability reporting...deals with a wide range of subjects

from resource management to human rights. Large Indian and multinational corporations like

Tata Steel, Tata Motors, Ford Motor India, Dr Reddy‟s Labs, ITC have already started

sustainability reporting (Business Standard, 2005).

The extent of reporting is higher for firms with larger size, lower profitability, lower liquidity,

and for firms with membership in the manufacturing industry. Further analysis indicates that the

results for the total TBL disclosure are primarily driven by non-economic disclosures. The

extent of overall TBL reporting is higher for Japanese firms, with environmental disclosure

being the key driver. (Li-Chin and Martin, 2007).

In India a study on determinants of corporate governance disclosures also concluded that there is

a substantial scope for improvement in the corporate governance disclosure practices and the

size of the company is a significant determinant of disclosure (Anurag and Bhatia, 2010).
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 30

There is a scope of improvement in corporate social reporting practices of Indian companies.

Although, a few companies have started to publish separate sustainability and CSR reports, there

is a lack of objective and informative reporting. Multitude of directives regarding CRS reporting

pose a challenge on having a simple and credible for analysing CSR initiatives of the reporting

companies (Satyajit and Sarbani, 2010).

Objectives of Study

1. To study the concept of Triple Bottom Line and its benefits.

2. To analyse the link between triple bottom line and sustainable development.

3. To identify the nature and extent of sustainable reporting by Jubilant Organosys Ltd. and

evaluate their performance as per triple bottom line indicators.

METHODOLOGY

First the economic, social and environmental indicators have been studied from the Global

Reporting Indicators and Sustainable reporting and then an extensive study of the sustainable

reporting by Jubilant Organosys Ltd. has been done to identify the extent of reporting and the

indicators covered by the company. Percentage analysis has been done to show the extent of

coverage of performance indicators as compared to the total indicators given in sustainability

reporting guidelines.

TRIPLE BOTTOM LINE

The „triple bottom-line‟ approach has become the most appreciated and accepted way of

doing business. The 'triple bottom line' is rapidly gaining recognition as a framework for
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 31

measuring business performance. The triple bottom line (TBL), also known as "people, planet,

profit", stands for measuring organizational success on three parameters- social, ecological and

economic. The triple bottom line or "the three pillars" captures an expanded spectrum of

values and criteria for measuring organizational (and societal) success not only from economic

point of view but also from ecological and social concern. In practical terms, triple bottom line

accounting means expanding the traditional reporting framework to take into account ecological

and social performance in addition to financial performance.

The term was coined by John Elkington in the early 1980s:

The triple bottom line focuses corporations not just on the economic value they add, but also on

the environmental and social value they add – and destroy. At its narrowest, the term „triple

bottom line‟ is used as a framework for measuring and reporting corporate performance against

economic, social and environmental parameters.

Elkington, J. (1980). The Ecology of Tomorrow’s World

Economic performance encompasses issues conventionally reported in a company‟s annual

financial report, but also considers matters such as: the ratio of market capitalisation to „book

value‟, investments in human capital and research and development, wages and benefits paid,

community development initiatives, and the value and location of outsourced goods and

services.

Environmental performance includes factors such as: the amount of energy consumed and its

origin, resource and material usage, emissions, effluents and waste management, land use and

management of habitats.

Social performance addresses interactions between an organisation and its community. It

includes such issues as: employee relations, health and safety, ratio of wages to cost of living,
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 32

non-discrimination, Indigenous rights, impact of community involvement and customer

satisfaction.

A triple bottom line is not a quest for a new bottom-line metric but rather an approach to

management and performance assessment that stresses the importance and interdependence of

economic, environmental and social performance. Triple bottom line also needs to be

understood in relation to other related concepts about the role and responsibilities of the

corporation and its performance. While there are many conceptual frameworks that seek to

redefine the role and responsibilities of business, three related concepts that regularly arise in

discussion with companies are: sustainable development, corporate social responsibility and

corporate accountability.

Characteristics of Triple Bottom Line

Triple bottom line is a clever term for highlighting the non-market and non-financial areas of

corporate performance and responsibility: Environmental, social and economic. The core

characteristics of triple bottom line include:

•Accepting Accountability: triple bottom line is founded on the assumption that companies are

accountable not only to shareholders for generating returns but also to stakeholders;

• Being Transparent: companies have an obligation, within commercial limits, to be transparent

about their activities and impacts beyond financial performance;

• Integrated Planning and Operations: for a company to contribute to economic prosperity

(including returns to shareholders), environmental quality and social well-being it is necessary

that these dimensions be reflected in strategic planning;

 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 33

• Committed to Stakeholder Engagement: Interacting with internal and external stakeholders is

a process that informs business objectives and is developed from a base of rigorous research and

dialogue; and

• Multi-Dimensional Measurement and Reporting: Systematic analysis and verification of

economic, environmental and social performance, together with structured communication on

the results, is most often the main mechanism for making concrete what a company stands for,

how it behaves and how it delivers on its promises.

Benefits of Triple Bottom Line

Organisations which have successfully driven change as a result of TBL reporting have

identified the following benefits:

1. Embedding sound corporate governance and ethics systems throughout all levels of an

organisation.

2. TBL helps ensure a values-driven culture is integrated at all levels.

3. Improved management of risk through enhanced management systems and performance

monitoring.

4. Formalising and enhancing communication with key stakeholders such as the finance

sector, suppliers, community and customers.

5. Attracting and retaining competent staff by demonstrating an organisation is focused on

values and its long-term existence.

6. Ability to benchmark performance both within industries and across industries.

7. There is growing evidence to suggest that over time these benefits do contribute to the

increased market value of an organisation.

 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 34

TRIPLE BOTTOM LINE AND SUSTAINABLE DEVELOPMENT

The concept of sustainable development has been defined as “meeting the needs of the present,

without compromising the ability of future generations to meet their own needs.” The World

Business Council for Sustainable Development has defined it as “ensuring a better quality of life

for everyone, for now and for generations to come.” It combines economic, social and

environmental concerns, and offers business opportunities for companies that can improve the

lives of the world‟s population.

World Business Council for Sustainability (WBSCD) regards eco-efficiency – which combines

environmental and economic performance and corporate social responsibility – as the core

business contributions to sustainability. Adopting a way of measuring and reporting progress

towards sustainability through a triple bottom line approach is clearly of benefit to the business

itself and to those audiences who are seeking to evaluate progress.

A company‟s approach to sustainable development could affect share value and a company‟s

standing. The companies which are conscious of sustainability not only manage the standard

economic factors affecting their business, but also the environmental and social factors as well.

There is mounting evidence that their financial performance is superior to that of companies that

do not adequately, correctly and optimally manage these important factors.

Triple Bottom Line/ Sustainability Reporting

Triple bottom line reporting is the practice of measuring, disclosing, and being accountable to

internal and external stakeholders for organizational performance towards the goal of sustainable

development. „Sustainability reporting‟ is a broad term considered synonymous with others used
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 35

to describe reporting on economic, environmental, and social impacts (e.g., triple bottom line,

corporate responsibility reporting, etc.).

A sustainability report should provide a balanced and reasonable representation of the

sustainability performance of a reporting organization – including both positive and negative

contributions. Sustainability reports based on the GRI Reporting Framework disclose outcomes

and results that occurred within the reporting period in the context of the organization‟s

commitments, strategy, and management approach. Reports can be used for the following

purposes, among others:

• Benchmarking and assessing sustainability performance with respect to laws, norms, codes,

performance standards, and voluntary initiatives;

• Demonstrating how the organization influences and is influenced by expectations about

sustainable development; and

• Comparing performance within an organization and between different organizations over

time.

Enhancing TBL Reporting In India

Triple bottom line reporting is growing in India. This growth is expected to continue as

companies increasingly recognize the value sustainability reporting can offer in satisfying

stakeholder demands for transparency and social responsibility. However, despite this growth,

the analysis also reveals that, to date, the adoption of corporate sustainability reporting in India

has not been uniform. A significant number of companies, especially smaller entities, currently

do not report on their social or environmental performance. Further, growth in the number of
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 36

reporters and the budgets allocated to reporting on sustainability issues is only expected to be

moderate. Companies are also expressing a number of concerns with respect to sustainability

reporting practices and guidelines, citing problems with the costs of reporting, information

overload of stakeholders, the vagueness of reporting practices and guidelines, and the credibility

of sustainability reports.

These concerns and the slow growth in sustainability reporting can be attributed to two factors.

First, sustainability reporting is still in its infancy. Proponents and practitioners are still

wrestling with questions of best practice and the intended character of future reporting codes,

principles, and/or guidelines.

Second, unlike financial reporting, which has a clear unit of measure, sustainability issues tend

to be more qualitative in nature and address broader groups of stakeholders. This ambiguity and

diversity contributes to the difficulties of establishing best reporting practices, codes, principles,

and guidelines. Until these issues can be reasonably addressed, TBL reporting is not expected to

experience widespread adoption.

Current Indian Scenario

The time is just right for Indian organisations to come out with their first 'triple bottom line'

(economic, environmental and social) performance, and put forth their first corporate

sustainability report. Of the 250 largest global companies, over 65% are already publishing a

sustainability report. More than 3,000 companies across the world report on how they minimise

their environmental footprint, engage with stakeholders, adopt fair social practices, or embed

sustainability into their day-to-day business, R&D or marketing practices.

 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 37

Companies across Europe, Canada, Australia, Japan and USA, and across sectors, have been

coming up with sustainability reports for 6 to 10 years now. However, with over 7,000 listed

companies, India has only a handful 36 companies as on 19th Jan.2011 reporting on

sustainability strategy, vision, performance or governance as per Global reporting Index. These

reporters are mainly from oil & gas, mining, cement, steel, minerals, automotive, pharma and

other such 'industrial' sectors. Hospitality is the

only non-industrial sector which sees Indian reporters (2), as against the worldwide scenario

where all leading banks, services, telecom and hospitality companies have been reporting on

sustainability for years now.

ITC, Reliance Industries, Dr Reddy's, Jubilant Organosys and Tata Steel are some of the more

visible organisations that report on sustainability in India, with the first two companies having

recently been given the highest rating (g3 a+) from GRI (global reporting initiative) for their

latest sustainability report.

SUSTAINABILITY REPORTING BY JUBILANT ORGANOSYS LTD.

Company Profile

Jubilant Organosys Ltd. is an integrated Pharmaceutical and Life Sciences company. It is the

largest Custom Research and Manufacturing Services (CRAMS) player and a leading Drug

Discovery and Development Solution (DDDS) provider out of India. Jubilant has geographically

diversified manufacturing facilities at 11 locations worldwide of which 8 are based in India and

3 in North America.
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 38

Analysis and Interpretation

Economic Indicators: The Company has reported its direct economic value generated and

distributed, including revenues, operating costs, employee compensation, donations and other

community investments, retained earnings, and payments to capital providers and governments.

Financial implications and other risks and opportunities for the organization‟s activities due to

climate change have been clearly stated in its sustainability report. It has also stated the impact

of infrastructure investments and services provided primarily for public. But the ratios of

standard entry level wage compared to local minimum wages and policy, practices, and

proportion of spending on locally-based suppliers at significant locations of operation has not

been stated in detail. Out of total of 9 economic indicators they have reported 6 clearly which

means they are providing 66% of information required by the GRI.

Environment Indicators: Jubilant Organosys has very efficiently reported the environment

aspects related to material used, direct and indirect energy consumed and usage and

conservation of water. It has taken initiatives to reduce greenhouse gas emissions and reductions

and has stated emissions of ozone-depleting substances like NO, SO, and other significant air

emissions by type and weight. Total water discharge by quality and destination has also been

reported convincingly. But not much stress has been given on the description of significant

impacts of activities, products, and services on biodiversity in protected areas and areas of high

biodiversity value outside protected areas and habitats protected or restored. Strategies, current

actions, and future plans for managing impacts on biodiversity are not very clear. Moreover,

environmental protection expenditures and investments by type have not been reported

completely. Out of 30 environmental indicators they have highlighted 16 which mean they have

disclosed 53% as compared to the required disclosures.

 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 39

Labour Practices and Decent Work Performance Indicators: Total workforce by

employment type and region has been clearly reported but the total number and rate of employee

turnover by age group, gender, and region and the benefits provided to full-time employees that

are not provided to temporary or part-time employees have not been reported at all. Percentage

of employees covered by collective bargaining agreements has not been stated. The involvement

of the employees in monitoring and conducting occupational health and safety programs has

been reported. Number of incidents per million man hour has been given according to the level

of seriousness. More detailed information on Education, training, counselling, prevention, and

risk-control programs to assist workforce members, their families, or community members

regarding serious diseases could have been provided. Although different awards initiated for the

employees have been mentioned in the report but the percentage of employees receiving regular

performance and career development awards is not given. The sustainability report clearly states

its non discrimination policy and is providing equal opportunity to all employees. There are no

incidents of child labour, and measures have been taken to eliminate child labour and forced or

compulsory labour. On an average 50% of the labour practices related indicators have been

disclosed in the report.

Society Performance Indicators: The report has effectively stated its programs and practices

that access and manage the impacts of operations on communities, including entering, operating,

and exiting. The company has a separate anticorruption policy and there have been no incidents

of corruption. Company is involved in number of public private partnerships and with some

NGOs also for different programs for the benefit of the community. It has done proper

compliance with all the legal requirements and no fines and non-monetary sanctions for
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 40

noncompliance with laws and regulations have been imposed. The company has shown a solid

performance of nearly 80% in disclosing the social indicators.

Product Responsibility Performance Indicators: At Jubilant proper steps have been taken to

report health and safety impacts of products and services. No incidents of non-compliance with

regulations and voluntary codes concerning health and safety impacts of products and services

during their life cycle, by type of outcomes have been shown in the report. It being a

pharmaceutical and food products company, has taken considerable steps to proper labelling as

per type of product and service information required by procedures. The company should also

report the practices related to customer satisfaction, including results of surveys measuring

customer satisfaction although it is taking measures related to marketing communications,

including advertising, promotion, and sponsorship. It did not receive any complaints regarding

breaches of customer privacy and losses of customer data and even regarding any anti

competitive policy. Approximately 66% of the indicators have been covered under this aspect.

CONCLUSION

Due to the infancy of sustainability reporting and the complexity of reporting qualitative issues

to diverse audiences, there is tremendous variation in the quality, comprehensiveness, and

content of current sustainability reporting practices, systems, and directives. Sustainability

Reporting Guidelines (Guidelines) provided by the Global Reporting Initiative (GRI) represent

the best framework for achieving necessary standardization. Although there is substantial

support for mandatory reporting of sustainability issues, sustainability reporting should, at least

in the short-term, remain voluntary. The business associations should involve companies like

jubilant organsys, ITC, Tata Steels etc. which are already doing sustainable reporting in
 Journal of Finance, Accounting and Management, 1(1), 27-42, July 2010 41

organising workshops to share experience and good practice amongst member companies. Triple

bottom line runs the risk of being a tick in box exercise and just a token of corporate

responsibility unless and until regulatory agencies like SEBI and ICAI make it mandatory to

fulfil its requirements.

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