January 10, 2025

Deconstructing Triple Bottom Line: A Critical Look at Corporate Sustainability Metrics

 

Understanding the Triple Bottom Line Statement

Let's examine a case study of one of the most advanced companies in sustainability reporting. Holcim’s Triple Bottom Line statement begins with what they call "retained value" - essentially their profit contribution. They then include employment costs, taxes, and dividends as positive societal impacts. There are two fundamental issues with this approach:

Basic Business Operations vs. True Social Impact

Companies often list standard business expenses as social contributions in their Triple Bottom Line. However, paying salaries, taxes, and dividends are compensation for fundamental business operation needs, not a social benefit. These are obligations companies must fulfill to:

• Attract and retain employees (salaries)
• Maintain their license to operate (taxes)
• Secure investor funding (dividends)

 

Scale Disparity in Social Investments

When companies engage in genuine social investments like community housing or healthcare, these contributions often appear insignificant compared to their financial performance. The difference between millions in social investment and billions in regular operations creates a misleading perspective where the social dimension is smaller by several orders of magnitudes, rendering it invisible in Triple Bottom Lines based on impact valuation.

Environmental Impact: The Hidden Truth

Perhaps the most significant issue emerges when examining environmental impacts. Using the cement industry as an example, the net contribution to society is significantly negative when we remove the questionable positive contributions and focus on actual environmental costs (like CO2 emissions). When companies account for these environmental costs in their Triple Bottom Line - in this case, an estimated 8.3 billion in unpaid environmental impact, the Triple Bottom Line turns negative, an outcome that we would expect from the nature of their compensation habits for natural resources.

Moving Forward: Recommendations for Better Reporting

To improve Triple Bottom Line reporting, companies could:

• Only report contributions that exceed standard business requirements
• Separate mandatory business operations from voluntary social investments

However, doing so jeopardizes their fiduciary responsibilities to owners. Instead, they could use achievement-based performance reporting, as introduced in The Triple Bottom Line Error. This more transparent approach gives stakeholders a clearer picture of a company's social and environmental impact beyond its business operations.