Triple Bottom Line Reporting - Making It Tangible

A report by the Allen Consulting Group takes a look at the ‘state of play’ of the adoption of triple bottom line reporting in Australia’s major businesses in 2002.

“Triple Bottom Line Measurement and Reporting in Australia – Making it Tangible” examines how various Australian businesses address issues of transparency and accountability through the use of ‘triple bottom line’ measurement and reporting. The variety of expectations, rationales, practices and limitations are reviewed and the diversity of approaches taken by business is investigated.

The project sought to draw on the everyday experience of companies and record their sense of priorities, benefits and challenges.

Researcher Dahle Suggett says the aim was not necessarily to mount a case for adopting triple bottom line reporting, rather to portray companies’ thinking and experiences so more companies could develop a critical understanding of the questions to be considered and the business benefits to be gained.

Suggett says that while relatively few companies formally issue triple bottom line reports in Australia, a groundswell of interest is now evident across Australian business. 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.

This research examined the views and practices of 29 Australian companies and seven overseas companies, as well as consulted with a range of industry bodies and non-government organisations.

Suggett says an important objective was to look behind the ‘big ideas’ to illustrate current practices for measuring and reporting corporate performance and to explain the benefits and challenges that companies identify.

Five broad categories capture the current diverse state of play in performance measurement and reporting in Australia. (Some British companies were also included to illustrate the additional dimensions that will probably develop in
Australian companies over the next few years.)

The categories are to show the varied business rationales and interpretation of community expectations for triple bottom line measuring and reporting.

1. ‘Wait and see’ is the category where companies are satisfied with their present approaches to communication and accountability, such as Fosters and Woolworths. Either a change is not a business priority and ‘not on the radar’, or there is a sense of potential benefit, but it is far too early to proceed without understanding more about the context and the directions for the rest of business.

2. Other companies make a commitment to their stakeholders to be open and transparent, observing ‘the community right to know’ principle and endorsing the notion of greater accountability to the community for their performance.
To meet this commitment they assemble and ‘package’ internal information for an external audience. This information reveals the standards they seek to meet, how well they perform against those standards and a description of their activities.

Some companies in this area are international leaders in environmental reporting such as Wesfarmers and Orica. They continue to develop their data collection, reporting and verification approaches, but do not see that a change in approach to embrace social or economic dimensions to the same extent would necessarily yield additional business benefits.

3. A few companies have ‘started from scratch’ and systematically seek alignment between stakeholders’ expectations and corporate strategy. This approach requires establishing new management systems and is a long and often resource-intensive approach. WMC is an example of a company that seeks to continue to develop in this direction and a number of other companies have embarked on the first steps, such as Westpac, and others are poised to go down this track, such as ANZ.

4. A few companies, mostly international, such as Rio Tinto and Shell, shape their response to stakeholder expectations into principles that guide their business activity: sustainability principles or partnership principles for example. This approach is directed at embedding these principles into management practices – again an intense and, for some, a problematic journey. AMP has recently initiated processes to proceed in this direction.

5. Finally, some companies, mostly in private ownership, define their business purpose and their commitment to sustainability values and accountability as fully integrated – their business success depends on this cultural perspective.
The Body Shop is the often-quoted example and the Co–operative Bank in the United Kingdom, but also Visy Industries in Australia embraces this holistic approach.

Main features of performance measures adopted by companies include:

• input measures that are the least difficult to develop and hence are the most common, whereas outcomes measures are rare;
• performance targets are used to varying degrees. Most do not set targets but compare incremental performance improvements over time, and set short to medium-term targets (objectives) and assess performance against these. A few companies set aspirational targets and measure performance against these over the long term;
• few companies explicitly link performance measures with the social, environmental or economic impact of the measured processes or events;
• while there are few opportunities for companies to benchmark performance against key competitors (except in the resource sector) some companies are benchmarking against legal licence limits (that is, emissions and so on);
• indicators are verified in a variety of ways, the most common are external verification and systems incorporating external input. There are several leading companies verifying indicators based on feedback from readers and program recipients. While environmental indicators are increasingly externally verified, this is more difficult for social indicators; and
• leading companies enable data to be ‘disaggregated’ to the local level and customised through web-based reporting. A few companies are ‘going live’ with their data, which challenges the status of the more static traditional paper based reporting.