{"id":541,"date":"2011-10-25T13:15:49","date_gmt":"2011-10-25T03:15:49","guid":{"rendered":"http:\/\/blogs.unsw.edu.au\/knowledgetoday\/?p=541"},"modified":"2011-10-25T13:17:07","modified_gmt":"2011-10-25T03:17:07","slug":"death-to-the-triple-bottom-line","status":"publish","type":"post","link":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/blog\/2011\/10\/death-to-the-triple-bottom-line\/","title":{"rendered":"Death to the Triple Bottom Line?"},"content":{"rendered":"

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Peter Shergold<\/strong> | <\/em>CSI Blog<\/a><\/p>\n

Daniel Altman was in Australia recently as a guest of the Sydney Writer\u2019s Festival.\u00a0 He\u2019s Director of Thought Leadership at Dalberg Global Development Advisors (a far more exciting career description than General Manager!).\u00a0 I was fortunate to attend a provocative breakfast session he presented based around his book, Outrageous Fortunes:\u00a0 The Twelve Surprising Themes That Will Shape The Global Economy<\/em>.<\/p>\n

I was also able to interview him for last week\u2019s Social Business<\/em> program about a paper<\/a> he and his colleague, Jonathan Berman, have recently published.\u00a0 Their argument is that schemes such as corporate social responsibility, creating shared value or triple bottom line reporting are unnecessary.\u00a0 At best they are inefficient workarounds.\u00a0 Business should get back to focussing on profit which will, over time, deliver social benefits more effectively.<\/p>\n

It\u2019s not surprising that this viewpoint is generating waves of angst in the blogosphere.\u00a0 The financial journalist, Felix Salmon, in a recent response<\/a> called the thesis \u201cprofoundly silly\u201d and Altman \u201ca complete laughing stock\u201d.\u00a0 Other commentators, although employing less extravagant language, tend to agree.<\/p>\n

So let\u2019s be clear about what Altman is not saying.\u00a0 He is not returning to the position, associated with the great economist Milton Friedman, that by creating employment and producing goods and services in a competitive market, employers fully met their moral obligations and that no more should be required of them.<\/p>\n

Altman, by contrast, believes in the value of the beneficial outcomes often associated with CSR.\u00a0 His position, at its heart, is this:\u00a0 if corporations focus only on profit they will generate social benefits more efficiently and sustainably than through the embrace of separate programs.<\/p>\n

In other words, management \u2013 if it is economically rational \u2013 will recognise the monetary value that corporate reputation, employee loyalty, job satisfaction and positive government relations have on the single bottom line.\u00a0 Such factors enhance shareholder value.\u00a0 There is no need to embrace (and report upon) well-meaning but often ill-considered corporate citizenship initiatives.\u00a0\u00a0 A focus exclusively on profit will naturally inculcate behaviours that are socially and environmentally responsible.<\/p>\n

In a nutshell, Altman believes that doing good really is good for business.\u00a0 To develop distinctive programs is inefficient.\u00a0 Indeed, by hiding the contribution of economic contribution of social responsibility to profit, CSR interventions may be more likely to be cut back or discarded at times of economic downturn.<\/p>\n

I think that Altman\u2019s provocation does us a service.\u00a0 Too often CSR or corporate citizenship has been treated as a public relations exercise, separate from the strategic core of a business.\u00a0 It is better to devote attention to the business of the business.<\/p>\n

Yet I remain unpersuaded by his central thesis, for two reasons.\u00a0 The first, which goes to the essence of the Altman\/Berman arguments, is time horizon.\u00a0 As Altman argues convincingly, it takes a long-term perspective to fully appreciate and value the goodwill that derives from corporate responsibility and accountability.<\/p>\n

The reality, as was made manifest in the causes of the global financial crisis, is that whilst management leadership and directors should be driven by long-term corporate sustainability, there is a strong tendency for remuneration and dividend structures to reflect short-term profitability.\u00a0 \u00a0Positive and normative economics are being confused.\u00a0 In the immediate future managers and shareholders can often be better off: in the long-term we are all dead.<\/p>\n

The advantage of a company articulating a program which emphasises both social and financial returns is that it can act as a valuable counterbalance to narrow thinking driven by immediate considerations.\u00a0 It can help frame risk appetite for the long-term.<\/p>\n

As an economist I believe it is probable that companies will tend to maximise their benefits to society when they concentrate their resources on achieving sustained profitability.\u00a0 As an economic historian, however, I discern from the recent past that such time horizons are unlikely to motivate business behaviours naturally.\u00a0 Right now, in my view, there is advantage for companies in articulating and promoting shared or blended value.\u00a0 It is a way of ensuring that they look to a more distant future.\u00a0\u00a0 Think of CSR or shared value as a way of reporting on profitability (and corporate survivability) over the next generation.<\/p>\n

And the second reason why I part company with Daniel Altman?\u00a0 That will be the subject of my next blog.\u00a0 In the meantime, I urge you to read \u201cThe Single Bottom Line<\/a>\u201d for yourself.<\/p>\n

Peter Shergold<\/a> is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW.\u00a0 This blog post first appeared on the CSI Blog<\/strong><\/a>. <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

        Peter Shergold | CSI Blog Daniel Altman was in Australia recently as a guest of the Sydney Writer\u2019s Festival.\u00a0 He\u2019s Director of Thought Leadership at Dalberg Global Development Advisors (a far more exciting career description than General Manager!).\u00a0 I was fortunate to attend a provocative breakfast session he presented based around […]<\/p>\n","protected":false},"author":336,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12673],"tags":[12777],"class_list":["post-541","post","type-post","status-publish","format-standard","hentry","category-social-impact","tag-corporate-social-responsibility"],"_links":{"self":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/541","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/users\/336"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/comments?post=541"}],"version-history":[{"count":6,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/541\/revisions"}],"predecessor-version":[{"id":546,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/posts\/541\/revisions\/546"}],"wp:attachment":[{"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/media?parent=541"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/categories?post=541"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.unsw.edu.au\/BTOpinion\/wp-json\/wp\/v2\/tags?post=541"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}