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Corporate social responsibility: the triple bottom line
How should corporate social responsibility: the triple bottom line be measured and interpreted?
Contents
Corporate social responsibility (CSR) is a form of self-regulation that many firms have taken on, as a way of monitoring and ensuring their active compliance with the spirit of the law, ethical standards and internationa
Corporate social responsibility (CSR) is a company’s voluntary commitment to operate in line with ethical standards, international norms and the spirit as well as the letter of the law. The triple bottom line turns that broad commitment into three dimensions of performance: financial value, contribution to people and communities, and stewardship of scarce planetary resources.
When to use it
- Use it to examine the organisation’s responsibilities to stakeholders beyond shareholders.
- Apply it to identify and account for the social and environmental costs of using natural resources.
- Use it to find opportunities where business performance and stakeholder welfare can improve together through shared value.
Origins
The responsibilities of business have occupied economic thinkers for centuries. Karl Marx viewed business profit as extraction from workers, while Thomas Malthus worried that growth would outstrip finite natural resources. Debate intensified after the war. Milton Friedman argued that society benefits when companies maximise profit while obeying the law; opposing views asked business to respect the law’s spirit and the interests of all stakeholders. “Corporate social responsibility” entered wider use in the 1960s and became central to large-company strategy during the 1980s and 1990s. Related language includes corporate citizenship, sustainability, stakeholder management, responsible business and shared value. John Elkington proposed the triple bottom line in 1994. Today, large firms address CSR through both voluntary initiative and pressure from communities and organisations such as Greenpeace and Friends of the Earth.
What it is
CSR encompasses actions that go beyond current legal requirements, with larger firms often more active because of their resource use, social reach and visibility. Practice also varies by country, including differences often drawn between Continental European and Anglo-Saxon traditions.
Three approaches are useful.
- Corporate philanthropy
- donates money or aid to communities and non-profits but may leave core operations unchanged.
- Risk-management CSR
- invests in affected communities or partners and can shape operations; resource companies may support training and local development to protect their licence to operate.
- Creating shared value
- treats company success and social welfare as interdependent: a healthy, educated workforce, capable government and sustainable resources support long-term competitiveness. In practice, the boundaries blur. A company may claim shared value while critics see only the minimum investment required to manage risk.
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