The idea of sustainability stems from the concept of sustainable development which became common language at the World's first Earth Summit in Rio in 1992. There is no universally agreed definition of sustainability. The original definition of sustainable development is usually considered to be: “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.”
Sustainability describes the ability to maintain various systems and processes – environmentally, socially, and economically – over time. Sustainability originated in natural resource economics, but has since gained broader focus over time into sustainable development and social equality.
Environmental sustainability addresses ecological systems and keeping in balance natural resources within them so that our use of these scarce resources is replenished for the benefit of future generations.
Economic sustainability addresses the need for financial resources to maintain independent communities around the globe and provide economic activities available to everyone to secure sources of livelihood.
Social Sustainability deals with universal human rights and basic necessities attainable for all peoples to keep their families and communities healthy and secure.
I’ve been interested for many years in just how to measure these three aspects of sustainability, often referred to as the three “P’s” – people, planet and profit. The notion of "Triple Bottom Line" (TBL) Reporting has received increased attention from non-governmental organizations, management, consultants, and investors seeking to invest in socially-responsible companies.
TBL describes the scope of reporting in three broad areas affecting society: economic including financial reporting, ecological including the environment, and social including social responsibility. Over half of the global Fortune 500 companies and almost half of S&P's 100 companies issue TBL reports. Investors use them and their own measurements for valuing companies.
Accountability for environmental, social and economic impacts of a company is increasingly part of every manager's job. TBL is an important part of disclosure and enhances transparency of financial reporting. TBL is consistent with the broad stakeholder perspective of corporate social responsibility that includes shareholders, creditors, employees, the community, the environment, government, and society in general. TBL's mission is to disseminate knowledge to engender and catalyze TBL practices.
The Global Reporting Initiative (GRI) has embraced and promoted the TBL concept for use in the corporate world. The GRI is a network-based organization that pioneered the worlds most widely used sustainability reporting framework. The framework sets out principles and Key Performance Indicators (KPI) that organizations can use to measure and report their economic, environmental, and social performance.
Once an organization has analyzed its mission, identified all its stakeholders, and defined its goals, it needs a way to measure progress toward those goals. KPIs are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization. They differ depending on the organization. Here are some examples:
A business may have as one of its KPIs the percentage of its income that comes from repeat customers.
A school may focus its KPI on graduation rates of its students.
A Customer Service Department may have as one of its Key Performance Indicators, in line with overall company KPIs, percentage of customer calls answered in the first minute.
A Key Performance Indicator for a social service organization might be number of clients assisted during the year.
Sustainability reporting is the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organizational performance towards the goal of sustainable development. A sustainability report should provide a balanced and reasonable representation of the sustainability performance of a reporting organization to include both positive and negative contributions.
Sustainability reports based on the GRI Reporting Framework discloses outcomes and results that occurred within the reporting period in the context of the organization’s commitments, strategic policies, and management decision making. Reports tend to be used for benchmarking and assessing sustainability performance with respect to laws, norms, codes, performance standards, and voluntary initiatives. Its usefulness includes demonstrating how the organization influences and is influenced by expectations about sustainable development and for comparing performance within an organization and between different organizations over time.
Sustainability reporting is here to stay. Millennials have embraced it through social entrepreneurship by finding new and innovative ways to address the three P’s. One excellent example is the number of socially-conscious organizations committed to bringing clean water to areas of the world; countries without them for way too long largely in Africa.
We need more businesses to commit resources to the cause. We can no longer stand idly by and watch other people suffer and important causes go unaddressed. With better systems to measure results should come regulatory requirements to disclose sustainability information. In the U.S., this means the accounting community should set standards for disclosure to enhance transparency.
Blog posted by Steven Mintz, aka Ethics Sage, on January 10, 2018. Dr. Mintz is a Professor Emeritus from Cal Poly San Luis Obispo. Visit his website to find out more about his services and sign up for his newsletter.