Published August 5, 2015
John W. Maxwell
W. George Pinnell Professor of Business Economics and Public Policy
Kelley School of Business, Indiana University
One of the most famous frames related to corporate sustainability is the triple bottom line. The triple bottom line separates the way we think about business into three broad areas: economic, social and environmental. This frame has had great influence over corporate thinking in the past 20 years. At least in part, this frame has led to the introduction of sustainability reporting by many firms, and even the introduction of chief sustainability officers. On the whole one can easily argue that it has raised the profile of environmental and social concerns within corporations, certainly a good thing. However, twenty years on, I wonder if it’s time to take down this frame and replace it with another.
What prompts my thinking is current research I am undertaking on activist campaigns against corporations. Let me provide you with a summary of an example I’m thinking of using for this research. In 2010 a small group of citizens concerned about recent cutbacks to social programs in the United Kingdom met to explore strategies aimed at getting their message out, and connecting with likeminded individuals. These individuals observed that at the same time the UK government was engaging in budget cuts, many domestic corporations avoided paying corporate income taxes by legally locating their headquarters outside the country, or otherwise lobbying successfully for tax breaks.
“As corporate sustainability scholars we need to consider reframing our field, or risk being viewed as an add-on to the core of business research.”
The movement born that day materialized as the group UK Uncut. UK Uncut has since launched boycotts against a large number of well-known UK based companies, and has successfully pressured them to raise the corporate taxes they pay to the UK government. Starbucks UK serves as an interesting example. Due in part to public expressions of concern by UK Uncut, Reuters printed an exposé of Starbucks UK. Reuters detailed that while reporting losses for twenty years the company was simultaneously telling investors that it was enjoying a great deal of success in the UK market. The reports noted how the company transferred offshore profits made in the UK through the use of licensing agreements with another division of Starbucks.
Following publication of the articles, as well as criticism and boycotts directed by UK Uncut, Starbucks UK went from consumers’ number one coffee chain by reputation to number three. Same-store sales stagnated, and expansion plans were cut back. In 2015 Starbucks UK announced their first ever corporate profit, paying 21 million pounds of tax. The company also announced it was moving its European headquarters to the UK.
This issue has nothing to do with the natural environment, and while it does have a social element, the social aspects of the case are not those usually thought of when thinking about the triple bottom line. Because corporate sustainability has been framed around the triple bottom line one might think that sustainability scholars would have little to say about the event I just described. This would be wrong.
Scholars of corporate sustainability will in fact find themselves very familiar with many aspects of the Starbucks UK example. We are experts in studying how society views corporate actions, how societal views are organized and how, once organized, they exert pressure on corporate actions.
Traditionally, we have focused on the natural environment and social impacts including worker treatment and community impacts (often of pollution and or corruption). As my example illustrates, largely due to a reduction in communications costs, we need to change our ideas regarding community. I also think we need to change how we frame corporate sustainability.
Failure to act in response to social pressure would have been a direct threat to the sustainability of Starbucks UK. This is because of the impact of that pressure on corporate profits, the real bottom line. The notion of the triple bottom line, in my view, separates sustainability scholars from issues such as the one described in the Starbucks UK example, and this bothers me.
The triple bottom line may have served to raise the profile of social and environmental concerns surrounding corporations, but it has also separated them from corporate profits. I’m worried that this frame marginalizes corporate environmentalism to something of an “add-on.” This frame may lead some corporations into thinking that that they can consider corporate sustainability when times are good, and ignore it when the real bottom line is squeezed. It also runs the risk of marginalizing research on corporate sustainability. In part because of this frame, scholars have sought to answer such question as “does it pay to be green?” I contend that this is a question similar to “does it pay to have good employees?” Such a paper would never be written, let alone published, because employees are core to the organization. Corporate sustainability should reside there as well.
As good as it is to produce sustainability reports, we should encourage the practice that some companies are now undertaking to include this information in their annual reports, rather than producing separate add-on reports. As good as it is to have chief sustainability officers, perhaps they need to morph into chief reputation officers that consider not only environmental and labor practices but also actions that affect tax payments or other issues that are on society’s radar.
As corporate sustainability scholars we need to consider reframing our field, or risk being viewed as an add-on to the core of business research. Largely because of reduced communication costs, social regulation is on the rise, and other scholars will increasingly enter this area of study. We should make it clear that we, as corporate sustainability scholars, are ahead of the game. To make this message clear we may need to reframe how with think about corporate sustainability. In business there is only one bottom line, and corporate sustainability is at the heart of it.