From Triple Bottom Line ‘Product Recall’ to The Transformation Journey — Reflections from the Reporting 3.0 Community
By Ralph Thurm and Bill Baue
The fifth edition of the International Reporting 3.0 Conference (our first ‘lustrum’ — the Dutch tradition celebrating events happening for the fifth time) featured a special surprise guest: John Elkington, Founder and Chief Pollinator of Volans, spoke by video to reflect on progress and remaining challenges in the field since he first addressed the r3.0 community at its 2nd conference in 2014. In this earlier intervention, Elkington presented the 3 axes necessary in reporting (riffing numerically on his own notion of the triple bottom line): lateral (integration of the capitals); vertical (integration of biosphere, economy, and supply chain data); and longitudinal (integration of life cycle and demographic data). We at r3.0 considered this significant validation of contextualization and multicapitalism (which have since served as cornerstones of our Blueprint “Work Ecosystem”) as key commitments that are vital to the future of reporting.
In Elkington’s 2018 intervention, he delivered a Big Bang: it’s time for a “product recall” of the Triple Bottom line concept, he explained, laying out the rationale in more depth in a Harvard Business Review article about two weeks later, including the following noteworthy quotes:
While there have been successes, our climate, water resources, oceans, forests, soils and biodiversity are all increasingly threatened. It is time to either step up — or get out of the way.
The Triple Bottom Line (TBL) wasn’t designed to be just an accounting tool — it was intended to provoke deeper thinking about capitalism and its future.
The bewildering range of options now on offer can provide business with an alibi for inaction. Worse, we have conspicuously failed to benchmark progress across these options, on the basis of their real-world impacts and performance.
Fundamentally, we have a hard-wired cultural problem in business, finance and markets. Whereas CEOs, CFOs, and other corporate leaders move heaven and earth to ensure that they hit their quarterly profit targets, the same is very rarely true of their people and planet targets. Clearly, the Triple Bottom Line has failed to transform the monocapitalistic, single bottom line paradigm.
The focus was on breakthrough change, disruption, asymmetric growth (with unsustainable sectors actively sidelined), and the scaling of next-generation market solutions.
It is funny to remark that the URL of the article was potentially overstretching the aim of the ‚product recall’: https://hbr.org/2018/06/25-years-ago-i-coined-the-phrase-triple-bottom-line-heres-why-im-giving-up-on-it. Clearly, John hasn’t given up on the concept, but it needs a significant revamp.
The Conference Twitterfeed (#Reporting3) picked up immediately on the implications of a TBL product recall, with Elkington underlining the urgency through the visual metaphor of our monocapitalist economy as an airliner seeming to operate perfectly — except its dashboard fails to register the mountain we’re flying directly into.
Elkington consolidated TBL product recall responses into a GreenBiz article, ‘Zen and the Triple Bottom Line,’ and included input from r3.0 Advocation Partner Mark McElroy: “For whatever it’s worth, Von Carlowitz arguably introduced the idea (not phrase) in 1713 as Edinger & Kaul point out (2003): ‘He outlined the triad principles of sustainability (ecology, economy and social aspects)’. But to John’s credit, he not only coined it, he ‘capitalized’ it!”
Elkington also announced the launch of the Tomorrow’s Capitalism Inquiry in the fall “to solve the puzzle of how business and financial markets can best address multiple capitals and future forms of value. We will wire the door for sound — and encourage all sorts of people to knock. Take this as your invitation to take part in that inquiry, slated to run for a full year. The idea is to use crowd sourcing to critically review progress — or the lack of it — with the Triple Bottom Line.”
We at r3.0 hereby RSVP “Yes” to this invitation, and lay out below how the Reporting 3.0 Blueprint Work Ecosystem already proposes and is actively testing many viable solutions to the TBL shortfall through our Transformation Journey Program.
Reporting Blueprint: The 1987 Brundtland Report, which established the go-to definition of sustainable development, originally conceived of prosperity (not just profit) and intergenerational equity as two primary preconditions for achieving sustainability. Both are essentially non-existent in the mindsets of corporate leaders and their dashboards anymore (if they ever were…). The ultimate ends of sustainability have been engineered out of the collective perspective, with little idea of interdependency amongst nano (individual), micro (organizational), meso (industry, habitat, protfolio) and macro (economic system design). In the meanwhile, Earth Overshoot Day falls on August 1, pushing humanity ever further into ecological bankruptcy. At r3.0, we have mapped a path to a Green, Inclusive & Open Economy, starting with a set of First Principles and Desiderata that form the basis of how to design thriveable transformation.
Data Blueprint: Current ESG information systems are incrementalist by nature — dashboards that are perfectly suited for flying blind into the mountainside. We need to put the mountain on the radar! How? By placing company-level impacts (think carbon footprint) in the context of thresholds in economic, social, and ecological systems (think carbon budget.) In other words, the equation of micro-level numerators over macro-level denominators measures actual sustainability, as the Triple Bottom Line always intended. Recent research confirms the utter failure of this aspiration, as 95% of so-called sustainability reports produced since 2000 fully neglect to include the context of ecological limits, for example. The Data Blueprintmakes a series of Recommendations for closing this Sustainability Gap through a seamless information flow integrating internal and external data. Additionally, r3.0 is incubating a Global Thresholds and Allocations Council (GTAC) to vet, validate, adjudicate, and disseminate threshold determinations across the Triple Bottom Line, and allocation approaches for parsing responsibility to the organizational level.
Accounting Blueprint: A half-decade ago, World Business Council for Sustainable Development CEO Peter Bakker pronounced that “Accountants will save the world” — a call echoed by Six Capitals Author Jane Gleesson-White and Chief Value Officer Author Mervyn King in their book subtitles.) This salvation has yet to materialize, underscoring its aspirational nature — we at r3.0 believe it can happen, but only with significant transformation of the accounting regime. We propose such changes in our Accounting Blueprint, including multicapital, multilayered P&L statements and balance sheet, as well as a ‚Statement Of Future Risk And Opportunity.’
New Business Models Blueprint: The rubber meets the road on corporate transformation at the business model level. However, as the r3.0 motto says, there is no sustainable business in and unsustainable world,’ so companies are challenged in implementing transformative change in the context of the current (broken) economic system. The New Business Models Blueprint noted in its review of the literature and practice, that most current work conceived of „sustainable business models“ within the existing economic paradigm, predisposing failure. Accordingly, the Blueprint proposes eight General Characteristics of what we call Integral Business Models that seek change at the individual mindset (nano), company (micro), industry (meso), and economy (macro) levels in order to create system value. The Blueprint also provides a process flow and template geared to both emerging company entrepreneurs and existing company intrapreneurs, as well as case examples.
Transformation Journey Blueprint: After two years of designing our Blueprints, our community asked us to package our Work Ecosystem into a single, concise statement. So, we serially published Medium articles to distill and synthesize the four Blueprints, and bundled that output into a fifth Blueprint. We also integrated an implementation process framework, called the Transformation Journey Program, into the final Blueprint. Organized in modules for nano, micro, meso and macro level players and offering a complete set of steps (all addressing one ‚pain point’ and delivering on the ‚gain point’ of implementing our recommendations), this is now an „off-the-shelf“ resource for making change happen.
The five years at r3.0 have been the most satisfying of our careers, working with hundreds of likeminded experts from all over the world to address many of the shortcomings that are spurring John Elkington to issue a TBL product recall. From our perspective we will move forward with the Transformation Journey Program as we think we have already identified the problems, and proposed highly vetted solutions. We are offering this input right at the start of the ‘Tomorrow’s Capitalism Inquiry’. We invite John and the Volans Team to consider our Work Ecosystem as a highly complementary set of Recommendations for triggering “Tomorrow’s Capitalism” — or what we might call regenerative and distributive multicapitalism. And we welcome the opportunity to collaborate in the ‘Tomorrow’s Capitalism Inquiry’ to help ensure the year doesn’t amount to what Alex Steffen calls “predatory delay.”