ACCOUNTANCY BEYOND THE NUMBERS with Hayes Knight

Beyond the “triple bottom line”

Accountants have long been criticised as backwards looking and only interested in the numbers, but there is a new breed of accountants on the rise that actually have the personality and skill set to make a difference to businesses, and the planet in general. If that sounds like a radical statement, then read on.

The phrase “triple bottom line” was first used by John Elkington in 1994 and in practical terms means looking beyond an organisations profit and into its impact on the planet and people. In other words it looks at the economic, environmental and social performance of an organisation.
This three pronged approach has arguably been the cornerstone of the sustainability movement as organisations have looked to balance these aspects to meet the needs of their stakeholders including their customers, employees, shareholders and in some cases the legislators.
The results of measuring the “triple bottom line” have often formed the basis of sustainability reports and while many organisations support this approach and advocate for it, it has its critics. A lot of this criticism has been directed at the manner in which sustainability reports are written and what is left out of them rather than what is in them. They are often only retrospective, heavy in data and talk up the success without citing the issues facing the organisation.
So the challenge is how can we measure the impact of their sustainability programmes rather than just reporting them? To answer this you have to look at what the critics are saying. Following a review of types of criticism that was being levelled at sustainability reporting we were led to some of the new approaches to measuring the value of organisations. These included Jonathan Porrit’s Five Capitals model which is used and promoted by UK based Forum for the Future. This model takes a much more holistic and future focused approach and looks at wealth creation or ‘capital’ rather than a more retrospective view which is often the way the “triple bottom line” reporting is conducted.
Again, the shortfall in these models are often that they are predominantly aimed at by big business, and don’t really measure the impact or value and returns on their investments in social and environmental programmes. This can be a complex area, often referred to as “Social Return on Investment”. It attempts to include both tangible and intangible measures of value and the impact that has occurred as a result of the investment. You only have to be involved in some of the amazing work that goes on in the community to get a huge sense of pride – our own local North Harbour Club being a prime example. So why not come up with a system that measures the long term impact of business corporate and social responsibility strategies, and benchmark the investment against budgets – just like you would a revenue or expense line?
Drawing this together we created a new system for measuring our sustainability and as, if not more importantly, helping to plan actions that will increase our sustainability. Centred on the profit and loss and balance sheet with the addition of less common “non financial KPIs”, the “6 Capitals Model” (see diagram) is a blending of the approaches reviewed above plus our own experience of what makes New Zealand companies and non-profits tick. The impact on the environment of reducing waste or power is measured and tracked, and also has a financial return. The impact on the community of sponsorships, give-aways or discounted product or supplying volunteer labour is also benchmarked and tracked. Although it is not all about the dollars – there is also a positive impact there as well.