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The Triple Bottom Line
Cultivating Sustainable Business
Practices in Corporate America
Last fall, as thousands of companies were feeling the
effects of the spike in energy costs and scrambling to
find more efficient ways to maintain their supply
chains, light their stores and hedge fuel costs, FedEx
Kinko’s was ahead of the curve.
The company established an environmental mission statement in the late 1990s after a growing number of its stores on college campuses reported a demand for more environmentally sustainable practices. Executives took team members’ and customers’ opinions to heart and aimed for maximum use of recycled materials, required waste reduction and mandated cutbacks in the amount of greenhouse gases produced.
Since then, FedEx Kinko’s has increased its use of recycled materials from 5 to 30 percent. Today about 30 percent of its store locations use renewable energy. “We went from an SUV to a Toyota Prius in terms of energy consumption,” says Larry Rogero, FedEx Kinko’s director of environmental affairs.
So when energy prices soared, the company had a real advantage. While half the company’s supply chain structure was still affected—mostly by increased costs in its manufacturing centers—the environmental policies it developed almost a decade ago proved valuable not only to stakeholders, but also to the company’s bottom line.
Rogero says the company’s view of social responsibility has evolved. “In 2003 and 2004, we started talking more holistically and realized business has a responsibility to return profits to shareholders and also be a good steward of the environment and demonstrate responsibility to the communities it’s immersed in,” he says. “We went to the triple bottom line focus.”
Walking the Walk
Watching the triple bottom line—that is, paying attention not only to financial results but also to social and environmental outcomes—means making sure a company’s actions live up to the needs of all stakeholders, including the shareholders, community, environment, employees, customers and suppliers, says Paula Ivey, a marketing and international business lecturer who teaches a corporate social responsibility (CSR) class at the McCombs School of Business.
Everyone is familiar with companies that pursued a CSR agenda as a response to negative media attention and boycotts. What’s changed is that more companies are working to avoid earning a bad reputation in the first place. They’re finding more and more reasons to proactively define their corporate values and responsibilities. And these initiatives are being delegated to newly created CSR departments and outside firms—rather than to public relations departments.
In the last five years, about half the companies in the Fortune 500 have begun publishing CSR annual reports. The reports discuss the companies’ sustainability and CSR approaches, provide their mission statements, and outline all the efforts undertaken to achieve their goals. Sometimes, the companies measure how many and to what extent each goal has been met.
What’s more, corporations aren’t the only ones keeping tabs on their actions. A report from the Social Investment Forum—a national nonprofit membership association dedicated to promoting the concept and practice of socially and environmentally responsible investing—found that $2.3 trillion were invested in SRI (socially responsible investing) mutual funds in 2005. And shareholders are increasingly becoming more involved in the practices of their companies. “A lot of people are filing shareholder resolutions to make changes,” Ivey says.
According to data from the CSR Group—a consulting and communications firm Ivey founded and operates—129 shareholder resolutions were filed against corporations for various social and sustainability issues last year. Although ExxonMobil had the most with eight resolutions, and Wal-Mart and Chevron were close behind, even companies that already have good CSR reputations —such as Ford Motor Co. and Whole Foods Market—received a couple of admonitions from their shareholders.
Ford was hit for lobbying related to the fuel economy while big-box retailer Whole Foods—which has already become a leader in purchasing renewable wind energy—was asked to improve its energy efficiency programs and performance.
Ivey attributes this to the need for companies to continuously improve their practices. She adds that shareholders who invest in companies with better reputations may hold these firms to a higher standard.
What’s clear is that CSR practices are becoming more critical to businesses than ever before. Even if it means higher operations costs, the return on CSR investment is significant across the board.
What Goes Around Comes Around
As McCombs School faculty research has found, CSR practices tend to benefit a company by adding value to its relationships with customers, employees, shareholders, board of directors and other firms.
“One of the main reasons companies go into CSR is reputation,” explains Ivey. And a brand’s reputation is very important to customers. “People are more loyal to companies who share their values and priorities,” Ivey says.
An overlap in values is also important to employees, says Caroline Bartel, assistant professor of management at McCombs. Her research has found that employees who identify with their company are more likely to stay at the firm. Even potential employees seek firms who are viewed positively by the outside world.
The company established an environmental mission statement in the late 1990s after a growing number of its stores on college campuses reported a demand for more environmentally sustainable practices. Executives took team members’ and customers’ opinions to heart and aimed for maximum use of recycled materials, required waste reduction and mandated cutbacks in the amount of greenhouse gases produced.
Since then, FedEx Kinko’s has increased its use of recycled materials from 5 to 30 percent. Today about 30 percent of its store locations use renewable energy. “We went from an SUV to a Toyota Prius in terms of energy consumption,” says Larry Rogero, FedEx Kinko’s director of environmental affairs.
So when energy prices soared, the company had a real advantage. While half the company’s supply chain structure was still affected—mostly by increased costs in its manufacturing centers—the environmental policies it developed almost a decade ago proved valuable not only to stakeholders, but also to the company’s bottom line.
Rogero says the company’s view of social responsibility has evolved. “In 2003 and 2004, we started talking more holistically and realized business has a responsibility to return profits to shareholders and also be a good steward of the environment and demonstrate responsibility to the communities it’s immersed in,” he says. “We went to the triple bottom line focus.”
Walking the Walk
Watching the triple bottom line—that is, paying attention not only to financial results but also to social and environmental outcomes—means making sure a company’s actions live up to the needs of all stakeholders, including the shareholders, community, environment, employees, customers and suppliers, says Paula Ivey, a marketing and international business lecturer who teaches a corporate social responsibility (CSR) class at the McCombs School of Business.
Everyone is familiar with companies that pursued a CSR agenda as a response to negative media attention and boycotts. What’s changed is that more companies are working to avoid earning a bad reputation in the first place. They’re finding more and more reasons to proactively define their corporate values and responsibilities. And these initiatives are being delegated to newly created CSR departments and outside firms—rather than to public relations departments.
In the last five years, about half the companies in the Fortune 500 have begun publishing CSR annual reports. The reports discuss the companies’ sustainability and CSR approaches, provide their mission statements, and outline all the efforts undertaken to achieve their goals. Sometimes, the companies measure how many and to what extent each goal has been met.
What’s more, corporations aren’t the only ones keeping tabs on their actions. A report from the Social Investment Forum—a national nonprofit membership association dedicated to promoting the concept and practice of socially and environmentally responsible investing—found that $2.3 trillion were invested in SRI (socially responsible investing) mutual funds in 2005. And shareholders are increasingly becoming more involved in the practices of their companies. “A lot of people are filing shareholder resolutions to make changes,” Ivey says.
According to data from the CSR Group—a consulting and communications firm Ivey founded and operates—129 shareholder resolutions were filed against corporations for various social and sustainability issues last year. Although ExxonMobil had the most with eight resolutions, and Wal-Mart and Chevron were close behind, even companies that already have good CSR reputations —such as Ford Motor Co. and Whole Foods Market—received a couple of admonitions from their shareholders.
Ford was hit for lobbying related to the fuel economy while big-box retailer Whole Foods—which has already become a leader in purchasing renewable wind energy—was asked to improve its energy efficiency programs and performance.
Ivey attributes this to the need for companies to continuously improve their practices. She adds that shareholders who invest in companies with better reputations may hold these firms to a higher standard.
What’s clear is that CSR practices are becoming more critical to businesses than ever before. Even if it means higher operations costs, the return on CSR investment is significant across the board.
What Goes Around Comes Around
As McCombs School faculty research has found, CSR practices tend to benefit a company by adding value to its relationships with customers, employees, shareholders, board of directors and other firms.
“One of the main reasons companies go into CSR is reputation,” explains Ivey. And a brand’s reputation is very important to customers. “People are more loyal to companies who share their values and priorities,” Ivey says.
An overlap in values is also important to employees, says Caroline Bartel, assistant professor of management at McCombs. Her research has found that employees who identify with their company are more likely to stay at the firm. Even potential employees seek firms who are viewed positively by the outside world.
