A RESPONSE TO
"GETTING TO THE BOTTOM OF 'TRIPLE BOTTOM LINE'"
Moses L. Pava
Wayne Norman and Chris MacDonald launch a strong attack
against Triple Bottom Line or 3BL accounting in their article "Getting
to the Bottom of Triple Bottom Line'" (2004). This response suggests
that, while limitations to 3BL accounting do exist, the critique of Nor-
man and MacDonald is deeply flawed.
ayne Norman and Chris MacDonald make a strong attack against Triple
Bottom Line or 3BL accounting in their article "Getting to the Bottom of
'Triple Bottom Line" (Norman and MacDonald 2004). They correctly note that
there has been relatively little academic research on this topic. This is particularly
troublesome given that this term is now widely used in business circles. A Google
search in February of 2004 returned roughly 52,400 web pages that mention this
phrase.' One of the purposes of their paper, then, is to begin a rigorous debate about
the strengths and weaknesses of 3BL. This is an important and long-overdue goal.
Unfortunately, the authors' own conclusions are deeply flawed.
The authors begin their analysis by methodically setting out five claims that they
believe are being made by the supporters of 3BL. These are as follows:
components of "social performance" can
in relatively objective ways on the basis of standard indicators.
A social "bottom line"—that
something analogous to
a net social "profit/loss"—can be calculated using data from these indicators
and a relatively uncontroversial formula that could be used for any firm.
Claim: Measuring social performance helps improve social
with better social performance tend
to be more
able in the long run.
Firms have an obligation to maximize (or
weaker: to improve) their social bottom line—their net positive social im-
pact—and accurate measurement is necessary to judge how well they have
fulfilled this obligation.
The firm has obligations to stakeholders to disclose
information about how well it performs with respect to all stakeholders (Nor-
man and MacDonald 2004: 246).
ISSN 1052-150X. pp. 105-110
106 BU S INE S S ETHI CS Q UA R TE RLY
Immediately after presenting these five claims, the authors criticize the "vagueness"
of these formulations. "[T]he truth of many of these claims is salvaged at the expense
of their power," they write (Norman and MacDonald 2004: 246).
In particular, Norman and MacDonald believe that the transparency claim is
especially weak. They state that everyone believes that corporations have obliga-
tions to disclose some information to stakeholders beyond financial measures, but
the real questions is "what information do stakeholders actually have a right to, and
how would one justify such rights-claims?" (Norman and MacDonald 2004: 246).
I believe that the authors are correct when they complain that there is virtually no
substantive discussion among academics about what must be disclosed, what can
be disclosed, and what may not be disclosed to corporate stakeholders. And, to the
extent that their article sparks a dialogue centered on this single issue, it will have
served an important purpose.
However, this problem about the boundaries of what is appropriate and not ap-
propriate to disclose is not unique to the advocates of 3BL accounting. This is a
problem for everyone interested in more and better corporate disclosure, presumably
even Norman and MacDonald. For example, Wal-Mart—which is not one of the
companies that have adopted 3BL accounting—is currently under intense pressure
to disclose the names of
overseas factories. The question of whether or not Wal-
Mart has an obligation to disclose this information can be debated, but it does not
hinge on one's acceptance or non acceptance of 3BL accounting.
The fundamental basis of the authors' rejection of 3BL accounting is based on
their rejection of 3BL's so-called Aggregation Claim. Apparently they accept the
other four claims of 3BL (even transparency). To Norman and MacDonald the Ag-
gregation Claim is the only distinctive aspect of 3BL accounting. In their memorable
words, "what's sound about the 3BL project is not novel, and what is novel is not
sound" (Norman and MacDonald 2004: 247).
What Norman and MacDonald want for social and environmental reports is "an
agreed-upon methodology that allows us, at least in principle, to add and subtract
various data until we arrive at a net sum" (Norman and MacDonald 2004: 249).
they state, is what the Aggregation Claim demands. But, given that this
methodology does not exist, and given that this is the only distinctive claim of 3BL
accounting, the whole movement, in their view, becomes "a kind of he" (Norman
and MacDonald 2004: 256).
It would seem that Norman and MacDonald's critique of 3BL accounting is
wholly dependent on their assertion that advocates of 3BL really do accept the
Aggregation Claim. According to Norman and MacDonald, "Organizations such
as the Global Reporting Initiative and AccountAbility have embraced .. . the 3BL
concept for use in the corporate world" (Norman and MacDonald 2004:244). Surely
A RESPONSE TO NO R MAN AN D MA C D ON A L D 107
then, one would imagine from the flow of their argument, these two organizations
especially would fully endorse the Aggregation Claim.
But Norman and MacDonald note correctly just a few pages later that this, in
fact, is not the case. They admit that "the Aggregation Claim .. . is definitely not
endorsed by any of the major social-performance standards to date" (Norman and
MacDonald 2004: 247). They also note, that in practice, no company endorses this
claim. So if the Global Reporting Initiative, AccountAbility, and real businesses
do not endorse the Aggregation Claim, who does?
Norman and MacDonald must and do admit that, in practice, no one actually ac-
that even though no group really accepts the Aggregation Claim,
logical consistency demands that advocates of 3BL should endorse the claim.
Here is how the authors derive their conclusion. "The keenest supporters of the
3BL movement tend to insist, if only in passing, that firms have social and environ-
mental bottom lines
just the same way that they have 'financial' or 'economic'
bottom lines" (Norman and MacDonald 2004: 249, emphasis in original).
There is no source for this claim. Given that the entire argument rests upon its
truthfulness, this is surprising, especially in a paper that already includes thirty-
seven endnotes. For the sake of argument, however, let us assume (despite the fact
that this claim has not been documented) that it is true. Does the Aggregation Claim
logically follow from the claim that firms have "social and environmental bottom
lines in just the same way that they have 'financial' . . . bottom lines"?
The central point of my response is that it follows only if the advocates for 3BL
already accept an Aggregation Claim for the financial bottom
My most impor-
tant disagreement with Norman and MacDonald is with regard to this precise issue.
It is simply not the case that there exists a single number that aggregates financial
performance, and therefore no one should demand this of social and environmental
I think that one can argue that the overriding point of the metaphor of the triple
bottom line is to challenge the traditionally held assumption that any number
alone—including net income—can meaningful capture the appropriate assessment
of corporate performance. Norman and MacDonald seem to take it as a matter of
faith that net income, or the traditional bottom line, is the single source of financial
information included in annual reports to shareholders. It is the number that ag-
gregates financial performance. This is not the case, though.
For years there has been an increasing demand for better financial accountability.
The Securities and Exchange Commission (SEC) and the Financial Accounting
Standards Board (FASB) in the U.S. have met this demand by requiring additional
disaggregated disclosures. Anyone who teaches financial statement analysis will
tell you how important it is t o blend information from many different sources about
many different elements of performance. At the simplest level, no one would dream
108 BUSINESS ETHICS QUARTERLY
of evaluating a company without looking at operating cash flows in addition to net
income. Similarly, no one would consider an investment by focusing on operating
cash flows and completely ignoring a risk measure. Is there anyway to aggregate
net income, operating cash flows, and risk? Not to my knowledge.
It is true that financial accounting continues to report a number called net
income, but it is not true that accountants claim that this number tracks financial
performance in a one to one fashion. What is truly confusing about the Norman
and MacDonald paper is that they themselves seem to recognize this very point in
an extended endnote. They state:
It really should be noted that the income statement, with its famous "bottom
is but one of the principal financial statements used to evaluate the
firm. The others include the balance sheet, the statement of cash
flows and the statement of owners' equity. (Norman and MacDonald 2004:
What they fail to notice here, however, is how devastating this note is to their
own argument. By everyone's agreement, net income does not aggregate financial
performance into a single number. It is better thought of as a matrix of financial
why hold the advocates of
reporting to a higher
standard than is currently acceptable in the
realm? In other words, if you
can not summarize financial performance with a single, objective number, you
certainly should not expect to summarize social and environmental performance
in this way.
The Irony of a Triple Bottom Line
One of the major limitations of
business ethics movement, to date, has been
measure and track social and environmental performance in
ingful, consistent, and comparable
But blaming the advocates of triple bottom
blame the only group that
and is trying to remedy
Rather than criticizing triple bottom line reports for their
magical number that aggregates ethical performance, academics
should understand the real import of 3BL reporting and try to improve it.
Triple bottom hne reporting is a metaphor to remind us that corporate perfor-
more accurate description of the goals for
the crucial issue here. What is important to note is the irony inherent in the phrase
And this is exactly what Norman and MacDonald have missed. Isn't the very
claim of more than one bottom line a contradiction in terms? Of course it is. But
that's the point. There is no bottom hne nor was there ever a bottom hne—only
multiple and contingent bottom lines.
A RESPONSE TO NORMAN AND MAC DONALD 109
Norman and MacDonald raise some important criticisms concerning 3BL ac-
counting. Most importantly, their concern that some companies are abusing it to
promote their own interests is accurate. Consider the case of tobacco company
Brown and Williamson's triple bottom line report as an illustrative example of the
problems of 3BL.
Specifically, the company's claim in its social and environmental report that
to ensure the
long-term sustainability of our company with
our responsibilities as a good corporate citizen is not a dilemma" is, at best, hard
to understand (see Brown and Williamson
51). Further, does the company
recognize that cigarettes are addictive in nature? If so, the company does not say
this in this report. Although the document does state explicitly that members of
the "public health group" hold the position that nicotine is an addictive substance,
the company itself
not take a position on this issue here (see Brown and Wil-
33). In fact, the company states that smokers
to use tobacco
products" (the company's emphasis) and "should be free to do so."
In addition, a report advertising itself as "a social and environmental report"
should include some specific statistics on the admitted dangers of cigarettes. For
example, how many people die each year from smoking Brown and Williamson's
cigarettes? We're told over and over again in the document that there are forty-five
specific statistics about
dangers these smokers
are facing. Obviously, the company is trying to represent its own interests in the
best possible light. There is nothing wrong with
There is a problem, however,
when one uses ethical
to hide unethical behavior.
What does all of this imply about 3BL reporting? Jettisoning it because it can
be misused is like throwing out the baby with the bathwater. Certainly if we have
learned anything over the last decade it is that even audited income statements are
subject to manipulation. Just as no one is calhng to get rid of income statements,
no one should call for the abandonment of 3BL reporting.
Not Just an Academic Debate
This is not just an academic
is currently overhauhng its basic
conceptual framework. This project should be of critical concern to the business
ethics community. Among other issues, the FASB is addressing the objectives of
accounting and deciding which stakeholders will count. As of
writing it looks
current and exclusive emphasis
related to the prediction of cash flows, and will ignore social and environmental
indicators (Bullen and Crook
The FASB would be well-advised to examine
the vast and growing business ethics hterature on stakeholder theory before it com-
mits itself once again to Milton Friedman's thin theory of profit maximization.
The triple bottom line is not a panacea. But, unhke Norman and MacDonald,
I beheve it is a step in the right direction. Triple Bottom Line accounting puts the
110 BU SIN ESS ET H I C S Q UAR TER LY
notion of accountability back into accounting. Further, it is derived from a more
ethically defensible theory of the firm than the traditional annual report with it sole
emphasis on profit maximization for shareholders.
My own Google search in July 2005 revealed 166,000 hits for "triple bottom line," an
increase of more than 200 percent
just a year and a
Brown and Williamson Tobacco USA.
Social and Environmental Report
2002/2003. Winston-Salem, N.C.: R. J. Reynolds Co.
Bullen, Hasley G., and Kimberly Crook. 2005. "Revisiting the Concepts" (May), www
and Chris MacDonald. 2004. "Getting to the Bottom of Triple Bottom
Business Ethics Quarterly 14(2) (April): 243-62.