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Death to the triple bottom line?

By Peter Shergold - posted Friday, 29 July 2011

Daniel Altman was in Australia recently as a guest of the Sydney Writer's Festival. He's Director of Thought Leadership at Dalberg Global Development Advisors (a far more exciting career description than General Manager!). I was fortunate to attend a provocative breakfast session he presented based around his book,Outrageous Fortunes: The Twelve Surprising Themes That Will Shape The Global Economy.

I was also able to interview him for last week's Social Business program about a paper he and his colleague, Jonathan Berman, have recently published. Their argument is that schemes such as corporate social responsibility, creating shared value or triple bottom line reporting are unnecessary. At best they are inefficient workarounds. Business should get back to focussing on profit which will, over time, deliver social benefits more effectively.

It's not surprising that this viewpoint is generating waves of angst in the blogosphere. The financial journalist, Felix Salmon, in a recent response called the thesis "profoundly silly" and Altman "a complete laughing stock". Other commentators, although employing less extravagant language, tend to agree.


So let's be clear about what Altman is not saying. He is not returning to the position, associated with the great economist Milton Friedman, that by creating employment and producing goods and services in a competitive market, employers fully met their moral obligations and that no more should be required of them.

Altman, by contrast, believes in the value of the beneficial outcomes often associated with CSR. His position, at its heart, is this: if corporations focus only on profit they will generate social benefits more efficiently and sustainably than through the embrace of separate programs.

In other words, management – if it is economically rational – will recognise the monetary value that corporate reputation, employee loyalty, job satisfaction and positive government relations have on the single bottom line. Such factors enhance shareholder value. There is no need to embrace (and report upon) well-meaning but often ill-considered corporate citizenship initiatives. A focus exclusively on profit will naturally inculcate behaviours that are socially and environmentally responsible.

In a nutshell, Altman believes that doing good really is good for business. To develop distinctive programs is inefficient. Indeed, by hiding the contribution of economic contribution of social responsibility to profit, CSR interventions may be more likely to be cut back or discarded at times of economic downturn.

I think that Altman's provocation does us a service. Too often CSR or corporate citizenship has been treated as a public relations exercise, separate from the strategic core of a business. It is better to devote attention to the business of the business.

Yet I remain unpersuaded by his central thesis, for two reasons. The first, which goes to the essence of the Altman/Berman arguments, is time horizon. As Altman argues convincingly, it takes a long-term perspective to fully appreciate and value the goodwill that derives from corporate responsibility and accountability.


The reality, as was made manifest in the causes of the global financial crisis, is that whilst management leadership and directors should be driven by long-term corporate sustainability, there is a strong tendency for remuneration and dividend structures to reflect short-term profitability. Positive and normative economics are being confused. In the immediate future managers and shareholders can often be better off: in the long-term we are all dead.

The advantage of a company articulating a program which emphasises both social and financial returns is that it can act as a valuable counterbalance to narrow thinking driven by immediate considerations. It can help frame risk appetite for the long-term.

As an economist I believe it is probable that companies will tend to maximise their benefits to society when they concentrate their resources on achieving sustained profitability. As an economic historian, however, I discern from the recent past that such time horizons are unlikely to motivate business behaviours naturally. Right now, in my view, there is advantage for companies in articulating and promoting shared or blended value. It is a way of ensuring that they look to a more distant future. Think of CSR or shared value as a way of reporting on profitability (and corporate survivability) over the next generation.

And the second reason why I part company with Daniel Altman? That will be the subject of a later piece. In the meantime, I urge you to read "The Single Bottom Line" for yourself.

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This article was first published on the blog of the Centre for Social Impact on July 20, 2011.

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About the Author

Peter Shergold is the Macquarie Group Foundation Professor at the Centre for Social Impact (CSI) at UNSW.

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