Impact of global warming on validity of triple bottom line reporting


The triple bottom line (TBL) process involves identifying, assessing and reporting an organisation’s activities in terms of their impact on the environment, society, and the economy (Elkington 1980).  TBL covers ‘planet, people and profit’ (de Gruchy 2006).  In TBL it is important to use environmental, social and economic parameters when it comes to measuring an organisation’s activities and impacts.  Only by understanding and acting in relation to all three of these parameters, can an organisation enhance its short and long term interests, thereby creating greater opportunities and reducing risks.  Accordingly, a TBL approach ensures the organisation’s success.

That success (or failure) must now take place in the era of global warming.  Global warming can be defined as “the observed increase in the average temperature of the Earth’s atmosphere and oceans in recent decades and its projected continuation” ( 2007).

TBL bolstered by reporting indicators

To support the ‘three pillars’ of TBL and to ensure they are viable and useful, a range of related concepts come into play which need to be considered by an organisation.  These include corporate governance, corporate ethics, corporate social responsibility or corporate citizenship, and importantly sustainability or sustainable development. All of these are best achieved through cooperative endeavours, but a socio-economic system based on cooperative principles requires a fundamental change in business psychology TBL is a step in the right direction.

Sustainable development is that which seeks to meet the needs of the present generation without compromising the ability of future generations to meet their own needs (WCED 1987).  Sustainability reporting will always include a forward-looking and holistic approach (de Gruchy 2006).  This is evident  (GRI 2006:1) in the Sustainability Reporting Guidelines (Guidelines) issued by the Global Reporting Initiative (GRI), which is the leading approach in this area, aiming at a worldwide framework for sustainability reporting.

Part of these Guidelines oblige organisations to report on how they aim to contribute in the future to the improvement (or deterioration) of environmental developments and trends at the local, regional or global level (GRI 2006:1, 11).  This concept is often articulated in terms of limits on resource use and pollution levels (GRI 2006:1, 11).  Clearly, with the advent and recognition of global warming, the impetus and ability to reduce greenhouse gas emissions, which is a major cause of global warming, as well as ozone-depleting substances and other significant air emissions, are measures to take into account in sustainability reporting.

To assist in reporting of measured outcomes, the Guidelines include the Environment Performance Indicators (GRI 2006:1 28; GRI 2006:2), the aspects of which are structured to reflect the inputs (e.g. energy), outputs (e.g. emissions), and modes of impact that an organisation has on the environment (GRI 2006:2 3).  In this regard, indicator EN16 (GRI 2006:2 22) deals with total direct and indirect greenhouse gas emissions by weight, and generally sets out methodologies for use of data and making calculations on this matter for sustainability reporting purposes.  Direct emissions are those owned or controlled by the organisation.  Indirect emissions are those resulting from activities of the organisation but are generated at sources owned or controlled by another organisation.  Indirect emissions are also further covered by indicator EN17 (GRI 2006:2 24).

This type of reporting should assist in an understanding of, and positively change, an organisation’s practices thereby leading to significant reductions in emissions.  Indicator EN18 (GRI 2006:2 25) then deals with reporting on the setting and monitoring of reduction targets.  All of indicators EN16, 17 and 18 of the Guidelines seem to support the United Nations Framework Convention on Climate Change (UNFCC) to protect the climate system for present and future generations and the subsequent Kyoto Protocol to limit and reduce greenhouse gas emissions in order to promote sustainable development.

While the Guidelines and their environmental performance indicators are fairly general, it should be remembered that these and related initiatives such as greenhouse gas accounting and reporting practices are still evolving (WRI & WBCSD 2004).  Since TBL was espoused the concept of public environmental reporting has emerged and evolved from the United Nations Conference on Environment and Development held in Rio de Janeiro in 1992, followed by the GRI’s Guidelines.  The basic principles and aspects of methodology have been established through a collaborative process involving stakeholders from a wide range of environmental, technical and accounting disciplines.  This has lead to an even more developed corporate accounting and reporting standard for greenhouse gas emissions called The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (WRI & WBCSD 2004).  Linked to this is The Greenhouse Gas Protocol: The GHG Protocol for Project Accounting which is a guide for quantifying reductions from greenhouse gas mitigation projects (WRI & WBCSD 2005).

These documents seek to help organisations represent a faithful, true and fair account of their greenhouse gas emissions and reductions, while ensuring consistency and transparency (WRI & WBCSD 2004 3, 6; WRI & WBCSD 2005 5).  This goal is in line with generally accepted accounting principles.  Accordingly, the validity of TBL has been bolstered by these initiatives, as the point has been reached whereby certain practical components of implementing TBL (in relation to a particular environmental matter) have been integrated into the mainstream accounting framework.  From that perspective it can hardly be said that TBL has rendered itself invalid since the recognition of global warming as an important and high priority environmental and socio-economic phenomena that has to be grappled with.

In Australia, the Federal Government has also produced its Triple Bottom Line Reporting in Australia: A Guide to Reporting Against Environmental Indicators (Environment Australia 2003).  Similarly, this Guide calls for transparency and accountability concerning environmental impacts produced by organisations, and states that non-financial disclosure is likewise important, not just financial disclosure (Environment Australia 2003 6).  The Guide contains simple methodologies to enable organisations to measure performance against environmental performance indicators.  These methodologies are either developed or widely used or adapted to Australia (Environment Australia 2003 11).  Again this shows that serious consideration is given to the validity, and to both the substance and form, of TBL reporting in terms of a particular country’s circumstances and requirements.  This demonstrates that TBL is a flexible mechanism.  Such flexibility makes it dynamic, allowing it to evolve over time and withstand the passage of time.

TBL and economic modelling

To ensure robust outcomes, TBL has to be applied to particular environmental impacts.  In regard to the impact of greenhouse gas emissions (the major cause of global warming) or their reductions, economic modelling can be used to try to verify results in some kind of ‘real’ terms.   Economic modelling has been developed to produce two basic approaches to calculating the value of incremental emissions reductions.  These are the ‘direct damage estimation’ and the ‘cost of abatement’ methods (Koomey & Krause 1997 6).   The results of these methods can be used for reporting purposes and to give some semblance of economic worth to reduction programs.

The direct damage estimation method involves calculating damages that can be definitively linked to emissions of a particular pollutant (Hohmeyer 1988; Ottinger et al. 1990).  This is done in dollar terms, e.g. human health and environmental effects, but it is extremely difficult to do.   Mainly, it is difficult because practically it has to be applied to a region and regional forecasts of climate change are even less certain than global predictions, yet regional forecasts are necessary to estimate the damages (Koomey 1990 4).  Once that is known, organisations can assess the necessity to reduce the relevant pollutants.

The cost of abatement (or revealed preferences) method involves assessing the use of cost of pollution controls that are imposed by regulatory decisions (e.g. mandated by regulators).  This is a proxy for the true externality costs imposed by a pollutant (Chernick & Caverhill 1989; Marcus 1989).  This method is simpler and takes the marginal mitigation costs incurred solely to reduce emissions of a single pollutant.  This assumes there are no other benefits to a pollution reduction investment.  Therefore, such proxy approaches present difficulties since many global warming mitigation measures have multiple benefits (Krause & Koomey 1989) which can make it difficult to assess where the benefits actually lay.  Also many such measures await detailed, consistent tabulation.

Nevertheless, progress in the building and acceptance of this type of economic modelling, as an aid to assessing impacts or reductions of greenhouse gas emissions, and thereby the impact or alleviation of global warming, are important for reporting purposes.  They provide pragmatic tools for the mathematical synthesis of the best, currently available data for the purpose of informing a healthy policy decision by an organisation.  Even if the tools are not yet the most robust, they still assist in building a TBL compliance culture, and so do not derogate (at all) from the validity of TBL reporting.

Attention of business to TBL

The necessity for useful environmental performance indicators, reporting methodologies and economic modelling that have and continue to be developed and improved, can only assist a business, or any organisation, in better determining its social responsibility in a world that is now undergoing global warming.  It is essential to have these tools so that TBL reporting can move through into management thinking and management systems and all the processes of an organisation.  This will then impact on what products are produced, and how an organisation produces its products.  In turn, there are flow-on effects on the actual day-to-day reality of consumers in the way they behave.  For example, what sort of light bulb (energy efficient) to use, what sort of car (fuel efficient) to purchase, or what sort of toilet (full-flush or half-flush facility) to use, and so on.

Accordingly, TBL assists an organisation in its aim of corporate social responsibility, which requires that an organisation not only abide by the law, but also abide to product and other standards, codes and requirements, as well as a good sense of ethics in being a good corporate citizen.  Unless an organisation has good TBL tools it is more difficult to cement organisational commitment towards the outcomes that are desired by the imposition of environmental reporting and environmental aspirations.

Viable and workable TBL tools assist an organisation to perform towards a higher standard than that which is required by the law.  Such tools help an organisation to develop a framework for social responsibility and commitment, demonstrate to stakeholders that the organisation is guided by principles of social responsibility, and to accept accountability for not measuring up to any of the organisation’s social responsibilities (de Gruchy 2006).  They are important in transforming strategy into action.  The impact of global warming must surely have heightened the need for an organisation to develop and understand its social responsibilities, and that is surely assisted by a range of TBL tools for TBL reporting.

Attention of government to TBL

As TBL represents a balance between ecological, social and economic elements, it does rest on the philosophy that profits are not the only measure of the success of an organisation.  This may pose some problems for organisations, and particularly businesses, in implementing TBL reporting and of seeking to fulfil social obligations inherent in a TBL compliance culture.  But to ensure environmental sustainability (now absolutely necessary since the advent of global warming), which is inherently an integrated outcome, organisations and businesses will have little option but to adopt TBL and sustainability policies and processes.  This means they will have to measure their activities and impacts against environmental performance indicators and monitor progress over time.

For businesses and organisations to move towards a more comprehensive TBL approach there will have to be legislative and other pressures from government.  This requires governments to adopt a TBL perspective, which can be done by governments (RTSA 2004 3):

  • adopting ‘user pays’ principles in providing services that have pollution impacts, unless there are clearly defined Community Service Obligations (CSOs) that need to be satisfied;
  • moving towards a ‘polluter pays’ principle that applies to producers and consumers generally;
  • ensuring better integration of National Competition Policy (NCP) principles with Ecologically Sustainable Development (ESO) principles; and
  • seeking a reduction of imported oil inputs and greenhouse gas emissions, e.g. by a carbon trading scheme.

Bringing this together requires governments to understand TBL reporting and to regulate for the imposition of environmental performance indicators and use of methodologies that are needed for TBL reporting.  This has to be done within a solid policy framework.


The impact of global warming on the validity of TBL reporting has been such that it has more than ever heightened the need for thorough environmental reporting indicators, methodologies, economic modelling and reporting tools (the suite of TBL tools) consistent with the TBL approach.  While a good number of businesses and organisations and, of course, the community and its consumers, have generally woken up to the impact of negative externalities caused by the production of goods and services on the environment – which has been reinforced by the advent of global warming – it is still essential that governments give more attention as to how to implement the TBL approach in our society and to make it part of our socio-economic consciousness.

In order for businesses and organisations to comply, mandatory or legislative steps will need to be taken because TBL represents a balance between ecological, social and economic elements.  In that sense it looks at total welfare, in which profits are not the only measure of success.  Consequently, organisations and businesses will have to understand that a TBL approach is ultimately better for them, just as it is better for society as a whole.  This understanding has certainly increased since the advent of global warming, which has resulted in the need to develop a suite of good TBL tools.  This also proves the continuation of the validity of the TBL approach.


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de Gruchy, R (2006) Corporate governance and the triple bottom line, paper presented to the inaugural Australian Women Lawyers Conference – Celebrating Excellence, Sydney, 29-30 September 2006 (Chief Executive Officer, Australian Government Solicitor). (2007) A Global Warming Primer,

Elkington, J (1980) The Ecology of Tomorrow’s World: Industry’s Environment, London, Associated Business Press, 1980.

Environment Australia – Department of Environment and Heritage (2003) Triple Bottom Line Reporting in Australia: A Guide to Reporting Against Environmental Indicators,

Global Reporting Initiative (2000-2006) Sustainability Reporting Guidelines, Version 3.0, Amsterdam,

Global Reporting Initiative (2000-2006) Environment Performance Indicators, Version 3.0, Amsterdam,

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Electricity Generation in the Federal Republic of Germany, Berlin: Springer-Verlag.

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Koomey, J & Krause, F (1997) Introduction to Environmental Externality Costs, published in the ‘CRC Handbook on Energy Efficiency’, Energy Analysis Program, Lawrence Berkeley Laboratory, Berkeley, CA 94720,

Krause, F & Koomey, J (1989) Unit Costs of Carbon Savings From Urban Trees, Rural Trees, and Electricity Demand-Side Resources, presented at Conference on Urban Heat Islands in Berkeley, California.

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Ottinger, RL; Wooley, DR; Robinson, NA; Hodas, DR; Babb, SE; Buchanan, SC; Chernick, PL; Caverhill, E; Krupnick, A; Harrington, W; Radin, S; & Fritsche, U (1990) Environmental Costs of Electricity; New York, NY: Oceana Publications, Inc., for the Pace University Center for Environmental and Legal Studies.

Railway Technical Society of Australasia (RTSA) (2004), Submission to the Productivity Commission re National Competition Policy May 2004, Summary of submission to the Productivity Commission’s Inquiry re National Competition Policy from the Railway Technical Society of Australasia,

United Nations (1992) United Nations Framework Convention on Climate Change,

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World Commission on Environment and Development (WCED) (1987) Our Common Future,;

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World Resources Institute (WRI) & World Business Council for Sustainable Development (WBCSD) (2005) The Greenhouse Gas Protocol: The GHG Protocol for Project Accounting




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