MANAGING THE TRIPLE BOTTOM LINE

MARCH 15, 2016

DOGWE, ALEXISEUSEBIO, CAMILLEGONZALES, MAURICETANDOC, LESLEE MAYTATING, AL MARIE

UNIVERSITY OF THE PHILIPPINESTECHNOLOGY MANAGEMENT CENTER

Under the Management of Prof. Ed Cruz

OUTLINEA. The Triple Bottom LineB. Corporate Social

ResponsibilityC. Serving BOP MarketsD. The Digital DivideE. Responding to Global

Climate Change in the Corporate World

F. Framework for Navigating Ethical Issues

THE TRIPLE BOTTOM LINE

PEOPLEoSocial structure of the organizationoStakeholders of the projectoEnsures fair trade and ethical practices are observed within the eco-system of the organization

PLANEToFor a business to survive, it has to earn profit but needs to understand sustainabilityoSustainability

PROFIT the economic value created by the company, or the economic benefit to the surrounding community and society

Source: Triple Bottom Line Definition | Investopedia http://www.investopedia.com/terms/t/triple-bottom-line.asp#ixzz42hNc6nyu 

DOMAINS

EconomicCompetitivePoliticalSocio-CulturalTechnologicalNatural ResourcesChanges in the

environment that should be taken into

consideration

DOMAINSECONOMIC COMPETITIVE

DOMAINSPOLITICAL SOCIO - DEMOGRAPHIC

DOMAINSTECHNOLOGICAL NATURAL RESOURCES

BUSINESS INITIATIVES THAT MOLD ECONOMIC OBJECTIVES

WITH SOCIAL WELFARE

RECAP

1. People2. Planet3. Profit

Triple Bottom Line

Corporate Social ResponsibilityBusiness initiatives that mold economic objectives (profit) with social welfare

RECAP

oEconomicoCompetitiveoRegulatory

oSocio demographicsoTechnologicaloNatural Resources

Key Domains for the Triple Bottom Line

DEBATES & CRITICISMS, DESIRED OUTCOMES, DOMAINS, MODELS &

APPROACHES OF CSR

DEBATES AND CRITICISMS OVER CSR Should firms engage in CSR?

DEBATES AND CRITICISMS OVER CSR Is it truly CSR if company benefits?

DESIRED OUTCOMES OF CSR Business GoalsDriving revenue growth through CSR initiatives

Social GoalsImprove quality of life and to build capacity in disadvantaged communities

CSR DOMAINS PEOPLEPeople includes employees, suppliers, customers, people in the local community where the business operates, or society as a whole.

PLANETEngaging in environmentally responsible, sustainable business practices.

CROPITAL

MODELS OF AND APPROACHES TO CSR Business Case Model The ability of CSR to create positive business results

CSR is viewed as relevant only when it translates unambiguously to competitive advantage.

MODELS OF AND APPROACHES TO CSR Social Values ModelSocial issue is the “force” that drives the organization

MODELS OF AND APPROACHES TO CSR Syncretic Stewardship ModelSyncretize means “To unite and harmonize”

Combines, integrates, negotiates and balances the competing claims of varied stakeholders.

Model 1:Business Case

Model 2: Social Values

Model 3: Syncretic Stewardship Model

MEASURING OUTCOMES AND EFFECTIVENESS OF CSR INITIATIVES

MEASURING OUTCOMES AND EFFECTIVENESS OF CSR INITIATIVES How does a company evaluate its performance for the triple bottom line?

How does a company's social performance relate to its financial performance?

EVALUATING TRIPLE BOTTOM LINE PERFORMANCE AccountAbility and CSR Network: Strategy, Governance, Stakeholder Involvement, Follow-through

Vodaphone (#5, with a score of 66.3) Deutsche Telekom (#33)

GE (#13, with a score of 59.1) Sony (#34)

Toyota (#38) HP (#24)

Siemens (#41) Toshiba (#30)

EVALUATING TRIPLE BOTTOM LINE PERFORMANCE

EVALUATING TRIPLE BOTTOM LINE PERFORMANCE

o Companies must evaluate their social and environmental performanceo A company should proactively monitor its own performance, using one of the generally accepted frameworks

EVALUATING TRIPLE BOTTOM LINE PERFORMANCE

AccountAbility's AA1000 standard

Verite's Monitoring Guidelines to assess sweatshop labor and labor abuses

Social Accountability International's SA8000 standard for human rights

The FTSE4Good Index, an evaluation of CSR performance of companies

GlobeScan's Corporate Social Responsibility Monitor

SOCIAL ACCOUNTING

EVALUATING TRIPLE BOTTOM LINE PERFORMANCEEnvironmental GuidelinesoThe Global Reporting Initiative's Sustainability Reporting Guidelines oCERES oInstitute 4 Sustainability oGreen Globe Certification/Standard oThe ISO 14000 environmental management standard

CORPORATE SOCIAL PERFORMANCE AND ITS FINANCIALPERFORMANCE

attract quality employees and customer loyalty

VS additional leverage

create new opportunities raise the firm's costs

unnecessary expenditures

detract from its focus on profit

CORPORATE SOCIAL PERFORMANCE AND ITS FINANCIALPERFORMANCE

From Innovest Rankings: Companies that received relatively high scores for corporate social responsibility (including BP and Sony) but whose financial (stock market) values did not perform well.

Companies that received lower scores for corporate social performance (including Apple and Nintendo) but whose stock market prices did perform well.

BEST-PRACTICES CSR FOR HIGH TECH COMPANIES

BEST-PRACTICES CSR Link CSR to Business Strategy

Supply/input conditionsMicrosoft - information technology education infrastructure GlaxoSmithKline - access of poor people to medications and vaccines attract scientists.

Demand/customer conditionsCompetitive contextSupporting infrastructure

BEST-PRACTICES CSR Measure the impact of CSR

Balance competing stakeholder interests

Collaborate with relevant partners

BEST-PRACTICES CSR Beware of unintended reputation effects (Hypocrisy)

oFocus CSR initiatives into areas unrelated to the firm’s business

oAvoid using socially responsible behaviors for compensating socially irresponsible ones

BEST-PRACTICES CSREmbed CSR in senior leadership

and in organizational reward

Link CSR to Innovation

SERVING BOP MARKETS CSR & Social

Entrepreneurship

BOP: BASE OF PYRAMID

PHILIPPINES & USA

LOWER CLASS(< $35k annual household income)

MIDDLE CLASS($35k - $200k annual

household income)

UPPER CLASS(> $200k annual household income)5.6%

60.6%

33.8%

Gov’t / NGO Assistance NGO Corp Donations/

Philantrophy Enlightened CSR/

Social Entrepreneurship

DOMAINS FOR INTERVENTION

2 Dimensions: 1. Happens in top or base of the

pyramid2. Caused by a crisis or is

chronic

CRISIS

CHRONIC

BOP TOP

1 2

3 4

AID/DONATIONS

CAPACITY BUILDING

THE 10 GREAT DIVIDES1. Demographic Divide2. Financial Divide3. Nutritional Divide4. Natural Resource Divide5. Environmental Divide6. Health Divide7. Gender Divide8. Educational Divide9. Digital Divide10. Security Divide

BUSINESS MODELS TO SOLVE BOP

BOP 1.0 “Selling to the Poor”

Potential customers Deep listening Reduce price Redesign packaging Extend distribution Mediated by NGOs

BOP 2.0 “Business Co-Venturing”

Business partners Deep dialogue Expand imagination Build shared commitment Marry capabilities Direct, personal relationships facilitated by NGOs

“ENLIGHTENED” CSR

View of PeopleModel of EngagementBusiness Solution

Nature of Relationship

BUSINESS MODELS TO SOLVE BOP

Power of small businesses to create innovative solutions Belief that everyone has innate capacity to contribute to development Primary focus is value creation Willing to share insights & innovations

SOCIAL ENTREPRENEURSHIP

Phase I: Opening Up

Phase II: Building the Ecosystem

Phase III: Enterprise Creation

CO-CREATION

SOCIAL ENTREPRENEURSHIPLEVERAGED

NONPROFIT VENTUREDrive adoption of innovation Requires external partners for support One Laptop Per Child Organization

HYBRID NONPROFIT VENTURE

Recover portion of cost Sets up several legal entities EnvirofitAravind Eye Care

SOCIAL BUSINESS VENTURE

For-profit business setup Reinvest profits to grow the venture and reach more people

5 KEY AREAS TO CONSIDER DISTRIBUTION• Poor roads, high transportation cost• Localize value creation PRICING• Price needs to be slashed• “Surplus revenue” to subsidize• Community based pricing

OPEN SOURCE & LICENSING• Rely on open source models to reuse, adapt or modify

RESPONDING TO FAILURE• Fail early & fail fast • Learning labs for new insights

MEASUREMENT CHALLENGES• BOP impact assessment framework

1 3

2 4

5

THE DIGITAL DIVIDE

THE DIGITAL DIVIDE Disparity in technology access between:

o Socioeconomic groupso Geographic areaso Ethnic groupso Countries

“if technology revolution leaves some behind, all will suffer”

SOLUTIONS TO THE DIGITAL DIVIDE Public Policy Nonprofit Ventures Training & education Market-based solutions Mobile telephony

Mobile Telephony• Cheaper phones• Market preference over other gadgets• Provides access to different apps

UBP + GLOBE = VIDEO

RESPONDING TO GLOBAL CLIMATE CHANGE IN THE

CORPORATE WORLD

ADDRESSING ENVIRONMENTAL IMPACTSCap and TradeCarbon OffsetsBest Practices Environmental Strategy: Four-Step ApproachNatural Capitalism

CAP AND TRADE

CARBON OFFSETS

BEST PRACTICES ENVIRONMENTAL STRATEGY: A FOUR-STEP APPROACH

Quantify the company’s carbon footprint.

Assess carbon-related risks and opportunities.

Adapt the company’s business strategy.

Stay ahead of competitors.

NATURAL CAPITALISMDramatically increase the

productivity of natural resources

Shift to biologically

inspired production models

Engage in “solutions-based”

thinking

Reinvest in natural capital

CHALLENGES FOR ENVIRONMENTALLY RESPONSIBLE BUSINESS PRACTICES

unintended consequences

• Use of crops for human consumption for processing biofuels

greenwashing

• energy-efficient electronics that have hazardous materials

• products claiming to be “organic” without verifiable proof

fairness and equity for

developing nations

• growth in China, India and other developing countries cause GHG emissions to also rise (1/3 of global emissions as of 2004)

FRAMEWORK FOR NAVIGATING ETHICAL ISSUES

FRAMEWORK FOR NAVIGATING ETHICAL ISSUES

Identify all stakeholders

who are affected by the

situation

For each stakeholder

group, identify its needs and

concerns, both if the decision

is implemented and if decision

is not implemented.

Prioritize the stakeholder groups and

perspectives.

Make and implement a

decision.

FRAMEWORK FOR NAVIGATING ETHICAL ISSUES

Case Study: Merck and the Cure to River-blindness in 1978, onchocerciasis or “river-blindness” plagued at least 85 million peoplecaused by a parasitic worm carried by a tiny black fly that thrives along fast-moving riversthe larvae the adult worm reproduces invades the eyes and often cause blindnessdisease was so prevalent that children thought blindness is part of growing up Merck has discovered that a drug which was used to eliminate insect-borne parasites in cows also has properties that can eliminate the cause of river-blindness

FRAMEWORK FOR NAVIGATING ETHICAL ISSUES

Identify all stakeholders

who are affected by the situation

• shareholders• public at large• Third World population• government• employees

For each stakeholder

group, identify its needs and

concerns, both if the decision is implemented

and if decision is not

implemented.• negative impacts on

profits vs negative publicity

• favorable vs insincere• quality of life

enhanced vs backlash against corporations in developing countries

• expedite approval process vs possible intervention to require licensing

• belt-tightening/ lay-offs vs de-moralization

Prioritize the stakeholder groups and

perspectives.

• “We try never to forget that medicine is for the people. It is not for profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.”

Make and implement a

decision.

• pursue the study of the drug

WRAP-UP

People• Corporate Social

Responsibility• Social

Entrepreneurship• Serving BOP

Markets• Bridging the

Digital DivideProfit

Planet• Corporate Social

Responsibility• Environmental

Strategy Best Practices

• Natural Capitalism

• Cap and Trade

REFERENCES1. Marketing of High Technology Products & Innovations by Jakki

Mohr et al.2. http://www.investopedia.com/terms/t/triple-bottom-line.asp3. The Economist – The Triple Bottomline4. https://

www.cdp.net/CDPResults/carbon-action-infographic-2015.PDF