When John Elkington coined the term "triple bottom line reporting" back in the mid-1980s, the idea was dismissed as irrelevant idealism. Why would a company bother to track not just its financial progress but also its impact on the environment and on the communities in which it does business? Elkington, one of the world's seminal thinkers in the area of defining and advocating good corporate citizenship, presciently argued that companies would (and should) embrace this new way of reporting on multiple dimensions to shareholders-and the world-as a core aspect of business accountability.

He recalls a conversation at that time with a senior executive at Shell Oil Company who firmly vowed, "Shell will never report." But ten years later, Shell became the target of consumer boycotts and widespread outrage over its alleged involvement in backing a brutal military retaliation against environmental protestors in Nigeria, which resulted in nearly 2,000 deaths and the execution of the movement's leader. Plunged into a brand-threatening crisis, Shell suddenly understood how tracking its behavior as a corporate citizen could be integral to its success in the marketplace. Eighteen months later, Shell published its first corporate social responsibility (CSR) report.

Shell's experience has served as a cautionary tale for many companies as the notion of triple bottom line (TBL) reporting has taken hold in the business sector. Today, according to Ceres-a nonprofit founded to promote TBL reporting-more than 1,300 companies participate in the Global Reporting Initiative (GRI), a program that standardizes the measures and areas to cover in such reports. While that number is still just a small proportion of the business community as a whole, the forward strides in understanding how and why to measure non-financial impacts have fundamentally changed the business landscape, Elkington says. His firm, SustainAbility, advises corporate clients about the risks and opportunities associated with CSR and sustainable development.

"One of the successes of the movement has been the introduction of a competitive element to reporting," Elkington says. "When the EPA or other regulatory agencies force companies to disclose, companies do it grudgingly and only dare share as much as their lawyers will allow. It's defensive. With this voluntary initiative, it's almost become a version of the Dance of Seven Veils, with companies competing for the right to say, 'I'm disclosing a lot more than everyone else.'" (Case in point: Shell's CSR report in 2001 noted that Shell employees that year were offered 13 bribes-and refused nine.)

What does TBL reporting measure?
In addition to the financial metrics that any annual report would include, it can entail measurements related to these areas:

Company's effect on air quality and/or water quality. Does the company have smokestacks belching toxic fumes into the air? Does the manufacture of its products create hazardous waste?

Energy use. What is the carbon footprint of the company? How much electricity does it use to power its offices and factories? How much fuel does it use for its fleet?

Product life cycle. What happens when consumers are done with a company's products? Do the materials break down over time, or can they be recycled? Does disposal of a product pose a significant threat to the environment?

Social impact

Labor practices. How does a company treat its employees? How do the suppliers and vendors that the company hires to make its products treat their employees (i.e., are they using sweatshops)?

Human rights. Is the company involved in practices-directly or indirectly (via relationships with governments)-that result in political oppression, torture, or other human-rights violations?

The GRI periodically releases updates of the recommended specific measures companies should include in their reports.

Why does TBL reporting matter?
The saying goes in business that what gets measured matters. Companies that track things like customer satisfaction, product quality, and other performance measures are then able to put practices in place that move the needle on performance in those areas. Measurement is a way of focusing attention. So it follows that companies paying attention to how they affect the environment and communities (and being publicly accountable for it), will make changes that improve their effect on the world. While the ways of measuring some of these areas are still nascent, it's worth noting that the accounting principles in place at companies these days evolved over the last half-century and didn't always exist, says Sara Olsen, principal of Social Venture Technology Group, a consulting firm that specializes in measuring social and environmental impact.

"The system that prevails in business and the economy is extremely good at creating wealth for the owners and shareholders, and that is in large part because we have good systems of financial accounting," Olsen explains. "People can tell what kind of financial value is being created or lost by specific decisions, products, or strategies. We don't yet have systems that inform people about the value created or lost from a social or environmental perspective. So those dimensions tend not to be taken into account. Doing business as usual that way is rapidly depleting the world's resources and spoiling the environments in which many species need to live-including us."

So part of the value of TBL reporting is that it forces companies to build internal systems to collect data about these issues and to enter into a conversation about how to measure. The further the field moves toward standards, the easier and more common it will become to apply them.

A further benefit is that TBL reporting typically forces companies to engage with their critics. A practice that is becoming increasingly popular in the creation of these reports is what's called stakeholder engagement. A company will convene a group of outsiders-including nonprofit activists, vendors, customers, and other players with a vested interest in the company's practices-to discuss particularly thorny issues and seek advice.

Aren't companies just using these glossy reports as slick PR?
Certainly some companies use TBL reports to trumpet only their good achievements, and spend less time examining real challenges or areas of poor performance. The good news is that because bolder companies are more forthright, reports filtered through rose-colored glasses tend to stand out. Both the GRI standards and the scrutiny of groups like Ceres, which gives awards every year for excellence in this type of reporting, help distinguish between the leaders using the reports as a powerful tool and the laggards reporting to burnish a misleading image.

What's the relevance of TBL reporting to consumers?
For consumers looking to support brands putting real action behind intentions around the environment and social issues, TBL reporting can be an indicator of a company's sincerity. Companies track how many times their reports are downloaded, who gets copies, and the feedback they receive. So commenting to a company about a report is one way to provide support for, or critiques of, its stances and behaviors.

How does TBL thinking change corporate behavior?
Olsen says once companies start thinking about society and the environment as factors in their business, that can affect decisions about how products are designed and built, and about which long-term strategies are prioritized. She cites General Electric's recent development of a new MRI machine (a medical device used for creating images of the inside of the body) designed for use in developing nations, where budgets are slim and access to electricity is often sporadic. The device opened up a lucrative emerging market to the company and served a population that it might not otherwise have sought out as a market if it had remained focused on traditional financial-only measures.

How does this drive change in the world?
Ideally, Olsen says, these measures start to align companies so that they are forces of positive change in the world: "We want to get to a place where the market economy becomes an engine that drives human health and well-being and thriving communities that are economically and socially just, as well as environmentally sustainable."

On a more modest scale, the power of large companies-particularly multinationals-to inspire other companies to include social and environmental measures is impressive. "Wal-Mart has more than 61,000 suppliers," Elkington notes. "If they get to a place there they start requiring their suppliers to report as well, that could have a huge, systemic impact."

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