Double bottom line: Difference between revisions
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While all businesses have a conventional [[bottom line]] to measure their fiscal performance— financial [[Profit (accounting)|profit]] or loss— enterprises that seek a ''second'' bottom line look to measure their performance in terms of positive social impact. |
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The idea that for-profit corporations have an obligation to support social causes beyond their immediate interest in short-term profits dates back at least to the [[Corporate Social Responsibility]] movement that can be traced to the 1960s.<ref>DeGeorge, Richard T. Business Ethics. 7th. Upper Saddle River: Pearson Education, Inc. , 2010. 200. Print.</ref> The idea that upholding social responsibilities can help a company sustain its profits in the long has been "part of mainstream management theory at least since the publication of [[Edward Freeman]]'s 1984 classic, Strategic Management: A Stakeholder Approach," according to an article by Wayne Norman and Chris MacDonald in 2004.<ref>{{cite journal|last=Norman|first=Wayne|coauthors=Chris MacDonald|title=Getting to the Bottom of 'Triple Bottom Line'|journal=Business Ethics Quarterly|date=April, 2004|volume=14|issue=2|page=247|pages=243-262|url=http://www.jstor.org/stable/3857909|accessdate=28 April 2014}}</ref> An early reference to the term itself came in Emerson and Twersky's 1996 book ''New Social Entrepreneurs: The Success, Challenge, and Lessons of Non-profit Enterprise Creation."<ref>{{cite book|last=Emerson|first=J|title=New Social Entrepreneurs: The Success, Challenge, and Lessons of Non-profit Enterprise Creation|date=1996|publisher=Roberts Foundation|location=San Francisco}}</ref> |
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'''Double bottom line''' is a ''mission-based'' business term used in [[social responsibility|socially responsible]] enterprise and [[socially responsible investing|investment]]. |
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One example of a double bottom line enterprise is the Khushhali Bank’s microfinance program in Pakistan. While the bank wants to generate profits so that it can grow, it has a second bottom line of reducing local poverty. Its 2004 annual report provides "audited financial statements and indicators of financial |
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performance such as the bank’s credit rating, portfolio at risk and efficiency ratio" but also notes that the bank was "established to mobilize funds for providing micro-finance services to poor persons, particularly poor women for mitigating poverty and promoting social welfare and economic justice through community |
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building and social mobilization with the ultimate objective of poverty alleviation"<ref>{{cite journal|last=Montgomery|first=Heather|title=Meeting the double bottom line: the impact of Khushhali bank's micro|journal=Asian Development Bank Institute Policy Paper|issue=No.8|date=2005|page=1-2|url=http://mpra.ub.uni-muenchen.de/32595/}}</ref> [Cited by Dart, Raymond.<ref>{{cite journal|last=Dart|first=Raymond|title=The Legitimacy of Social Enterprise|journal=nonprofit Management & Leadership|date=Summer 2014|volume=14|issue=4|page=415|pages=411-424|doi=10.1002/nml.43|url=http://onlinelibrary.wiley.com/doi/10.1002/nml.43/abstract|accessdate=28 April 2014}}</ref>] For an example of a double bottom line in the public sector, California State Treasurer Philip Angelides in 2000 called on state programs "to create economic growth and development in California's communities" by investing in them.<ref>{{cite web|last=Angelides|first=Philip|title=The Double Bottom Line: Investing in California's Emerging Markets|url=http://www.cnu.org/sites/www.cnu.org/files/Angelides.pdf|publisher=Presented at CNU 2000|accessdate=28 April 2014}}</ref> |
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Some site as examples for-profit corporations contributing money or labor to charities and social causes. A 2006 article on corporate branding points to [[Nike]]'s support of the "NikeGO" program to encourage and enable physically active children, and "Zoneparcs" "to transform playtime at UK primary schools." It also refers to [[Ben & Jerry's]] "splitting the traditional financial bottom line into a 'double' bottom line, which included a measurement of the environmental impact of their products and processes."<ref>{{cite journal|last=Keller|first=Kevin Lane|title=The importance of corporate brand personality traits to a successful 21st century business|journal=Brand Management|date=Sept.-Nov. 2006|volume=14|issue=1/2|page=77|pages=74-81|url=http://www.palgrave-journals.com/bm/journal/v14/n1/pdf/2550055a.pdf|accessdate=28 April 2014}}</ref> |
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'''Double bottom line''' also describes a ''resource-based'' [[business model]] for a [[project]], [[program management|program]] or [[Organization|enterprise]] where there is an operational partnership between a '''non-profit corporation''' and a '''for-profit corporation''' and/or a '''foundation;''' |
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There is controversy about how to measure the double bottom line, especially since the use of the term "bottom line" implies some form of quantification. A 2004 report by the Center for Responsible Business (University of California, Berkeley) noted that while there are " generally accepted principles of accounting" for financial returns, "A comparable standard for social impact accounting does not yet exist."<ref>{{cite journal|last=Rosenzweig|first=William|title=Double Bottom Line Project Report:Assessing Social Impact In Double Bottom Line Ventures|journal=Center for Responsible Business|date=01-01-2004|series=Working Paper Series|page=3|url=http://escholarship.org/uc/item/80n4f1mf|accessdate=28 April 2014}}</ref> [[Social Return on Investment]] has been suggested as a way to quantify the second bottom line. |
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''whereas'', a '''[[nonprofit organization|non-profit corporation]],''' a '''[[private foundation]]''' or '''[[Foundation (nonprofit)|non-profit foundation]],''' and a '''[[for-profit corporation]]''' each have access to [[Fundraising|sector funding]] and resources that are not available to the other corporate partners''',''' |
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''whereas'', a [[For-profit corporation|'''for-profit''']] partner has access to [[intellectual properties]], expertise, [[capital assets]], legal freedoms and other resources that are not available to a [[Nonprofit organization|'''non-profit''']] partner, |
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''whereas'', '''non-profits, for-profits''' and '''foundations''' are governed by different laws and conventions which can be exploited separately in the execution of a [[project]], [[program management|program]] or [[Organization|enterprise]]''',''' |
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''whereas'', some larger '''non-profit corporations''' executes the '''Double bottom line''' [[business model]] though ''outright ownership'' of a '''for-profit corporation,''' |
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''whereas'', a '''for-profit corporation''' cannot legally own shares of a '''non-profit corporation,''' |
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''therefore'', the resources and governance models of these two types of corporations can be brought together to be exploited (''as in'' ''[[profit sharing]]'') for the mutual benefit of the [[Stakeholder theory|principal stakeholders]] and partners. |
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While all businesses have a conventional [[bottom line]] to measure their fiscal performance— financial [[Profit (accounting)|profit]] or loss— enterprises which seek a ''second'' bottom line look to measure their performance in terms of positive social impact. The double bottom line approach can be applied to both public and private sector organizations. An excellent application of this is seen in Bernardez (2009) (Bernardez, M. (2009). Minding the Business of Business: Tools and Models to Design and Measure Wealth Creation. Performance Improvement Quarterly. 22(2) pp. 17–72)and his other work that includes Kaufman's Mega level strategic planning ( Kaufman, R. (2006). Change, Choices, and Consequences: A Guide to Mega Thinking and Planning. Amherst, MA. HRD Press Inc. to Refinor in Argentina, the Sonora Institute of Technology, and lately for the strategic planning of a transformation of the City of Colon in Panama.Bernardez, M. (2005). Achieving Business Success by Developing Clients and Community: Lessons from Leading Companies, Emerging Economies and a Nine Year Case Study. Performance Improvement Quarterly, Vol. 18, Number 3. pp. 37–55.) |
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Increasingly companies big and small are incorporating a "[[cause marketing]]" strategy as a means of differentiating themselves from their competition. The increased usage of social media is allowing these "company helping a cause" promotions to expand rapidly as people who support the cause easily "share" the information with their friends. |
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Examples of big Double Bottom Line campaigns include the Pepsi Refresh campaign [refresheverything.com] and the Clorox Promoting a Bright Future Contest [facebook.com/clorox] where each company is giving away money to causes that are submitted by and voted upon by normal everyday citizens who are trying to make the world a better place. |
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By doing things that are socially responsible, they are also benefiting in a way that significantly increases their ROI. This also allows them to build a more loyal customer base, what some are calling a "strong tribe" - internally and externally. According to the marketing strategist Gina Carr, "This is THE differentiating strategy for 21st century businesses." |
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Another formulation is [[Blended value|Blended Value]] Promulgated by Jed Emerson one of the leaders in [[Social Return on Investment]] or SROI.[http://www.Blendedvalue.org] It attempts to get out of the binary thinking of double bottom line. |
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==See also== |
==See also== |
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*[[Triple bottom line]], a UN standardized term |
*[[Triple bottom line]], a UN standardized term |
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*[[Integrated bottom line]], an attempt to combine the parameters from the triple bottom line as a single parameter (links to Triple bottom line). |
*[[Integrated bottom line]], an attempt to combine the parameters from the triple bottom line as a single parameter (links to Triple bottom line). |
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==References== |
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{{reflist}} |
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==External links== |
==External links== |
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Revision as of 15:57, 28 April 2014
While all businesses have a conventional bottom line to measure their fiscal performance— financial profit or loss— enterprises that seek a second bottom line look to measure their performance in terms of positive social impact.
The idea that for-profit corporations have an obligation to support social causes beyond their immediate interest in short-term profits dates back at least to the Corporate Social Responsibility movement that can be traced to the 1960s.[1] The idea that upholding social responsibilities can help a company sustain its profits in the long has been "part of mainstream management theory at least since the publication of Edward Freeman's 1984 classic, Strategic Management: A Stakeholder Approach," according to an article by Wayne Norman and Chris MacDonald in 2004.[2] An early reference to the term itself came in Emerson and Twersky's 1996 book New Social Entrepreneurs: The Success, Challenge, and Lessons of Non-profit Enterprise Creation."[3]
One example of a double bottom line enterprise is the Khushhali Bank’s microfinance program in Pakistan. While the bank wants to generate profits so that it can grow, it has a second bottom line of reducing local poverty. Its 2004 annual report provides "audited financial statements and indicators of financial performance such as the bank’s credit rating, portfolio at risk and efficiency ratio" but also notes that the bank was "established to mobilize funds for providing micro-finance services to poor persons, particularly poor women for mitigating poverty and promoting social welfare and economic justice through community building and social mobilization with the ultimate objective of poverty alleviation"[4] [Cited by Dart, Raymond.[5]] For an example of a double bottom line in the public sector, California State Treasurer Philip Angelides in 2000 called on state programs "to create economic growth and development in California's communities" by investing in them.[6]
Some site as examples for-profit corporations contributing money or labor to charities and social causes. A 2006 article on corporate branding points to Nike's support of the "NikeGO" program to encourage and enable physically active children, and "Zoneparcs" "to transform playtime at UK primary schools." It also refers to Ben & Jerry's "splitting the traditional financial bottom line into a 'double' bottom line, which included a measurement of the environmental impact of their products and processes."[7]
There is controversy about how to measure the double bottom line, especially since the use of the term "bottom line" implies some form of quantification. A 2004 report by the Center for Responsible Business (University of California, Berkeley) noted that while there are " generally accepted principles of accounting" for financial returns, "A comparable standard for social impact accounting does not yet exist."[8] Social Return on Investment has been suggested as a way to quantify the second bottom line.
See also
- Triple bottom line, a UN standardized term
- Integrated bottom line, an attempt to combine the parameters from the triple bottom line as a single parameter (links to Triple bottom line).
References
- ^ DeGeorge, Richard T. Business Ethics. 7th. Upper Saddle River: Pearson Education, Inc. , 2010. 200. Print.
- ^ Norman, Wayne (April, 2004). "Getting to the Bottom of 'Triple Bottom Line'". Business Ethics Quarterly. 14 (2): 247. Retrieved 28 April 2014.
{{cite journal}}: Check date values in:|date=(help); More than one of|pages=and|page=specified (help); Unknown parameter|coauthors=ignored (|author=suggested) (help) - ^ Emerson, J (1996). New Social Entrepreneurs: The Success, Challenge, and Lessons of Non-profit Enterprise Creation. San Francisco: Roberts Foundation.
- ^ Montgomery, Heather (2005). "Meeting the double bottom line: the impact of Khushhali bank's micro". Asian Development Bank Institute Policy Paper (No.8): 1-2.
{{cite journal}}:|issue=has extra text (help) - ^ Dart, Raymond (Summer 2014). "The Legitimacy of Social Enterprise". nonprofit Management & Leadership. 14 (4): 415. doi:10.1002/nml.43. Retrieved 28 April 2014.
{{cite journal}}: More than one of|pages=and|page=specified (help) - ^ Angelides, Philip. "The Double Bottom Line: Investing in California's Emerging Markets" (PDF). Presented at CNU 2000. Retrieved 28 April 2014.
- ^ Keller, Kevin Lane (Sept.-Nov. 2006). "The importance of corporate brand personality traits to a successful 21st century business" (PDF). Brand Management. 14 (1/2): 77. Retrieved 28 April 2014.
{{cite journal}}: Check date values in:|date=(help); More than one of|pages=and|page=specified (help) - ^ Rosenzweig, William (01-01-2004). "Double Bottom Line Project Report:Assessing Social Impact In Double Bottom Line Ventures". Center for Responsible Business. Working Paper Series: 3. Retrieved 28 April 2014.
{{cite journal}}: Check date values in:|date=(help)
External links
- National Association of Socially Responsible Organizations
- Catalyst Fund Management and Research
- Socialinvestments.com
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