Archive for August, 2009
Don’t wait on triple-bottom-line accounting standard
Brian Setzler is a staunch advocate of triple-bottom-line (TBL) business practices. He’s also a realistic CPA in Portland, Ore. who knows we’re years away from internationally recognized and adopted rules for TBL accounting.
Brian and I have been each other’s client: I helped him define the brand of his new firm TriLibrium and his firm did my taxes. I figured he’d be the perfect person to give me a read on where TBL stands in the accounting profession. Not surprisingly, there’s much work to be done, starting with general awareness.
“Half or more of accountants today don’t even know what ‘triple bottom line’ means,” Brian says. Having recently completed an MBA in sustainability, Brian sees business schools increasingly doing their parts to introduce and teach the concept. But a good understanding of TBL principles among professional accountants is uncommon. Even more rare are accountants such as Brian who make TBL practices the cornerstone of their business.
Brian believes it could be 15-20 years or more before governing bodies in accounting expand rules to include environmental and social performance reporting, in addition to financial. He points to the years it took the U.S. Financial Accounting Services Board (FASB) and SEC to agree on moving from Generally Accepted Accounting Practices (GAAP) to International Financial Reporting Standards (IFRS). The official move to IFRS in the U.S. is still five years off. The point being, the wheels of accounting governance move slowly. Getting to a TBL version of IFRS is years down the road.
Taking matters into your own hands
That doesn’t mean individual businesses shouldn’t take matters into their own hands when it comes to accounting for their environmental footprint and social impact. There are plenty of sustainability consultants and tools that can help.
Brian and his firm aren’t waiting for the world to converge on international TBL standards. “We hold a very high bar for ourselves.” Despite being a small business, TriLibrium is making a significant investment in producing a sustainability report based on the Global Reporting Initiative guidelines. “It’s one of the things that separates the real deal from the wannabes in sustainability,” he says.
For Brian, adopting the triple bottom line is akin to the move to PC-based business systems 25 years ago. “It’s just the way business is going. It’s the future of business.” And as more companies such as Wal-Mart push their sustainability standards down into their supply chain, it will no longer be enough to say you’re green. “In the future it will be, ‘Prove it. Show me, don’t just tell me.’ If you’re not doing this today, you’re missing the boat.”
Tags: accounting, Brian Setzler, CPA, Global Reporting Initiative, Sustainability, TriLibrium, triple bottom line
Posted in Business & Economics, Sustainability | No Comments »
As sustainability spreads, customers want numbers
After years on the business fringe, life cycle assessments are moving closer to the mainstream as sustainable practices spread. The trend signals a growing customer desire to see and compare the numbers behind marketers’ claims of sustainability.
Last week Deloitte Consulting, a decidedly mainstream business, released a new whitepaper, “Lifecycle Assessment: Where is it on your sustainability agenda?” Joel Makower refers to the paper in an excellent article on the “renaissance of lifecyle thinking.” An LCA, Deloitte says, “charts the course of all inputs and outputs, and their resulting environmental impacts for a given product system throughout its lifecycle.” The paper’s authors write:
Sustainability is now widely accepted as a core business issue rather than a passing fad. However, particularly in light of the current downturn, many stakeholder groups are no longer satisfied with vague assertions that green is really ‘gold,’ or that green products are in fact better for the environment. Customers (both businesses and consumers), investors, environmental interest groups, and governments are pressuring companies for enhanced quantification of environmental impacts.
This increased external demand is fueling the use of LCAs. Clearly, Deloitte sees a business opportunity in helping its clients produce them. Nevertheless, Deloitte’s paper echos the themes of author Daniel Goleman in his new book, “Ecological Intelligence,” which I wrote about in a previous post. Goleman cites LCAs as the data backbone for emerging online services that enable businesses and consumers to make purchase decisions based on hard numbers for the environmental (and in some cases, social) impacts of a product.
Although the early LCAs date back to the 1960s, Goleman describes how far they have come in sophistication and detail:
Never before have we had the methodology at hand to track, organize, and display the complex interrelationships among all the steps from extraction to manufacture of goods through their use to their disposal—and summarize how each step matters for ecosystems, whether in the environment or in our body.
Deloitte cites several marketing and communications benefits for companies employing LCAs. Besides supporting marketing claims about a product’s “environmental friendliness,” it can enhance a company’s reputation:
LCA can demonstrate that a company has moved beyond surface-level sustainability window-dressing to a deeper commitment to improved environmental impact…However, as LCA becomes more common, it will no longer serve as a differentiator in itself; it is the actual results—and what they say about a company’s environmental progress—that will matter to stakeholders.
LCAs can be complex and costly to produce. This puts them out of reach of most smaller producers and manufacturers. Deloitte says these and other firms may want to consider an LCA “lite” approach that is less data intensive.
LCAs are not appropriate for every business, but there’s an underlying message for marketers in their widening use. “Becoming sustainable” and “going green” are well past the sloganeering stage. More customers and other stakeholders are asking for quantifiable progress. So before you make that next sustainability claim, you’d do well to have the numbers to back it up. Only your competitors will be unhappy to see them.
Tags: Daniel Goleman, Deloitte, Ecological Intelligence, going green, Joel Makower, LCA, life cycle assessment, Marketing, Sustainability
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Five questions your business should be asking
My business inspiration today comes from an unlikely source, Palestinian Prime Minister Salam Fayyad.
Tom Friedman, in his latest New York Times column, credits Fayyad for his leadership in improving conditions in the West Bank. Here’s the part I like. Freidman quotes Fayyad about his approach to governing: “tell people who you are, what you are about and what you intend to do and then actually do it.”
Those are words to live by as a politician. I could imagine them coming just as easily from the mouth of an effective business owner or executive. Fayyad’s simple philosophy can instruct any of us in business, especially after an unforgivable period of corporate excess and ethical lapses have left so many of us staggered, angry and jaded. In this environment, opportunity lies with businesses that act with higher purpose and integrity — the ones that keep their promises.
Here are five questions every business ought to be asking (and answering) today:
- What is my business ultimately pursuing? For many companies, the honest answer to this one is maximum shareholder return or more sales or more profits. The pursuit is financial. Not that there’s anything wrong with that. But it’s worth asking, is financial success really what you want the measure of your business to be? Or is money only an enabler, making it possible to pursue a larger social or environmental vision?
- What is my business trying to accomplish? I’ve heard vision described as something to be pursued and mission as something to be accomplished. I like that distinction. For example: “We pursue clean, fresh water for all. Our contribution to this effort is producing low-cost, long-lasting water purification systems for individuals.” I also think of mission as the reason a business exists. We exist to accomplish something. What is that for your business? Is your purpose clear? Does it inspire you and your employees and customers?
- What do we promise? Ask yourself what you want every stakeholder — customer, employee, supplier, partner, investor, community citizen — to experience from your business. This is an experience you strive to create for everyone, at all times. It’s what you stand for, the essence of your business. It’s what keeps customers returning and employees staying. And it can’t be taken lightly. As Fayyad has demonstrated, doing what you say you’ll do can have profound impact.
- What makes us different? So you’re clear-eyed about the difference your business is trying to make and the experience you want others to have of your firm. The question now is where that places you versus the businesses competing directly or indirectly for the customers and other stakeholders you’re targeting. Study your competitors and what others are saying about them. Ask customers and others what makes your firm different. If you don’t like their answers, you have some work to do.
- What makes us relevant? A company may have the distinction of producing the world’s only sustainably made, solar-powered 8-track player, but, really, who cares? Sure, the business is different. It’s also irrelevant! The key is to be distinct and relevant. What do your stakeholders most value about your firm today? Do you matter to them in important ways or only superficially? Survey them to find out.
My work is helping businesses wrestle with these fundamental questions. It’s far more than a marketing or branding exercise. My clients establish their firm’s reason for being and core identity. They give purpose and direction to the decisions and actions of every individual and group within their company. Best of all they put themselves in position to make a difference — “and then actually do it.”
Tags: brand promise, business, mission, Sustainability, Tom Friedman, vision
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