2013 A Big Year for Triple Bottom Line Accounting

February 4, 2014 in Latest News

2013 a big year for Triple Bottom Line Accounting

Report from Michael Towsey

February 2014.

2013 was a big year for Triple Bottom Line Accounting. Actually TBA now goes by many names. As with any active and potentially controversial field of endeavour, the terminology is multiplying fast. Now it is called Social Accounting or Integrated Reporting or Sustainability Reporting. In addition, there are now more than three bottom lines!

Two major standards are currently attracting global attention, Integrated Reporting (IR) released in December 2013 by the International Integrated Reporting Council (IIRC) and G4, promoted by the Global Reporting Initiative (GRI).

There are similarities and differences between the two standards. Both have heavy weight proponents. For example, GRI is being led by Mervyn King, Governor of the Bank of England, who argues that the move to adopt integrated reporting practices is driven by financial, social and environmental imperatives <http://bookishgirl.com.au/2012/05/12/877/>. The IR Framework is being driven by a who’s who of multinational corporations, for example National Australia Bank, Pepsi Co, HSBC, Unilever, Deutsche Bank, China Light & Power, Hyundai Engineering and Construction, and Tata Steel <http://www.theiirc.org/>.

Both standards accept the so-called six capitals model. Traditional accounting recognises just two forms of capital, manufactured and financial. The new proposals broaden the concept of capital to include: 1. financial capital, 2. manufactured capital, 3. social capital, 4. intellectual capital, 5. human capital, and 6. natural capital. See <http://www.theiirc.org/wp-content/uploads/2013/12/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-2-1.pdf>.

Although at times it seems as if the two reporting standards are in competition, in fact the IIRC grew out of the GRI and the two serve difference purposes.  Their target audiences are different. According to the IIRC, “An integrated report should be prepared primarily for providers of financial capital in order to support their financial capital allocation assessments.” By contrast a GRI is more general and targets all the stakeholders in a business <http://www.incite.co.za/2013/07/17/the-gri-versus-the-iirc-the-battle-for-supremacy-in-corporate-reporting/>.

For a simple introduction to the world of integrated reporting, see “Ten practical steps to integrated reporting” in The Guardian, 9th December 2013: <http://www.theguardian.com/sustainable-business/ten-practical-steps-integrated-reporting> The full IR Framework can be downloaded from: <http://www.theiirc.org/wp-content/uploads/2013/12/13-12-08-THE-INTERNATIONAL-IR-FRAMEWORK-2-1.pdf>.


Global Alliance for Banking on Values

Another organisation that is changing the face of the banking world is the Global Alliance for Banking on Values <http://www.gabv.org/>. GABV was founded in 2009 as an independent network of banks using finance to deliver sustainable development for unserved people, communities and the environment. The GABV has 22 of the world’s leading sustainable banks, from six continents. Their collective goal is to touch the lives of one billion people through sustainable banking by 2020. The Australian credit union, bankmecu, became the first and only Australian member in May 2012.


Is it making a difference?

You might think that Integrated Reporting has reached the point where its validity can no longer be questioned. Not so!  One of the world’s pre-eminent authorities on environmental accounting, Robert Gray, (Professor of Social and Environmental Accounting, St. Andrews University, Scotland) presents a rather depressing argument that despite the wide-spread adoption of Integrated Reporting by many global corporations, it is not actually making a difference to the sustainability report of the planet as a whole – key global indicators such as climate change, species extinctions, species diversity etc. continue to get worse (< http://www.st-andrews.ac.uk/csear/what-is-sea/>). Gray draws the conclusion that corporate sustainability reports are not actually changing corporate behaviour in ways that make a material difference to the planet. It is too easy for integrated reporting to be a marketing exercise.


The Maleny Credit Union and Social Accounting

The Maleny Credit Union has decided to adopt the Social Audit Network’s (SAN) methodology for social and environmental reporting. SAN was founded in Edinburgh in 2000 and it could be argued that Scotland is the birthplace of social and environmental reporting, beginning in the early 1990’s. The SAN methodology is aimed at smaller enterprises, particularly in the social enterprise sector, that do not have the resources to start big. The SAN manual was developed through practical experimentation in the late 1990’s.

SAN already has a track record in Australia. In 2009, the Australian chapter of the Association of Chartered Certified Accountants gave its annual award for Sustainability Reporting to Brian Coffey of Mission Australia. This report used the SAN approach to Social and Environmental Accounting and was mentored by Marcelle Holdaway, a previous director of the Maleny Credit Union.