Meeting the 'Triple Bottom Line'

THE INCREASING SCRUTINY of corporate behavior made possible by the Internet and a globalizing economy has resulted in an evolving consensus that corporations should be held accountable for ensuring that their operations are environmentally and socially sustainable. Hard financial decisions by shareholders, lending institutions and business customers are increasingly taking into consideration a prospective company's "sustainability" performance measured on the "triple bottom line" of the financial, environmental and social arenas.

The successful corporations of the future will be the ones that embrace this trend early, and incorporate sustainable, triple-bottom-line thinking into their company culture.

Attorneys can support these cultural changes by helping clients develop integrated sustainability programs and reports while protecting the company from liability or targeted activism.

Corporate environmental and social "sustainability reports" have increasingly become an important means of communicating corporate environmental and social policies, performance data, and corporate compliance history of interest to shareholders, activists, business customers and clients. In the same way that attorneys have long been involved in the preparation of financial reports, they also have a critical role to play in triple-bottom-line sustainability reporting.

For most corporations, the decision to embrace sustainability reporting is based on business considerations. These include:

• The preservation of valuable public image;
• Attracting investors and lenders who are increasingly sensitive to corporate environmental and social stewardship; and
• Defusing issues of potential interest to activist groups.

In some cases, companies may be able to leverage their own sustainability efforts by selecting suppliers who can demonstrate adequate triple bottom line performance. Progressive companies have already recognized this opportunity to increase market share and open new markets by being the first among their competitors to offer "sustainable" services or products.

In the post-Enron era, lenders, activists and shareholders will give short shrift to unsubstantiated claims of performance, or to the airy text and glossy photos that characterized past environmental and social reports. The reporting of verifiable information on meaningful indicators of performance will be increasingly demanded.

Professional standards for sustainability reporting and verification are rapidly coming into focus through the work of such organizations as the Global Reporting Initiative (GRI), the International Standards Organization (ISO) 14001 certification program, and the Institute of Social and Ethical AccountAbility AA 1000 standards.

The preparation of a corporate sustainability report is a complex undertaking requiring an attorney's attention to detail, accuracy and presentation. It should include, at a minimum, a forceful statement by the CEO supporting sustainable business practices, a discussion of the major sustainability issues relating to company operations, measures of the companies performance relative to these issues, and plans for improving the company's performance. The sustainability report should be prepared as a stand-alone document, rather than as a chapter of the annual report.

Although the sustainability report is an important communication device, and an indicia of corporate commitment to triple-bottom-line thinking, it is not likely to be sufficient by itself for changing corporate culture or achieving target sustainability performance goals. Ideally, the report should be made part of a comprehensive sustainability program within the company. Implementing a comprehensive sustainability program requires a long-term commitment from senior corporate management, but is achievable with common-sense measures that accomplish the following:

• Promote awareness and a sense of personal commitment to sustainability throughout each level of the company;
• Maintain compliance with all applicable environmental and employment laws and regulations;
• Provide systems for identifying and implementing sustainable business practices;
• Involve external groups in dialogue and cooperative efforts on relevant sustainability issues; and
• Provide coordinated, integrated sustainability information and reports.

The preparation of sustainability reports and the development of comprehensive corporate sustainability programs is a new and expanding arena requiring the unique combination of skills and expertise of attorneys. The unmistakable trend in sustainability reporting towards the use of recognized reporting standards and verification practices is already generating a corps of sustainability consultants and verification specialists, and will generate a need for legal specialists, as well. Attorneys with expertise in environmental affairs and employment law, in particular, are likely to benefit from the growing corporate emphasis on the triple bottom line.

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