The Emergence of the New Enterprise - Part 3 of 3

Emergence of the new Enterprise

Given the compulsions of the world we have created and the world we leave behind, the emergence of the new enterprise was only a matter of time. The triple bottom line approach and theory, while being instituted in the 1990s, ignored mainly in the rest of the century, is now gaining momentum.

The stakeholder theory, as compared to the shareholder theory is gaining more and more acceptance. The emergence of the Social Enterprise will sooner or later become a threat to the traditional enterprise. In India, we will all remember the famous social enterprise of the 70s – AMUL.  Even today , AMUL is a huge threat and a powerful competition to modern day enterprises in the same industry.

We have to change the way we look, the way we act and the way we do our business. It is a radical change and as with every radical change there is an interim “change platform”.  In the case that platform can be the corporate social responsibility programs and policies of the enterprises.  

CSR RESPONSIBILITY AND THE TRIPLE BOTTOM LINE

In the private sector, a commitment to corporate social responsibility (CSR) implies a commitment to some form of TBL reporting. This is distinct from the more limited changes required to deal only with ecological issues.

For reporting their efforts companies may demonstrate their commitment to CSR through the following:

·         Top-level involvement (CEO, Board of Directors)

·         Policy Investments

·         Programs

·         Signatories to voluntary standards

·         Principles (UN Global Compact-Ceres Principles)

·         Reporting (Global Reporting Initiative)

Triple bottom line (TBL) accounting expands the traditional reporting framework to take into account social and environmental performance in addition to financial performance.

Corporate Social Responsibility (CSR)

The aptly named CSR view is that corporations are members of the moral community and these responsibilities fall into four groups: 

ü  Economic Responsibility

ü  Legal Responsibility

ü  Ethical Responsibility

ü  Philanthropic Responsibility

The Economic Responsibility is the responsibility of a business to make money

The Legal Responsibility is the responsibility to obey the law of the land as a proactive duty.

The Ethical Responsibility is the responsibility to do the right thing even when neither the spirit nor the letter of the law apply to the situation.

The Philanthropic Responsibility, is a responsibility "to contribute to society's projects even when they're independent of the particular business."

Triple Bottom Line Approach

Another theory of corporate social responsibility is the Triple Bottom Line. Like the CSR theory we just discussed, Triple Bottom Line works on the assumption that the corporation is a member of the moral community, and this gives it social responsibilities. This theory focuses on sustainability, and requires that any company weigh its actions on three independent scales: economic sustainability, social sustainability, and environmental sustainability.

These three tabulations are all aimed at long-term sustainability. 

Economic sustainability must focus on the long term because this is the nature of a persistent company. A decision which creates an economic boon in the short-term but causes long-term harm, would likely reduce this bottom line to such a degree that the action would be untenable.

Social sustainability gives precedence on the balance of economic power in the society. Competition in the business arena is common, and encouraged, behavior, but maximizing the bottom line in social terms requires that a business foster an environment in which all can succeed. This might seem counterintuitive, but in the big-picture it is better for a whole society to thrive than for one single corporation to thrive alone. “Co-optetion” rather than competition .

The requirement of environmental sustainability stems from the recognition that resources are not infinite, and leads to the reasoning that too much degradation will worsen the lives of us, our children and so on.

Business cannot operate in a world which is poisoned or "used up." Efforts have to be made to renew some of the environments that have been harmed in the past, and these environmental harms and gains belong on this bottom line.

The future enterprise lies in the triple Bottom line

If businesses calculate their gains and losses by  way of the TBL  they will be more likely to take actions which are to the benefit of both the business and the community.

The Triple Bottom Line requires that a business decision be composed of all of these elements from the beginning. When the data shows each of these dimensions along the same line, and measured with the same metric, it will be much easier to see the impact of a decision and to judge the fittingness of that decision.

This then is the future of businesses and enterprises. As we move forward we see more and more companies moving along the path from Traditional to CSR adoption and finally to the TBL approach. This is now not only limited to Social Enterprises but also to whole business ecosystem.