Multiple bottom line vs pressure the bottom line
Nov 29, 2010

Multiple bottom line vs pressure the bottom line

There is a lot of commentary among environmentalists, social activists and the like about the need for a "multiple bottom line" mentality in corporations that considers the bottom line not just of profits but also of the environmental, social and other bottom lines. The idea being our private institutions should be striving to achieve these other goals along with profits. While it is well motivated and intended, I find it to be a poor strategy to accomplish environmental and social change.

The issue is simply that the fundamental driving force behind profit making institutions is indeed profit. So when these other issues come at the expense of making a profit they will always be at a disadvantage. Even if one accomplishes a shift towards corporate culture that emphasizes these other goals, being able to enforce them and to balance them with the goals of making money is going to be very difficult.

Instead, we should work with the profit oriented system we have and find ways to tie these other objectives into the profit based bottom line. There are many ways one can do this. One of the easiest ways is via consumer pressure. If consumers demand that they will only purchase environmentally conscious and ethically sourced and produced products, then it puts pressure on companies to do this in the interest of maximizing their profits. Many companies, knowing that this is important to consumers, heavily market their environmental and social virtues and quite likely wouldn't do this if it wasn't seen as profitable.

The other major method of incorporating these other bottom lines into the conventional profit one is through government intervention such as through regulations, taxes and incentives. All of these change the costs to companies of engaging in actions (either positively or negatively). Related but separate is changing the legal culture. Just as landmark legal decisions were the source of some of the most critical social changes in the civil rights, women's rights and the like, so to may this turn out to be the key place where today's leading environmental and social causes may be resolved. There exists an interplay between people and governments that the judiciary is somewhat removed from; a people who are not prioritizing a good issue will be reflected in the government however the judiciary can and has settled these issues independently.

Depending on the issue, there is a varying degree to which an issue can be brought into the profit bottom line approach. In economic terms, the goal is to force (through consumer advocacy or governmental or judicial decree) the internalization of currently external costs such as pollution or unsafe working conditions. With some things this is quite possible, with others it is not. Consider the example of a corporation whose Chinese manufacturing plants pollutes the river that downstream villages suffer the health costs of. This is an externality that is very hard for consumers back in Canada to fight against. It is unlikely for people to even find out that this is existing let alone motivate a strong enough movement to create genuine price pressure to change. However, since this is outside of Canadian governmental and judicial jurisdiction, it is up to the consumer to demand this change as well as to the creation of strong but democratic international institutions.

The point of this post is to try and de-radicalize the claims sometimes made by well intended people looking out for social and environmental causes. For better or worse, a large component of our society is going to consist of profit making institutions. We who care about these other issues should attempt to work within that framework to force profit to be dependent on our values opposed to shifting the very nature of profit making institutions.

Thoughts on this post? Comment below!

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