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Re: Triple Bottom Line Methods - Meaningful or Not?

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  • ethicsblogger
    Mark: You suggest I look closer...is the Re-Casting document the place to look? Or is there another source? If the bottom lines are going to multiply, then
    Message 1 of 20 , Apr 23 5:41 PM
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      Mark:

      You suggest I look closer...is the "Re-Casting" document the place to look? Or is there another source?

      If the bottom lines are going to multiply, then the aggregation gets easier, certainly. But the misleadingness of the metaphor still worries me...if the financial bottom line (and accounting more generally) stops being a good analogy, why keep using that language?

      Regards,

      Chris.

      --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark W. McElroy" <mmcelroy@...> wrote:
      >
      > Dear Friends:
      >
      > Earlier this week, we (CSI) issued a press release regarding an award
      > we received from the State of Vermont for our general approach to
      > Triple Bottom Line measurement, management, and reporting. Here's
      > the release:
      >
      > http://www.csrwire.com/News/15105.html
      >
      > Afterwards, a comment about the release was posted by Chris
      > MacDonald, who questioned the design and effectiveness of our
      > method. His post appeared on the same page as our announcement as
      > you will see from the link above. There you will also see my
      > response to Chris, and one or two more rounds of chatter between us.
      > Here is that exchange:
      >
      > Chris MacDonald 2009-04-23 02:36:30
      > As far as I can see, they haven't overcome the problem of finding a
      > common unit of measure for social goods and bads, or for ecological
      > ones. The example provided in the "Recasting" report involves using
      > monetary measures for social issues (i.e., teen pregnancy is
      > understood in terms of its impact on financial productivity). It
      > seems unlikely, at best, that all socially-relevant issues can be
      > cast in financial terms. I think it's telling that, to date, there
      > has been no satisfactory reply, from TBL advocates, to the critique
      > offered here: "Getting to the Bottom of 'Triple Bottom Line'."
      > Business Ethics Quarterly. 14:2. 2004. 243–262
      >
      > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
      >
      > Chris, I will respond only to what you have said here, and not your
      > 2004 paper. That we can discuss elsewhere, if you like. That said,
      > your criticism here is not a criticism at all, in my view, because it
      > is predicated on a supposed problem ("of finding a common unit of
      > measure for social goods and bads....") that does not exist. You seem
      > to want to take a 'weak' sustainability stance, whereas I and others
      > take a 'strong' one, in which capitals are not substitutable and
      > aggregation (i.e., your "common unit" idea) is ill conceived. Absent
      > your starting premise, then, your criticisms fade away, one and all.
      >
      > Chris MacDonald 2009-04-23 12:28:57
      >
      > Mark: Thanks for taking the time to reply. I don't have a view on the
      > "strong vs. week." I just thought that the idea of a "bottom line"
      > requires adding stuff up. And adding stuff up requires a common unit.
      > Maybe you're not after a bottom line at all, which is fine. Chris.
      >
      > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
      >
      > Chris, I am indeed after a bottom line, but I don't agree that it
      > necessarily entails single bottom lines for social or environmental
      > performance, respectively. I think the three-bottom-line metaphor is
      > more forgiving than that. I prefer to think of it as three categories
      > of multiple bottom lines. Also, I suggest that before you continue to
      > hold the financial bottom line out as the standard that the other non-
      > financial bottom lines should adhere to, do not lose sight of the
      > fact that the financial bottom line exported its social and
      > environmental costs, precisely because it could not accommodate them
      > with its own so-called "common unit" unit of measure, as you put it.
      > So let's not pretend that the financial bottom line is some sort of
      > paragon that the other bottom lines should be judged by. Last, me
      > also say that your 2004 article was an outstanding piece of work, and
      > that what we (CSI) have done with our own Triple Bottom Line method
      > (as announced this week) resolves, so far as we are concerned, all of
      > the issues and criticisms you and your co-author raised at that time.
      > If you do not see this, I suggest you look closer. Happy to discuss
      > this further if you like. Regards, Mark
      > ____________________
      >
      > Given the significance of Chris's criticisms and the importance of
      > the topic in general, I decided to take the discussion over to this
      > listserve, and have invited Chris to join us. It is my hope that he
      > will do so.
      >
      > Regards,
      >
      > Mark
      >
      >
      >
      >
      >
      > Mark W. McElroy, Ph.D.
      > Executive Director
      > Center for Sustainable Innovation
      > www.sustainableinnovation.org
      > (802) 785-2293 (office)
      > (802) 296-1928 (mobile)
      >
      > This message sent by a renewable-energy-powered computer
      >
    • Mark W. McElroy
      Chris: Thanks for joining in. As you might imagine, where to look depends on what the specific issue is. It s a big topic with many dimensions. Our body of
      Message 2 of 20 , Apr 23 7:05 PM
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        Chris:

        Thanks for joining in.  As you might imagine, where to look depends on what the specific issue is.  It's a big topic with many dimensions.  Our body of work is broad and deep, so rather than send you off in multiple directions, let's take it one step at a time.  In your response to our press release yesterday, you raised several issues about TBL theory in general, and the problems our own method may or may not have resolved.  So let's take each of the issues and criticisms you raised this week (and in your very fine article in 2004) one at a time, and explain how we (on this end) think we have resolved them.  You go first.  In the meantime, let me answer your question about why we should keep using the metaphor.  Three responses:

        1) The metaphor is valuable in helping to call attention to the fact that businesses have real social and environmental obligations to people in the world, not just financial ones.  Moreover, the financial bottom line concept is itself imperfect.  Its "common unit of measure" is no less illusory there than it may be on other fronts, and yet the language of the metaphor has been useful there.  Why not reap its value on the social and environmental fronts, as well, I wonder?

        2) It is, in fact, possible, we think, to compute aggregated social and environmental bottom lines at the organizational level of analysis.  Whether or not it makes sense to do so is another matter.  I hesitate to explain how to do this now, since we are just getting started in this conversation.  Happy to proceed at your pace.  Just ask.

        3) The term has taken on a life of its own.  It has legs.  It has emotional value.  Why not keep it for what it's worth and just deal with its imperfections?

        Regards,

        Mark


        Mark W. McElroy, Ph.D.
        Executive Director
        Center for Sustainable Innovation
        www.sustainableinnovation.org
        (802) 785-2293 (office)
        (802) 296-1928 (mobile)

        This message sent by a renewable-energy-powered computer




        On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:



        Mark:

        You suggest I look closer...is the "Re-Casting" document the place to look? Or is there another source?

        If the bottom lines are going to multiply, then the aggregation gets easier, certainly. But the misleadingness of the metaphor still worries me...if the financial bottom line (and accounting more generally) stops being a good analogy, why keep using that language?

        Regards,

        Chris.

        --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
        >
        > Dear Friends:
        > 
        > Earlier this week, we (CSI) issued a press release regarding an award 
        > we received from the State of Vermont for our general approach to 
        > Triple Bottom Line measurement, management, and reporting. Here's 
        > the release:
        > 
        > http://www.csrwire. com/News/ 15105.html
        > 
        > Afterwards, a comment about the release was posted by Chris 
        > MacDonald, who questioned the design and effectiveness of our 
        > method. His post appeared on the same page as our announcement as 
        > you will see from the link above. There you will also see my 
        > response to Chris, and one or two more rounds of chatter between us. 
        > Here is that exchange:
        > 
        > Chris MacDonald 2009-04-23 02:36:30
        > As far as I can see, they haven't overcome the problem of finding a 
        > common unit of measure for social goods and bads, or for ecological 
        > ones. The example provided in the "Recasting" report involves using 
        > monetary measures for social issues (i.e., teen pregnancy is 
        > understood in terms of its impact on financial productivity) . It 
        > seems unlikely, at best, that all socially-relevant issues can be 
        > cast in financial terms. I think it's telling that, to date, there 
        > has been no satisfactory reply, from TBL advocates, to the critique 
        > offered here: "Getting to the Bottom of 'Triple Bottom Line'." 
        > Business Ethics Quarterly. 14:2. 2004. 243–262
        > 
        > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
        > 
        > Chris, I will respond only to what you have said here, and not your 
        > 2004 paper. That we can discuss elsewhere, if you like. That said, 
        > your criticism here is not a criticism at all, in my view, because it 
        > is predicated on a supposed problem ("of finding a common unit of 
        > measure for social goods and bads....") that does not exist. You seem 
        > to want to take a 'weak' sustainability stance, whereas I and others 
        > take a 'strong' one, in which capitals are not substitutable and 
        > aggregation (i.e., your "common unit" idea) is ill conceived. Absent 
        > your starting premise, then, your criticisms fade away, one and all.
        > 
        > Chris MacDonald 2009-04-23 12:28:57
        > 
        > Mark: Thanks for taking the time to reply. I don't have a view on the 
        > "strong vs. week." I just thought that the idea of a "bottom line" 
        > requires adding stuff up. And adding stuff up requires a common unit. 
        > Maybe you're not after a bottom line at all, which is fine. Chris.
        > 
        > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
        > 
        > Chris, I am indeed after a bottom line, but I don't agree that it 
        > necessarily entails single bottom lines for social or environmental 
        > performance, respectively. I think the three-bottom- line metaphor is 
        > more forgiving than that. I prefer to think of it as three categories 
        > of multiple bottom lines. Also, I suggest that before you continue to 
        > hold the financial bottom line out as the standard that the other non- 
        > financial bottom lines should adhere to, do not lose sight of the 
        > fact that the financial bottom line exported its social and 
        > environmental costs, precisely because it could not accommodate them 
        > with its own so-called "common unit" unit of measure, as you put it. 
        > So let's not pretend that the financial bottom line is some sort of 
        > paragon that the other bottom lines should be judged by. Last, me 
        > also say that your 2004 article was an outstanding piece of work, and 
        > that what we (CSI) have done with our own Triple Bottom Line method 
        > (as announced this week) resolves, so far as we are concerned, all of 
        > the issues and criticisms you and your co-author raised at that time. 
        > If you do not see this, I suggest you look closer. Happy to discuss 
        > this further if you like. Regards, Mark
        > ____________ ________
        > 
        > Given the significance of Chris's criticisms and the importance of 
        > the topic in general, I decided to take the discussion over to this 
        > listserve, and have invited Chris to join us. It is my hope that he 
        > will do so.
        > 
        > Regards,
        > 
        > Mark
        > 
        > 
        > 
        > 
        > 
        > Mark W. McElroy, Ph.D.
        > Executive Director
        > Center for Sustainable Innovation
        > www.sustainableinno vation.org
        > (802) 785-2293 (office)
        > (802) 296-1928 (mobile)
        > 
        > This message sent by a renewable-energy- powered computer
        >


      • Mark W. McElroy
        All: Back in 2004, Chris MacDonald and his co-author, Wayne Norman, wrote: Ultimately, we argue there are fundamental philosophical grounds for thinking that
        Message 3 of 20 , Apr 25 6:45 AM
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          All:

          Back in 2004, Chris MacDonald and his co-author, Wayne Norman, wrote:

          "Ultimately, we argue there are fundamental philosophical grounds for thinking that it is impossible to develop a sound methodology for arriving at a meaniningful social bottom line for a firm."  They added, "...the various values involved in evaluations of corporate behavior are 'incommensurable' ".

          For Chris's benefit, and others', I have added two slides to this presentation (slides 34 and 35), which show exactly how one can calculate a quantitative (and 'blended') social bottom line for a firm:


          This, of course, occurs in the context of utilizing a general methodology for assessing the social footprint of an organization, which can be done using the methodology we created called the Social Footprint Method.  I hope Chris will chime in and comment on all of this.

          Regards,

          Mark


          Mark W. McElroy, Ph.D.
          Executive Director
          Center for Sustainable Innovation
          www.sustainableinnovation.org
          (802) 785-2293 (office)
          (802) 296-1928 (mobile)

          This message sent by a renewable-energy-powered computer




          On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:



          Chris:


          Thanks for joining in.  As you might imagine, where to look depends on what the specific issue is.  It's a big topic with many dimensions.  Our body of work is broad and deep, so rather than send you off in multiple directions, let's take it one step at a time.  In your response to our press release yesterday, you raised several issues about TBL theory in general, and the problems our own method may or may not have resolved.  So let's take each of the issues and criticisms you raised this week (and in your very fine article in 2004) one at a time, and explain how we (on this end) think we have resolved them.  You go first.  In the meantime, let me answer your question about why we should keep using the metaphor.  Three responses:

          1) The metaphor is valuable in helping to call attention to the fact that businesses have real social and environmental obligations to people in the world, not just financial ones.  Moreover, the financial bottom line concept is itself imperfect.  Its "common unit of measure" is no less illusory there than it may be on other fronts, and yet the language of the metaphor has been useful there.  Why not reap its value on the social and environmental fronts, as well, I wonder?

          2) It is, in fact, possible, we think, to compute aggregated social and environmental bottom lines at the organizational level of analysis.  Whether or not it makes sense to do so is another matter.  I hesitate to explain how to do this now, since we are just getting started in this conversation.  Happy to proceed at your pace.  Just ask.

          3) The term has taken on a life of its own.  It has legs.  It has emotional value.  Why not keep it for what it's worth and just deal with its imperfections?

          Regards,

          Mark


          Mark W. McElroy, Ph.D.
          Executive Director
          Center for Sustainable Innovation
          www.sustainableinno vation.org
          (802) 785-2293 (office)
          (802) 296-1928 (mobile)

          This message sent by a renewable-energy- powered computer




          On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:



          Mark:

          You suggest I look closer...is the "Re-Casting" document the place to look? Or is there another source?

          If the bottom lines are going to multiply, then the aggregation gets easier, certainly. But the misleadingness of the metaphor still worries me...if the financial bottom line (and accounting more generally) stops being a good analogy, why keep using that language?

          Regards,

          Chris.

          --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
          >
          > Dear Friends:
          > 
          > Earlier this week, we (CSI) issued a press release regarding an award 
          > we received from the State of Vermont for our general approach to 
          > Triple Bottom Line measurement, management, and reporting. Here's 
          > the release:
          > 
          > http://www.csrwire. com/News/ 15105.html
          > 
          > Afterwards, a comment about the release was posted by Chris 
          > MacDonald, who questioned the design and effectiveness of our 
          > method. His post appeared on the same page as our announcement as 
          > you will see from the link above. There you will also see my 
          > response to Chris, and one or two more rounds of chatter between us. 
          > Here is that exchange:
          > 
          > Chris MacDonald 2009-04-23 02:36:30
          > As far as I can see, they haven't overcome the problem of finding a 
          > common unit of measure for social goods and bads, or for ecological 
          > ones. The example provided in the "Recasting" report involves using 
          > monetary measures for social issues (i.e., teen pregnancy is 
          > understood in terms of its impact on financial productivity) . It 
          > seems unlikely, at best, that all socially-relevant issues can be 
          > cast in financial terms. I think it's telling that, to date, there 
          > has been no satisfactory reply, from TBL advocates, to the critique 
          > offered here: "Getting to the Bottom of 'Triple Bottom Line'." 
          > Business Ethics Quarterly. 14:2. 2004. 243–262
          > 
          > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
          > 
          > Chris, I will respond only to what you have said here, and not your 
          > 2004 paper. That we can discuss elsewhere, if you like. That said, 
          > your criticism here is not a criticism at all, in my view, because it 
          > is predicated on a supposed problem ("of finding a common unit of 
          > measure for social goods and bads....") that does not exist. You seem 
          > to want to take a 'weak' sustainability stance, whereas I and others 
          > take a 'strong' one, in which capitals are not substitutable and 
          > aggregation (i.e., your "common unit" idea) is ill conceived. Absent 
          > your starting premise, then, your criticisms fade away, one and all.
          > 
          > Chris MacDonald 2009-04-23 12:28:57
          > 
          > Mark: Thanks for taking the time to reply. I don't have a view on the 
          > "strong vs. week." I just thought that the idea of a "bottom line" 
          > requires adding stuff up. And adding stuff up requires a common unit. 
          > Maybe you're not after a bottom line at all, which is fine. Chris.
          > 
          > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
          > 
          > Chris, I am indeed after a bottom line, but I don't agree that it 
          > necessarily entails single bottom lines for social or environmental 
          > performance, respectively. I think the three-bottom- line metaphor is 
          > more forgiving than that. I prefer to think of it as three categories 
          > of multiple bottom lines. Also, I suggest that before you continue to 
          > hold the financial bottom line out as the standard that the other non- 
          > financial bottom lines should adhere to, do not lose sight of the 
          > fact that the financial bottom line exported its social and 
          > environmental costs, precisely because it could not accommodate them 
          > with its own so-called "common unit" unit of measure, as you put it. 
          > So let's not pretend that the financial bottom line is some sort of 
          > paragon that the other bottom lines should be judged by. Last, me 
          > also say that your 2004 article was an outstanding piece of work, and 
          > that what we (CSI) have done with our own Triple Bottom Line method 
          > (as announced this week) resolves, so far as we are concerned, all of 
          > the issues and criticisms you and your co-author raised at that time. 
          > If you do not see this, I suggest you look closer. Happy to discuss 
          > this further if you like. Regards, Mark
          > ____________ ________
          > 
          > Given the significance of Chris's criticisms and the importance of 
          > the topic in general, I decided to take the discussion over to this 
          > listserve, and have invited Chris to join us. It is my hope that he 
          > will do so.
          > 
          > Regards,
          > 
          > Mark
          > 
          > 
          > 
          > 
          > 
          > Mark W. McElroy, Ph.D.
          > Executive Director
          > Center for Sustainable Innovation
          > www.sustainableinno vation.org
          > (802) 785-2293 (office)
          > (802) 296-1928 (mobile)
          > 
          > This message sent by a renewable-energy- powered computer
          >




        • ethicsblogger
          Mark: Thanks. I still feel like -- having looked at the relevant documents -- I m lacking a good, clear, simple example of how the aggregation is supposed to
          Message 4 of 20 , Apr 25 10:24 AM
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            Mark:

            Thanks.

            I still feel like -- having looked at the relevant documents -- I'm lacking a good, clear, simple example of how the aggregation is supposed to work.

            But one thing that's clear is that the method involves averaging scores (for various sub-bottom-lines). Averaging implies that all the factors being averaged are equally important. I don't see what justifies that assumption.

            Chris.


            --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark W. McElroy" <mmcelroy@...> wrote:
            >
            > All:
            >
            > Back in 2004, Chris MacDonald and his co-author, Wayne Norman, wrote:
            >
            > "Ultimately, we argue there are fundamental philosophical grounds for
            > thinking that it is impossible to develop a sound methodology for
            > arriving at a meaniningful social bottom line for a firm." They
            > added, "...the various values involved in evaluations of corporate
            > behavior are 'incommensurable' ".
            >
            > For Chris's benefit, and others', I have added two slides to this
            > presentation (slides 34 and 35), which show exactly how one can
            > calculate a quantitative (and 'blended') social bottom line for a firm:
            >
            > http://www.sustainableinnovation.org/Recasting-TBL.pdf
            >
            > This, of course, occurs in the context of utilizing a general
            > methodology for assessing the social footprint of an organization,
            > which can be done using the methodology we created called the Social
            > Footprint Method. I hope Chris will chime in and comment on all of
            > this.
            >
            > Regards,
            >
            > Mark
            >
            >
            > Mark W. McElroy, Ph.D.
            > Executive Director
            > Center for Sustainable Innovation
            > www.sustainableinnovation.org
            > (802) 785-2293 (office)
            > (802) 296-1928 (mobile)
            >
            > This message sent by a renewable-energy-powered computer
            >
            >
            >
            >
            > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
            >
            > >
            > >
            > > Chris:
            > >
            > >
            > > Thanks for joining in. As you might imagine, where to look depends
            > > on what the specific issue is. It's a big topic with many
            > > dimensions. Our body of work is broad and deep, so rather than
            > > send you off in multiple directions, let's take it one step at a
            > > time. In your response to our press release yesterday, you raised
            > > several issues about TBL theory in general, and the problems our
            > > own method may or may not have resolved. So let's take each of the
            > > issues and criticisms you raised this week (and in your very fine
            > > article in 2004) one at a time, and explain how we (on this end)
            > > think we have resolved them. You go first. In the meantime, let
            > > me answer your question about why we should keep using the
            > > metaphor. Three responses:
            > >
            > > 1) The metaphor is valuable in helping to call attention to the
            > > fact that businesses have real social and environmental obligations
            > > to people in the world, not just financial ones. Moreover, the
            > > financial bottom line concept is itself imperfect. Its "common
            > > unit of measure" is no less illusory there than it may be on other
            > > fronts, and yet the language of the metaphor has been useful
            > > there. Why not reap its value on the social and environmental
            > > fronts, as well, I wonder?
            > >
            > > 2) It is, in fact, possible, we think, to compute aggregated social
            > > and environmental bottom lines at the organizational level of
            > > analysis. Whether or not it makes sense to do so is another
            > > matter. I hesitate to explain how to do this now, since we are
            > > just getting started in this conversation. Happy to proceed at
            > > your pace. Just ask.
            > >
            > > 3) The term has taken on a life of its own. It has legs. It has
            > > emotional value. Why not keep it for what it's worth and just deal
            > > with its imperfections?
            > >
            > > Regards,
            > >
            > > Mark
            > >
            > >
            > > Mark W. McElroy, Ph.D.
            > > Executive Director
            > > Center for Sustainable Innovation
            > > www.sustainableinnovation.org
            > > (802) 785-2293 (office)
            > > (802) 296-1928 (mobile)
            > >
            > > This message sent by a renewable-energy-powered computer
            > >
            > >
            > >
            > >
            > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
            > >
            > >>
            > >>
            > >> Mark:
            > >>
            > >> You suggest I look closer...is the "Re-Casting" document the place
            > >> to look? Or is there another source?
            > >>
            > >> If the bottom lines are going to multiply, then the aggregation
            > >> gets easier, certainly. But the misleadingness of the metaphor
            > >> still worries me...if the financial bottom line (and accounting
            > >> more generally) stops being a good analogy, why keep using that
            > >> language?
            > >>
            > >> Regards,
            > >>
            > >> Chris.
            > >>
            > >> --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
            > >> W. McElroy" <mmcelroy@> wrote:
            > >> >
            > >> > Dear Friends:
            > >> >
            > >> > Earlier this week, we (CSI) issued a press release regarding an
            > >> award
            > >> > we received from the State of Vermont for our general approach to
            > >> > Triple Bottom Line measurement, management, and reporting. Here's
            > >> > the release:
            > >> >
            > >> > http://www.csrwire.com/News/15105.html
            > >> >
            > >> > Afterwards, a comment about the release was posted by Chris
            > >> > MacDonald, who questioned the design and effectiveness of our
            > >> > method. His post appeared on the same page as our announcement as
            > >> > you will see from the link above. There you will also see my
            > >> > response to Chris, and one or two more rounds of chatter between
            > >> us.
            > >> > Here is that exchange:
            > >> >
            > >> > Chris MacDonald 2009-04-23 02:36:30
            > >> > As far as I can see, they haven't overcome the problem of finding a
            > >> > common unit of measure for social goods and bads, or for ecological
            > >> > ones. The example provided in the "Recasting" report involves using
            > >> > monetary measures for social issues (i.e., teen pregnancy is
            > >> > understood in terms of its impact on financial productivity). It
            > >> > seems unlikely, at best, that all socially-relevant issues can be
            > >> > cast in financial terms. I think it's telling that, to date, there
            > >> > has been no satisfactory reply, from TBL advocates, to the critique
            > >> > offered here: "Getting to the Bottom of 'Triple Bottom Line'."
            > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
            > >> >
            > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
            > >> >
            > >> > Chris, I will respond only to what you have said here, and not your
            > >> > 2004 paper. That we can discuss elsewhere, if you like. That said,
            > >> > your criticism here is not a criticism at all, in my view,
            > >> because it
            > >> > is predicated on a supposed problem ("of finding a common unit of
            > >> > measure for social goods and bads....") that does not exist. You
            > >> seem
            > >> > to want to take a 'weak' sustainability stance, whereas I and
            > >> others
            > >> > take a 'strong' one, in which capitals are not substitutable and
            > >> > aggregation (i.e., your "common unit" idea) is ill conceived.
            > >> Absent
            > >> > your starting premise, then, your criticisms fade away, one and
            > >> all.
            > >> >
            > >> > Chris MacDonald 2009-04-23 12:28:57
            > >> >
            > >> > Mark: Thanks for taking the time to reply. I don't have a view
            > >> on the
            > >> > "strong vs. week." I just thought that the idea of a "bottom line"
            > >> > requires adding stuff up. And adding stuff up requires a common
            > >> unit.
            > >> > Maybe you're not after a bottom line at all, which is fine. Chris.
            > >> >
            > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
            > >> >
            > >> > Chris, I am indeed after a bottom line, but I don't agree that it
            > >> > necessarily entails single bottom lines for social or environmental
            > >> > performance, respectively. I think the three-bottom-line
            > >> metaphor is
            > >> > more forgiving than that. I prefer to think of it as three
            > >> categories
            > >> > of multiple bottom lines. Also, I suggest that before you
            > >> continue to
            > >> > hold the financial bottom line out as the standard that the
            > >> other non-
            > >> > financial bottom lines should adhere to, do not lose sight of the
            > >> > fact that the financial bottom line exported its social and
            > >> > environmental costs, precisely because it could not accommodate
            > >> them
            > >> > with its own so-called "common unit" unit of measure, as you put
            > >> it.
            > >> > So let's not pretend that the financial bottom line is some sort of
            > >> > paragon that the other bottom lines should be judged by. Last, me
            > >> > also say that your 2004 article was an outstanding piece of
            > >> work, and
            > >> > that what we (CSI) have done with our own Triple Bottom Line method
            > >> > (as announced this week) resolves, so far as we are concerned,
            > >> all of
            > >> > the issues and criticisms you and your co-author raised at that
            > >> time.
            > >> > If you do not see this, I suggest you look closer. Happy to discuss
            > >> > this further if you like. Regards, Mark
            > >> > ____________________
            > >> >
            > >> > Given the significance of Chris's criticisms and the importance of
            > >> > the topic in general, I decided to take the discussion over to this
            > >> > listserve, and have invited Chris to join us. It is my hope that he
            > >> > will do so.
            > >> >
            > >> > Regards,
            > >> >
            > >> > Mark
            > >> >
            > >> >
            > >> >
            > >> >
            > >> >
            > >> > Mark W. McElroy, Ph.D.
            > >> > Executive Director
            > >> > Center for Sustainable Innovation
            > >> > www.sustainableinnovation.org
            > >> > (802) 785-2293 (office)
            > >> > (802) 296-1928 (mobile)
            > >> >
            > >> > This message sent by a renewable-energy-powered computer
            > >> >
            > >>
            > >>
            > >
            > >
            > >
            >
          • Mark W. McElroy
            Chris: I agree with you. That s why I say on slide 35 that individual sub- bottom line scores can be weighted. You re free to weight them any way you like.
            Message 5 of 20 , Apr 25 11:43 AM
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              Chris:

              I agree with you.  That's why I say on slide 35 that individual sub-bottom line scores can be weighted.  You're free to weight them any way you like.  The method is completely open to that.

              Regards,

              Mark


              Mark W. McElroy, Ph.D.
              Executive Director
              Center for Sustainable Innovation
              www.sustainableinnovation.org
              (802) 785-2293 (office)
              (802) 296-1928 (mobile)

              This message sent by a renewable-energy-powered computer




              On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:



              Mark:

              Thanks.

              I still feel like -- having looked at the relevant documents -- I'm lacking a good, clear, simple example of how the aggregation is supposed to work.

              But one thing that's clear is that the method involves averaging scores (for various sub-bottom-lines) . Averaging implies that all the factors being averaged are equally important. I don't see what justifies that assumption.

              Chris.

              --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
              >
              > All:
              > 
              > Back in 2004, Chris MacDonald and his co-author, Wayne Norman, wrote:
              > 
              > "Ultimately, we argue there are fundamental philosophical grounds for 
              > thinking that it is impossible to develop a sound methodology for 
              > arriving at a meaniningful social bottom line for a firm." They 
              > added, "...the various values involved in evaluations of corporate 
              > behavior are 'incommensurable' ".
              > 
              > For Chris's benefit, and others', I have added two slides to this 
              > presentation (slides 34 and 35), which show exactly how one can 
              > calculate a quantitative (and 'blended') social bottom line for a firm:
              > 
              > http://www.sustaina bleinnovation. org/Recasting- TBL.pdf
              > 
              > This, of course, occurs in the context of utilizing a general 
              > methodology for assessing the social footprint of an organization, 
              > which can be done using the methodology we created called the Social 
              > Footprint Method. I hope Chris will chime in and comment on all of 
              > this.
              > 
              > Regards,
              > 
              > Mark
              > 
              > 
              > Mark W. McElroy, Ph.D.
              > Executive Director
              > Center for Sustainable Innovation
              > www.sustainableinno vation.org
              > (802) 785-2293 (office)
              > (802) 296-1928 (mobile)
              > 
              > This message sent by a renewable-energy- powered computer
              > 
              > 
              > 
              > 
              > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
              > 
              > >
              > >
              > > Chris:
              > >
              > >
              > > Thanks for joining in. As you might imagine, where to look depends 
              > > on what the specific issue is. It's a big topic with many 
              > > dimensions. Our body of work is broad and deep, so rather than 
              > > send you off in multiple directions, let's take it one step at a 
              > > time. In your response to our press release yesterday, you raised 
              > > several issues about TBL theory in general, and the problems our 
              > > own method may or may not have resolved. So let's take each of the 
              > > issues and criticisms you raised this week (and in your very fine 
              > > article in 2004) one at a time, and explain how we (on this end) 
              > > think we have resolved them. You go first. In the meantime, let 
              > > me answer your question about why we should keep using the 
              > > metaphor. Three responses:
              > >
              > > 1) The metaphor is valuable in helping to call attention to the 
              > > fact that businesses have real social and environmental obligations 
              > > to people in the world, not just financial ones. Moreover, the 
              > > financial bottom line concept is itself imperfect. Its "common 
              > > unit of measure" is no less illusory there than it may be on other 
              > > fronts, and yet the language of the metaphor has been useful 
              > > there. Why not reap its value on the social and environmental 
              > > fronts, as well, I wonder?
              > >
              > > 2) It is, in fact, possible, we think, to compute aggregated social 
              > > and environmental bottom lines at the organizational level of 
              > > analysis. Whether or not it makes sense to do so is another 
              > > matter. I hesitate to explain how to do this now, since we are 
              > > just getting started in this conversation. Happy to proceed at 
              > > your pace. Just ask.
              > >
              > > 3) The term has taken on a life of its own. It has legs. It has 
              > > emotional value. Why not keep it for what it's worth and just deal 
              > > with its imperfections?
              > >
              > > Regards,
              > >
              > > Mark
              > >
              > >
              > > Mark W. McElroy, Ph.D.
              > > Executive Director
              > > Center for Sustainable Innovation
              > > www.sustainableinno vation.org
              > > (802) 785-2293 (office)
              > > (802) 296-1928 (mobile)
              > >
              > > This message sent by a renewable-energy- powered computer
              > >
              > >
              > >
              > >
              > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
              > >
              > >>
              > >>
              > >> Mark:
              > >>
              > >> You suggest I look closer...is the "Re-Casting" document the place 
              > >> to look? Or is there another source?
              > >>
              > >> If the bottom lines are going to multiply, then the aggregation 
              > >> gets easier, certainly. But the misleadingness of the metaphor 
              > >> still worries me...if the financial bottom line (and accounting 
              > >> more generally) stops being a good analogy, why keep using that 
              > >> language?
              > >>
              > >> Regards,
              > >>
              > >> Chris.
              > >>
              > >> --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark 
              > >> W. McElroy" <mmcelroy@> wrote:
              > >> >
              > >> > Dear Friends:
              > >> >
              > >> > Earlier this week, we (CSI) issued a press release regarding an 
              > >> award
              > >> > we received from the State of Vermont for our general approach to
              > >> > Triple Bottom Line measurement, management, and reporting. Here's
              > >> > the release:
              > >> >
              > >> > http://www.csrwire. com/News/ 15105.html
              > >> >
              > >> > Afterwards, a comment about the release was posted by Chris
              > >> > MacDonald, who questioned the design and effectiveness of our
              > >> > method. His post appeared on the same page as our announcement as
              > >> > you will see from the link above. There you will also see my
              > >> > response to Chris, and one or two more rounds of chatter between 
              > >> us.
              > >> > Here is that exchange:
              > >> >
              > >> > Chris MacDonald 2009-04-23 02:36:30
              > >> > As far as I can see, they haven't overcome the problem of finding a
              > >> > common unit of measure for social goods and bads, or for ecological
              > >> > ones. The example provided in the "Recasting" report involves using
              > >> > monetary measures for social issues (i.e., teen pregnancy is
              > >> > understood in terms of its impact on financial productivity) . It
              > >> > seems unlikely, at best, that all socially-relevant issues can be
              > >> > cast in financial terms. I think it's telling that, to date, there
              > >> > has been no satisfactory reply, from TBL advocates, to the critique
              > >> > offered here: "Getting to the Bottom of 'Triple Bottom Line'."
              > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
              > >> >
              > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
              > >> >
              > >> > Chris, I will respond only to what you have said here, and not your
              > >> > 2004 paper. That we can discuss elsewhere, if you like. That said,
              > >> > your criticism here is not a criticism at all, in my view, 
              > >> because it
              > >> > is predicated on a supposed problem ("of finding a common unit of
              > >> > measure for social goods and bads....") that does not exist. You 
              > >> seem
              > >> > to want to take a 'weak' sustainability stance, whereas I and 
              > >> others
              > >> > take a 'strong' one, in which capitals are not substitutable and
              > >> > aggregation (i.e., your "common unit" idea) is ill conceived. 
              > >> Absent
              > >> > your starting premise, then, your criticisms fade away, one and 
              > >> all.
              > >> >
              > >> > Chris MacDonald 2009-04-23 12:28:57
              > >> >
              > >> > Mark: Thanks for taking the time to reply. I don't have a view 
              > >> on the
              > >> > "strong vs. week." I just thought that the idea of a "bottom line"
              > >> > requires adding stuff up. And adding stuff up requires a common 
              > >> unit.
              > >> > Maybe you're not after a bottom line at all, which is fine. Chris.
              > >> >
              > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
              > >> >
              > >> > Chris, I am indeed after a bottom line, but I don't agree that it
              > >> > necessarily entails single bottom lines for social or environmental
              > >> > performance, respectively. I think the three-bottom- line 
              > >> metaphor is
              > >> > more forgiving than that. I prefer to think of it as three 
              > >> categories
              > >> > of multiple bottom lines. Also, I suggest that before you 
              > >> continue to
              > >> > hold the financial bottom line out as the standard that the 
              > >> other non-
              > >> > financial bottom lines should adhere to, do not lose sight of the
              > >> > fact that the financial bottom line exported its social and
              > >> > environmental costs, precisely because it could not accommodate 
              > >> them
              > >> > with its own so-called "common unit" unit of measure, as you put 
              > >> it.
              > >> > So let's not pretend that the financial bottom line is some sort of
              > >> > paragon that the other bottom lines should be judged by. Last, me
              > >> > also say that your 2004 article was an outstanding piece of 
              > >> work, and
              > >> > that what we (CSI) have done with our own Triple Bottom Line method
              > >> > (as announced this week) resolves, so far as we are concerned, 
              > >> all of
              > >> > the issues and criticisms you and your co-author raised at that 
              > >> time.
              > >> > If you do not see this, I suggest you look closer. Happy to discuss
              > >> > this further if you like. Regards, Mark
              > >> > ____________ ________
              > >> >
              > >> > Given the significance of Chris's criticisms and the importance of
              > >> > the topic in general, I decided to take the discussion over to this
              > >> > listserve, and have invited Chris to join us. It is my hope that he
              > >> > will do so.
              > >> >
              > >> > Regards,
              > >> >
              > >> > Mark
              > >> >
              > >> >
              > >> >
              > >> >
              > >> >
              > >> > Mark W. McElroy, Ph.D.
              > >> > Executive Director
              > >> > Center for Sustainable Innovation
              > >> > www.sustainableinno vation.org
              > >> > (802) 785-2293 (office)
              > >> > (802) 296-1928 (mobile)
              > >> >
              > >> > This message sent by a renewable-energy- powered computer
              > >> >
              > >>
              > >>
              > >
              > >
              > >
              >


            • ethicsblogger
              Mark: Weight them any way [I] like ? The weighting seems crucial. No one ever doubted that you could apply numbers to these things. The problem is
              Message 6 of 20 , Apr 25 12:20 PM
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              • 0 Attachment
                Mark:

                Weight them "any way [I] like"?

                The weighting seems crucial. No one ever doubted that you could apply numbers to these things. The problem is commensurability. If I'm not weighting factors (for my company) the same way you are for yours, we can't compare progress.

                Sounds fine for an system of internal tracking, but seems not to live up to the term "bottom line".

                Regards,
                Chris.

                --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark W. McElroy" <mmcelroy@...> wrote:
                >
                > Chris:
                >
                > I agree with you. That's why I say on slide 35 that individual sub-
                > bottom line scores can be weighted. You're free to weight them any
                > way you like. The method is completely open to that.
                >
                > Regards,
                >
                > Mark
                >
                >
                > Mark W. McElroy, Ph.D.
                > Executive Director
                > Center for Sustainable Innovation
                > www.sustainableinnovation.org
                > (802) 785-2293 (office)
                > (802) 296-1928 (mobile)
                >
                > This message sent by a renewable-energy-powered computer
                >
                >
                >
                >
                > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                >
                > >
                > >
                > > Mark:
                > >
                > > Thanks.
                > >
                > > I still feel like -- having looked at the relevant documents -- I'm
                > > lacking a good, clear, simple example of how the aggregation is
                > > supposed to work.
                > >
                > > But one thing that's clear is that the method involves averaging
                > > scores (for various sub-bottom-lines). Averaging implies that all
                > > the factors being averaged are equally important. I don't see what
                > > justifies that assumption.
                > >
                > > Chris.
                > >
                > > --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                > > W. McElroy" <mmcelroy@> wrote:
                > > >
                > > > All:
                > > >
                > > > Back in 2004, Chris MacDonald and his co-author, Wayne Norman,
                > > wrote:
                > > >
                > > > "Ultimately, we argue there are fundamental philosophical grounds
                > > for
                > > > thinking that it is impossible to develop a sound methodology for
                > > > arriving at a meaniningful social bottom line for a firm." They
                > > > added, "...the various values involved in evaluations of corporate
                > > > behavior are 'incommensurable' ".
                > > >
                > > > For Chris's benefit, and others', I have added two slides to this
                > > > presentation (slides 34 and 35), which show exactly how one can
                > > > calculate a quantitative (and 'blended') social bottom line for a
                > > firm:
                > > >
                > > > http://www.sustainableinnovation.org/Recasting-TBL.pdf
                > > >
                > > > This, of course, occurs in the context of utilizing a general
                > > > methodology for assessing the social footprint of an organization,
                > > > which can be done using the methodology we created called the Social
                > > > Footprint Method. I hope Chris will chime in and comment on all of
                > > > this.
                > > >
                > > > Regards,
                > > >
                > > > Mark
                > > >
                > > >
                > > > Mark W. McElroy, Ph.D.
                > > > Executive Director
                > > > Center for Sustainable Innovation
                > > > www.sustainableinnovation.org
                > > > (802) 785-2293 (office)
                > > > (802) 296-1928 (mobile)
                > > >
                > > > This message sent by a renewable-energy-powered computer
                > > >
                > > >
                > > >
                > > >
                > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
                > > >
                > > > >
                > > > >
                > > > > Chris:
                > > > >
                > > > >
                > > > > Thanks for joining in. As you might imagine, where to look depends
                > > > > on what the specific issue is. It's a big topic with many
                > > > > dimensions. Our body of work is broad and deep, so rather than
                > > > > send you off in multiple directions, let's take it one step at a
                > > > > time. In your response to our press release yesterday, you raised
                > > > > several issues about TBL theory in general, and the problems our
                > > > > own method may or may not have resolved. So let's take each of the
                > > > > issues and criticisms you raised this week (and in your very fine
                > > > > article in 2004) one at a time, and explain how we (on this end)
                > > > > think we have resolved them. You go first. In the meantime, let
                > > > > me answer your question about why we should keep using the
                > > > > metaphor. Three responses:
                > > > >
                > > > > 1) The metaphor is valuable in helping to call attention to the
                > > > > fact that businesses have real social and environmental
                > > obligations
                > > > > to people in the world, not just financial ones. Moreover, the
                > > > > financial bottom line concept is itself imperfect. Its "common
                > > > > unit of measure" is no less illusory there than it may be on other
                > > > > fronts, and yet the language of the metaphor has been useful
                > > > > there. Why not reap its value on the social and environmental
                > > > > fronts, as well, I wonder?
                > > > >
                > > > > 2) It is, in fact, possible, we think, to compute aggregated
                > > social
                > > > > and environmental bottom lines at the organizational level of
                > > > > analysis. Whether or not it makes sense to do so is another
                > > > > matter. I hesitate to explain how to do this now, since we are
                > > > > just getting started in this conversation. Happy to proceed at
                > > > > your pace. Just ask.
                > > > >
                > > > > 3) The term has taken on a life of its own. It has legs. It has
                > > > > emotional value. Why not keep it for what it's worth and just deal
                > > > > with its imperfections?
                > > > >
                > > > > Regards,
                > > > >
                > > > > Mark
                > > > >
                > > > >
                > > > > Mark W. McElroy, Ph.D.
                > > > > Executive Director
                > > > > Center for Sustainable Innovation
                > > > > www.sustainableinnovation.org
                > > > > (802) 785-2293 (office)
                > > > > (802) 296-1928 (mobile)
                > > > >
                > > > > This message sent by a renewable-energy-powered computer
                > > > >
                > > > >
                > > > >
                > > > >
                > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                > > > >
                > > > >>
                > > > >>
                > > > >> Mark:
                > > > >>
                > > > >> You suggest I look closer...is the "Re-Casting" document the
                > > place
                > > > >> to look? Or is there another source?
                > > > >>
                > > > >> If the bottom lines are going to multiply, then the aggregation
                > > > >> gets easier, certainly. But the misleadingness of the metaphor
                > > > >> still worries me...if the financial bottom line (and accounting
                > > > >> more generally) stops being a good analogy, why keep using that
                > > > >> language?
                > > > >>
                > > > >> Regards,
                > > > >>
                > > > >> Chris.
                > > > >>
                > > > >> --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                > > > >> W. McElroy" <mmcelroy@> wrote:
                > > > >> >
                > > > >> > Dear Friends:
                > > > >> >
                > > > >> > Earlier this week, we (CSI) issued a press release regarding an
                > > > >> award
                > > > >> > we received from the State of Vermont for our general
                > > approach to
                > > > >> > Triple Bottom Line measurement, management, and reporting.
                > > Here's
                > > > >> > the release:
                > > > >> >
                > > > >> > http://www.csrwire.com/News/15105.html
                > > > >> >
                > > > >> > Afterwards, a comment about the release was posted by Chris
                > > > >> > MacDonald, who questioned the design and effectiveness of our
                > > > >> > method. His post appeared on the same page as our
                > > announcement as
                > > > >> > you will see from the link above. There you will also see my
                > > > >> > response to Chris, and one or two more rounds of chatter
                > > between
                > > > >> us.
                > > > >> > Here is that exchange:
                > > > >> >
                > > > >> > Chris MacDonald 2009-04-23 02:36:30
                > > > >> > As far as I can see, they haven't overcome the problem of
                > > finding a
                > > > >> > common unit of measure for social goods and bads, or for
                > > ecological
                > > > >> > ones. The example provided in the "Recasting" report
                > > involves using
                > > > >> > monetary measures for social issues (i.e., teen pregnancy is
                > > > >> > understood in terms of its impact on financial
                > > productivity). It
                > > > >> > seems unlikely, at best, that all socially-relevant issues
                > > can be
                > > > >> > cast in financial terms. I think it's telling that, to date,
                > > there
                > > > >> > has been no satisfactory reply, from TBL advocates, to the
                > > critique
                > > > >> > offered here: "Getting to the Bottom of 'Triple Bottom Line'."
                > > > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
                > > > >> >
                > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                > > > >> >
                > > > >> > Chris, I will respond only to what you have said here, and
                > > not your
                > > > >> > 2004 paper. That we can discuss elsewhere, if you like. That
                > > said,
                > > > >> > your criticism here is not a criticism at all, in my view,
                > > > >> because it
                > > > >> > is predicated on a supposed problem ("of finding a common
                > > unit of
                > > > >> > measure for social goods and bads....") that does not exist.
                > > You
                > > > >> seem
                > > > >> > to want to take a 'weak' sustainability stance, whereas I and
                > > > >> others
                > > > >> > take a 'strong' one, in which capitals are not substitutable
                > > and
                > > > >> > aggregation (i.e., your "common unit" idea) is ill conceived.
                > > > >> Absent
                > > > >> > your starting premise, then, your criticisms fade away, one and
                > > > >> all.
                > > > >> >
                > > > >> > Chris MacDonald 2009-04-23 12:28:57
                > > > >> >
                > > > >> > Mark: Thanks for taking the time to reply. I don't have a view
                > > > >> on the
                > > > >> > "strong vs. week." I just thought that the idea of a "bottom
                > > line"
                > > > >> > requires adding stuff up. And adding stuff up requires a common
                > > > >> unit.
                > > > >> > Maybe you're not after a bottom line at all, which is fine.
                > > Chris.
                > > > >> >
                > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                > > > >> >
                > > > >> > Chris, I am indeed after a bottom line, but I don't agree
                > > that it
                > > > >> > necessarily entails single bottom lines for social or
                > > environmental
                > > > >> > performance, respectively. I think the three-bottom-line
                > > > >> metaphor is
                > > > >> > more forgiving than that. I prefer to think of it as three
                > > > >> categories
                > > > >> > of multiple bottom lines. Also, I suggest that before you
                > > > >> continue to
                > > > >> > hold the financial bottom line out as the standard that the
                > > > >> other non-
                > > > >> > financial bottom lines should adhere to, do not lose sight
                > > of the
                > > > >> > fact that the financial bottom line exported its social and
                > > > >> > environmental costs, precisely because it could not accommodate
                > > > >> them
                > > > >> > with its own so-called "common unit" unit of measure, as you
                > > put
                > > > >> it.
                > > > >> > So let's not pretend that the financial bottom line is some
                > > sort of
                > > > >> > paragon that the other bottom lines should be judged by.
                > > Last, me
                > > > >> > also say that your 2004 article was an outstanding piece of
                > > > >> work, and
                > > > >> > that what we (CSI) have done with our own Triple Bottom Line
                > > method
                > > > >> > (as announced this week) resolves, so far as we are concerned,
                > > > >> all of
                > > > >> > the issues and criticisms you and your co-author raised at that
                > > > >> time.
                > > > >> > If you do not see this, I suggest you look closer. Happy to
                > > discuss
                > > > >> > this further if you like. Regards, Mark
                > > > >> > ____________________
                > > > >> >
                > > > >> > Given the significance of Chris's criticisms and the
                > > importance of
                > > > >> > the topic in general, I decided to take the discussion over
                > > to this
                > > > >> > listserve, and have invited Chris to join us. It is my hope
                > > that he
                > > > >> > will do so.
                > > > >> >
                > > > >> > Regards,
                > > > >> >
                > > > >> > Mark
                > > > >> >
                > > > >> >
                > > > >> >
                > > > >> >
                > > > >> >
                > > > >> > Mark W. McElroy, Ph.D.
                > > > >> > Executive Director
                > > > >> > Center for Sustainable Innovation
                > > > >> > www.sustainableinnovation.org
                > > > >> > (802) 785-2293 (office)
                > > > >> > (802) 296-1928 (mobile)
                > > > >> >
                > > > >> > This message sent by a renewable-energy-powered computer
                > > > >> >
                > > > >>
                > > > >>
                > > > >
                > > > >
                > > > >
                > > >
                > >
                > >
                > >
                >
              • ethicsblogger
                Mark: In financial accounting, the footnotes matter, and judgment is called for, but you still have a single unit -- the dollar -- to work with. Assets (in
                Message 7 of 20 , Apr 25 12:27 PM
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                  Mark:

                  In financial accounting, the footnotes matter, and judgment is called for, but you still have a single unit -- the dollar -- to work with. Assets (in dollars) minus liabilities (in dollars) = bottom line (in dollars).

                  The fact that the term "triple bottom line" has emotional appeal should count against it, not for it. It's misleading, so people end up saying silly things like "firms have a social bottom line JUST LIKE they have a financial bottom line," which is a bad way of acknowledging that social issues matter. The differences are crucial. Why not just admit that managing social & environmental impact is a complicated task, and forget catchy (but misleading) terminology?

                  Chris.



                  --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark W. McElroy" <mmcelroy@...> wrote:
                  >
                  > Chris:
                  >
                  > Thanks for joining in. As you might imagine, where to look depends
                  > on what the specific issue is. It's a big topic with many
                  > dimensions. Our body of work is broad and deep, so rather than send
                  > you off in multiple directions, let's take it one step at a time. In
                  > your response to our press release yesterday, you raised several
                  > issues about TBL theory in general, and the problems our own method
                  > may or may not have resolved. So let's take each of the issues and
                  > criticisms you raised this week (and in your very fine article in
                  > 2004) one at a time, and explain how we (on this end) think we have
                  > resolved them. You go first. In the meantime, let me answer your
                  > question about why we should keep using the metaphor. Three responses:
                  >
                  > 1) The metaphor is valuable in helping to call attention to the fact
                  > that businesses have real social and environmental obligations to
                  > people in the world, not just financial ones. Moreover, the
                  > financial bottom line concept is itself imperfect. Its "common unit
                  > of measure" is no less illusory there than it may be on other fronts,
                  > and yet the language of the metaphor has been useful there. Why not
                  > reap its value on the social and environmental fronts, as well, I
                  > wonder?
                  >
                  > 2) It is, in fact, possible, we think, to compute aggregated social
                  > and environmental bottom lines at the organizational level of
                  > analysis. Whether or not it makes sense to do so is another matter.
                  > I hesitate to explain how to do this now, since we are just getting
                  > started in this conversation. Happy to proceed at your pace. Just ask.
                  >
                  > 3) The term has taken on a life of its own. It has legs. It has
                  > emotional value. Why not keep it for what it's worth and just deal
                  > with its imperfections?
                  >
                  > Regards,
                  >
                  > Mark
                  >
                  >
                  > Mark W. McElroy, Ph.D.
                  > Executive Director
                  > Center for Sustainable Innovation
                  > www.sustainableinnovation.org
                  > (802) 785-2293 (office)
                  > (802) 296-1928 (mobile)
                  >
                  > This message sent by a renewable-energy-powered computer
                  >
                  >
                  >
                  >
                  > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                  >
                  > >
                  > >
                  > > Mark:
                  > >
                  > > You suggest I look closer...is the "Re-Casting" document the place
                  > > to look? Or is there another source?
                  > >
                  > > If the bottom lines are going to multiply, then the aggregation
                  > > gets easier, certainly. But the misleadingness of the metaphor
                  > > still worries me...if the financial bottom line (and accounting
                  > > more generally) stops being a good analogy, why keep using that
                  > > language?
                  > >
                  > > Regards,
                  > >
                  > > Chris.
                  > >
                  > > --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                  > > W. McElroy" <mmcelroy@> wrote:
                  > > >
                  > > > Dear Friends:
                  > > >
                  > > > Earlier this week, we (CSI) issued a press release regarding an
                  > > award
                  > > > we received from the State of Vermont for our general approach to
                  > > > Triple Bottom Line measurement, management, and reporting. Here's
                  > > > the release:
                  > > >
                  > > > http://www.csrwire.com/News/15105.html
                  > > >
                  > > > Afterwards, a comment about the release was posted by Chris
                  > > > MacDonald, who questioned the design and effectiveness of our
                  > > > method. His post appeared on the same page as our announcement as
                  > > > you will see from the link above. There you will also see my
                  > > > response to Chris, and one or two more rounds of chatter between us.
                  > > > Here is that exchange:
                  > > >
                  > > > Chris MacDonald 2009-04-23 02:36:30
                  > > > As far as I can see, they haven't overcome the problem of finding a
                  > > > common unit of measure for social goods and bads, or for ecological
                  > > > ones. The example provided in the "Recasting" report involves using
                  > > > monetary measures for social issues (i.e., teen pregnancy is
                  > > > understood in terms of its impact on financial productivity). It
                  > > > seems unlikely, at best, that all socially-relevant issues can be
                  > > > cast in financial terms. I think it's telling that, to date, there
                  > > > has been no satisfactory reply, from TBL advocates, to the critique
                  > > > offered here: "Getting to the Bottom of 'Triple Bottom Line'."
                  > > > Business Ethics Quarterly. 14:2. 2004. 243–262
                  > > >
                  > > > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                  > > >
                  > > > Chris, I will respond only to what you have said here, and not your
                  > > > 2004 paper. That we can discuss elsewhere, if you like. That said,
                  > > > your criticism here is not a criticism at all, in my view,
                  > > because it
                  > > > is predicated on a supposed problem ("of finding a common unit of
                  > > > measure for social goods and bads....") that does not exist. You
                  > > seem
                  > > > to want to take a 'weak' sustainability stance, whereas I and others
                  > > > take a 'strong' one, in which capitals are not substitutable and
                  > > > aggregation (i.e., your "common unit" idea) is ill conceived. Absent
                  > > > your starting premise, then, your criticisms fade away, one and all.
                  > > >
                  > > > Chris MacDonald 2009-04-23 12:28:57
                  > > >
                  > > > Mark: Thanks for taking the time to reply. I don't have a view on
                  > > the
                  > > > "strong vs. week." I just thought that the idea of a "bottom line"
                  > > > requires adding stuff up. And adding stuff up requires a common
                  > > unit.
                  > > > Maybe you're not after a bottom line at all, which is fine. Chris.
                  > > >
                  > > > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                  > > >
                  > > > Chris, I am indeed after a bottom line, but I don't agree that it
                  > > > necessarily entails single bottom lines for social or environmental
                  > > > performance, respectively. I think the three-bottom-line metaphor is
                  > > > more forgiving than that. I prefer to think of it as three
                  > > categories
                  > > > of multiple bottom lines. Also, I suggest that before you
                  > > continue to
                  > > > hold the financial bottom line out as the standard that the other
                  > > non-
                  > > > financial bottom lines should adhere to, do not lose sight of the
                  > > > fact that the financial bottom line exported its social and
                  > > > environmental costs, precisely because it could not accommodate them
                  > > > with its own so-called "common unit" unit of measure, as you put it.
                  > > > So let's not pretend that the financial bottom line is some sort of
                  > > > paragon that the other bottom lines should be judged by. Last, me
                  > > > also say that your 2004 article was an outstanding piece of work,
                  > > and
                  > > > that what we (CSI) have done with our own Triple Bottom Line method
                  > > > (as announced this week) resolves, so far as we are concerned,
                  > > all of
                  > > > the issues and criticisms you and your co-author raised at that
                  > > time.
                  > > > If you do not see this, I suggest you look closer. Happy to discuss
                  > > > this further if you like. Regards, Mark
                  > > > ____________________
                  > > >
                  > > > Given the significance of Chris's criticisms and the importance of
                  > > > the topic in general, I decided to take the discussion over to this
                  > > > listserve, and have invited Chris to join us. It is my hope that he
                  > > > will do so.
                  > > >
                  > > > Regards,
                  > > >
                  > > > Mark
                  > > >
                  > > >
                  > > >
                  > > >
                  > > >
                  > > > Mark W. McElroy, Ph.D.
                  > > > Executive Director
                  > > > Center for Sustainable Innovation
                  > > > www.sustainableinnovation.org
                  > > > (802) 785-2293 (office)
                  > > > (802) 296-1928 (mobile)
                  > > >
                  > > > This message sent by a renewable-energy-powered computer
                  > > >
                  > >
                  > >
                  > >
                  >
                • Mark W. McElroy
                  Chris: The issue you raise is not with the method, it is with whether or not people can agree (or have agreed) on a weighting scheme, and also on specific
                  Message 8 of 20 , Apr 25 1:06 PM
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                    Chris:

                    The issue you raise is not with the method, it is with whether or not people can agree (or have agreed) on a weighting scheme, and also on specific indicators.  The non-financial accounting method I propose is just as neutral on that issue as GAAP is on financial matters.  GAAP stops at the level of categories, and leaves it to individual reporters to define their own underlying accounts.  Are all companies' charts of accounts identical?  Of course not.  Why do you/we assume commensurability in that case but not in non-financial reporting?  And why do you insist of having weighting applied in the case of non-financial reporting, but not in financial reporting?  Let me put it this way, ASSUMING people can come to some agreement on metrics and weighting, the kind of comparability you refer to will be possible, but I'm not sure it's necessary.  

                    In the meantime, if individual companies want to pilot, test, and evaluate schemes of their own based on a proposed conceptual framework such as the one we propose, that seems like an entirely constructive step to take in my view.  Consider the alternative: no meaningful non-financial measurement and reporting takes place at all.  So let the individual claims about metrics compete in the intellectual marketplace, I say, and let us collectively take steps to evolve the kind of common index you and the rest of us would like to see.  But in order to do that, we must have a conceptual framework in which such indicators and weighting schemes can fit, and that is precisely what we have created.  If you want to talk about metrics, on the other hand, we have put a proposal forward for that, too (the True Sustainability Index), and so we can have that conversation, as well.  But the TBL method we have proposed does not come crashing down simply because people haven't agreed on a choice of related metrics.  Should GAAP come to a screeching halt simply because no two organizations' charts of accounts that use it are alike?

                    Regards,

                    Mark


                    Mark W. McElroy, Ph.D.
                    Executive Director
                    Center for Sustainable Innovation
                    www.sustainableinnovation.org
                    (802) 785-2293 (office)
                    (802) 296-1928 (mobile)

                    This message sent by a renewable-energy-powered computer




                    On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:



                    Mark:

                    Weight them "any way [I] like"?

                    The weighting seems crucial. No one ever doubted that you could apply numbers to these things. The problem is commensurability. If I'm not weighting factors (for my company) the same way you are for yours, we can't compare progress.

                    Sounds fine for an system of internal tracking, but seems not to live up to the term "bottom line". 

                    Regards,
                    Chris.

                    --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
                    >
                    > Chris:
                    > 
                    > I agree with you. That's why I say on slide 35 that individual sub- 
                    > bottom line scores can be weighted. You're free to weight them any 
                    > way you like. The method is completely open to that.
                    > 
                    > Regards,
                    > 
                    > Mark
                    > 
                    > 
                    > Mark W. McElroy, Ph.D.
                    > Executive Director
                    > Center for Sustainable Innovation
                    > www.sustainableinno vation.org
                    > (802) 785-2293 (office)
                    > (802) 296-1928 (mobile)
                    > 
                    > This message sent by a renewable-energy- powered computer
                    > 
                    > 
                    > 
                    > 
                    > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                    > 
                    > >
                    > >
                    > > Mark:
                    > >
                    > > Thanks.
                    > >
                    > > I still feel like -- having looked at the relevant documents -- I'm 
                    > > lacking a good, clear, simple example of how the aggregation is 
                    > > supposed to work.
                    > >
                    > > But one thing that's clear is that the method involves averaging 
                    > > scores (for various sub-bottom-lines) . Averaging implies that all 
                    > > the factors being averaged are equally important. I don't see what 
                    > > justifies that assumption.
                    > >
                    > > Chris.
                    > >
                    > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark 
                    > > W. McElroy" <mmcelroy@> wrote:
                    > > >
                    > > > All:
                    > > >
                    > > > Back in 2004, Chris MacDonald and his co-author, Wayne Norman, 
                    > > wrote:
                    > > >
                    > > > "Ultimately, we argue there are fundamental philosophical grounds 
                    > > for
                    > > > thinking that it is impossible to develop a sound methodology for
                    > > > arriving at a meaniningful social bottom line for a firm." They
                    > > > added, "...the various values involved in evaluations of corporate
                    > > > behavior are 'incommensurable' ".
                    > > >
                    > > > For Chris's benefit, and others', I have added two slides to this
                    > > > presentation (slides 34 and 35), which show exactly how one can
                    > > > calculate a quantitative (and 'blended') social bottom line for a 
                    > > firm:
                    > > >
                    > > > http://www.sustaina bleinnovation. org/Recasting- TBL.pdf
                    > > >
                    > > > This, of course, occurs in the context of utilizing a general
                    > > > methodology for assessing the social footprint of an organization,
                    > > > which can be done using the methodology we created called the Social
                    > > > Footprint Method. I hope Chris will chime in and comment on all of
                    > > > this.
                    > > >
                    > > > Regards,
                    > > >
                    > > > Mark
                    > > >
                    > > >
                    > > > Mark W. McElroy, Ph.D.
                    > > > Executive Director
                    > > > Center for Sustainable Innovation
                    > > > www.sustainableinno vation.org
                    > > > (802) 785-2293 (office)
                    > > > (802) 296-1928 (mobile)
                    > > >
                    > > > This message sent by a renewable-energy- powered computer
                    > > >
                    > > >
                    > > >
                    > > >
                    > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
                    > > >
                    > > > >
                    > > > >
                    > > > > Chris:
                    > > > >
                    > > > >
                    > > > > Thanks for joining in. As you might imagine, where to look depends
                    > > > > on what the specific issue is. It's a big topic with many
                    > > > > dimensions. Our body of work is broad and deep, so rather than
                    > > > > send you off in multiple directions, let's take it one step at a
                    > > > > time. In your response to our press release yesterday, you raised
                    > > > > several issues about TBL theory in general, and the problems our
                    > > > > own method may or may not have resolved. So let's take each of the
                    > > > > issues and criticisms you raised this week (and in your very fine
                    > > > > article in 2004) one at a time, and explain how we (on this end)
                    > > > > think we have resolved them. You go first. In the meantime, let
                    > > > > me answer your question about why we should keep using the
                    > > > > metaphor. Three responses:
                    > > > >
                    > > > > 1) The metaphor is valuable in helping to call attention to the
                    > > > > fact that businesses have real social and environmental 
                    > > obligations
                    > > > > to people in the world, not just financial ones. Moreover, the
                    > > > > financial bottom line concept is itself imperfect. Its "common
                    > > > > unit of measure" is no less illusory there than it may be on other
                    > > > > fronts, and yet the language of the metaphor has been useful
                    > > > > there. Why not reap its value on the social and environmental
                    > > > > fronts, as well, I wonder?
                    > > > >
                    > > > > 2) It is, in fact, possible, we think, to compute aggregated 
                    > > social
                    > > > > and environmental bottom lines at the organizational level of
                    > > > > analysis. Whether or not it makes sense to do so is another
                    > > > > matter. I hesitate to explain how to do this now, since we are
                    > > > > just getting started in this conversation. Happy to proceed at
                    > > > > your pace. Just ask.
                    > > > >
                    > > > > 3) The term has taken on a life of its own. It has legs. It has
                    > > > > emotional value. Why not keep it for what it's worth and just deal
                    > > > > with its imperfections?
                    > > > >
                    > > > > Regards,
                    > > > >
                    > > > > Mark
                    > > > >
                    > > > >
                    > > > > Mark W. McElroy, Ph.D.
                    > > > > Executive Director
                    > > > > Center for Sustainable Innovation
                    > > > > www.sustainableinno vation.org
                    > > > > (802) 785-2293 (office)
                    > > > > (802) 296-1928 (mobile)
                    > > > >
                    > > > > This message sent by a renewable-energy- powered computer
                    > > > >
                    > > > >
                    > > > >
                    > > > >
                    > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                    > > > >
                    > > > >>
                    > > > >>
                    > > > >> Mark:
                    > > > >>
                    > > > >> You suggest I look closer...is the "Re-Casting" document the 
                    > > place
                    > > > >> to look? Or is there another source?
                    > > > >>
                    > > > >> If the bottom lines are going to multiply, then the aggregation
                    > > > >> gets easier, certainly. But the misleadingness of the metaphor
                    > > > >> still worries me...if the financial bottom line (and accounting
                    > > > >> more generally) stops being a good analogy, why keep using that
                    > > > >> language?
                    > > > >>
                    > > > >> Regards,
                    > > > >>
                    > > > >> Chris.
                    > > > >>
                    > > > >> --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                    > > > >> W. McElroy" <mmcelroy@> wrote:
                    > > > >> >
                    > > > >> > Dear Friends:
                    > > > >> >
                    > > > >> > Earlier this week, we (CSI) issued a press release regarding an
                    > > > >> award
                    > > > >> > we received from the State of Vermont for our general 
                    > > approach to
                    > > > >> > Triple Bottom Line measurement, management, and reporting. 
                    > > Here's
                    > > > >> > the release:
                    > > > >> >
                    > > > >> > http://www.csrwire. com/News/ 15105.html
                    > > > >> >
                    > > > >> > Afterwards, a comment about the release was posted by Chris
                    > > > >> > MacDonald, who questioned the design and effectiveness of our
                    > > > >> > method. His post appeared on the same page as our 
                    > > announcement as
                    > > > >> > you will see from the link above. There you will also see my
                    > > > >> > response to Chris, and one or two more rounds of chatter 
                    > > between
                    > > > >> us.
                    > > > >> > Here is that exchange:
                    > > > >> >
                    > > > >> > Chris MacDonald 2009-04-23 02:36:30
                    > > > >> > As far as I can see, they haven't overcome the problem of 
                    > > finding a
                    > > > >> > common unit of measure for social goods and bads, or for 
                    > > ecological
                    > > > >> > ones. The example provided in the "Recasting" report 
                    > > involves using
                    > > > >> > monetary measures for social issues (i.e., teen pregnancy is
                    > > > >> > understood in terms of its impact on financial 
                    > > productivity) . It
                    > > > >> > seems unlikely, at best, that all socially-relevant issues 
                    > > can be
                    > > > >> > cast in financial terms. I think it's telling that, to date, 
                    > > there
                    > > > >> > has been no satisfactory reply, from TBL advocates, to the 
                    > > critique
                    > > > >> > offered here: "Getting to the Bottom of 'Triple Bottom Line'."
                    > > > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
                    > > > >> >
                    > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                    > > > >> >
                    > > > >> > Chris, I will respond only to what you have said here, and 
                    > > not your
                    > > > >> > 2004 paper. That we can discuss elsewhere, if you like. That 
                    > > said,
                    > > > >> > your criticism here is not a criticism at all, in my view,
                    > > > >> because it
                    > > > >> > is predicated on a supposed problem ("of finding a common 
                    > > unit of
                    > > > >> > measure for social goods and bads....") that does not exist. 
                    > > You
                    > > > >> seem
                    > > > >> > to want to take a 'weak' sustainability stance, whereas I and
                    > > > >> others
                    > > > >> > take a 'strong' one, in which capitals are not substitutable 
                    > > and
                    > > > >> > aggregation (i.e., your "common unit" idea) is ill conceived.
                    > > > >> Absent
                    > > > >> > your starting premise, then, your criticisms fade away, one and
                    > > > >> all.
                    > > > >> >
                    > > > >> > Chris MacDonald 2009-04-23 12:28:57
                    > > > >> >
                    > > > >> > Mark: Thanks for taking the time to reply. I don't have a view
                    > > > >> on the
                    > > > >> > "strong vs. week." I just thought that the idea of a "bottom 
                    > > line"
                    > > > >> > requires adding stuff up. And adding stuff up requires a common
                    > > > >> unit.
                    > > > >> > Maybe you're not after a bottom line at all, which is fine. 
                    > > Chris.
                    > > > >> >
                    > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                    > > > >> >
                    > > > >> > Chris, I am indeed after a bottom line, but I don't agree 
                    > > that it
                    > > > >> > necessarily entails single bottom lines for social or 
                    > > environmental
                    > > > >> > performance, respectively. I think the three-bottom- line
                    > > > >> metaphor is
                    > > > >> > more forgiving than that. I prefer to think of it as three
                    > > > >> categories
                    > > > >> > of multiple bottom lines. Also, I suggest that before you
                    > > > >> continue to
                    > > > >> > hold the financial bottom line out as the standard that the
                    > > > >> other non-
                    > > > >> > financial bottom lines should adhere to, do not lose sight 
                    > > of the
                    > > > >> > fact that the financial bottom line exported its social and
                    > > > >> > environmental costs, precisely because it could not accommodate
                    > > > >> them
                    > > > >> > with its own so-called "common unit" unit of measure, as you 
                    > > put
                    > > > >> it.
                    > > > >> > So let's not pretend that the financial bottom line is some 
                    > > sort of
                    > > > >> > paragon that the other bottom lines should be judged by. 
                    > > Last, me
                    > > > >> > also say that your 2004 article was an outstanding piece of
                    > > > >> work, and
                    > > > >> > that what we (CSI) have done with our own Triple Bottom Line 
                    > > method
                    > > > >> > (as announced this week) resolves, so far as we are concerned,
                    > > > >> all of
                    > > > >> > the issues and criticisms you and your co-author raised at that
                    > > > >> time.
                    > > > >> > If you do not see this, I suggest you look closer. Happy to 
                    > > discuss
                    > > > >> > this further if you like. Regards, Mark
                    > > > >> > ____________ ________
                    > > > >> >
                    > > > >> > Given the significance of Chris's criticisms and the 
                    > > importance of
                    > > > >> > the topic in general, I decided to take the discussion over 
                    > > to this
                    > > > >> > listserve, and have invited Chris to join us. It is my hope 
                    > > that he
                    > > > >> > will do so.
                    > > > >> >
                    > > > >> > Regards,
                    > > > >> >
                    > > > >> > Mark
                    > > > >> >
                    > > > >> >
                    > > > >> >
                    > > > >> >
                    > > > >> >
                    > > > >> > Mark W. McElroy, Ph.D.
                    > > > >> > Executive Director
                    > > > >> > Center for Sustainable Innovation
                    > > > >> > www.sustainableinno vation.org
                    > > > >> > (802) 785-2293 (office)
                    > > > >> > (802) 296-1928 (mobile)
                    > > > >> >
                    > > > >> > This message sent by a renewable-energy- powered computer
                    > > > >> >
                    > > > >>
                    > > > >>
                    > > > >
                    > > > >
                    > > > >
                    > > >
                    > >
                    > >
                    > >
                    >


                  • Mark W. McElroy
                    Chris: Actually, it is financial accounting that should lose the bottom line lingo, or at least live up to it. You seem to be saying that the term is used
                    Message 9 of 20 , Apr 25 1:25 PM
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                      Chris:

                      Actually, it is financial accounting that should lose the 'bottom line' lingo, or at least live up to it.  You seem to be saying that the term is used legitimately in the case of financial accounting, but illegitimately in non-financial accounting.  I can't speak for other approaches to social and environmental accounting, but I can tell you that our approach takes a rather literal stance on the subject.  Organizations have clearly identifiable social and environmental duties and obligations, and they either live up to those duties and obligations or they don't.  That's the non-financial bottom line, and it can be quantified.

                      If only the financial bottom line took a similar stance on the subject, we'd all be a lot better off.  Consider the extent to which financial reports systematically exclude consideration of the full social and environmental impacts of their operations.  Instead, they routinely externalize their costs with GAAP's blessing!  Conventional financial reporting sets the worst kind of example in that regard, and also shows how bankrupt the concept of relying on consensus is when it comes to the sort of commensurability you have argued for.  Should all companies lower their standards when it comes to reporting, simply because doing so will make their reports comparable?  What about producing meaningful reports in the first place?  Isn't that what we're all supposed to be doing?  Who cares about commensurability, if in order to have it, reports must be dysfunctional or incomplete?

                      Frankly, I think the kind of commensurability (or comparability) you speak of is a red herring.  I for one am willing to tolerate inconsistency in my TBL report as compared to yours, if I think my report is more correctly formed and yours is flawed.  If someone wants to question the inconsistency in our reports, I'm happy to have that conversation, and it may be that one of us is simply mistaken.  Or maybe we both are.  In that case, wouldn't we each be better off the next time around, and wouldn't the act of at least having created our reports (albeit inconsistently) be progress in terms of managing our non-financial performance?

                      Last, commensurability predicated on consensus is no panacea.  The leading sustainability standard in the world (GRI) arguably tells us nothing about the real sustainability performance of organizations that use it.  There's a case where we have agreement on the metrics, but the framework is flawed.  Our approach has been to get the framework right first, and then deal with the issue of metrics later.  That's where we are right now.

                      Regards,

                      Mark 


                      Mark W. McElroy, Ph.D.
                      Executive Director
                      Center for Sustainable Innovation
                      www.sustainableinnovation.org
                      (802) 785-2293 (office)
                      (802) 296-1928 (mobile)

                      This message sent by a renewable-energy-powered computer




                      On Apr 25, 2009, at 3:27 PM, ethicsblogger wrote:



                      Mark:

                      In financial accounting, the footnotes matter, and judgment is called for, but you still have a single unit -- the dollar -- to work with. Assets (in dollars) minus liabilities (in dollars) = bottom line (in dollars).

                      The fact that the term "triple bottom line" has emotional appeal should count against it, not for it. It's misleading, so people end up saying silly things like "firms have a social bottom line JUST LIKE they have a financial bottom line," which is a bad way of acknowledging that social issues matter. The differences are crucial. Why not just admit that managing social & environmental impact is a complicated task, and forget catchy (but misleading) terminology?

                      Chris.

                      --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
                      >
                      > Chris:
                      > 
                      > Thanks for joining in. As you might imagine, where to look depends 
                      > on what the specific issue is. It's a big topic with many 
                      > dimensions. Our body of work is broad and deep, so rather than send 
                      > you off in multiple directions, let's take it one step at a time. In 
                      > your response to our press release yesterday, you raised several 
                      > issues about TBL theory in general, and the problems our own method 
                      > may or may not have resolved. So let's take each of the issues and 
                      > criticisms you raised this week (and in your very fine article in 
                      > 2004) one at a time, and explain how we (on this end) think we have 
                      > resolved them. You go first. In the meantime, let me answer your 
                      > question about why we should keep using the metaphor. Three responses:
                      > 
                      > 1) The metaphor is valuable in helping to call attention to the fact 
                      > that businesses have real social and environmental obligations to 
                      > people in the world, not just financial ones. Moreover, the 
                      > financial bottom line concept is itself imperfect. Its "common unit 
                      > of measure" is no less illusory there than it may be on other fronts, 
                      > and yet the language of the metaphor has been useful there. Why not 
                      > reap its value on the social and environmental fronts, as well, I 
                      > wonder?
                      > 
                      > 2) It is, in fact, possible, we think, to compute aggregated social 
                      > and environmental bottom lines at the organizational level of 
                      > analysis. Whether or not it makes sense to do so is another matter. 
                      > I hesitate to explain how to do this now, since we are just getting 
                      > started in this conversation. Happy to proceed at your pace. Just ask.
                      > 
                      > 3) The term has taken on a life of its own. It has legs. It has 
                      > emotional value. Why not keep it for what it's worth and just deal 
                      > with its imperfections?
                      > 
                      > Regards,
                      > 
                      > Mark
                      > 
                      > 
                      > Mark W. McElroy, Ph.D.
                      > Executive Director
                      > Center for Sustainable Innovation
                      > www.sustainableinno vation.org
                      > (802) 785-2293 (office)
                      > (802) 296-1928 (mobile)
                      > 
                      > This message sent by a renewable-energy- powered computer
                      > 
                      > 
                      > 
                      > 
                      > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                      > 
                      > >
                      > >
                      > > Mark:
                      > >
                      > > You suggest I look closer...is the "Re-Casting" document the place 
                      > > to look? Or is there another source?
                      > >
                      > > If the bottom lines are going to multiply, then the aggregation 
                      > > gets easier, certainly. But the misleadingness of the metaphor 
                      > > still worries me...if the financial bottom line (and accounting 
                      > > more generally) stops being a good analogy, why keep using that 
                      > > language?
                      > >
                      > > Regards,
                      > >
                      > > Chris.
                      > >
                      > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark 
                      > > W. McElroy" <mmcelroy@> wrote:
                      > > >
                      > > > Dear Friends:
                      > > >
                      > > > Earlier this week, we (CSI) issued a press release regarding an 
                      > > award
                      > > > we received from the State of Vermont for our general approach to
                      > > > Triple Bottom Line measurement, management, and reporting. Here's
                      > > > the release:
                      > > >
                      > > > http://www.csrwire. com/News/ 15105.html
                      > > >
                      > > > Afterwards, a comment about the release was posted by Chris
                      > > > MacDonald, who questioned the design and effectiveness of our
                      > > > method. His post appeared on the same page as our announcement as
                      > > > you will see from the link above. There you will also see my
                      > > > response to Chris, and one or two more rounds of chatter between us.
                      > > > Here is that exchange:
                      > > >
                      > > > Chris MacDonald 2009-04-23 02:36:30
                      > > > As far as I can see, they haven't overcome the problem of finding a
                      > > > common unit of measure for social goods and bads, or for ecological
                      > > > ones. The example provided in the "Recasting" report involves using
                      > > > monetary measures for social issues (i.e., teen pregnancy is
                      > > > understood in terms of its impact on financial productivity) . It
                      > > > seems unlikely, at best, that all socially-relevant issues can be
                      > > > cast in financial terms. I think it's telling that, to date, there
                      > > > has been no satisfactory reply, from TBL advocates, to the critique
                      > > > offered here: "Getting to the Bottom of 'Triple Bottom Line'."
                      > > > Business Ethics Quarterly. 14:2. 2004. 243–262
                      > > >
                      > > > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                      > > >
                      > > > Chris, I will respond only to what you have said here, and not your
                      > > > 2004 paper. That we can discuss elsewhere, if you like. That said,
                      > > > your criticism here is not a criticism at all, in my view, 
                      > > because it
                      > > > is predicated on a supposed problem ("of finding a common unit of
                      > > > measure for social goods and bads....") that does not exist. You 
                      > > seem
                      > > > to want to take a 'weak' sustainability stance, whereas I and others
                      > > > take a 'strong' one, in which capitals are not substitutable and
                      > > > aggregation (i.e., your "common unit" idea) is ill conceived. Absent
                      > > > your starting premise, then, your criticisms fade away, one and all.
                      > > >
                      > > > Chris MacDonald 2009-04-23 12:28:57
                      > > >
                      > > > Mark: Thanks for taking the time to reply. I don't have a view on 
                      > > the
                      > > > "strong vs. week." I just thought that the idea of a "bottom line"
                      > > > requires adding stuff up. And adding stuff up requires a common 
                      > > unit.
                      > > > Maybe you're not after a bottom line at all, which is fine. Chris.
                      > > >
                      > > > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                      > > >
                      > > > Chris, I am indeed after a bottom line, but I don't agree that it
                      > > > necessarily entails single bottom lines for social or environmental
                      > > > performance, respectively. I think the three-bottom- line metaphor is
                      > > > more forgiving than that. I prefer to think of it as three 
                      > > categories
                      > > > of multiple bottom lines. Also, I suggest that before you 
                      > > continue to
                      > > > hold the financial bottom line out as the standard that the other 
                      > > non-
                      > > > financial bottom lines should adhere to, do not lose sight of the
                      > > > fact that the financial bottom line exported its social and
                      > > > environmental costs, precisely because it could not accommodate them
                      > > > with its own so-called "common unit" unit of measure, as you put it.
                      > > > So let's not pretend that the financial bottom line is some sort of
                      > > > paragon that the other bottom lines should be judged by. Last, me
                      > > > also say that your 2004 article was an outstanding piece of work, 
                      > > and
                      > > > that what we (CSI) have done with our own Triple Bottom Line method
                      > > > (as announced this week) resolves, so far as we are concerned, 
                      > > all of
                      > > > the issues and criticisms you and your co-author raised at that 
                      > > time.
                      > > > If you do not see this, I suggest you look closer. Happy to discuss
                      > > > this further if you like. Regards, Mark
                      > > > ____________ ________
                      > > >
                      > > > Given the significance of Chris's criticisms and the importance of
                      > > > the topic in general, I decided to take the discussion over to this
                      > > > listserve, and have invited Chris to join us. It is my hope that he
                      > > > will do so.
                      > > >
                      > > > Regards,
                      > > >
                      > > > Mark
                      > > >
                      > > >
                      > > >
                      > > >
                      > > >
                      > > > Mark W. McElroy, Ph.D.
                      > > > Executive Director
                      > > > Center for Sustainable Innovation
                      > > > www.sustainableinno vation.org
                      > > > (802) 785-2293 (office)
                      > > > (802) 296-1928 (mobile)
                      > > >
                      > > > This message sent by a renewable-energy- powered computer
                      > > >
                      > >
                      > >
                      > >
                      >


                    • Mark W. McElroy
                      All: Upon further reflection of Chris s point about giving different indicators different weights because of their arguably different importance, I find myself
                      Message 10 of 20 , Apr 26 9:27 AM
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                        All:

                        Upon further reflection of Chris's point about giving different indicators different weights because of their arguably different importance, I find myself leaning more strongly against it than for it.  While there is nothing in the TBL method we propose that would prevent us from applying such variable weightings, Chris's point about the desirability of bottom lines being commensurable or comparable from one organization to another is a good one, I think.  But how can we have it both ways?  How can we have variable weightings and commensurable reporting, when no two organizations will likely see the relative importance of various indicators the same?

                        The answer, I think, is to leave weightings out of reports altogether, and to leave it to the readers or consumers of such reports to apply their own weightings.  Indeed, this is precisely what we do with financial reports.  The raw data, so to speak, is disclosed in financial reports, without any attempt to weight the numbers.  The numbers are reported just as they are.  Shareholders are then free to attach more or less importance to the numbers they read as they see fit.  I see no reason to do things differently in social and environmental reporting.

                        Regards,

                        Mark


                        Mark W. McElroy, Ph.D.
                        Executive Director
                        Center for Sustainable Innovation
                        www.sustainableinnovation.org
                        (802) 785-2293 (office)
                        (802) 296-1928 (mobile)

                        This message sent by a renewable-energy-powered computer




                        On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:



                        Chris:


                        The issue you raise is not with the method, it is with whether or not people can agree (or have agreed) on a weighting scheme, and also on specific indicators.  The non-financial accounting method I propose is just as neutral on that issue as GAAP is on financial matters.  GAAP stops at the level of categories, and leaves it to individual reporters to define their own underlying accounts.  Are all companies' charts of accounts identical?  Of course not.  Why do you/we assume commensurability in that case but not in non-financial reporting?  And why do you insist of having weighting applied in the case of non-financial reporting, but not in financial reporting?  Let me put it this way, ASSUMING people can come to some agreement on metrics and weighting, the kind of comparability you refer to will be possible, but I'm not sure it's necessary.  

                        In the meantime, if individual companies want to pilot, test, and evaluate schemes of their own based on a proposed conceptual framework such as the one we propose, that seems like an entirely constructive step to take in my view.  Consider the alternative: no meaningful non-financial measurement and reporting takes place at all.  So let the individual claims about metrics compete in the intellectual marketplace, I say, and let us collectively take steps to evolve the kind of common index you and the rest of us would like to see.  But in order to do that, we must have a conceptual framework in which such indicators and weighting schemes can fit, and that is precisely what we have created.  If you want to talk about metrics, on the other hand, we have put a proposal forward for that, too (the True Sustainability Index), and so we can have that conversation, as well.  But the TBL method we have proposed does not come crashing down simply because people haven't agreed on a choice of related metrics.  Should GAAP come to a screeching halt simply because no two organizations' charts of accounts that use it are alike?

                        Regards,

                        Mark


                        Mark W. McElroy, Ph.D.
                        Executive Director
                        Center for Sustainable Innovation
                        www.sustainableinno vation.org
                        (802) 785-2293 (office)
                        (802) 296-1928 (mobile)

                        This message sent by a renewable-energy- powered computer




                        On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:



                        Mark:

                        Weight them "any way [I] like"?

                        The weighting seems crucial. No one ever doubted that you could apply numbers to these things. The problem is commensurability. If I'm not weighting factors (for my company) the same way you are for yours, we can't compare progress.

                        Sounds fine for an system of internal tracking, but seems not to live up to the term "bottom line". 

                        Regards,
                        Chris.

                        --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
                        >
                        > Chris:
                        > 
                        > I agree with you. That's why I say on slide 35 that individual sub- 
                        > bottom line scores can be weighted. You're free to weight them any 
                        > way you like. The method is completely open to that.
                        > 
                        > Regards,
                        > 
                        > Mark
                        > 
                        > 
                        > Mark W. McElroy, Ph.D.
                        > Executive Director
                        > Center for Sustainable Innovation
                        > www.sustainableinno vation.org
                        > (802) 785-2293 (office)
                        > (802) 296-1928 (mobile)
                        > 
                        > This message sent by a renewable-energy- powered computer
                        > 
                        > 
                        > 
                        > 
                        > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                        > 
                        > >
                        > >
                        > > Mark:
                        > >
                        > > Thanks.
                        > >
                        > > I still feel like -- having looked at the relevant documents -- I'm 
                        > > lacking a good, clear, simple example of how the aggregation is 
                        > > supposed to work.
                        > >
                        > > But one thing that's clear is that the method involves averaging 
                        > > scores (for various sub-bottom-lines) . Averaging implies that all 
                        > > the factors being averaged are equally important. I don't see what 
                        > > justifies that assumption.
                        > >
                        > > Chris.
                        > >
                        > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark 
                        > > W. McElroy" <mmcelroy@> wrote:
                        > > >
                        > > > All:
                        > > >
                        > > > Back in 2004, Chris MacDonald and his co-author, Wayne Norman, 
                        > > wrote:
                        > > >
                        > > > "Ultimately, we argue there are fundamental philosophical grounds 
                        > > for
                        > > > thinking that it is impossible to develop a sound methodology for
                        > > > arriving at a meaniningful social bottom line for a firm." They
                        > > > added, "...the various values involved in evaluations of corporate
                        > > > behavior are 'incommensurable' ".
                        > > >
                        > > > For Chris's benefit, and others', I have added two slides to this
                        > > > presentation (slides 34 and 35), which show exactly how one can
                        > > > calculate a quantitative (and 'blended') social bottom line for a 
                        > > firm:
                        > > >
                        > > > http://www.sustaina bleinnovation. org/Recasting- TBL.pdf
                        > > >
                        > > > This, of course, occurs in the context of utilizing a general
                        > > > methodology for assessing the social footprint of an organization,
                        > > > which can be done using the methodology we created called the Social
                        > > > Footprint Method. I hope Chris will chime in and comment on all of
                        > > > this.
                        > > >
                        > > > Regards,
                        > > >
                        > > > Mark
                        > > >
                        > > >
                        > > > Mark W. McElroy, Ph.D.
                        > > > Executive Director
                        > > > Center for Sustainable Innovation
                        > > > www.sustainableinno vation.org
                        > > > (802) 785-2293 (office)
                        > > > (802) 296-1928 (mobile)
                        > > >
                        > > > This message sent by a renewable-energy- powered computer
                        > > >
                        > > >
                        > > >
                        > > >
                        > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
                        > > >
                        > > > >
                        > > > >
                        > > > > Chris:
                        > > > >
                        > > > >
                        > > > > Thanks for joining in. As you might imagine, where to look depends
                        > > > > on what the specific issue is. It's a big topic with many
                        > > > > dimensions. Our body of work is broad and deep, so rather than
                        > > > > send you off in multiple directions, let's take it one step at a
                        > > > > time. In your response to our press release yesterday, you raised
                        > > > > several issues about TBL theory in general, and the problems our
                        > > > > own method may or may not have resolved. So let's take each of the
                        > > > > issues and criticisms you raised this week (and in your very fine
                        > > > > article in 2004) one at a time, and explain how we (on this end)
                        > > > > think we have resolved them. You go first. In the meantime, let
                        > > > > me answer your question about why we should keep using the
                        > > > > metaphor. Three responses:
                        > > > >
                        > > > > 1) The metaphor is valuable in helping to call attention to the
                        > > > > fact that businesses have real social and environmental 
                        > > obligations
                        > > > > to people in the world, not just financial ones. Moreover, the
                        > > > > financial bottom line concept is itself imperfect. Its "common
                        > > > > unit of measure" is no less illusory there than it may be on other
                        > > > > fronts, and yet the language of the metaphor has been useful
                        > > > > there. Why not reap its value on the social and environmental
                        > > > > fronts, as well, I wonder?
                        > > > >
                        > > > > 2) It is, in fact, possible, we think, to compute aggregated 
                        > > social
                        > > > > and environmental bottom lines at the organizational level of
                        > > > > analysis. Whether or not it makes sense to do so is another
                        > > > > matter. I hesitate to explain how to do this now, since we are
                        > > > > just getting started in this conversation. Happy to proceed at
                        > > > > your pace. Just ask.
                        > > > >
                        > > > > 3) The term has taken on a life of its own. It has legs. It has
                        > > > > emotional value. Why not keep it for what it's worth and just deal
                        > > > > with its imperfections?
                        > > > >
                        > > > > Regards,
                        > > > >
                        > > > > Mark
                        > > > >
                        > > > >
                        > > > > Mark W. McElroy, Ph.D.
                        > > > > Executive Director
                        > > > > Center for Sustainable Innovation
                        > > > > www.sustainableinno vation.org
                        > > > > (802) 785-2293 (office)
                        > > > > (802) 296-1928 (mobile)
                        > > > >
                        > > > > This message sent by a renewable-energy- powered computer
                        > > > >
                        > > > >
                        > > > >
                        > > > >
                        > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                        > > > >
                        > > > >>
                        > > > >>
                        > > > >> Mark:
                        > > > >>
                        > > > >> You suggest I look closer...is the "Re-Casting" document the 
                        > > place
                        > > > >> to look? Or is there another source?
                        > > > >>
                        > > > >> If the bottom lines are going to multiply, then the aggregation
                        > > > >> gets easier, certainly. But the misleadingness of the metaphor
                        > > > >> still worries me...if the financial bottom line (and accounting
                        > > > >> more generally) stops being a good analogy, why keep using that
                        > > > >> language?
                        > > > >>
                        > > > >> Regards,
                        > > > >>
                        > > > >> Chris.
                        > > > >>
                        > > > >> --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                        > > > >> W. McElroy" <mmcelroy@> wrote:
                        > > > >> >
                        > > > >> > Dear Friends:
                        > > > >> >
                        > > > >> > Earlier this week, we (CSI) issued a press release regarding an
                        > > > >> award
                        > > > >> > we received from the State of Vermont for our general 
                        > > approach to
                        > > > >> > Triple Bottom Line measurement, management, and reporting. 
                        > > Here's
                        > > > >> > the release:
                        > > > >> >
                        > > > >> > http://www.csrwire. com/News/ 15105.html
                        > > > >> >
                        > > > >> > Afterwards, a comment about the release was posted by Chris
                        > > > >> > MacDonald, who questioned the design and effectiveness of our
                        > > > >> > method. His post appeared on the same page as our 
                        > > announcement as
                        > > > >> > you will see from the link above. There you will also see my
                        > > > >> > response to Chris, and one or two more rounds of chatter 
                        > > between
                        > > > >> us.
                        > > > >> > Here is that exchange:
                        > > > >> >
                        > > > >> > Chris MacDonald 2009-04-23 02:36:30
                        > > > >> > As far as I can see, they haven't overcome the problem of 
                        > > finding a
                        > > > >> > common unit of measure for social goods and bads, or for 
                        > > ecological
                        > > > >> > ones. The example provided in the "Recasting" report 
                        > > involves using
                        > > > >> > monetary measures for social issues (i.e., teen pregnancy is
                        > > > >> > understood in terms of its impact on financial 
                        > > productivity) . It
                        > > > >> > seems unlikely, at best, that all socially-relevant issues 
                        > > can be
                        > > > >> > cast in financial terms. I think it's telling that, to date, 
                        > > there
                        > > > >> > has been no satisfactory reply, from TBL advocates, to the 
                        > > critique
                        > > > >> > offered here: "Getting to the Bottom of 'Triple Bottom Line'."
                        > > > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
                        > > > >> >
                        > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                        > > > >> >
                        > > > >> > Chris, I will respond only to what you have said here, and 
                        > > not your
                        > > > >> > 2004 paper. That we can discuss elsewhere, if you like. That 
                        > > said,
                        > > > >> > your criticism here is not a criticism at all, in my view,
                        > > > >> because it
                        > > > >> > is predicated on a supposed problem ("of finding a common 
                        > > unit of
                        > > > >> > measure for social goods and bads....") that does not exist. 
                        > > You
                        > > > >> seem
                        > > > >> > to want to take a 'weak' sustainability stance, whereas I and
                        > > > >> others
                        > > > >> > take a 'strong' one, in which capitals are not substitutable 
                        > > and
                        > > > >> > aggregation (i.e., your "common unit" idea) is ill conceived.
                        > > > >> Absent
                        > > > >> > your starting premise, then, your criticisms fade away, one and
                        > > > >> all.
                        > > > >> >
                        > > > >> > Chris MacDonald 2009-04-23 12:28:57
                        > > > >> >
                        > > > >> > Mark: Thanks for taking the time to reply. I don't have a view
                        > > > >> on the
                        > > > >> > "strong vs. week." I just thought that the idea of a "bottom 
                        > > line"
                        > > > >> > requires adding stuff up. And adding stuff up requires a common
                        > > > >> unit.
                        > > > >> > Maybe you're not after a bottom line at all, which is fine. 
                        > > Chris.
                        > > > >> >
                        > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                        > > > >> >
                        > > > >> > Chris, I am indeed after a bottom line, but I don't agree 
                        > > that it
                        > > > >> > necessarily entails single bottom lines for social or 
                        > > environmental
                        > > > >> > performance, respectively. I think the three-bottom- line
                        > > > >> metaphor is
                        > > > >> > more forgiving than that. I prefer to think of it as three
                        > > > >> categories
                        > > > >> > of multiple bottom lines. Also, I suggest that before you
                        > > > >> continue to
                        > > > >> > hold the financial bottom line out as the standard that the
                        > > > >> other non-
                        > > > >> > financial bottom lines should adhere to, do not lose sight 
                        > > of the
                        > > > >> > fact that the financial bottom line exported its social and
                        > > > >> > environmental costs, precisely because it could not accommodate
                        > > > >> them
                        > > > >> > with its own so-called "common unit" unit of measure, as you 
                        > > put
                        > > > >> it.
                        > > > >> > So let's not pretend that the financial bottom line is some 
                        > > sort of
                        > > > >> > paragon that the other bottom lines should be judged by. 
                        > > Last, me
                        > > > >> > also say that your 2004 article was an outstanding piece of
                        > > > >> work, and
                        > > > >> > that what we (CSI) have done with our own Triple Bottom Line 
                        > > method
                        > > > >> > (as announced this week) resolves, so far as we are concerned,
                        > > > >> all of
                        > > > >> > the issues and criticisms you and your co-author raised at that
                        > > > >> time.
                        > > > >> > If you do not see this, I suggest you look closer. Happy to 
                        > > discuss
                        > > > >> > this further if you like. Regards, Mark
                        > > > >> > ____________ ________
                        > > > >> >
                        > > > >> > Given the significance of Chris's criticisms and the 
                        > > importance of
                        > > > >> > the topic in general, I decided to take the discussion over 
                        > > to this
                        > > > >> > listserve, and have invited Chris to join us. It is my hope 
                        > > that he
                        > > > >> > will do so.
                        > > > >> >
                        > > > >> > Regards,
                        > > > >> >
                        > > > >> > Mark
                        > > > >> >
                        > > > >> >
                        > > > >> >
                        > > > >> >
                        > > > >> >
                        > > > >> > Mark W. McElroy, Ph.D.
                        > > > >> > Executive Director
                        > > > >> > Center for Sustainable Innovation
                        > > > >> > www.sustainableinno vation.org
                        > > > >> > (802) 785-2293 (office)
                        > > > >> > (802) 296-1928 (mobile)
                        > > > >> >
                        > > > >> > This message sent by a renewable-energy- powered computer
                        > > > >> >
                        > > > >>
                        > > > >>
                        > > > >
                        > > > >
                        > > > >
                        > > >
                        > >
                        > >
                        > >
                        >




                      • ethicsblogger
                        Mark: Sounds like you re suggesting a (reasonably) method of SEAAR. And, as we tried to make clear in our paper, we re not against SEAAR. We re just against
                        Message 11 of 20 , Apr 26 1:01 PM
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                          Mark:

                          Sounds like you're suggesting a (reasonably) method of SEAAR. And, as we tried to make clear in our paper, we're not against SEAAR. We're just against the *implication* of intercomparability that the accounting terminology implies (even if people overestimate financial accounting in that regard).

                          Annual reports still do generate a Bottom Line, right? Assets in dollars, liabilities in dollars. Higher number is better.

                          So, I think you're right to leave out weightings, but that looks (again) like taking an potentially-fuzzy financial concept and applying it to an even fuzzier case.

                          p.s. I'm still lacking a good, clear, simple example of how different categories of social goods & bads would be added together, if that's still part of the agenda. Reporting gender balance on the Board is good; reporting charitable donations is good; reporting collaboration with NGO's is good. But they cannot be added together. Am I still missing something?

                          Regards,
                          Chris.

                          --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark W. McElroy" <mmcelroy@...> wrote:
                          >
                          > All:
                          >
                          > Upon further reflection of Chris's point about giving different
                          > indicators different weights because of their arguably different
                          > importance, I find myself leaning more strongly against it than for
                          > it. While there is nothing in the TBL method we propose that would
                          > prevent us from applying such variable weightings, Chris's point
                          > about the desirability of bottom lines being commensurable or
                          > comparable from one organization to another is a good one, I think.
                          > But how can we have it both ways? How can we have variable
                          > weightings and commensurable reporting, when no two organizations
                          > will likely see the relative importance of various indicators the same?
                          >
                          > The answer, I think, is to leave weightings out of reports
                          > altogether, and to leave it to the readers or consumers of such
                          > reports to apply their own weightings. Indeed, this is precisely
                          > what we do with financial reports. The raw data, so to speak, is
                          > disclosed in financial reports, without any attempt to weight the
                          > numbers. The numbers are reported just as they are. Shareholders
                          > are then free to attach more or less importance to the numbers they
                          > read as they see fit. I see no reason to do things differently in
                          > social and environmental reporting.
                          >
                          > Regards,
                          >
                          > Mark
                          >
                          >
                          > Mark W. McElroy, Ph.D.
                          > Executive Director
                          > Center for Sustainable Innovation
                          > www.sustainableinnovation.org
                          > (802) 785-2293 (office)
                          > (802) 296-1928 (mobile)
                          >
                          > This message sent by a renewable-energy-powered computer
                          >
                          >
                          >
                          >
                          > On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:
                          >
                          > >
                          > >
                          > > Chris:
                          > >
                          > >
                          > > The issue you raise is not with the method, it is with whether or
                          > > not people can agree (or have agreed) on a weighting scheme, and
                          > > also on specific indicators. The non-financial accounting method I
                          > > propose is just as neutral on that issue as GAAP is on financial
                          > > matters. GAAP stops at the level of categories, and leaves it to
                          > > individual reporters to define their own underlying accounts. Are
                          > > all companies' charts of accounts identical? Of course not. Why
                          > > do you/we assume commensurability in that case but not in non-
                          > > financial reporting? And why do you insist of having weighting
                          > > applied in the case of non-financial reporting, but not in
                          > > financial reporting? Let me put it this way, ASSUMING people can
                          > > come to some agreement on metrics and weighting, the kind of
                          > > comparability you refer to will be possible, but I'm not sure it's
                          > > necessary.
                          > >
                          > > In the meantime, if individual companies want to pilot, test, and
                          > > evaluate schemes of their own based on a proposed conceptual
                          > > framework such as the one we propose, that seems like an entirely
                          > > constructive step to take in my view. Consider the alternative: no
                          > > meaningful non-financial measurement and reporting takes place at
                          > > all. So let the individual claims about metrics compete in the
                          > > intellectual marketplace, I say, and let us collectively take steps
                          > > to evolve the kind of common index you and the rest of us would
                          > > like to see. But in order to do that, we must have a conceptual
                          > > framework in which such indicators and weighting schemes can fit,
                          > > and that is precisely what we have created. If you want to talk
                          > > about metrics, on the other hand, we have put a proposal forward
                          > > for that, too (the True Sustainability Index), and so we can have
                          > > that conversation, as well. But the TBL method we have proposed
                          > > does not come crashing down simply because people haven't agreed on
                          > > a choice of related metrics. Should GAAP come to a screeching halt
                          > > simply because no two organizations' charts of accounts that use it
                          > > are alike?
                          > >
                          > > Regards,
                          > >
                          > > Mark
                          > >
                          > >
                          > > Mark W. McElroy, Ph.D.
                          > > Executive Director
                          > > Center for Sustainable Innovation
                          > > www.sustainableinnovation.org
                          > > (802) 785-2293 (office)
                          > > (802) 296-1928 (mobile)
                          > >
                          > > This message sent by a renewable-energy-powered computer
                          > >
                          > >
                          > >
                          > >
                          > > On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:
                          > >
                          > >>
                          > >>
                          > >> Mark:
                          > >>
                          > >> Weight them "any way [I] like"?
                          > >>
                          > >> The weighting seems crucial. No one ever doubted that you could
                          > >> apply numbers to these things. The problem is commensurability. If
                          > >> I'm not weighting factors (for my company) the same way you are
                          > >> for yours, we can't compare progress.
                          > >>
                          > >> Sounds fine for an system of internal tracking, but seems not to
                          > >> live up to the term "bottom line".
                          > >>
                          > >> Regards,
                          > >> Chris.
                          > >>
                          > >> --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                          > >> W. McElroy" <mmcelroy@> wrote:
                          > >> >
                          > >> > Chris:
                          > >> >
                          > >> > I agree with you. That's why I say on slide 35 that individual sub-
                          > >> > bottom line scores can be weighted. You're free to weight them any
                          > >> > way you like. The method is completely open to that.
                          > >> >
                          > >> > Regards,
                          > >> >
                          > >> > Mark
                          > >> >
                          > >> >
                          > >> > Mark W. McElroy, Ph.D.
                          > >> > Executive Director
                          > >> > Center for Sustainable Innovation
                          > >> > www.sustainableinnovation.org
                          > >> > (802) 785-2293 (office)
                          > >> > (802) 296-1928 (mobile)
                          > >> >
                          > >> > This message sent by a renewable-energy-powered computer
                          > >> >
                          > >> >
                          > >> >
                          > >> >
                          > >> > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                          > >> >
                          > >> > >
                          > >> > >
                          > >> > > Mark:
                          > >> > >
                          > >> > > Thanks.
                          > >> > >
                          > >> > > I still feel like -- having looked at the relevant documents
                          > >> -- I'm
                          > >> > > lacking a good, clear, simple example of how the aggregation is
                          > >> > > supposed to work.
                          > >> > >
                          > >> > > But one thing that's clear is that the method involves averaging
                          > >> > > scores (for various sub-bottom-lines). Averaging implies that all
                          > >> > > the factors being averaged are equally important. I don't see
                          > >> what
                          > >> > > justifies that assumption.
                          > >> > >
                          > >> > > Chris.
                          > >> > >
                          > >> > > --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                          > >> > > W. McElroy" <mmcelroy@> wrote:
                          > >> > > >
                          > >> > > > All:
                          > >> > > >
                          > >> > > > Back in 2004, Chris MacDonald and his co-author, Wayne Norman,
                          > >> > > wrote:
                          > >> > > >
                          > >> > > > "Ultimately, we argue there are fundamental philosophical
                          > >> grounds
                          > >> > > for
                          > >> > > > thinking that it is impossible to develop a sound
                          > >> methodology for
                          > >> > > > arriving at a meaniningful social bottom line for a firm." They
                          > >> > > > added, "...the various values involved in evaluations of
                          > >> corporate
                          > >> > > > behavior are 'incommensurable' ".
                          > >> > > >
                          > >> > > > For Chris's benefit, and others', I have added two slides to
                          > >> this
                          > >> > > > presentation (slides 34 and 35), which show exactly how one can
                          > >> > > > calculate a quantitative (and 'blended') social bottom line
                          > >> for a
                          > >> > > firm:
                          > >> > > >
                          > >> > > > http://www.sustainableinnovation.org/Recasting-TBL.pdf
                          > >> > > >
                          > >> > > > This, of course, occurs in the context of utilizing a general
                          > >> > > > methodology for assessing the social footprint of an
                          > >> organization,
                          > >> > > > which can be done using the methodology we created called
                          > >> the Social
                          > >> > > > Footprint Method. I hope Chris will chime in and comment on
                          > >> all of
                          > >> > > > this.
                          > >> > > >
                          > >> > > > Regards,
                          > >> > > >
                          > >> > > > Mark
                          > >> > > >
                          > >> > > >
                          > >> > > > Mark W. McElroy, Ph.D.
                          > >> > > > Executive Director
                          > >> > > > Center for Sustainable Innovation
                          > >> > > > www.sustainableinnovation.org
                          > >> > > > (802) 785-2293 (office)
                          > >> > > > (802) 296-1928 (mobile)
                          > >> > > >
                          > >> > > > This message sent by a renewable-energy-powered computer
                          > >> > > >
                          > >> > > >
                          > >> > > >
                          > >> > > >
                          > >> > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
                          > >> > > >
                          > >> > > > >
                          > >> > > > >
                          > >> > > > > Chris:
                          > >> > > > >
                          > >> > > > >
                          > >> > > > > Thanks for joining in. As you might imagine, where to look
                          > >> depends
                          > >> > > > > on what the specific issue is. It's a big topic with many
                          > >> > > > > dimensions. Our body of work is broad and deep, so rather
                          > >> than
                          > >> > > > > send you off in multiple directions, let's take it one
                          > >> step at a
                          > >> > > > > time. In your response to our press release yesterday, you
                          > >> raised
                          > >> > > > > several issues about TBL theory in general, and the
                          > >> problems our
                          > >> > > > > own method may or may not have resolved. So let's take
                          > >> each of the
                          > >> > > > > issues and criticisms you raised this week (and in your
                          > >> very fine
                          > >> > > > > article in 2004) one at a time, and explain how we (on
                          > >> this end)
                          > >> > > > > think we have resolved them. You go first. In the
                          > >> meantime, let
                          > >> > > > > me answer your question about why we should keep using the
                          > >> > > > > metaphor. Three responses:
                          > >> > > > >
                          > >> > > > > 1) The metaphor is valuable in helping to call attention
                          > >> to the
                          > >> > > > > fact that businesses have real social and environmental
                          > >> > > obligations
                          > >> > > > > to people in the world, not just financial ones. Moreover,
                          > >> the
                          > >> > > > > financial bottom line concept is itself imperfect. Its
                          > >> "common
                          > >> > > > > unit of measure" is no less illusory there than it may be
                          > >> on other
                          > >> > > > > fronts, and yet the language of the metaphor has been useful
                          > >> > > > > there. Why not reap its value on the social and environmental
                          > >> > > > > fronts, as well, I wonder?
                          > >> > > > >
                          > >> > > > > 2) It is, in fact, possible, we think, to compute aggregated
                          > >> > > social
                          > >> > > > > and environmental bottom lines at the organizational level of
                          > >> > > > > analysis. Whether or not it makes sense to do so is another
                          > >> > > > > matter. I hesitate to explain how to do this now, since we
                          > >> are
                          > >> > > > > just getting started in this conversation. Happy to
                          > >> proceed at
                          > >> > > > > your pace. Just ask.
                          > >> > > > >
                          > >> > > > > 3) The term has taken on a life of its own. It has legs.
                          > >> It has
                          > >> > > > > emotional value. Why not keep it for what it's worth and
                          > >> just deal
                          > >> > > > > with its imperfections?
                          > >> > > > >
                          > >> > > > > Regards,
                          > >> > > > >
                          > >> > > > > Mark
                          > >> > > > >
                          > >> > > > >
                          > >> > > > > Mark W. McElroy, Ph.D.
                          > >> > > > > Executive Director
                          > >> > > > > Center for Sustainable Innovation
                          > >> > > > > www.sustainableinnovation.org
                          > >> > > > > (802) 785-2293 (office)
                          > >> > > > > (802) 296-1928 (mobile)
                          > >> > > > >
                          > >> > > > > This message sent by a renewable-energy-powered computer
                          > >> > > > >
                          > >> > > > >
                          > >> > > > >
                          > >> > > > >
                          > >> > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                          > >> > > > >
                          > >> > > > >>
                          > >> > > > >>
                          > >> > > > >> Mark:
                          > >> > > > >>
                          > >> > > > >> You suggest I look closer...is the "Re-Casting" document the
                          > >> > > place
                          > >> > > > >> to look? Or is there another source?
                          > >> > > > >>
                          > >> > > > >> If the bottom lines are going to multiply, then the
                          > >> aggregation
                          > >> > > > >> gets easier, certainly. But the misleadingness of the
                          > >> metaphor
                          > >> > > > >> still worries me...if the financial bottom line (and
                          > >> accounting
                          > >> > > > >> more generally) stops being a good analogy, why keep
                          > >> using that
                          > >> > > > >> language?
                          > >> > > > >>
                          > >> > > > >> Regards,
                          > >> > > > >>
                          > >> > > > >> Chris.
                          > >> > > > >>
                          > >> > > > >> --- In
                          > >> Corporate_Sustainability_Management@yahoogroups.com, "Mark
                          > >> > > > >> W. McElroy" <mmcelroy@> wrote:
                          > >> > > > >> >
                          > >> > > > >> > Dear Friends:
                          > >> > > > >> >
                          > >> > > > >> > Earlier this week, we (CSI) issued a press release
                          > >> regarding an
                          > >> > > > >> award
                          > >> > > > >> > we received from the State of Vermont for our general
                          > >> > > approach to
                          > >> > > > >> > Triple Bottom Line measurement, management, and reporting.
                          > >> > > Here's
                          > >> > > > >> > the release:
                          > >> > > > >> >
                          > >> > > > >> > http://www.csrwire.com/News/15105.html
                          > >> > > > >> >
                          > >> > > > >> > Afterwards, a comment about the release was posted by
                          > >> Chris
                          > >> > > > >> > MacDonald, who questioned the design and effectiveness
                          > >> of our
                          > >> > > > >> > method. His post appeared on the same page as our
                          > >> > > announcement as
                          > >> > > > >> > you will see from the link above. There you will also
                          > >> see my
                          > >> > > > >> > response to Chris, and one or two more rounds of chatter
                          > >> > > between
                          > >> > > > >> us.
                          > >> > > > >> > Here is that exchange:
                          > >> > > > >> >
                          > >> > > > >> > Chris MacDonald 2009-04-23 02:36:30
                          > >> > > > >> > As far as I can see, they haven't overcome the problem of
                          > >> > > finding a
                          > >> > > > >> > common unit of measure for social goods and bads, or for
                          > >> > > ecological
                          > >> > > > >> > ones. The example provided in the "Recasting" report
                          > >> > > involves using
                          > >> > > > >> > monetary measures for social issues (i.e., teen
                          > >> pregnancy is
                          > >> > > > >> > understood in terms of its impact on financial
                          > >> > > productivity). It
                          > >> > > > >> > seems unlikely, at best, that all socially-relevant issues
                          > >> > > can be
                          > >> > > > >> > cast in financial terms. I think it's telling that, to
                          > >> date,
                          > >> > > there
                          > >> > > > >> > has been no satisfactory reply, from TBL advocates, to the
                          > >> > > critique
                          > >> > > > >> > offered here: "Getting to the Bottom of 'Triple Bottom
                          > >> Line'."
                          > >> > > > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
                          > >> > > > >> >
                          > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                          > >> > > > >> >
                          > >> > > > >> > Chris, I will respond only to what you have said here, and
                          > >> > > not your
                          > >> > > > >> > 2004 paper. That we can discuss elsewhere, if you like.
                          > >> That
                          > >> > > said,
                          > >> > > > >> > your criticism here is not a criticism at all, in my view,
                          > >> > > > >> because it
                          > >> > > > >> > is predicated on a supposed problem ("of finding a common
                          > >> > > unit of
                          > >> > > > >> > measure for social goods and bads....") that does not
                          > >> exist.
                          > >> > > You
                          > >> > > > >> seem
                          > >> > > > >> > to want to take a 'weak' sustainability stance, whereas
                          > >> I and
                          > >> > > > >> others
                          > >> > > > >> > take a 'strong' one, in which capitals are not
                          > >> substitutable
                          > >> > > and
                          > >> > > > >> > aggregation (i.e., your "common unit" idea) is ill
                          > >> conceived.
                          > >> > > > >> Absent
                          > >> > > > >> > your starting premise, then, your criticisms fade away,
                          > >> one and
                          > >> > > > >> all.
                          > >> > > > >> >
                          > >> > > > >> > Chris MacDonald 2009-04-23 12:28:57
                          > >> > > > >> >
                          > >> > > > >> > Mark: Thanks for taking the time to reply. I don't have
                          > >> a view
                          > >> > > > >> on the
                          > >> > > > >> > "strong vs. week." I just thought that the idea of a
                          > >> "bottom
                          > >> > > line"
                          > >> > > > >> > requires adding stuff up. And adding stuff up requires
                          > >> a common
                          > >> > > > >> unit.
                          > >> > > > >> > Maybe you're not after a bottom line at all, which is
                          > >> fine.
                          > >> > > Chris.
                          > >> > > > >> >
                          > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                          > >> > > > >> >
                          > >> > > > >> > Chris, I am indeed after a bottom line, but I don't agree
                          > >> > > that it
                          > >> > > > >> > necessarily entails single bottom lines for social or
                          > >> > > environmental
                          > >> > > > >> > performance, respectively. I think the three-bottom-line
                          > >> > > > >> metaphor is
                          > >> > > > >> > more forgiving than that. I prefer to think of it as three
                          > >> > > > >> categories
                          > >> > > > >> > of multiple bottom lines. Also, I suggest that before you
                          > >> > > > >> continue to
                          > >> > > > >> > hold the financial bottom line out as the standard that
                          > >> the
                          > >> > > > >> other non-
                          > >> > > > >> > financial bottom lines should adhere to, do not lose sight
                          > >> > > of the
                          > >> > > > >> > fact that the financial bottom line exported its social
                          > >> and
                          > >> > > > >> > environmental costs, precisely because it could not
                          > >> accommodate
                          > >> > > > >> them
                          > >> > > > >> > with its own so-called "common unit" unit of measure,
                          > >> as you
                          > >> > > put
                          > >> > > > >> it.
                          > >> > > > >> > So let's not pretend that the financial bottom line is
                          > >> some
                          > >> > > sort of
                          > >> > > > >> > paragon that the other bottom lines should be judged by.
                          > >> > > Last, me
                          > >> > > > >> > also say that your 2004 article was an outstanding
                          > >> piece of
                          > >> > > > >> work, and
                          > >> > > > >> > that what we (CSI) have done with our own Triple Bottom
                          > >> Line
                          > >> > > method
                          > >> > > > >> > (as announced this week) resolves, so far as we are
                          > >> concerned,
                          > >> > > > >> all of
                          > >> > > > >> > the issues and criticisms you and your co-author raised
                          > >> at that
                          > >> > > > >> time.
                          > >> > > > >> > If you do not see this, I suggest you look closer.
                          > >> Happy to
                          > >> > > discuss
                          > >> > > > >> > this further if you like. Regards, Mark
                          > >> > > > >> > ____________________
                          > >> > > > >> >
                          > >> > > > >> > Given the significance of Chris's criticisms and the
                          > >> > > importance of
                          > >> > > > >> > the topic in general, I decided to take the discussion
                          > >> over
                          > >> > > to this
                          > >> > > > >> > listserve, and have invited Chris to join us. It is my
                          > >> hope
                          > >> > > that he
                          > >> > > > >> > will do so.
                          > >> > > > >> >
                          > >> > > > >> > Regards,
                          > >> > > > >> >
                          > >> > > > >> > Mark
                          > >> > > > >> >
                          > >> > > > >> >
                          > >> > > > >> >
                          > >> > > > >> >
                          > >> > > > >> >
                          > >> > > > >> > Mark W. McElroy, Ph.D.
                          > >> > > > >> > Executive Director
                          > >> > > > >> > Center for Sustainable Innovation
                          > >> > > > >> > www.sustainableinnovation.org
                          > >> > > > >> > (802) 785-2293 (office)
                          > >> > > > >> > (802) 296-1928 (mobile)
                          > >> > > > >> >
                          > >> > > > >> > This message sent by a renewable-energy-powered computer
                          > >> > > > >> >
                          > >> > > > >>
                          > >> > > > >>
                          > >> > > > >
                          > >> > > > >
                          > >> > > > >
                          > >> > > >
                          > >> > >
                          > >> > >
                          > >> > >
                          > >> >
                          > >>
                          > >>
                          > >
                          > >
                          > >
                          >
                        • Mark W. McElroy
                          Chris: Actually, yes, there are a few key pieces missing from the discussion that I really should explain. In particular, the adding up of goods and
                          Message 12 of 20 , Apr 26 4:14 PM
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                            Chris:

                            Actually, yes, there are a few key pieces missing from the discussion that I really should explain.  In particular, the 'adding up of goods and subtracting the bads' premise you're relying on is mistaken, in my view.  That's really not how non-financial reporting works, nor how it should work, as we see it.  Moreover, it's not how financial reporting works, either.  Here I want to encourage you (and others) to think of organizational performance reporting as:  A process of measuring impacts on capitals relative to norms or duties for what such impacts ought to be.  Metrics for such measurements can usefully take the form of quotients, where numerators represent measured impacts on capitals, and denominators represent norms or duties for what such impacts ought to be.  Now let's apply these principles and see what we get, starting with financial reporting.

                            In financial reporting, income statements largely boil down to quotients of revenues over expenses.  The type of capital involved here is monetary capital.  The norm or duty represented by the denominator is a monetary value that the numerator (revenues) should at least equal (and hopefully exceed, the more so the better!) if the financial performance of the organization is to be viewed as sustainable, or solvent if you like.  Thus, quotient values that are greater than or equal to 1.0 in financial reporting signify sustainable performance.  Here I agree that there is adding and subtracting going on, but only in the calculation of the numerator and the denominator.  The key sustainability metric is subsequent to all of that and is a quotient, not a sum.  This is the logic of solvency, and it is arguably at the heart of what we mean by the 'financial bottom line'.

                            Here it should also be clear that there is a difference between measuring financial sustainability and measuring financial profitability.  For the former, all we care about is whether the quotient is greater than or equal to 1.0.  For the latter, we, too, want sustainability, of course, but we also want to maximize the ratio (i.e., maximize profits).  Not so for sustainability measures.  There, breaking even is good enough.  In this regard, sustainability measurement and reporting, like pregnancy, is 'binary'.  You're either one of the other, period.

                            Now take the same principles and apply them to non-financial measurement.  The first thing to understand is that the capitals are different.  In fact, there are four of them, and they are not fungible or substitutable with one another (this relates to the 'strong' vs. 'weak' sustainability point I made earlier).  I, and many others, take the 'strong' position as I just did, which is that the four capitals involved are not substitutable.  In other words, an organization cannot compensate for environmental bads by investing more in social goods.  Moreover, even good and bad impacts within individual categories of capital are not necessarily fungible or substitutable.  I can't be absolved of polluting the water table simply because I helped clean up the air, yet both are instances of natural capital.  The four capitals I speak of are natural, human, social, and constructed (or built).  I call the latter three anthro capital because they are anthropogenic; natural capital is not.

                            The implication of all of this is that (a) non-financial reporting necessarily involves the need to produce multiple social and environmental scores, (b) such multiple scores cannot be added up together very well because they are not fungible, and (c) such scores should be averaged, not summed, because again, they are not fungible, and to sum them up would be to take a weak sustainability position, as if social and environmental impacts share a common currency, which they do not!  This is why I say a good TBL bottom line for social and environmental performance -- if we must have single scores for each -- must be the result of averaging many scores, not adding and subtracting (although summing can occur beforehand as individual numerators and denominators are computed).

                            I also want to explain the logic of denominators further, because I see misconceptions there, too, but I'll stop now and let you react to the above before I do.

                            Regards,

                            Mark


                            Mark W. McElroy, Ph.D.
                            Executive Director
                            Center for Sustainable Innovation
                            www.sustainableinnovation.org
                            (802) 785-2293 (office)
                            (802) 296-1928 (mobile)

                            This message sent by a renewable-energy-powered computer




                            On Apr 26, 2009, at 4:01 PM, ethicsblogger wrote:



                            Mark:

                            Sounds like you're suggesting a (reasonably) method of SEAAR. And, as we tried to make clear in our paper, we're not against SEAAR. We're just against the *implication* of intercomparability that the accounting terminology implies (even if people overestimate financial accounting in that regard).

                            Annual reports still do generate a Bottom Line, right? Assets in dollars, liabilities in dollars. Higher number is better.

                            So, I think you're right to leave out weightings, but that looks (again) like taking an potentially- fuzzy financial concept and applying it to an even fuzzier case.

                            p.s. I'm still lacking a good, clear, simple example of how different categories of social goods & bads would be added together, if that's still part of the agenda. Reporting gender balance on the Board is good; reporting charitable donations is good; reporting collaboration with NGO's is good. But they cannot be added together. Am I still missing something?

                            Regards,
                            Chris.

                            --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
                            >
                            > All:
                            > 
                            > Upon further reflection of Chris's point about giving different 
                            > indicators different weights because of their arguably different 
                            > importance, I find myself leaning more strongly against it than for 
                            > it. While there is nothing in the TBL method we propose that would 
                            > prevent us from applying such variable weightings, Chris's point 
                            > about the desirability of bottom lines being commensurable or 
                            > comparable from one organization to another is a good one, I think. 
                            > But how can we have it both ways? How can we have variable 
                            > weightings and commensurable reporting, when no two organizations 
                            > will likely see the relative importance of various indicators the same?
                            > 
                            > The answer, I think, is to leave weightings out of reports 
                            > altogether, and to leave it to the readers or consumers of such 
                            > reports to apply their own weightings. Indeed, this is precisely 
                            > what we do with financial reports. The raw data, so to speak, is 
                            > disclosed in financial reports, without any attempt to weight the 
                            > numbers. The numbers are reported just as they are. Shareholders 
                            > are then free to attach more or less importance to the numbers they 
                            > read as they see fit. I see no reason to do things differently in 
                            > social and environmental reporting.
                            > 
                            > Regards,
                            > 
                            > Mark
                            > 
                            > 
                            > Mark W. McElroy, Ph.D.
                            > Executive Director
                            > Center for Sustainable Innovation
                            > www.sustainableinno vation.org
                            > (802) 785-2293 (office)
                            > (802) 296-1928 (mobile)
                            > 
                            > This message sent by a renewable-energy- powered computer
                            > 
                            > 
                            > 
                            > 
                            > On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:
                            > 
                            > >
                            > >
                            > > Chris:
                            > >
                            > >
                            > > The issue you raise is not with the method, it is with whether or 
                            > > not people can agree (or have agreed) on a weighting scheme, and 
                            > > also on specific indicators. The non-financial accounting method I 
                            > > propose is just as neutral on that issue as GAAP is on financial 
                            > > matters. GAAP stops at the level of categories, and leaves it to 
                            > > individual reporters to define their own underlying accounts. Are 
                            > > all companies' charts of accounts identical? Of course not. Why 
                            > > do you/we assume commensurability in that case but not in non- 
                            > > financial reporting? And why do you insist of having weighting 
                            > > applied in the case of non-financial reporting, but not in 
                            > > financial reporting? Let me put it this way, ASSUMING people can 
                            > > come to some agreement on metrics and weighting, the kind of 
                            > > comparability you refer to will be possible, but I'm not sure it's 
                            > > necessary.
                            > >
                            > > In the meantime, if individual companies want to pilot, test, and 
                            > > evaluate schemes of their own based on a proposed conceptual 
                            > > framework such as the one we propose, that seems like an entirely 
                            > > constructive step to take in my view. Consider the alternative: no 
                            > > meaningful non-financial measurement and reporting takes place at 
                            > > all. So let the individual claims about metrics compete in the 
                            > > intellectual marketplace, I say, and let us collectively take steps 
                            > > to evolve the kind of common index you and the rest of us would 
                            > > like to see. But in order to do that, we must have a conceptual 
                            > > framework in which such indicators and weighting schemes can fit, 
                            > > and that is precisely what we have created. If you want to talk 
                            > > about metrics, on the other hand, we have put a proposal forward 
                            > > for that, too (the True Sustainability Index), and so we can have 
                            > > that conversation, as well. But the TBL method we have proposed 
                            > > does not come crashing down simply because people haven't agreed on 
                            > > a choice of related metrics. Should GAAP come to a screeching halt 
                            > > simply because no two organizations' charts of accounts that use it 
                            > > are alike?
                            > >
                            > > Regards,
                            > >
                            > > Mark
                            > >
                            > >
                            > > Mark W. McElroy, Ph.D.
                            > > Executive Director
                            > > Center for Sustainable Innovation
                            > > www.sustainableinno vation.org
                            > > (802) 785-2293 (office)
                            > > (802) 296-1928 (mobile)
                            > >
                            > > This message sent by a renewable-energy- powered computer
                            > >
                            > >
                            > >
                            > >
                            > > On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:
                            > >
                            > >>
                            > >>
                            > >> Mark:
                            > >>
                            > >> Weight them "any way [I] like"?
                            > >>
                            > >> The weighting seems crucial. No one ever doubted that you could 
                            > >> apply numbers to these things. The problem is commensurability. If 
                            > >> I'm not weighting factors (for my company) the same way you are 
                            > >> for yours, we can't compare progress.
                            > >>
                            > >> Sounds fine for an system of internal tracking, but seems not to 
                            > >> live up to the term "bottom line".
                            > >>
                            > >> Regards,
                            > >> Chris.
                            > >>
                            > >> --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark 
                            > >> W. McElroy" <mmcelroy@> wrote:
                            > >> >
                            > >> > Chris:
                            > >> >
                            > >> > I agree with you. That's why I say on slide 35 that individual sub-
                            > >> > bottom line scores can be weighted. You're free to weight them any
                            > >> > way you like. The method is completely open to that.
                            > >> >
                            > >> > Regards,
                            > >> >
                            > >> > Mark
                            > >> >
                            > >> >
                            > >> > Mark W. McElroy, Ph.D.
                            > >> > Executive Director
                            > >> > Center for Sustainable Innovation
                            > >> > www.sustainableinno vation.org
                            > >> > (802) 785-2293 (office)
                            > >> > (802) 296-1928 (mobile)
                            > >> >
                            > >> > This message sent by a renewable-energy- powered computer
                            > >> >
                            > >> >
                            > >> >
                            > >> >
                            > >> > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                            > >> >
                            > >> > >
                            > >> > >
                            > >> > > Mark:
                            > >> > >
                            > >> > > Thanks.
                            > >> > >
                            > >> > > I still feel like -- having looked at the relevant documents 
                            > >> -- I'm
                            > >> > > lacking a good, clear, simple example of how the aggregation is
                            > >> > > supposed to work.
                            > >> > >
                            > >> > > But one thing that's clear is that the method involves averaging
                            > >> > > scores (for various sub-bottom-lines) . Averaging implies that all
                            > >> > > the factors being averaged are equally important. I don't see 
                            > >> what
                            > >> > > justifies that assumption.
                            > >> > >
                            > >> > > Chris.
                            > >> > >
                            > >> > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                            > >> > > W. McElroy" <mmcelroy@> wrote:
                            > >> > > >
                            > >> > > > All:
                            > >> > > >
                            > >> > > > Back in 2004, Chris MacDonald and his co-author, Wayne Norman,
                            > >> > > wrote:
                            > >> > > >
                            > >> > > > "Ultimately, we argue there are fundamental philosophical 
                            > >> grounds
                            > >> > > for
                            > >> > > > thinking that it is impossible to develop a sound 
                            > >> methodology for
                            > >> > > > arriving at a meaniningful social bottom line for a firm." They
                            > >> > > > added, "...the various values involved in evaluations of 
                            > >> corporate
                            > >> > > > behavior are 'incommensurable' ".
                            > >> > > >
                            > >> > > > For Chris's benefit, and others', I have added two slides to 
                            > >> this
                            > >> > > > presentation (slides 34 and 35), which show exactly how one can
                            > >> > > > calculate a quantitative (and 'blended') social bottom line 
                            > >> for a
                            > >> > > firm:
                            > >> > > >
                            > >> > > > http://www.sustaina bleinnovation. org/Recasting- TBL.pdf
                            > >> > > >
                            > >> > > > This, of course, occurs in the context of utilizing a general
                            > >> > > > methodology for assessing the social footprint of an 
                            > >> organization,
                            > >> > > > which can be done using the methodology we created called 
                            > >> the Social
                            > >> > > > Footprint Method. I hope Chris will chime in and comment on 
                            > >> all of
                            > >> > > > this.
                            > >> > > >
                            > >> > > > Regards,
                            > >> > > >
                            > >> > > > Mark
                            > >> > > >
                            > >> > > >
                            > >> > > > Mark W. McElroy, Ph.D.
                            > >> > > > Executive Director
                            > >> > > > Center for Sustainable Innovation
                            > >> > > > www.sustainableinno vation.org
                            > >> > > > (802) 785-2293 (office)
                            > >> > > > (802) 296-1928 (mobile)
                            > >> > > >
                            > >> > > > This message sent by a renewable-energy- powered computer
                            > >> > > >
                            > >> > > >
                            > >> > > >
                            > >> > > >
                            > >> > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
                            > >> > > >
                            > >> > > > >
                            > >> > > > >
                            > >> > > > > Chris:
                            > >> > > > >
                            > >> > > > >
                            > >> > > > > Thanks for joining in. As you might imagine, where to look 
                            > >> depends
                            > >> > > > > on what the specific issue is. It's a big topic with many
                            > >> > > > > dimensions. Our body of work is broad and deep, so rather 
                            > >> than
                            > >> > > > > send you off in multiple directions, let's take it one 
                            > >> step at a
                            > >> > > > > time. In your response to our press release yesterday, you 
                            > >> raised
                            > >> > > > > several issues about TBL theory in general, and the 
                            > >> problems our
                            > >> > > > > own method may or may not have resolved. So let's take 
                            > >> each of the
                            > >> > > > > issues and criticisms you raised this week (and in your 
                            > >> very fine
                            > >> > > > > article in 2004) one at a time, and explain how we (on 
                            > >> this end)
                            > >> > > > > think we have resolved them. You go first. In the 
                            > >> meantime, let
                            > >> > > > > me answer your question about why we should keep using the
                            > >> > > > > metaphor. Three responses:
                            > >> > > > >
                            > >> > > > > 1) The metaphor is valuable in helping to call attention 
                            > >> to the
                            > >> > > > > fact that businesses have real social and environmental
                            > >> > > obligations
                            > >> > > > > to people in the world, not just financial ones. Moreover, 
                            > >> the
                            > >> > > > > financial bottom line concept is itself imperfect. Its 
                            > >> "common
                            > >> > > > > unit of measure" is no less illusory there than it may be 
                            > >> on other
                            > >> > > > > fronts, and yet the language of the metaphor has been useful
                            > >> > > > > there. Why not reap its value on the social and environmental
                            > >> > > > > fronts, as well, I wonder?
                            > >> > > > >
                            > >> > > > > 2) It is, in fact, possible, we think, to compute aggregated
                            > >> > > social
                            > >> > > > > and environmental bottom lines at the organizational level of
                            > >> > > > > analysis. Whether or not it makes sense to do so is another
                            > >> > > > > matter. I hesitate to explain how to do this now, since we 
                            > >> are
                            > >> > > > > just getting started in this conversation. Happy to 
                            > >> proceed at
                            > >> > > > > your pace. Just ask.
                            > >> > > > >
                            > >> > > > > 3) The term has taken on a life of its own. It has legs. 
                            > >> It has
                            > >> > > > > emotional value. Why not keep it for what it's worth and 
                            > >> just deal
                            > >> > > > > with its imperfections?
                            > >> > > > >
                            > >> > > > > Regards,
                            > >> > > > >
                            > >> > > > > Mark
                            > >> > > > >
                            > >> > > > >
                            > >> > > > > Mark W. McElroy, Ph.D.
                            > >> > > > > Executive Director
                            > >> > > > > Center for Sustainable Innovation
                            > >> > > > > www.sustainableinno vation.org
                            > >> > > > > (802) 785-2293 (office)
                            > >> > > > > (802) 296-1928 (mobile)
                            > >> > > > >
                            > >> > > > > This message sent by a renewable-energy- powered computer
                            > >> > > > >
                            > >> > > > >
                            > >> > > > >
                            > >> > > > >
                            > >> > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                            > >> > > > >
                            > >> > > > >>
                            > >> > > > >>
                            > >> > > > >> Mark:
                            > >> > > > >>
                            > >> > > > >> You suggest I look closer...is the "Re-Casting" document the
                            > >> > > place
                            > >> > > > >> to look? Or is there another source?
                            > >> > > > >>
                            > >> > > > >> If the bottom lines are going to multiply, then the 
                            > >> aggregation
                            > >> > > > >> gets easier, certainly. But the misleadingness of the 
                            > >> metaphor
                            > >> > > > >> still worries me...if the financial bottom line (and 
                            > >> accounting
                            > >> > > > >> more generally) stops being a good analogy, why keep 
                            > >> using that
                            > >> > > > >> language?
                            > >> > > > >>
                            > >> > > > >> Regards,
                            > >> > > > >>
                            > >> > > > >> Chris.
                            > >> > > > >>
                            > >> > > > >> --- In 
                            > >> Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                            > >> > > > >> W. McElroy" <mmcelroy@> wrote:
                            > >> > > > >> >
                            > >> > > > >> > Dear Friends:
                            > >> > > > >> >
                            > >> > > > >> > Earlier this week, we (CSI) issued a press release 
                            > >> regarding an
                            > >> > > > >> award
                            > >> > > > >> > we received from the State of Vermont for our general
                            > >> > > approach to
                            > >> > > > >> > Triple Bottom Line measurement, management, and reporting.
                            > >> > > Here's
                            > >> > > > >> > the release:
                            > >> > > > >> >
                            > >> > > > >> > http://www.csrwire. com/News/ 15105.html
                            > >> > > > >> >
                            > >> > > > >> > Afterwards, a comment about the release was posted by 
                            > >> Chris
                            > >> > > > >> > MacDonald, who questioned the design and effectiveness 
                            > >> of our
                            > >> > > > >> > method. His post appeared on the same page as our
                            > >> > > announcement as
                            > >> > > > >> > you will see from the link above. There you will also 
                            > >> see my
                            > >> > > > >> > response to Chris, and one or two more rounds of chatter
                            > >> > > between
                            > >> > > > >> us.
                            > >> > > > >> > Here is that exchange:
                            > >> > > > >> >
                            > >> > > > >> > Chris MacDonald 2009-04-23 02:36:30
                            > >> > > > >> > As far as I can see, they haven't overcome the problem of
                            > >> > > finding a
                            > >> > > > >> > common unit of measure for social goods and bads, or for
                            > >> > > ecological
                            > >> > > > >> > ones. The example provided in the "Recasting" report
                            > >> > > involves using
                            > >> > > > >> > monetary measures for social issues (i.e., teen 
                            > >> pregnancy is
                            > >> > > > >> > understood in terms of its impact on financial
                            > >> > > productivity) . It
                            > >> > > > >> > seems unlikely, at best, that all socially-relevant issues
                            > >> > > can be
                            > >> > > > >> > cast in financial terms. I think it's telling that, to 
                            > >> date,
                            > >> > > there
                            > >> > > > >> > has been no satisfactory reply, from TBL advocates, to the
                            > >> > > critique
                            > >> > > > >> > offered here: "Getting to the Bottom of 'Triple Bottom 
                            > >> Line'."
                            > >> > > > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
                            > >> > > > >> >
                            > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                            > >> > > > >> >
                            > >> > > > >> > Chris, I will respond only to what you have said here, and
                            > >> > > not your
                            > >> > > > >> > 2004 paper. That we can discuss elsewhere, if you like. 
                            > >> That
                            > >> > > said,
                            > >> > > > >> > your criticism here is not a criticism at all, in my view,
                            > >> > > > >> because it
                            > >> > > > >> > is predicated on a supposed problem ("of finding a common
                            > >> > > unit of
                            > >> > > > >> > measure for social goods and bads....") that does not 
                            > >> exist.
                            > >> > > You
                            > >> > > > >> seem
                            > >> > > > >> > to want to take a 'weak' sustainability stance, whereas 
                            > >> I and
                            > >> > > > >> others
                            > >> > > > >> > take a 'strong' one, in which capitals are not 
                            > >> substitutable
                            > >> > > and
                            > >> > > > >> > aggregation (i.e., your "common unit" idea) is ill 
                            > >> conceived.
                            > >> > > > >> Absent
                            > >> > > > >> > your starting premise, then, your criticisms fade away, 
                            > >> one and
                            > >> > > > >> all.
                            > >> > > > >> >
                            > >> > > > >> > Chris MacDonald 2009-04-23 12:28:57
                            > >> > > > >> >
                            > >> > > > >> > Mark: Thanks for taking the time to reply. I don't have 
                            > >> a view
                            > >> > > > >> on the
                            > >> > > > >> > "strong vs. week." I just thought that the idea of a 
                            > >> "bottom
                            > >> > > line"
                            > >> > > > >> > requires adding stuff up. And adding stuff up requires 
                            > >> a common
                            > >> > > > >> unit.
                            > >> > > > >> > Maybe you're not after a bottom line at all, which is 
                            > >> fine.
                            > >> > > Chris.
                            > >> > > > >> >
                            > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                            > >> > > > >> >
                            > >> > > > >> > Chris, I am indeed after a bottom line, but I don't agree
                            > >> > > that it
                            > >> > > > >> > necessarily entails single bottom lines for social or
                            > >> > > environmental
                            > >> > > > >> > performance, respectively. I think the three-bottom- line
                            > >> > > > >> metaphor is
                            > >> > > > >> > more forgiving than that. I prefer to think of it as three
                            > >> > > > >> categories
                            > >> > > > >> > of multiple bottom lines. Also, I suggest that before you
                            > >> > > > >> continue to
                            > >> > > > >> > hold the financial bottom line out as the standard that 
                            > >> the
                            > >> > > > >> other non-
                            > >> > > > >> > financial bottom lines should adhere to, do not lose sight
                            > >> > > of the
                            > >> > > > >> > fact that the financial bottom line exported its social 
                            > >> and
                            > >> > > > >> > environmental costs, precisely because it could not 
                            > >> accommodate
                            > >> > > > >> them
                            > >> > > > >> > with its own so-called "common unit" unit of measure, 
                            > >> as you
                            > >> > > put
                            > >> > > > >> it.
                            > >> > > > >> > So let's not pretend that the financial bottom line is 
                            > >> some
                            > >> > > sort of
                            > >> > > > >> > paragon that the other bottom lines should be judged by.
                            > >> > > Last, me
                            > >> > > > >> > also say that your 2004 article was an outstanding 
                            > >> piece of
                            > >> > > > >> work, and
                            > >> > > > >> > that what we (CSI) have done with our own Triple Bottom 
                            > >> Line
                            > >> > > method
                            > >> > > > >> > (as announced this week) resolves, so far as we are 
                            > >> concerned,
                            > >> > > > >> all of
                            > >> > > > >> > the issues and criticisms you and your co-author raised 
                            > >> at that
                            > >> > > > >> time.
                            > >> > > > >> > If you do not see this, I suggest you look closer. 
                            > >> Happy to
                            > >> > > discuss
                            > >> > > > >> > this further if you like. Regards, Mark
                            > >> > > > >> > ____________ ________
                            > >> > > > >> >
                            > >> > > > >> > Given the significance of Chris's criticisms and the
                            > >> > > importance of
                            > >> > > > >> > the topic in general, I decided to take the discussion 
                            > >> over
                            > >> > > to this
                            > >> > > > >> > listserve, and have invited Chris to join us. It is my 
                            > >> hope
                            > >> > > that he
                            > >> > > > >> > will do so.
                            > >> > > > >> >
                            > >> > > > >> > Regards,
                            > >> > > > >> >
                            > >> > > > >> > Mark
                            > >> > > > >> >
                            > >> > > > >> >
                            > >> > > > >> >
                            > >> > > > >> >
                            > >> > > > >> >
                            > >> > > > >> > Mark W. McElroy, Ph.D.
                            > >> > > > >> > Executive Director
                            > >> > > > >> > Center for Sustainable Innovation
                            > >> > > > >> > www.sustainableinno vation.org
                            > >> > > > >> > (802) 785-2293 (office)
                            > >> > > > >> > (802) 296-1928 (mobile)
                            > >> > > > >> >
                            > >> > > > >> > This message sent by a renewable-energy- powered computer
                            > >> > > > >> >
                            > >> > > > >>
                            > >> > > > >>
                            > >> > > > >
                            > >> > > > >
                            > >> > > > >
                            > >> > > >
                            > >> > >
                            > >> > >
                            > >> > >
                            > >> >
                            > >>
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                            > >
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                          • ethicsblogger
                            Mark: That s a lot to chew on. I won t try to reply to it all. Where do we get the norms or duties for what such impacts ought to be ? Is there (or is there
                            Message 13 of 20 , Apr 27 8:41 AM
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                              Mark:

                              That's a lot to chew on. I won't try to reply to it all.

                              Where do we get the "norms or duties for what such impacts ought to be"? Is there (or is there likely to be) something like GAAP for that?

                              I need help with the idea that "In financial reporting, income statements largely boil down to quotients." I take it you mean they can be interpreted that way; they're not usually presented that way, right? That's fine. Where does the numerator come from? And what unit is the "The norm or duty represented by the denominator" in? Dollars? I'm just trying to picture this clearly. I've never heard of financial accounting described this way, so I want to be clear.

                              Next: the idea that in non-financial accounting there are to be precisely 4 non-substitutable "capitals" immediately gets you into huge, probably intracable, philosophical problems. You've got to make hugely contentious normative claims to do that. Maybe you can get away with that, for the relevant audiences.

                              I'm also confused by the idea that"such scores should be averaged, not summed, because again, they are not fungible." Seems to me that you cannot meaningfully average things that are not fungible. Averaging means adding together & dividing by the number of items added. How can you meaningfully add together things that aren't commensurable?

                              Regards,
                              Chris.

                              --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark W. McElroy" <mmcelroy@...> wrote:
                              >
                              > Chris:
                              >
                              > Actually, yes, there are a few key pieces missing from the discussion
                              > that I really should explain. In particular, the 'adding up of goods
                              > and subtracting the bads' premise you're relying on is mistaken, in
                              > my view. That's really not how non-financial reporting works, nor
                              > how it should work, as we see it. Moreover, it's not how financial
                              > reporting works, either. Here I want to encourage you (and others)
                              > to think of organizational performance reporting as: A process of
                              > measuring impacts on capitals relative to norms or duties for what
                              > such impacts ought to be. Metrics for such measurements can usefully
                              > take the form of quotients, where numerators represent measured
                              > impacts on capitals, and denominators represent norms or duties for
                              > what such impacts ought to be. Now let's apply these principles and
                              > see what we get, starting with financial reporting.
                              >
                              > In financial reporting, income statements largely boil down to
                              > quotients of revenues over expenses. The type of capital involved
                              > here is monetary capital. The norm or duty represented by the
                              > denominator is a monetary value that the numerator (revenues) should
                              > at least equal (and hopefully exceed, the more so the better!) if the
                              > financial performance of the organization is to be viewed as
                              > sustainable, or solvent if you like. Thus, quotient values that are
                              > greater than or equal to 1.0 in financial reporting signify
                              > sustainable performance. Here I agree that there is adding and
                              > subtracting going on, but only in the calculation of the numerator
                              > and the denominator. The key sustainability metric is subsequent to
                              > all of that and is a quotient, not a sum. This is the logic of
                              > solvency, and it is arguably at the heart of what we mean by the
                              > 'financial bottom line'.
                              >
                              > Here it should also be clear that there is a difference between
                              > measuring financial sustainability and measuring financial
                              > profitability. For the former, all we care about is whether the
                              > quotient is greater than or equal to 1.0. For the latter, we, too,
                              > want sustainability, of course, but we also want to maximize the
                              > ratio (i.e., maximize profits). Not so for sustainability measures.
                              > There, breaking even is good enough. In this regard, sustainability
                              > measurement and reporting, like pregnancy, is 'binary'. You're
                              > either one of the other, period.
                              >
                              > Now take the same principles and apply them to non-financial
                              > measurement. The first thing to understand is that the capitals are
                              > different. In fact, there are four of them, and they are not
                              > fungible or substitutable with one another (this relates to the
                              > 'strong' vs. 'weak' sustainability point I made earlier). I, and
                              > many others, take the 'strong' position as I just did, which is that
                              > the four capitals involved are not substitutable. In other words, an
                              > organization cannot compensate for environmental bads by investing
                              > more in social goods. Moreover, even good and bad impacts within
                              > individual categories of capital are not necessarily fungible or
                              > substitutable. I can't be absolved of polluting the water table
                              > simply because I helped clean up the air, yet both are instances of
                              > natural capital. The four capitals I speak of are natural, human,
                              > social, and constructed (or built). I call the latter three anthro
                              > capital because they are anthropogenic; natural capital is not.
                              >
                              > The implication of all of this is that (a) non-financial reporting
                              > necessarily involves the need to produce multiple social and
                              > environmental scores, (b) such multiple scores cannot be added up
                              > together very well because they are not fungible, and (c) such scores
                              > should be averaged, not summed, because again, they are not fungible,
                              > and to sum them up would be to take a weak sustainability position,
                              > as if social and environmental impacts share a common currency, which
                              > they do not! This is why I say a good TBL bottom line for social and
                              > environmental performance -- if we must have single scores for each
                              > -- must be the result of averaging many scores, not adding and
                              > subtracting (although summing can occur beforehand as individual
                              > numerators and denominators are computed).
                              >
                              > I also want to explain the logic of denominators further, because I
                              > see misconceptions there, too, but I'll stop now and let you react to
                              > the above before I do.
                              >
                              > Regards,
                              >
                              > Mark
                              >
                              >
                              > Mark W. McElroy, Ph.D.
                              > Executive Director
                              > Center for Sustainable Innovation
                              > www.sustainableinnovation.org
                              > (802) 785-2293 (office)
                              > (802) 296-1928 (mobile)
                              >
                              > This message sent by a renewable-energy-powered computer
                              >
                              >
                              >
                              >
                              > On Apr 26, 2009, at 4:01 PM, ethicsblogger wrote:
                              >
                              > >
                              > >
                              > > Mark:
                              > >
                              > > Sounds like you're suggesting a (reasonably) method of SEAAR. And,
                              > > as we tried to make clear in our paper, we're not against SEAAR.
                              > > We're just against the *implication* of intercomparability that the
                              > > accounting terminology implies (even if people overestimate
                              > > financial accounting in that regard).
                              > >
                              > > Annual reports still do generate a Bottom Line, right? Assets in
                              > > dollars, liabilities in dollars. Higher number is better.
                              > >
                              > > So, I think you're right to leave out weightings, but that looks
                              > > (again) like taking an potentially-fuzzy financial concept and
                              > > applying it to an even fuzzier case.
                              > >
                              > > p.s. I'm still lacking a good, clear, simple example of how
                              > > different categories of social goods & bads would be added
                              > > together, if that's still part of the agenda. Reporting gender
                              > > balance on the Board is good; reporting charitable donations is
                              > > good; reporting collaboration with NGO's is good. But they cannot
                              > > be added together. Am I still missing something?
                              > >
                              > > Regards,
                              > > Chris.
                              > >
                              > > --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                              > > W. McElroy" <mmcelroy@> wrote:
                              > > >
                              > > > All:
                              > > >
                              > > > Upon further reflection of Chris's point about giving different
                              > > > indicators different weights because of their arguably different
                              > > > importance, I find myself leaning more strongly against it than for
                              > > > it. While there is nothing in the TBL method we propose that would
                              > > > prevent us from applying such variable weightings, Chris's point
                              > > > about the desirability of bottom lines being commensurable or
                              > > > comparable from one organization to another is a good one, I think.
                              > > > But how can we have it both ways? How can we have variable
                              > > > weightings and commensurable reporting, when no two organizations
                              > > > will likely see the relative importance of various indicators the
                              > > same?
                              > > >
                              > > > The answer, I think, is to leave weightings out of reports
                              > > > altogether, and to leave it to the readers or consumers of such
                              > > > reports to apply their own weightings. Indeed, this is precisely
                              > > > what we do with financial reports. The raw data, so to speak, is
                              > > > disclosed in financial reports, without any attempt to weight the
                              > > > numbers. The numbers are reported just as they are. Shareholders
                              > > > are then free to attach more or less importance to the numbers they
                              > > > read as they see fit. I see no reason to do things differently in
                              > > > social and environmental reporting.
                              > > >
                              > > > Regards,
                              > > >
                              > > > Mark
                              > > >
                              > > >
                              > > > Mark W. McElroy, Ph.D.
                              > > > Executive Director
                              > > > Center for Sustainable Innovation
                              > > > www.sustainableinnovation.org
                              > > > (802) 785-2293 (office)
                              > > > (802) 296-1928 (mobile)
                              > > >
                              > > > This message sent by a renewable-energy-powered computer
                              > > >
                              > > >
                              > > >
                              > > >
                              > > > On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:
                              > > >
                              > > > >
                              > > > >
                              > > > > Chris:
                              > > > >
                              > > > >
                              > > > > The issue you raise is not with the method, it is with whether or
                              > > > > not people can agree (or have agreed) on a weighting scheme, and
                              > > > > also on specific indicators. The non-financial accounting method I
                              > > > > propose is just as neutral on that issue as GAAP is on financial
                              > > > > matters. GAAP stops at the level of categories, and leaves it to
                              > > > > individual reporters to define their own underlying accounts. Are
                              > > > > all companies' charts of accounts identical? Of course not. Why
                              > > > > do you/we assume commensurability in that case but not in non-
                              > > > > financial reporting? And why do you insist of having weighting
                              > > > > applied in the case of non-financial reporting, but not in
                              > > > > financial reporting? Let me put it this way, ASSUMING people can
                              > > > > come to some agreement on metrics and weighting, the kind of
                              > > > > comparability you refer to will be possible, but I'm not sure it's
                              > > > > necessary.
                              > > > >
                              > > > > In the meantime, if individual companies want to pilot, test, and
                              > > > > evaluate schemes of their own based on a proposed conceptual
                              > > > > framework such as the one we propose, that seems like an entirely
                              > > > > constructive step to take in my view. Consider the alternative: no
                              > > > > meaningful non-financial measurement and reporting takes place at
                              > > > > all. So let the individual claims about metrics compete in the
                              > > > > intellectual marketplace, I say, and let us collectively take
                              > > steps
                              > > > > to evolve the kind of common index you and the rest of us would
                              > > > > like to see. But in order to do that, we must have a conceptual
                              > > > > framework in which such indicators and weighting schemes can fit,
                              > > > > and that is precisely what we have created. If you want to talk
                              > > > > about metrics, on the other hand, we have put a proposal forward
                              > > > > for that, too (the True Sustainability Index), and so we can have
                              > > > > that conversation, as well. But the TBL method we have proposed
                              > > > > does not come crashing down simply because people haven't
                              > > agreed on
                              > > > > a choice of related metrics. Should GAAP come to a screeching halt
                              > > > > simply because no two organizations' charts of accounts that
                              > > use it
                              > > > > are alike?
                              > > > >
                              > > > > Regards,
                              > > > >
                              > > > > Mark
                              > > > >
                              > > > >
                              > > > > Mark W. McElroy, Ph.D.
                              > > > > Executive Director
                              > > > > Center for Sustainable Innovation
                              > > > > www.sustainableinnovation.org
                              > > > > (802) 785-2293 (office)
                              > > > > (802) 296-1928 (mobile)
                              > > > >
                              > > > > This message sent by a renewable-energy-powered computer
                              > > > >
                              > > > >
                              > > > >
                              > > > >
                              > > > > On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:
                              > > > >
                              > > > >>
                              > > > >>
                              > > > >> Mark:
                              > > > >>
                              > > > >> Weight them "any way [I] like"?
                              > > > >>
                              > > > >> The weighting seems crucial. No one ever doubted that you could
                              > > > >> apply numbers to these things. The problem is
                              > > commensurability. If
                              > > > >> I'm not weighting factors (for my company) the same way you are
                              > > > >> for yours, we can't compare progress.
                              > > > >>
                              > > > >> Sounds fine for an system of internal tracking, but seems not to
                              > > > >> live up to the term "bottom line".
                              > > > >>
                              > > > >> Regards,
                              > > > >> Chris.
                              > > > >>
                              > > > >> --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                              > > > >> W. McElroy" <mmcelroy@> wrote:
                              > > > >> >
                              > > > >> > Chris:
                              > > > >> >
                              > > > >> > I agree with you. That's why I say on slide 35 that
                              > > individual sub-
                              > > > >> > bottom line scores can be weighted. You're free to weight
                              > > them any
                              > > > >> > way you like. The method is completely open to that.
                              > > > >> >
                              > > > >> > Regards,
                              > > > >> >
                              > > > >> > Mark
                              > > > >> >
                              > > > >> >
                              > > > >> > Mark W. McElroy, Ph.D.
                              > > > >> > Executive Director
                              > > > >> > Center for Sustainable Innovation
                              > > > >> > www.sustainableinnovation.org
                              > > > >> > (802) 785-2293 (office)
                              > > > >> > (802) 296-1928 (mobile)
                              > > > >> >
                              > > > >> > This message sent by a renewable-energy-powered computer
                              > > > >> >
                              > > > >> >
                              > > > >> >
                              > > > >> >
                              > > > >> > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                              > > > >> >
                              > > > >> > >
                              > > > >> > >
                              > > > >> > > Mark:
                              > > > >> > >
                              > > > >> > > Thanks.
                              > > > >> > >
                              > > > >> > > I still feel like -- having looked at the relevant documents
                              > > > >> -- I'm
                              > > > >> > > lacking a good, clear, simple example of how the
                              > > aggregation is
                              > > > >> > > supposed to work.
                              > > > >> > >
                              > > > >> > > But one thing that's clear is that the method involves
                              > > averaging
                              > > > >> > > scores (for various sub-bottom-lines). Averaging implies
                              > > that all
                              > > > >> > > the factors being averaged are equally important. I don't see
                              > > > >> what
                              > > > >> > > justifies that assumption.
                              > > > >> > >
                              > > > >> > > Chris.
                              > > > >> > >
                              > > > >> > > --- In
                              > > Corporate_Sustainability_Management@yahoogroups.com, "Mark
                              > > > >> > > W. McElroy" <mmcelroy@> wrote:
                              > > > >> > > >
                              > > > >> > > > All:
                              > > > >> > > >
                              > > > >> > > > Back in 2004, Chris MacDonald and his co-author, Wayne
                              > > Norman,
                              > > > >> > > wrote:
                              > > > >> > > >
                              > > > >> > > > "Ultimately, we argue there are fundamental philosophical
                              > > > >> grounds
                              > > > >> > > for
                              > > > >> > > > thinking that it is impossible to develop a sound
                              > > > >> methodology for
                              > > > >> > > > arriving at a meaniningful social bottom line for a
                              > > firm." They
                              > > > >> > > > added, "...the various values involved in evaluations of
                              > > > >> corporate
                              > > > >> > > > behavior are 'incommensurable' ".
                              > > > >> > > >
                              > > > >> > > > For Chris's benefit, and others', I have added two
                              > > slides to
                              > > > >> this
                              > > > >> > > > presentation (slides 34 and 35), which show exactly how
                              > > one can
                              > > > >> > > > calculate a quantitative (and 'blended') social bottom line
                              > > > >> for a
                              > > > >> > > firm:
                              > > > >> > > >
                              > > > >> > > > http://www.sustainableinnovation.org/Recasting-TBL.pdf
                              > > > >> > > >
                              > > > >> > > > This, of course, occurs in the context of utilizing a
                              > > general
                              > > > >> > > > methodology for assessing the social footprint of an
                              > > > >> organization,
                              > > > >> > > > which can be done using the methodology we created called
                              > > > >> the Social
                              > > > >> > > > Footprint Method. I hope Chris will chime in and comment on
                              > > > >> all of
                              > > > >> > > > this.
                              > > > >> > > >
                              > > > >> > > > Regards,
                              > > > >> > > >
                              > > > >> > > > Mark
                              > > > >> > > >
                              > > > >> > > >
                              > > > >> > > > Mark W. McElroy, Ph.D.
                              > > > >> > > > Executive Director
                              > > > >> > > > Center for Sustainable Innovation
                              > > > >> > > > www.sustainableinnovation.org
                              > > > >> > > > (802) 785-2293 (office)
                              > > > >> > > > (802) 296-1928 (mobile)
                              > > > >> > > >
                              > > > >> > > > This message sent by a renewable-energy-powered computer
                              > > > >> > > >
                              > > > >> > > >
                              > > > >> > > >
                              > > > >> > > >
                              > > > >> > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
                              > > > >> > > >
                              > > > >> > > > >
                              > > > >> > > > >
                              > > > >> > > > > Chris:
                              > > > >> > > > >
                              > > > >> > > > >
                              > > > >> > > > > Thanks for joining in. As you might imagine, where to
                              > > look
                              > > > >> depends
                              > > > >> > > > > on what the specific issue is. It's a big topic with many
                              > > > >> > > > > dimensions. Our body of work is broad and deep, so rather
                              > > > >> than
                              > > > >> > > > > send you off in multiple directions, let's take it one
                              > > > >> step at a
                              > > > >> > > > > time. In your response to our press release yesterday,
                              > > you
                              > > > >> raised
                              > > > >> > > > > several issues about TBL theory in general, and the
                              > > > >> problems our
                              > > > >> > > > > own method may or may not have resolved. So let's take
                              > > > >> each of the
                              > > > >> > > > > issues and criticisms you raised this week (and in your
                              > > > >> very fine
                              > > > >> > > > > article in 2004) one at a time, and explain how we (on
                              > > > >> this end)
                              > > > >> > > > > think we have resolved them. You go first. In the
                              > > > >> meantime, let
                              > > > >> > > > > me answer your question about why we should keep using
                              > > the
                              > > > >> > > > > metaphor. Three responses:
                              > > > >> > > > >
                              > > > >> > > > > 1) The metaphor is valuable in helping to call attention
                              > > > >> to the
                              > > > >> > > > > fact that businesses have real social and environmental
                              > > > >> > > obligations
                              > > > >> > > > > to people in the world, not just financial ones.
                              > > Moreover,
                              > > > >> the
                              > > > >> > > > > financial bottom line concept is itself imperfect. Its
                              > > > >> "common
                              > > > >> > > > > unit of measure" is no less illusory there than it may be
                              > > > >> on other
                              > > > >> > > > > fronts, and yet the language of the metaphor has been
                              > > useful
                              > > > >> > > > > there. Why not reap its value on the social and
                              > > environmental
                              > > > >> > > > > fronts, as well, I wonder?
                              > > > >> > > > >
                              > > > >> > > > > 2) It is, in fact, possible, we think, to compute
                              > > aggregated
                              > > > >> > > social
                              > > > >> > > > > and environmental bottom lines at the organizational
                              > > level of
                              > > > >> > > > > analysis. Whether or not it makes sense to do so is
                              > > another
                              > > > >> > > > > matter. I hesitate to explain how to do this now,
                              > > since we
                              > > > >> are
                              > > > >> > > > > just getting started in this conversation. Happy to
                              > > > >> proceed at
                              > > > >> > > > > your pace. Just ask.
                              > > > >> > > > >
                              > > > >> > > > > 3) The term has taken on a life of its own. It has legs.
                              > > > >> It has
                              > > > >> > > > > emotional value. Why not keep it for what it's worth and
                              > > > >> just deal
                              > > > >> > > > > with its imperfections?
                              > > > >> > > > >
                              > > > >> > > > > Regards,
                              > > > >> > > > >
                              > > > >> > > > > Mark
                              > > > >> > > > >
                              > > > >> > > > >
                              > > > >> > > > > Mark W. McElroy, Ph.D.
                              > > > >> > > > > Executive Director
                              > > > >> > > > > Center for Sustainable Innovation
                              > > > >> > > > > www.sustainableinnovation.org
                              > > > >> > > > > (802) 785-2293 (office)
                              > > > >> > > > > (802) 296-1928 (mobile)
                              > > > >> > > > >
                              > > > >> > > > > This message sent by a renewable-energy-powered computer
                              > > > >> > > > >
                              > > > >> > > > >
                              > > > >> > > > >
                              > > > >> > > > >
                              > > > >> > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                              > > > >> > > > >
                              > > > >> > > > >>
                              > > > >> > > > >>
                              > > > >> > > > >> Mark:
                              > > > >> > > > >>
                              > > > >> > > > >> You suggest I look closer...is the "Re-Casting"
                              > > document the
                              > > > >> > > place
                              > > > >> > > > >> to look? Or is there another source?
                              > > > >> > > > >>
                              > > > >> > > > >> If the bottom lines are going to multiply, then the
                              > > > >> aggregation
                              > > > >> > > > >> gets easier, certainly. But the misleadingness of the
                              > > > >> metaphor
                              > > > >> > > > >> still worries me...if the financial bottom line (and
                              > > > >> accounting
                              > > > >> > > > >> more generally) stops being a good analogy, why keep
                              > > > >> using that
                              > > > >> > > > >> language?
                              > > > >> > > > >>
                              > > > >> > > > >> Regards,
                              > > > >> > > > >>
                              > > > >> > > > >> Chris.
                              > > > >> > > > >>
                              > > > >> > > > >> --- In
                              > > > >> Corporate_Sustainability_Management@yahoogroups.com, "Mark
                              > > > >> > > > >> W. McElroy" <mmcelroy@> wrote:
                              > > > >> > > > >> >
                              > > > >> > > > >> > Dear Friends:
                              > > > >> > > > >> >
                              > > > >> > > > >> > Earlier this week, we (CSI) issued a press release
                              > > > >> regarding an
                              > > > >> > > > >> award
                              > > > >> > > > >> > we received from the State of Vermont for our general
                              > > > >> > > approach to
                              > > > >> > > > >> > Triple Bottom Line measurement, management, and
                              > > reporting.
                              > > > >> > > Here's
                              > > > >> > > > >> > the release:
                              > > > >> > > > >> >
                              > > > >> > > > >> > http://www.csrwire.com/News/15105.html
                              > > > >> > > > >> >
                              > > > >> > > > >> > Afterwards, a comment about the release was posted by
                              > > > >> Chris
                              > > > >> > > > >> > MacDonald, who questioned the design and effectiveness
                              > > > >> of our
                              > > > >> > > > >> > method. His post appeared on the same page as our
                              > > > >> > > announcement as
                              > > > >> > > > >> > you will see from the link above. There you will also
                              > > > >> see my
                              > > > >> > > > >> > response to Chris, and one or two more rounds of
                              > > chatter
                              > > > >> > > between
                              > > > >> > > > >> us.
                              > > > >> > > > >> > Here is that exchange:
                              > > > >> > > > >> >
                              > > > >> > > > >> > Chris MacDonald 2009-04-23 02:36:30
                              > > > >> > > > >> > As far as I can see, they haven't overcome the
                              > > problem of
                              > > > >> > > finding a
                              > > > >> > > > >> > common unit of measure for social goods and bads,
                              > > or for
                              > > > >> > > ecological
                              > > > >> > > > >> > ones. The example provided in the "Recasting" report
                              > > > >> > > involves using
                              > > > >> > > > >> > monetary measures for social issues (i.e., teen
                              > > > >> pregnancy is
                              > > > >> > > > >> > understood in terms of its impact on financial
                              > > > >> > > productivity). It
                              > > > >> > > > >> > seems unlikely, at best, that all socially-relevant
                              > > issues
                              > > > >> > > can be
                              > > > >> > > > >> > cast in financial terms. I think it's telling that, to
                              > > > >> date,
                              > > > >> > > there
                              > > > >> > > > >> > has been no satisfactory reply, from TBL advocates,
                              > > to the
                              > > > >> > > critique
                              > > > >> > > > >> > offered here: "Getting to the Bottom of 'Triple Bottom
                              > > > >> Line'."
                              > > > >> > > > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
                              > > > >> > > > >> >
                              > > > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                              > > > >> > > > >> >
                              > > > >> > > > >> > Chris, I will respond only to what you have said
                              > > here, and
                              > > > >> > > not your
                              > > > >> > > > >> > 2004 paper. That we can discuss elsewhere, if you
                              > > like.
                              > > > >> That
                              > > > >> > > said,
                              > > > >> > > > >> > your criticism here is not a criticism at all, in
                              > > my view,
                              > > > >> > > > >> because it
                              > > > >> > > > >> > is predicated on a supposed problem ("of finding a
                              > > common
                              > > > >> > > unit of
                              > > > >> > > > >> > measure for social goods and bads....") that does not
                              > > > >> exist.
                              > > > >> > > You
                              > > > >> > > > >> seem
                              > > > >> > > > >> > to want to take a 'weak' sustainability stance,
                              > > whereas
                              > > > >> I and
                              > > > >> > > > >> others
                              > > > >> > > > >> > take a 'strong' one, in which capitals are not
                              > > > >> substitutable
                              > > > >> > > and
                              > > > >> > > > >> > aggregation (i.e., your "common unit" idea) is ill
                              > > > >> conceived.
                              > > > >> > > > >> Absent
                              > > > >> > > > >> > your starting premise, then, your criticisms fade
                              > > away,
                              > > > >> one and
                              > > > >> > > > >> all.
                              > > > >> > > > >> >
                              > > > >> > > > >> > Chris MacDonald 2009-04-23 12:28:57
                              > > > >> > > > >> >
                              > > > >> > > > >> > Mark: Thanks for taking the time to reply. I don't
                              > > have
                              > > > >> a view
                              > > > >> > > > >> on the
                              > > > >> > > > >> > "strong vs. week." I just thought that the idea of a
                              > > > >> "bottom
                              > > > >> > > line"
                              > > > >> > > > >> > requires adding stuff up. And adding stuff up requires
                              > > > >> a common
                              > > > >> > > > >> unit.
                              > > > >> > > > >> > Maybe you're not after a bottom line at all, which is
                              > > > >> fine.
                              > > > >> > > Chris.
                              > > > >> > > > >> >
                              > > > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                              > > > >> > > > >> >
                              > > > >> > > > >> > Chris, I am indeed after a bottom line, but I don't
                              > > agree
                              > > > >> > > that it
                              > > > >> > > > >> > necessarily entails single bottom lines for social or
                              > > > >> > > environmental
                              > > > >> > > > >> > performance, respectively. I think the three-bottom-
                              > > line
                              > > > >> > > > >> metaphor is
                              > > > >> > > > >> > more forgiving than that. I prefer to think of it
                              > > as three
                              > > > >> > > > >> categories
                              > > > >> > > > >> > of multiple bottom lines. Also, I suggest that
                              > > before you
                              > > > >> > > > >> continue to
                              > > > >> > > > >> > hold the financial bottom line out as the standard
                              > > that
                              > > > >> the
                              > > > >> > > > >> other non-
                              > > > >> > > > >> > financial bottom lines should adhere to, do not
                              > > lose sight
                              > > > >> > > of the
                              > > > >> > > > >> > fact that the financial bottom line exported its
                              > > social
                              > > > >> and
                              > > > >> > > > >> > environmental costs, precisely because it could not
                              > > > >> accommodate
                              > > > >> > > > >> them
                              > > > >> > > > >> > with its own so-called "common unit" unit of measure,
                              > > > >> as you
                              > > > >> > > put
                              > > > >> > > > >> it.
                              > > > >> > > > >> > So let's not pretend that the financial bottom line is
                              > > > >> some
                              > > > >> > > sort of
                              > > > >> > > > >> > paragon that the other bottom lines should be
                              > > judged by.
                              > > > >> > > Last, me
                              > > > >> > > > >> > also say that your 2004 article was an outstanding
                              > > > >> piece of
                              > > > >> > > > >> work, and
                              > > > >> > > > >> > that what we (CSI) have done with our own Triple
                              > > Bottom
                              > > > >> Line
                              > > > >> > > method
                              > > > >> > > > >> > (as announced this week) resolves, so far as we are
                              > > > >> concerned,
                              > > > >> > > > >> all of
                              > > > >> > > > >> > the issues and criticisms you and your co-author
                              > > raised
                              > > > >> at that
                              > > > >> > > > >> time.
                              > > > >> > > > >> > If you do not see this, I suggest you look closer.
                              > > > >> Happy to
                              > > > >> > > discuss
                              > > > >> > > > >> > this further if you like. Regards, Mark
                              > > > >> > > > >> > ____________________
                              > > > >> > > > >> >
                              > > > >> > > > >> > Given the significance of Chris's criticisms and the
                              > > > >> > > importance of
                              > > > >> > > > >> > the topic in general, I decided to take the discussion
                              > > > >> over
                              > > > >> > > to this
                              > > > >> > > > >> > listserve, and have invited Chris to join us. It is my
                              > > > >> hope
                              > > > >> > > that he
                              > > > >> > > > >> > will do so.
                              > > > >> > > > >> >
                              > > > >> > > > >> > Regards,
                              > > > >> > > > >> >
                              > > > >> > > > >> > Mark
                              > > > >> > > > >> >
                              > > > >> > > > >> >
                              > > > >> > > > >> >
                              > > > >> > > > >> >
                              > > > >> > > > >> >
                              > > > >> > > > >> > Mark W. McElroy, Ph.D.
                              > > > >> > > > >> > Executive Director
                              > > > >> > > > >> > Center for Sustainable Innovation
                              > > > >> > > > >> > www.sustainableinnovation.org
                              > > > >> > > > >> > (802) 785-2293 (office)
                              > > > >> > > > >> > (802) 296-1928 (mobile)
                              > > > >> > > > >> >
                              > > > >> > > > >> > This message sent by a renewable-energy-powered
                              > > computer
                              > > > >> > > > >> >
                              > > > >> > > > >>
                              > > > >> > > > >>
                              > > > >> > > > >
                              > > > >> > > > >
                              > > > >> > > > >
                              > > > >> > > >
                              > > > >> > >
                              > > > >> > >
                              > > > >> > >
                              > > > >> >
                              > > > >>
                              > > > >>
                              > > > >
                              > > > >
                              > > > >
                              > > >
                              > >
                              > >
                              > >
                              >
                            • Mark W. McElroy
                              Chris: Great questions, thanks. Some quick answers: 1. Sources for norms and duties are varied, depending on the metric. In some cases, they re regulatory
                              Message 14 of 20 , Apr 27 10:26 AM
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                                Chris:

                                Great questions, thanks.  Some quick answers:

                                1.  Sources for norms and duties are varied, depending on the metric.  In some cases, they're regulatory or legislative or NGO-based, in other cases they're scientific.  Ideally, yes, a source similar to GAAP would be nice to have, and someday I hope we do, but in the meantime, organizations must go it alone and develop standards of their own.  I know this doesn't meet your need for commensurability, but it's better than not measuring and reporting performance at all.  Better to have some standards as opposed to none, even if there is no widespread agreement behind them yet.  Over time, commensurability will improve, but not if we just sit here and do nothing.

                                2.  'Yes' is my answer to your question about income statements; they can simply be interpreted that way.  The numerator is just a measure of revenue; the denominator is a measure of expenses with an implicit norm tacked on to it (i.e., that it should be regarded as a minimum performance standard for revenue, as in revenue must at least equal it).

                                3.  Regarding the 4 capitals, there is a long and venerable intellectual history behind that idea.  It is, in my view, the least controversial aspect of the method we propose, and is arguably the dominant theory of sustainability in existence.  As for the fact that normative claims may be contentious, I say so what?  You're slipping back into the consensus trap, I think.  You seem to need consensus in order to make progress, whereas I would rather evaluate proposals on their merits, regardless of whether or not consensus lines up behind them.  Financial measurement and reporting is also normative and contentious, but that doesn't stop us from doing it.  Indeed, the supposed commensurability of related reports is debatable.  Are any two income statements identical in content?  I don't think so, other than at the mid- to top-level categories.  What I propose is no different.

                                4.  Regarding averaging, I have a completely different alternative to propose, a better one I think than averaging.  Averaging can be done, but it suffers from the same problem that adding and subtracting does, in some cases.  Namely, that unsustainable scores can be cancelled out by sufficiently higher sustainable scores.  The fix for this is to avoid both averaging and summing, and to instead rely on the quotients approach I have proposed for individual metrics.  In this case, I'm talking about a quotient OF quotients.  Once individual quotient scores are computed for each metric, a blended score would consist of a measure of the proportion of all such scores that at least comply sustainability performance standards.  If there are 15 metrics and all meet or exceed their standards, the blended bottom-line score would be 1.0.  If only 12 did, the net bottom line score would be 0.8.  The best possible score would be 1.0, and any score of less than that would signify unsustainable performance to some degree.  I have already updated my treatment of this issue on slides 34 and 35 of the following presentation:


                                Regards,

                                Mark


                                Mark W. McElroy, Ph.D.
                                Executive Director
                                Center for Sustainable Innovation
                                www.sustainableinnovation.org
                                (802) 785-2293 (office)
                                (802) 296-1928 (mobile)

                                This message sent by a renewable-energy-powered computer




                                On Apr 27, 2009, at 11:41 AM, ethicsblogger wrote:



                                Mark:

                                That's a lot to chew on. I won't try to reply to it all.

                                Where do we get the "norms or duties for what such impacts ought to be"? Is there (or is there likely to be) something like GAAP for that?

                                I need help with the idea that "In financial reporting, income statements largely boil down to quotients." I take it you mean they can be interpreted that way; they're not usually presented that way, right? That's fine. Where does the numerator come from? And what unit is the "The norm or duty represented by the denominator" in? Dollars? I'm just trying to picture this clearly. I've never heard of financial accounting described this way, so I want to be clear.

                                Next: the idea that in non-financial accounting there are to be precisely 4 non-substitutable "capitals" immediately gets you into huge, probably intracable, philosophical problems. You've got to make hugely contentious normative claims to do that. Maybe you can get away with that, for the relevant audiences. 

                                I'm also confused by the idea that"such scores should be averaged, not summed, because again, they are not fungible." Seems to me that you cannot meaningfully average things that are not fungible. Averaging means adding together & dividing by the number of items added. How can you meaningfully add together things that aren't commensurable?

                                Regards,
                                Chris.

                                --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
                                >
                                > Chris:
                                > 
                                > Actually, yes, there are a few key pieces missing from the discussion 
                                > that I really should explain. In particular, the 'adding up of goods 
                                > and subtracting the bads' premise you're relying on is mistaken, in 
                                > my view. That's really not how non-financial reporting works, nor 
                                > how it should work, as we see it. Moreover, it's not how financial 
                                > reporting works, either. Here I want to encourage you (and others) 
                                > to think of organizational performance reporting as: A process of 
                                > measuring impacts on capitals relative to norms or duties for what 
                                > such impacts ought to be. Metrics for such measurements can usefully 
                                > take the form of quotients, where numerators represent measured 
                                > impacts on capitals, and denominators represent norms or duties for 
                                > what such impacts ought to be. Now let's apply these principles and 
                                > see what we get, starting with financial reporting.
                                > 
                                > In financial reporting, income statements largely boil down to 
                                > quotients of revenues over expenses. The type of capital involved 
                                > here is monetary capital. The norm or duty represented by the 
                                > denominator is a monetary value that the numerator (revenues) should 
                                > at least equal (and hopefully exceed, the more so the better!) if the 
                                > financial performance of the organization is to be viewed as 
                                > sustainable, or solvent if you like. Thus, quotient values that are 
                                > greater than or equal to 1.0 in financial reporting signify 
                                > sustainable performance. Here I agree that there is adding and 
                                > subtracting going on, but only in the calculation of the numerator 
                                > and the denominator. The key sustainability metric is subsequent to 
                                > all of that and is a quotient, not a sum. This is the logic of 
                                > solvency, and it is arguably at the heart of what we mean by the 
                                > 'financial bottom line'.
                                > 
                                > Here it should also be clear that there is a difference between 
                                > measuring financial sustainability and measuring financial 
                                > profitability. For the former, all we care about is whether the 
                                > quotient is greater than or equal to 1.0. For the latter, we, too, 
                                > want sustainability, of course, but we also want to maximize the 
                                > ratio (i.e., maximize profits). Not so for sustainability measures. 
                                > There, breaking even is good enough. In this regard, sustainability 
                                > measurement and reporting, like pregnancy, is 'binary'. You're 
                                > either one of the other, period.
                                > 
                                > Now take the same principles and apply them to non-financial 
                                > measurement. The first thing to understand is that the capitals are 
                                > different. In fact, there are four of them, and they are not 
                                > fungible or substitutable with one another (this relates to the 
                                > 'strong' vs. 'weak' sustainability point I made earlier). I, and 
                                > many others, take the 'strong' position as I just did, which is that 
                                > the four capitals involved are not substitutable. In other words, an 
                                > organization cannot compensate for environmental bads by investing 
                                > more in social goods. Moreover, even good and bad impacts within 
                                > individual categories of capital are not necessarily fungible or 
                                > substitutable. I can't be absolved of polluting the water table 
                                > simply because I helped clean up the air, yet both are instances of 
                                > natural capital. The four capitals I speak of are natural, human, 
                                > social, and constructed (or built). I call the latter three anthro 
                                > capital because they are anthropogenic; natural capital is not.
                                > 
                                > The implication of all of this is that (a) non-financial reporting 
                                > necessarily involves the need to produce multiple social and 
                                > environmental scores, (b) such multiple scores cannot be added up 
                                > together very well because they are not fungible, and (c) such scores 
                                > should be averaged, not summed, because again, they are not fungible, 
                                > and to sum them up would be to take a weak sustainability position, 
                                > as if social and environmental impacts share a common currency, which 
                                > they do not! This is why I say a good TBL bottom line for social and 
                                > environmental performance -- if we must have single scores for each 
                                > -- must be the result of averaging many scores, not adding and 
                                > subtracting (although summing can occur beforehand as individual 
                                > numerators and denominators are computed).
                                > 
                                > I also want to explain the logic of denominators further, because I 
                                > see misconceptions there, too, but I'll stop now and let you react to 
                                > the above before I do.
                                > 
                                > Regards,
                                > 
                                > Mark
                                > 
                                > 
                                > Mark W. McElroy, Ph.D.
                                > Executive Director
                                > Center for Sustainable Innovation
                                > www.sustainableinno vation.org
                                > (802) 785-2293 (office)
                                > (802) 296-1928 (mobile)
                                > 
                                > This message sent by a renewable-energy- powered computer
                                > 
                                > 
                                > 
                                > 
                                > On Apr 26, 2009, at 4:01 PM, ethicsblogger wrote:
                                > 
                                > >
                                > >
                                > > Mark:
                                > >
                                > > Sounds like you're suggesting a (reasonably) method of SEAAR. And, 
                                > > as we tried to make clear in our paper, we're not against SEAAR. 
                                > > We're just against the *implication* of intercomparability that the 
                                > > accounting terminology implies (even if people overestimate 
                                > > financial accounting in that regard).
                                > >
                                > > Annual reports still do generate a Bottom Line, right? Assets in 
                                > > dollars, liabilities in dollars. Higher number is better.
                                > >
                                > > So, I think you're right to leave out weightings, but that looks 
                                > > (again) like taking an potentially- fuzzy financial concept and 
                                > > applying it to an even fuzzier case.
                                > >
                                > > p.s. I'm still lacking a good, clear, simple example of how 
                                > > different categories of social goods & bads would be added 
                                > > together, if that's still part of the agenda. Reporting gender 
                                > > balance on the Board is good; reporting charitable donations is 
                                > > good; reporting collaboration with NGO's is good. But they cannot 
                                > > be added together. Am I still missing something?
                                > >
                                > > Regards,
                                > > Chris.
                                > >
                                > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark 
                                > > W. McElroy" <mmcelroy@> wrote:
                                > > >
                                > > > All:
                                > > >
                                > > > Upon further reflection of Chris's point about giving different
                                > > > indicators different weights because of their arguably different
                                > > > importance, I find myself leaning more strongly against it than for
                                > > > it. While there is nothing in the TBL method we propose that would
                                > > > prevent us from applying such variable weightings, Chris's point
                                > > > about the desirability of bottom lines being commensurable or
                                > > > comparable from one organization to another is a good one, I think.
                                > > > But how can we have it both ways? How can we have variable
                                > > > weightings and commensurable reporting, when no two organizations
                                > > > will likely see the relative importance of various indicators the 
                                > > same?
                                > > >
                                > > > The answer, I think, is to leave weightings out of reports
                                > > > altogether, and to leave it to the readers or consumers of such
                                > > > reports to apply their own weightings. Indeed, this is precisely
                                > > > what we do with financial reports. The raw data, so to speak, is
                                > > > disclosed in financial reports, without any attempt to weight the
                                > > > numbers. The numbers are reported just as they are. Shareholders
                                > > > are then free to attach more or less importance to the numbers they
                                > > > read as they see fit. I see no reason to do things differently in
                                > > > social and environmental reporting.
                                > > >
                                > > > Regards,
                                > > >
                                > > > Mark
                                > > >
                                > > >
                                > > > Mark W. McElroy, Ph.D.
                                > > > Executive Director
                                > > > Center for Sustainable Innovation
                                > > > www.sustainableinno vation.org
                                > > > (802) 785-2293 (office)
                                > > > (802) 296-1928 (mobile)
                                > > >
                                > > > This message sent by a renewable-energy- powered computer
                                > > >
                                > > >
                                > > >
                                > > >
                                > > > On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:
                                > > >
                                > > > >
                                > > > >
                                > > > > Chris:
                                > > > >
                                > > > >
                                > > > > The issue you raise is not with the method, it is with whether or
                                > > > > not people can agree (or have agreed) on a weighting scheme, and
                                > > > > also on specific indicators. The non-financial accounting method I
                                > > > > propose is just as neutral on that issue as GAAP is on financial
                                > > > > matters. GAAP stops at the level of categories, and leaves it to
                                > > > > individual reporters to define their own underlying accounts. Are
                                > > > > all companies' charts of accounts identical? Of course not. Why
                                > > > > do you/we assume commensurability in that case but not in non-
                                > > > > financial reporting? And why do you insist of having weighting
                                > > > > applied in the case of non-financial reporting, but not in
                                > > > > financial reporting? Let me put it this way, ASSUMING people can
                                > > > > come to some agreement on metrics and weighting, the kind of
                                > > > > comparability you refer to will be possible, but I'm not sure it's
                                > > > > necessary.
                                > > > >
                                > > > > In the meantime, if individual companies want to pilot, test, and
                                > > > > evaluate schemes of their own based on a proposed conceptual
                                > > > > framework such as the one we propose, that seems like an entirely
                                > > > > constructive step to take in my view. Consider the alternative: no
                                > > > > meaningful non-financial measurement and reporting takes place at
                                > > > > all. So let the individual claims about metrics compete in the
                                > > > > intellectual marketplace, I say, and let us collectively take 
                                > > steps
                                > > > > to evolve the kind of common index you and the rest of us would
                                > > > > like to see. But in order to do that, we must have a conceptual
                                > > > > framework in which such indicators and weighting schemes can fit,
                                > > > > and that is precisely what we have created. If you want to talk
                                > > > > about metrics, on the other hand, we have put a proposal forward
                                > > > > for that, too (the True Sustainability Index), and so we can have
                                > > > > that conversation, as well. But the TBL method we have proposed
                                > > > > does not come crashing down simply because people haven't 
                                > > agreed on
                                > > > > a choice of related metrics. Should GAAP come to a screeching halt
                                > > > > simply because no two organizations' charts of accounts that 
                                > > use it
                                > > > > are alike?
                                > > > >
                                > > > > Regards,
                                > > > >
                                > > > > Mark
                                > > > >
                                > > > >
                                > > > > Mark W. McElroy, Ph.D.
                                > > > > Executive Director
                                > > > > Center for Sustainable Innovation
                                > > > > www.sustainableinno vation.org
                                > > > > (802) 785-2293 (office)
                                > > > > (802) 296-1928 (mobile)
                                > > > >
                                > > > > This message sent by a renewable-energy- powered computer
                                > > > >
                                > > > >
                                > > > >
                                > > > >
                                > > > > On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:
                                > > > >
                                > > > >>
                                > > > >>
                                > > > >> Mark:
                                > > > >>
                                > > > >> Weight them "any way [I] like"?
                                > > > >>
                                > > > >> The weighting seems crucial. No one ever doubted that you could
                                > > > >> apply numbers to these things. The problem is 
                                > > commensurability. If
                                > > > >> I'm not weighting factors (for my company) the same way you are
                                > > > >> for yours, we can't compare progress.
                                > > > >>
                                > > > >> Sounds fine for an system of internal tracking, but seems not to
                                > > > >> live up to the term "bottom line".
                                > > > >>
                                > > > >> Regards,
                                > > > >> Chris.
                                > > > >>
                                > > > >> --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                                > > > >> W. McElroy" <mmcelroy@> wrote:
                                > > > >> >
                                > > > >> > Chris:
                                > > > >> >
                                > > > >> > I agree with you. That's why I say on slide 35 that 
                                > > individual sub-
                                > > > >> > bottom line scores can be weighted. You're free to weight 
                                > > them any
                                > > > >> > way you like. The method is completely open to that.
                                > > > >> >
                                > > > >> > Regards,
                                > > > >> >
                                > > > >> > Mark
                                > > > >> >
                                > > > >> >
                                > > > >> > Mark W. McElroy, Ph.D.
                                > > > >> > Executive Director
                                > > > >> > Center for Sustainable Innovation
                                > > > >> > www.sustainableinno vation.org
                                > > > >> > (802) 785-2293 (office)
                                > > > >> > (802) 296-1928 (mobile)
                                > > > >> >
                                > > > >> > This message sent by a renewable-energy- powered computer
                                > > > >> >
                                > > > >> >
                                > > > >> >
                                > > > >> >
                                > > > >> > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                                > > > >> >
                                > > > >> > >
                                > > > >> > >
                                > > > >> > > Mark:
                                > > > >> > >
                                > > > >> > > Thanks.
                                > > > >> > >
                                > > > >> > > I still feel like -- having looked at the relevant documents
                                > > > >> -- I'm
                                > > > >> > > lacking a good, clear, simple example of how the 
                                > > aggregation is
                                > > > >> > > supposed to work.
                                > > > >> > >
                                > > > >> > > But one thing that's clear is that the method involves 
                                > > averaging
                                > > > >> > > scores (for various sub-bottom-lines) . Averaging implies 
                                > > that all
                                > > > >> > > the factors being averaged are equally important. I don't see
                                > > > >> what
                                > > > >> > > justifies that assumption.
                                > > > >> > >
                                > > > >> > > Chris.
                                > > > >> > >
                                > > > >> > > --- In 
                                > > Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                                > > > >> > > W. McElroy" <mmcelroy@> wrote:
                                > > > >> > > >
                                > > > >> > > > All:
                                > > > >> > > >
                                > > > >> > > > Back in 2004, Chris MacDonald and his co-author, Wayne 
                                > > Norman,
                                > > > >> > > wrote:
                                > > > >> > > >
                                > > > >> > > > "Ultimately, we argue there are fundamental philosophical
                                > > > >> grounds
                                > > > >> > > for
                                > > > >> > > > thinking that it is impossible to develop a sound
                                > > > >> methodology for
                                > > > >> > > > arriving at a meaniningful social bottom line for a 
                                > > firm." They
                                > > > >> > > > added, "...the various values involved in evaluations of
                                > > > >> corporate
                                > > > >> > > > behavior are 'incommensurable' ".
                                > > > >> > > >
                                > > > >> > > > For Chris's benefit, and others', I have added two 
                                > > slides to
                                > > > >> this
                                > > > >> > > > presentation (slides 34 and 35), which show exactly how 
                                > > one can
                                > > > >> > > > calculate a quantitative (and 'blended') social bottom line
                                > > > >> for a
                                > > > >> > > firm:
                                > > > >> > > >
                                > > > >> > > > http://www.sustaina bleinnovation. org/Recasting- TBL.pdf
                                > > > >> > > >
                                > > > >> > > > This, of course, occurs in the context of utilizing a 
                                > > general
                                > > > >> > > > methodology for assessing the social footprint of an
                                > > > >> organization,
                                > > > >> > > > which can be done using the methodology we created called
                                > > > >> the Social
                                > > > >> > > > Footprint Method. I hope Chris will chime in and comment on
                                > > > >> all of
                                > > > >> > > > this.
                                > > > >> > > >
                                > > > >> > > > Regards,
                                > > > >> > > >
                                > > > >> > > > Mark
                                > > > >> > > >
                                > > > >> > > >
                                > > > >> > > > Mark W. McElroy, Ph.D.
                                > > > >> > > > Executive Director
                                > > > >> > > > Center for Sustainable Innovation
                                > > > >> > > > www.sustainableinno vation.org
                                > > > >> > > > (802) 785-2293 (office)
                                > > > >> > > > (802) 296-1928 (mobile)
                                > > > >> > > >
                                > > > >> > > > This message sent by a renewable-energy- powered computer
                                > > > >> > > >
                                > > > >> > > >
                                > > > >> > > >
                                > > > >> > > >
                                > > > >> > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
                                > > > >> > > >
                                > > > >> > > > >
                                > > > >> > > > >
                                > > > >> > > > > Chris:
                                > > > >> > > > >
                                > > > >> > > > >
                                > > > >> > > > > Thanks for joining in. As you might imagine, where to 
                                > > look
                                > > > >> depends
                                > > > >> > > > > on what the specific issue is. It's a big topic with many
                                > > > >> > > > > dimensions. Our body of work is broad and deep, so rather
                                > > > >> than
                                > > > >> > > > > send you off in multiple directions, let's take it one
                                > > > >> step at a
                                > > > >> > > > > time. In your response to our press release yesterday, 
                                > > you
                                > > > >> raised
                                > > > >> > > > > several issues about TBL theory in general, and the
                                > > > >> problems our
                                > > > >> > > > > own method may or may not have resolved. So let's take
                                > > > >> each of the
                                > > > >> > > > > issues and criticisms you raised this week (and in your
                                > > > >> very fine
                                > > > >> > > > > article in 2004) one at a time, and explain how we (on
                                > > > >> this end)
                                > > > >> > > > > think we have resolved them. You go first. In the
                                > > > >> meantime, let
                                > > > >> > > > > me answer your question about why we should keep using 
                                > > the
                                > > > >> > > > > metaphor. Three responses:
                                > > > >> > > > >
                                > > > >> > > > > 1) The metaphor is valuable in helping to call attention
                                > > > >> to the
                                > > > >> > > > > fact that businesses have real social and environmental
                                > > > >> > > obligations
                                > > > >> > > > > to people in the world, not just financial ones. 
                                > > Moreover,
                                > > > >> the
                                > > > >> > > > > financial bottom line concept is itself imperfect. Its
                                > > > >> "common
                                > > > >> > > > > unit of measure" is no less illusory there than it may be
                                > > > >> on other
                                > > > >> > > > > fronts, and yet the language of the metaphor has been 
                                > > useful
                                > > > >> > > > > there. Why not reap its value on the social and 
                                > > environmental
                                > > > >> > > > > fronts, as well, I wonder?
                                > > > >> > > > >
                                > > > >> > > > > 2) It is, in fact, possible, we think, to compute 
                                > > aggregated
                                > > > >> > > social
                                > > > >> > > > > and environmental bottom lines at the organizational 
                                > > level of
                                > > > >> > > > > analysis. Whether or not it makes sense to do so is 
                                > > another
                                > > > >> > > > > matter. I hesitate to explain how to do this now, 
                                > > since we
                                > > > >> are
                                > > > >> > > > > just getting started in this conversation. Happy to
                                > > > >> proceed at
                                > > > >> > > > > your pace. Just ask.
                                > > > >> > > > >
                                > > > >> > > > > 3) The term has taken on a life of its own. It has legs.
                                > > > >> It has
                                > > > >> > > > > emotional value. Why not keep it for what it's worth and
                                > > > >> just deal
                                > > > >> > > > > with its imperfections?
                                > > > >> > > > >
                                > > > >> > > > > Regards,
                                > > > >> > > > >
                                > > > >> > > > > Mark
                                > > > >> > > > >
                                > > > >> > > > >
                                > > > >> > > > > Mark W. McElroy, Ph.D.
                                > > > >> > > > > Executive Director
                                > > > >> > > > > Center for Sustainable Innovation
                                > > > >> > > > > www.sustainableinno vation.org
                                > > > >> > > > > (802) 785-2293 (office)
                                > > > >> > > > > (802) 296-1928 (mobile)
                                > > > >> > > > >
                                > > > >> > > > > This message sent by a renewable-energy- powered computer
                                > > > >> > > > >
                                > > > >> > > > >
                                > > > >> > > > >
                                > > > >> > > > >
                                > > > >> > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                                > > > >> > > > >
                                > > > >> > > > >>
                                > > > >> > > > >>
                                > > > >> > > > >> Mark:
                                > > > >> > > > >>
                                > > > >> > > > >> You suggest I look closer...is the "Re-Casting" 
                                > > document the
                                > > > >> > > place
                                > > > >> > > > >> to look? Or is there another source?
                                > > > >> > > > >>
                                > > > >> > > > >> If the bottom lines are going to multiply, then the
                                > > > >> aggregation
                                > > > >> > > > >> gets easier, certainly. But the misleadingness of the
                                > > > >> metaphor
                                > > > >> > > > >> still worries me...if the financial bottom line (and
                                > > > >> accounting
                                > > > >> > > > >> more generally) stops being a good analogy, why keep
                                > > > >> using that
                                > > > >> > > > >> language?
                                > > > >> > > > >>
                                > > > >> > > > >> Regards,
                                > > > >> > > > >>
                                > > > >> > > > >> Chris.
                                > > > >> > > > >>
                                > > > >> > > > >> --- In
                                > > > >> Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                                > > > >> > > > >> W. McElroy" <mmcelroy@> wrote:
                                > > > >> > > > >> >
                                > > > >> > > > >> > Dear Friends:
                                > > > >> > > > >> >
                                > > > >> > > > >> > Earlier this week, we (CSI) issued a press release
                                > > > >> regarding an
                                > > > >> > > > >> award
                                > > > >> > > > >> > we received from the State of Vermont for our general
                                > > > >> > > approach to
                                > > > >> > > > >> > Triple Bottom Line measurement, management, and 
                                > > reporting.
                                > > > >> > > Here's
                                > > > >> > > > >> > the release:
                                > > > >> > > > >> >
                                > > > >> > > > >> > http://www.csrwire. com/News/ 15105.html
                                > > > >> > > > >> >
                                > > > >> > > > >> > Afterwards, a comment about the release was posted by
                                > > > >> Chris
                                > > > >> > > > >> > MacDonald, who questioned the design and effectiveness
                                > > > >> of our
                                > > > >> > > > >> > method. His post appeared on the same page as our
                                > > > >> > > announcement as
                                > > > >> > > > >> > you will see from the link above. There you will also
                                > > > >> see my
                                > > > >> > > > >> > response to Chris, and one or two more rounds of 
                                > > chatter
                                > > > >> > > between
                                > > > >> > > > >> us.
                                > > > >> > > > >> > Here is that exchange:
                                > > > >> > > > >> >
                                > > > >> > > > >> > Chris MacDonald 2009-04-23 02:36:30
                                > > > >> > > > >> > As far as I can see, they haven't overcome the 
                                > > problem of
                                > > > >> > > finding a
                                > > > >> > > > >> > common unit of measure for social goods and bads, 
                                > > or for
                                > > > >> > > ecological
                                > > > >> > > > >> > ones. The example provided in the "Recasting" report
                                > > > >> > > involves using
                                > > > >> > > > >> > monetary measures for social issues (i.e., teen
                                > > > >> pregnancy is
                                > > > >> > > > >> > understood in terms of its impact on financial
                                > > > >> > > productivity) . It
                                > > > >> > > > >> > seems unlikely, at best, that all socially-relevant 
                                > > issues
                                > > > >> > > can be
                                > > > >> > > > >> > cast in financial terms. I think it's telling that, to
                                > > > >> date,
                                > > > >> > > there
                                > > > >> > > > >> > has been no satisfactory reply, from TBL advocates, 
                                > > to the
                                > > > >> > > critique
                                > > > >> > > > >> > offered here: "Getting to the Bottom of 'Triple Bottom
                                > > > >> Line'."
                                > > > >> > > > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
                                > > > >> > > > >> >
                                > > > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                                > > > >> > > > >> >
                                > > > >> > > > >> > Chris, I will respond only to what you have said 
                                > > here, and
                                > > > >> > > not your
                                > > > >> > > > >> > 2004 paper. That we can discuss elsewhere, if you 
                                > > like.
                                > > > >> That
                                > > > >> > > said,
                                > > > >> > > > >> > your criticism here is not a criticism at all, in 
                                > > my view,
                                > > > >> > > > >> because it
                                > > > >> > > > >> > is predicated on a supposed problem ("of finding a 
                                > > common
                                > > > >> > > unit of
                                > > > >> > > > >> > measure for social goods and bads....") that does not
                                > > > >> exist.
                                > > > >> > > You
                                > > > >> > > > >> seem
                                > > > >> > > > >> > to want to take a 'weak' sustainability stance, 
                                > > whereas
                                > > > >> I and
                                > > > >> > > > >> others
                                > > > >> > > > >> > take a 'strong' one, in which capitals are not
                                > > > >> substitutable
                                > > > >> > > and
                                > > > >> > > > >> > aggregation (i.e., your "common unit" idea) is ill
                                > > > >> conceived.
                                > > > >> > > > >> Absent
                                > > > >> > > > >> > your starting premise, then, your criticisms fade 
                                > > away,
                                > > > >> one and
                                > > > >> > > > >> all.
                                > > > >> > > > >> >
                                > > > >> > > > >> > Chris MacDonald 2009-04-23 12:28:57
                                > > > >> > > > >> >
                                > > > >> > > > >> > Mark: Thanks for taking the time to reply. I don't 
                                > > have
                                > > > >> a view
                                > > > >> > > > >> on the
                                > > > >> > > > >> > "strong vs. week." I just thought that the idea of a
                                > > > >> "bottom
                                > > > >> > > line"
                                > > > >> > > > >> > requires adding stuff up. And adding stuff up requires
                                > > > >> a common
                                > > > >> > > > >> unit.
                                > > > >> > > > >> > Maybe you're not after a bottom line at all, which is
                                > > > >> fine.
                                > > > >> > > Chris.
                                > > > >> > > > >> >
                                > > > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                                > > > >> > > > >> >
                                > > > >> > > > >> > Chris, I am indeed after a bottom line, but I don't 
                                > > agree
                                > > > >> > > that it
                                > > > >> > > > >> > necessarily entails single bottom lines for social or
                                > > > >> > > environmental
                                > > > >> > > > >> > performance, respectively. I think the three-bottom- 
                                > > line
                                > > > >> > > > >> metaphor is
                                > > > >> > > > >> > more forgiving than that. I prefer to think of it 
                                > > as three
                                > > > >> > > > >> categories
                                > > > >> > > > >> > of multiple bottom lines. Also, I suggest that 
                                > > before you
                                > > > >> > > > >> continue to
                                > > > >> > > > >> > hold the financial bottom line out as the standard 
                                > > that
                                > > > >> the
                                > > > >> > > > >> other non-
                                > > > >> > > > >> > financial bottom lines should adhere to, do not 
                                > > lose sight
                                > > > >> > > of the
                                > > > >> > > > >> > fact that the financial bottom line exported its 
                                > > social
                                > > > >> and
                                > > > >> > > > >> > environmental costs, precisely because it could not
                                > > > >> accommodate
                                > > > >> > > > >> them
                                > > > >> > > > >> > with its own so-called "common unit" unit of measure,
                                > > > >> as you
                                > > > >> > > put
                                > > > >> > > > >> it.
                                > > > >> > > > >> > So let's not pretend that the financial bottom line is
                                > > > >> some
                                > > > >> > > sort of
                                > > > >> > > > >> > paragon that the other bottom lines should be 
                                > > judged by.
                                > > > >> > > Last, me
                                > > > >> > > > >> > also say that your 2004 article was an outstanding
                                > > > >> piece of
                                > > > >> > > > >> work, and
                                > > > >> > > > >> > that what we (CSI) have done with our own Triple 
                                > > Bottom
                                > > > >> Line
                                > > > >> > > method
                                > > > >> > > > >> > (as announced this week) resolves, so far as we are
                                > > > >> concerned,
                                > > > >> > > > >> all of
                                > > > >> > > > >> > the issues and criticisms you and your co-author 
                                > > raised
                                > > > >> at that
                                > > > >> > > > >> time.
                                > > > >> > > > >> > If you do not see this, I suggest you look closer.
                                > > > >> Happy to
                                > > > >> > > discuss
                                > > > >> > > > >> > this further if you like. Regards, Mark
                                > > > >> > > > >> > ____________ ________
                                > > > >> > > > >> >
                                > > > >> > > > >> > Given the significance of Chris's criticisms and the
                                > > > >> > > importance of
                                > > > >> > > > >> > the topic in general, I decided to take the discussion
                                > > > >> over
                                > > > >> > > to this
                                > > > >> > > > >> > listserve, and have invited Chris to join us. It is my
                                > > > >> hope
                                > > > >> > > that he
                                > > > >> > > > >> > will do so.
                                > > > >> > > > >> >
                                > > > >> > > > >> > Regards,
                                > > > >> > > > >> >
                                > > > >> > > > >> > Mark
                                > > > >> > > > >> >
                                > > > >> > > > >> >
                                > > > >> > > > >> >
                                > > > >> > > > >> >
                                > > > >> > > > >> >
                                > > > >> > > > >> > Mark W. McElroy, Ph.D.
                                > > > >> > > > >> > Executive Director
                                > > > >> > > > >> > Center for Sustainable Innovation
                                > > > >> > > > >> > www.sustainableinno vation.org
                                > > > >> > > > >> > (802) 785-2293 (office)
                                > > > >> > > > >> > (802) 296-1928 (mobile)
                                > > > >> > > > >> >
                                > > > >> > > > >> > This message sent by a renewable-energy- powered 
                                > > computer
                                > > > >> > > > >> >

                                (Message over 64 KB, truncated)

                              • ethicsblogger
                                Mark: For the sake of this discussion, I m going to give up on intercomparability of results. As long as you re ONLY trying to help a single company track its
                                Message 15 of 20 , Apr 27 10:50 AM
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                                  Mark:

                                  For the sake of this discussion, I'm going to give up on intercomparability of results. As long as you're ONLY trying to help a single company track its progress, it's score doesn't need to be comparable to another company's score. Fine.

                                  The math is still sounding very unconvincing to me. A ratio of ratios of incommensurable metrics sounds meaningless. And I'm still lacking a good, clear example. Show me how a company's score on just two nameable metrics would result in a meaningful bottom line. You pick the metrics. Fictional example will do.

                                  Thanks,
                                  Chris

                                  --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark W. McElroy" <mmcelroy@...> wrote:
                                  >
                                  > Chris:
                                  >
                                  > Great questions, thanks. Some quick answers:
                                  >
                                  > 1. Sources for norms and duties are varied, depending on the
                                  > metric. In some cases, they're regulatory or legislative or NGO-
                                  > based, in other cases they're scientific. Ideally, yes, a source
                                  > similar to GAAP would be nice to have, and someday I hope we do, but
                                  > in the meantime, organizations must go it alone and develop standards
                                  > of their own. I know this doesn't meet your need for
                                  > commensurability, but it's better than not measuring and reporting
                                  > performance at all. Better to have some standards as opposed to
                                  > none, even if there is no widespread agreement behind them yet. Over
                                  > time, commensurability will improve, but not if we just sit here and
                                  > do nothing.
                                  >
                                  > 2. 'Yes' is my answer to your question about income statements; they
                                  > can simply be interpreted that way. The numerator is just a measure
                                  > of revenue; the denominator is a measure of expenses with an implicit
                                  > norm tacked on to it (i.e., that it should be regarded as a minimum
                                  > performance standard for revenue, as in revenue must at least equal it).
                                  >
                                  > 3. Regarding the 4 capitals, there is a long and venerable
                                  > intellectual history behind that idea. It is, in my view, the least
                                  > controversial aspect of the method we propose, and is arguably the
                                  > dominant theory of sustainability in existence. As for the fact that
                                  > normative claims may be contentious, I say so what? You're slipping
                                  > back into the consensus trap, I think. You seem to need consensus in
                                  > order to make progress, whereas I would rather evaluate proposals on
                                  > their merits, regardless of whether or not consensus lines up behind
                                  > them. Financial measurement and reporting is also normative and
                                  > contentious, but that doesn't stop us from doing it. Indeed, the
                                  > supposed commensurability of related reports is debatable. Are any
                                  > two income statements identical in content? I don't think so, other
                                  > than at the mid- to top-level categories. What I propose is no
                                  > different.
                                  >
                                  > 4. Regarding averaging, I have a completely different alternative to
                                  > propose, a better one I think than averaging. Averaging can be done,
                                  > but it suffers from the same problem that adding and subtracting
                                  > does, in some cases. Namely, that unsustainable scores can be
                                  > cancelled out by sufficiently higher sustainable scores. The fix for
                                  > this is to avoid both averaging and summing, and to instead rely on
                                  > the quotients approach I have proposed for individual metrics. In
                                  > this case, I'm talking about a quotient OF quotients. Once
                                  > individual quotient scores are computed for each metric, a blended
                                  > score would consist of a measure of the proportion of all such scores
                                  > that at least comply sustainability performance standards. If there
                                  > are 15 metrics and all meet or exceed their standards, the blended
                                  > bottom-line score would be 1.0. If only 12 did, the net bottom line
                                  > score would be 0.8. The best possible score would be 1.0, and any
                                  > score of less than that would signify unsustainable performance to
                                  > some degree. I have already updated my treatment of this issue on
                                  > slides 34 and 35 of the following presentation:
                                  >
                                  > http://www.sustainableinnovation.org/Recasting-TBL.pdf
                                  >
                                  > Regards,
                                  >
                                  > Mark
                                  >
                                  >
                                  > Mark W. McElroy, Ph.D.
                                  > Executive Director
                                  > Center for Sustainable Innovation
                                  > www.sustainableinnovation.org
                                  > (802) 785-2293 (office)
                                  > (802) 296-1928 (mobile)
                                  >
                                  > This message sent by a renewable-energy-powered computer
                                  >
                                  >
                                  >
                                  >
                                  > On Apr 27, 2009, at 11:41 AM, ethicsblogger wrote:
                                  >
                                  > >
                                  > >
                                  > > Mark:
                                  > >
                                  > > That's a lot to chew on. I won't try to reply to it all.
                                  > >
                                  > > Where do we get the "norms or duties for what such impacts ought to
                                  > > be"? Is there (or is there likely to be) something like GAAP for that?
                                  > >
                                  > > I need help with the idea that "In financial reporting, income
                                  > > statements largely boil down to quotients." I take it you mean they
                                  > > can be interpreted that way; they're not usually presented that
                                  > > way, right? That's fine. Where does the numerator come from? And
                                  > > what unit is the "The norm or duty represented by the denominator"
                                  > > in? Dollars? I'm just trying to picture this clearly. I've never
                                  > > heard of financial accounting described this way, so I want to be
                                  > > clear.
                                  > >
                                  > > Next: the idea that in non-financial accounting there are to be
                                  > > precisely 4 non-substitutable "capitals" immediately gets you into
                                  > > huge, probably intracable, philosophical problems. You've got to
                                  > > make hugely contentious normative claims to do that. Maybe you can
                                  > > get away with that, for the relevant audiences.
                                  > >
                                  > > I'm also confused by the idea that"such scores should be averaged,
                                  > > not summed, because again, they are not fungible." Seems to me that
                                  > > you cannot meaningfully average things that are not fungible.
                                  > > Averaging means adding together & dividing by the number of items
                                  > > added. How can you meaningfully add together things that aren't
                                  > > commensurable?
                                  > >
                                  > > Regards,
                                  > > Chris.
                                  > >
                                  > > --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                                  > > W. McElroy" <mmcelroy@> wrote:
                                  > > >
                                  > > > Chris:
                                  > > >
                                  > > > Actually, yes, there are a few key pieces missing from the
                                  > > discussion
                                  > > > that I really should explain. In particular, the 'adding up of goods
                                  > > > and subtracting the bads' premise you're relying on is mistaken, in
                                  > > > my view. That's really not how non-financial reporting works, nor
                                  > > > how it should work, as we see it. Moreover, it's not how financial
                                  > > > reporting works, either. Here I want to encourage you (and others)
                                  > > > to think of organizational performance reporting as: A process of
                                  > > > measuring impacts on capitals relative to norms or duties for what
                                  > > > such impacts ought to be. Metrics for such measurements can usefully
                                  > > > take the form of quotients, where numerators represent measured
                                  > > > impacts on capitals, and denominators represent norms or duties for
                                  > > > what such impacts ought to be. Now let's apply these principles and
                                  > > > see what we get, starting with financial reporting.
                                  > > >
                                  > > > In financial reporting, income statements largely boil down to
                                  > > > quotients of revenues over expenses. The type of capital involved
                                  > > > here is monetary capital. The norm or duty represented by the
                                  > > > denominator is a monetary value that the numerator (revenues) should
                                  > > > at least equal (and hopefully exceed, the more so the better!) if
                                  > > the
                                  > > > financial performance of the organization is to be viewed as
                                  > > > sustainable, or solvent if you like. Thus, quotient values that are
                                  > > > greater than or equal to 1.0 in financial reporting signify
                                  > > > sustainable performance. Here I agree that there is adding and
                                  > > > subtracting going on, but only in the calculation of the numerator
                                  > > > and the denominator. The key sustainability metric is subsequent to
                                  > > > all of that and is a quotient, not a sum. This is the logic of
                                  > > > solvency, and it is arguably at the heart of what we mean by the
                                  > > > 'financial bottom line'.
                                  > > >
                                  > > > Here it should also be clear that there is a difference between
                                  > > > measuring financial sustainability and measuring financial
                                  > > > profitability. For the former, all we care about is whether the
                                  > > > quotient is greater than or equal to 1.0. For the latter, we, too,
                                  > > > want sustainability, of course, but we also want to maximize the
                                  > > > ratio (i.e., maximize profits). Not so for sustainability measures.
                                  > > > There, breaking even is good enough. In this regard, sustainability
                                  > > > measurement and reporting, like pregnancy, is 'binary'. You're
                                  > > > either one of the other, period.
                                  > > >
                                  > > > Now take the same principles and apply them to non-financial
                                  > > > measurement. The first thing to understand is that the capitals are
                                  > > > different. In fact, there are four of them, and they are not
                                  > > > fungible or substitutable with one another (this relates to the
                                  > > > 'strong' vs. 'weak' sustainability point I made earlier). I, and
                                  > > > many others, take the 'strong' position as I just did, which is that
                                  > > > the four capitals involved are not substitutable. In other words, an
                                  > > > organization cannot compensate for environmental bads by investing
                                  > > > more in social goods. Moreover, even good and bad impacts within
                                  > > > individual categories of capital are not necessarily fungible or
                                  > > > substitutable. I can't be absolved of polluting the water table
                                  > > > simply because I helped clean up the air, yet both are instances of
                                  > > > natural capital. The four capitals I speak of are natural, human,
                                  > > > social, and constructed (or built). I call the latter three anthro
                                  > > > capital because they are anthropogenic; natural capital is not.
                                  > > >
                                  > > > The implication of all of this is that (a) non-financial reporting
                                  > > > necessarily involves the need to produce multiple social and
                                  > > > environmental scores, (b) such multiple scores cannot be added up
                                  > > > together very well because they are not fungible, and (c) such
                                  > > scores
                                  > > > should be averaged, not summed, because again, they are not
                                  > > fungible,
                                  > > > and to sum them up would be to take a weak sustainability position,
                                  > > > as if social and environmental impacts share a common currency,
                                  > > which
                                  > > > they do not! This is why I say a good TBL bottom line for social and
                                  > > > environmental performance -- if we must have single scores for each
                                  > > > -- must be the result of averaging many scores, not adding and
                                  > > > subtracting (although summing can occur beforehand as individual
                                  > > > numerators and denominators are computed).
                                  > > >
                                  > > > I also want to explain the logic of denominators further, because I
                                  > > > see misconceptions there, too, but I'll stop now and let you
                                  > > react to
                                  > > > the above before I do.
                                  > > >
                                  > > > Regards,
                                  > > >
                                  > > > Mark
                                  > > >
                                  > > >
                                  > > > Mark W. McElroy, Ph.D.
                                  > > > Executive Director
                                  > > > Center for Sustainable Innovation
                                  > > > www.sustainableinnovation.org
                                  > > > (802) 785-2293 (office)
                                  > > > (802) 296-1928 (mobile)
                                  > > >
                                  > > > This message sent by a renewable-energy-powered computer
                                  > > >
                                  > > >
                                  > > >
                                  > > >
                                  > > > On Apr 26, 2009, at 4:01 PM, ethicsblogger wrote:
                                  > > >
                                  > > > >
                                  > > > >
                                  > > > > Mark:
                                  > > > >
                                  > > > > Sounds like you're suggesting a (reasonably) method of SEAAR. And,
                                  > > > > as we tried to make clear in our paper, we're not against SEAAR.
                                  > > > > We're just against the *implication* of intercomparability that
                                  > > the
                                  > > > > accounting terminology implies (even if people overestimate
                                  > > > > financial accounting in that regard).
                                  > > > >
                                  > > > > Annual reports still do generate a Bottom Line, right? Assets in
                                  > > > > dollars, liabilities in dollars. Higher number is better.
                                  > > > >
                                  > > > > So, I think you're right to leave out weightings, but that looks
                                  > > > > (again) like taking an potentially-fuzzy financial concept and
                                  > > > > applying it to an even fuzzier case.
                                  > > > >
                                  > > > > p.s. I'm still lacking a good, clear, simple example of how
                                  > > > > different categories of social goods & bads would be added
                                  > > > > together, if that's still part of the agenda. Reporting gender
                                  > > > > balance on the Board is good; reporting charitable donations is
                                  > > > > good; reporting collaboration with NGO's is good. But they cannot
                                  > > > > be added together. Am I still missing something?
                                  > > > >
                                  > > > > Regards,
                                  > > > > Chris.
                                  > > > >
                                  > > > > --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                                  > > > > W. McElroy" <mmcelroy@> wrote:
                                  > > > > >
                                  > > > > > All:
                                  > > > > >
                                  > > > > > Upon further reflection of Chris's point about giving different
                                  > > > > > indicators different weights because of their arguably different
                                  > > > > > importance, I find myself leaning more strongly against it
                                  > > than for
                                  > > > > > it. While there is nothing in the TBL method we propose that
                                  > > would
                                  > > > > > prevent us from applying such variable weightings, Chris's point
                                  > > > > > about the desirability of bottom lines being commensurable or
                                  > > > > > comparable from one organization to another is a good one, I
                                  > > think.
                                  > > > > > But how can we have it both ways? How can we have variable
                                  > > > > > weightings and commensurable reporting, when no two
                                  > > organizations
                                  > > > > > will likely see the relative importance of various indicators
                                  > > the
                                  > > > > same?
                                  > > > > >
                                  > > > > > The answer, I think, is to leave weightings out of reports
                                  > > > > > altogether, and to leave it to the readers or consumers of such
                                  > > > > > reports to apply their own weightings. Indeed, this is precisely
                                  > > > > > what we do with financial reports. The raw data, so to speak, is
                                  > > > > > disclosed in financial reports, without any attempt to weight
                                  > > the
                                  > > > > > numbers. The numbers are reported just as they are. Shareholders
                                  > > > > > are then free to attach more or less importance to the
                                  > > numbers they
                                  > > > > > read as they see fit. I see no reason to do things
                                  > > differently in
                                  > > > > > social and environmental reporting.
                                  > > > > >
                                  > > > > > Regards,
                                  > > > > >
                                  > > > > > Mark
                                  > > > > >
                                  > > > > >
                                  > > > > > Mark W. McElroy, Ph.D.
                                  > > > > > Executive Director
                                  > > > > > Center for Sustainable Innovation
                                  > > > > > www.sustainableinnovation.org
                                  > > > > > (802) 785-2293 (office)
                                  > > > > > (802) 296-1928 (mobile)
                                  > > > > >
                                  > > > > > This message sent by a renewable-energy-powered computer
                                  > > > > >
                                  > > > > >
                                  > > > > >
                                  > > > > >
                                  > > > > > On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:
                                  > > > > >
                                  > > > > > >
                                  > > > > > >
                                  > > > > > > Chris:
                                  > > > > > >
                                  > > > > > >
                                  > > > > > > The issue you raise is not with the method, it is with
                                  > > whether or
                                  > > > > > > not people can agree (or have agreed) on a weighting
                                  > > scheme, and
                                  > > > > > > also on specific indicators. The non-financial accounting
                                  > > method I
                                  > > > > > > propose is just as neutral on that issue as GAAP is on
                                  > > financial
                                  > > > > > > matters. GAAP stops at the level of categories, and leaves
                                  > > it to
                                  > > > > > > individual reporters to define their own underlying
                                  > > accounts. Are
                                  > > > > > > all companies' charts of accounts identical? Of course not.
                                  > > Why
                                  > > > > > > do you/we assume commensurability in that case but not in non-
                                  > > > > > > financial reporting? And why do you insist of having weighting
                                  > > > > > > applied in the case of non-financial reporting, but not in
                                  > > > > > > financial reporting? Let me put it this way, ASSUMING
                                  > > people can
                                  > > > > > > come to some agreement on metrics and weighting, the kind of
                                  > > > > > > comparability you refer to will be possible, but I'm not
                                  > > sure it's
                                  > > > > > > necessary.
                                  > > > > > >
                                  > > > > > > In the meantime, if individual companies want to pilot,
                                  > > test, and
                                  > > > > > > evaluate schemes of their own based on a proposed conceptual
                                  > > > > > > framework such as the one we propose, that seems like an
                                  > > entirely
                                  > > > > > > constructive step to take in my view. Consider the
                                  > > alternative: no
                                  > > > > > > meaningful non-financial measurement and reporting takes
                                  > > place at
                                  > > > > > > all. So let the individual claims about metrics compete in the
                                  > > > > > > intellectual marketplace, I say, and let us collectively take
                                  > > > > steps
                                  > > > > > > to evolve the kind of common index you and the rest of us
                                  > > would
                                  > > > > > > like to see. But in order to do that, we must have a
                                  > > conceptual
                                  > > > > > > framework in which such indicators and weighting schemes
                                  > > can fit,
                                  > > > > > > and that is precisely what we have created. If you want to
                                  > > talk
                                  > > > > > > about metrics, on the other hand, we have put a proposal
                                  > > forward
                                  > > > > > > for that, too (the True Sustainability Index), and so we
                                  > > can have
                                  > > > > > > that conversation, as well. But the TBL method we have
                                  > > proposed
                                  > > > > > > does not come crashing down simply because people haven't
                                  > > > > agreed on
                                  > > > > > > a choice of related metrics. Should GAAP come to a
                                  > > screeching halt
                                  > > > > > > simply because no two organizations' charts of accounts that
                                  > > > > use it
                                  > > > > > > are alike?
                                  > > > > > >
                                  > > > > > > Regards,
                                  > > > > > >
                                  > > > > > > Mark
                                  > > > > > >
                                  > > > > > >
                                  > > > > > > Mark W. McElroy, Ph.D.
                                  > > > > > > Executive Director
                                  > > > > > > Center for Sustainable Innovation
                                  > > > > > > www.sustainableinnovation.org
                                  > > > > > > (802) 785-2293 (office)
                                  > > > > > > (802) 296-1928 (mobile)
                                  > > > > > >
                                  > > > > > > This message sent by a renewable-energy-powered computer
                                  > > > > > >
                                  > > > > > >
                                  > > > > > >
                                  > > > > > >
                                  > > > > > > On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:
                                  > > > > > >
                                  > > > > > >>
                                  > > > > > >>
                                  > > > > > >> Mark:
                                  > > > > > >>
                                  > > > > > >> Weight them "any way [I] like"?
                                  > > > > > >>
                                  > > > > > >> The weighting seems crucial. No one ever doubted that you
                                  > > could
                                  > > > > > >> apply numbers to these things. The problem is
                                  > > > > commensurability. If
                                  > > > > > >> I'm not weighting factors (for my company) the same way
                                  > > you are
                                  > > > > > >> for yours, we can't compare progress.
                                  > > > > > >>
                                  > > > > > >> Sounds fine for an system of internal tracking, but seems
                                  > > not to
                                  > > > > > >> live up to the term "bottom line".
                                  > > > > > >>
                                  > > > > > >> Regards,
                                  > > > > > >> Chris.
                                  > > > > > >>
                                  > > > > > >> --- In
                                  > > Corporate_Sustainability_Management@yahoogroups.com, "Mark
                                  > > > > > >> W. McElroy" <mmcelroy@> wrote:
                                  > > > > > >> >
                                  > > > > > >> > Chris:
                                  > > > > > >> >
                                  > > > > > >> > I agree with you. That's why I say on slide 35 that
                                  > > > > individual sub-
                                  > > > > > >> > bottom line scores can be weighted. You're free to weight
                                  > > > > them any
                                  > > > > > >> > way you like. The method is completely open to that.
                                  > > > > > >> >
                                  > > > > > >> > Regards,
                                  > > > > > >> >
                                  > > > > > >> > Mark
                                  > > > > > >> >
                                  > > > > > >> >
                                  > > > > > >> > Mark W. McElroy, Ph.D.
                                  > > > > > >> > Executive Director
                                  > > > > > >> > Center for Sustainable Innovation
                                  > > > > > >> > www.sustainableinnovation.org
                                  > > > > > >> > (802) 785-2293 (office)
                                  > > > > > >> > (802) 296-1928 (mobile)
                                  > > > > > >> >
                                  > > > > > >> > This message sent by a renewable-energy-powered computer
                                  > > > > > >> >
                                  > > > > > >> >
                                  > > > > > >> >
                                  > > > > > >> >
                                  > > > > > >> > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                                  > > > > > >> >
                                  > > > > > >> > >
                                  > > > > > >> > >
                                  > > > > > >> > > Mark:
                                  > > > > > >> > >
                                  > > > > > >> > > Thanks.
                                  > > > > > >> > >
                                  > > > > > >> > > I still feel like -- having looked at the relevant
                                  > > documents
                                  > > > > > >> -- I'm
                                  > > > > > >> > > lacking a good, clear, simple example of how the
                                  > > > > aggregation is
                                  > > > > > >> > > supposed to work.
                                  > > > > > >> > >
                                  > > > > > >> > > But one thing that's clear is that the method involves
                                  > > > > averaging
                                  > > > > > >> > > scores (for various sub-bottom-lines). Averaging implies
                                  > > > > that all
                                  > > > > > >> > > the factors being averaged are equally important. I
                                  > > don't see
                                  > > > > > >> what
                                  > > > > > >> > > justifies that assumption.
                                  > > > > > >> > >
                                  > > > > > >> > > Chris.
                                  > > > > > >> > >
                                  > > > > > >> > > --- In
                                  > > > > Corporate_Sustainability_Management@yahoogroups.com, "Mark
                                  > > > > > >> > > W. McElroy" <mmcelroy@> wrote:
                                  > > > > > >> > > >
                                  > > > > > >> > > > All:
                                  > > > > > >> > > >
                                  > > > > > >> > > > Back in 2004, Chris MacDonald and his co-author, Wayne
                                  > > > > Norman,
                                  > > > > > >> > > wrote:
                                  > > > > > >> > > >
                                  > > > > > >> > > > "Ultimately, we argue there are fundamental
                                  > > philosophical
                                  > > > > > >> grounds
                                  > > > > > >> > > for
                                  > > > > > >> > > > thinking that it is impossible to develop a sound
                                  > > > > > >> methodology for
                                  > > > > > >> > > > arriving at a meaniningful social bottom line for a
                                  > > > > firm." They
                                  > > > > > >> > > > added, "...the various values involved in
                                  > > evaluations of
                                  > > > > > >> corporate
                                  > > > > > >> > > > behavior are 'incommensurable' ".
                                  > > > > > >> > > >
                                  > > > > > >> > > > For Chris's benefit, and others', I have added two
                                  > > > > slides to
                                  > > > > > >> this
                                  > > > > > >> > > > presentation (slides 34 and 35), which show exactly how
                                  > > > > one can
                                  > > > > > >> > > > calculate a quantitative (and 'blended') social
                                  > > bottom line
                                  > > > > > >> for a
                                  > > > > > >> > > firm:
                                  > > > > > >> > > >
                                  > > > > > >> > > > http://www.sustainableinnovation.org/Recasting-TBL.pdf
                                  > > > > > >> > > >
                                  > > > > > >> > > > This, of course, occurs in the context of utilizing a
                                  > > > > general
                                  > > > > > >> > > > methodology for assessing the social footprint of an
                                  > > > > > >> organization,
                                  > > > > > >> > > > which can be done using the methodology we created
                                  > > called
                                  > > > > > >> the Social
                                  > > > > > >> > > > Footprint Method. I hope Chris will chime in and
                                  > > comment on
                                  > > > > > >> all of
                                  > > > > > >> > > > this.
                                  > > > > > >> > > >
                                  > > > > > >> > > > Regards,
                                  > > > > > >> > > >
                                  > > > > > >> > > > Mark
                                  > > > > > >> > > >
                                  > > > > > >> > > >
                                  > > > > > >> > > > Mark W. McElroy, Ph.D.
                                  > > > > > >> > > > Executive Director
                                  > > > > > >> > > > Center for Sustainable Innovation
                                  > > > > > >> > > > www.sustainableinnovation.org
                                  > > > > > >> > > > (802) 785-2293 (office)
                                  > > > > > >> > > > (802) 296-1928 (mobile)
                                  > > > > > >> > > >
                                  > > > > > >> > > > This message sent by a renewable-energy-powered
                                  > > computer
                                  > > > > > >> > > >
                                  > > > > > >> > > >
                                  > > > > > >> > > >
                                  > > > > > >> > > >
                                  > > > > > >> > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
                                  > > > > > >> > > >
                                  > > > > > >> > > > >
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > Chris:
                                  > > > > > >> > > > >
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > Thanks for joining in. As you might imagine, where to
                                  > > > > look
                                  > > > > > >> depends
                                  > > > > > >> > > > > on what the specific issue is. It's a big topic
                                  > > with many
                                  > > > > > >> > > > > dimensions. Our body of work is broad and deep, so
                                  > > rather
                                  > > > > > >> than
                                  > > > > > >> > > > > send you off in multiple directions, let's take it
                                  > > one
                                  > > > > > >> step at a
                                  > > > > > >> > > > > time. In your response to our press release
                                  > > yesterday,
                                  > > > > you
                                  > > > > > >> raised
                                  > > > > > >> > > > > several issues about TBL theory in general, and the
                                  > > > > > >> problems our
                                  > > > > > >> > > > > own method may or may not have resolved. So let's
                                  > > take
                                  > > > > > >> each of the
                                  > > > > > >> > > > > issues and criticisms you raised this week (and in
                                  > > your
                                  > > > > > >> very fine
                                  > > > > > >> > > > > article in 2004) one at a time, and explain how we
                                  > > (on
                                  > > > > > >> this end)
                                  > > > > > >> > > > > think we have resolved them. You go first. In the
                                  > > > > > >> meantime, let
                                  > > > > > >> > > > > me answer your question about why we should keep
                                  > > using
                                  > > > > the
                                  > > > > > >> > > > > metaphor. Three responses:
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > 1) The metaphor is valuable in helping to call
                                  > > attention
                                  > > > > > >> to the
                                  > > > > > >> > > > > fact that businesses have real social and
                                  > > environmental
                                  > > > > > >> > > obligations
                                  > > > > > >> > > > > to people in the world, not just financial ones.
                                  > > > > Moreover,
                                  > > > > > >> the
                                  > > > > > >> > > > > financial bottom line concept is itself imperfect.
                                  > > Its
                                  > > > > > >> "common
                                  > > > > > >> > > > > unit of measure" is no less illusory there than it
                                  > > may be
                                  > > > > > >> on other
                                  > > > > > >> > > > > fronts, and yet the language of the metaphor has been
                                  > > > > useful
                                  > > > > > >> > > > > there. Why not reap its value on the social and
                                  > > > > environmental
                                  > > > > > >> > > > > fronts, as well, I wonder?
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > 2) It is, in fact, possible, we think, to compute
                                  > > > > aggregated
                                  > > > > > >> > > social
                                  > > > > > >> > > > > and environmental bottom lines at the organizational
                                  > > > > level of
                                  > > > > > >> > > > > analysis. Whether or not it makes sense to do so is
                                  > > > > another
                                  > > > > > >> > > > > matter. I hesitate to explain how to do this now,
                                  > > > > since we
                                  > > > > > >> are
                                  > > > > > >> > > > > just getting started in this conversation. Happy to
                                  > > > > > >> proceed at
                                  > > > > > >> > > > > your pace. Just ask.
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > 3) The term has taken on a life of its own. It has
                                  > > legs.
                                  > > > > > >> It has
                                  > > > > > >> > > > > emotional value. Why not keep it for what it's
                                  > > worth and
                                  > > > > > >> just deal
                                  > > > > > >> > > > > with its imperfections?
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > Regards,
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > Mark
                                  > > > > > >> > > > >
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > Mark W. McElroy, Ph.D.
                                  > > > > > >> > > > > Executive Director
                                  > > > > > >> > > > > Center for Sustainable Innovation
                                  > > > > > >> > > > > www.sustainableinnovation.org
                                  > > > > > >> > > > > (802) 785-2293 (office)
                                  > > > > > >> > > > > (802) 296-1928 (mobile)
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > This message sent by a renewable-energy-powered
                                  > > computer
                                  > > > > > >> > > > >
                                  > > > > > >> > > > >
                                  > > > > > >> > > > >
                                  > > > > > >> > > > >
                                  > > > > > >> > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                                  > > > > > >> > > > >
                                  > > > > > >> > > > >>
                                  > > > > > >> > > > >>
                                  > > > > > >> > > > >> Mark:
                                  > > > > > >> > > > >>
                                  > > > > > >> > > > >> You suggest I look closer...is the "Re-Casting"
                                  > > > > document the
                                  > > > > > >> > > place
                                  > > > > > >> > > > >> to look? Or is there another source?
                                  > > > > > >> > > > >>
                                  > > > > > >> > > > >> If the bottom lines are going to multiply, then the
                                  > > > > > >> aggregation
                                  > > > > > >> > > > >> gets easier, certainly. But the misleadingness of
                                  > > the
                                  > > > > > >> metaphor
                                  > > > > > >> > > > >> still worries me...if the financial bottom line (and
                                  > > > > > >> accounting
                                  > > > > > >> > > > >> more generally) stops being a good analogy, why keep
                                  > > > > > >> using that
                                  > > > > > >> > > > >> language?
                                  > > > > > >> > > > >>
                                  > > > > > >> > > > >> Regards,
                                  > > > > > >> > > > >>
                                  > > > > > >> > > > >> Chris.
                                  > > > > > >> > > > >>
                                  > > > > > >> > > > >> --- In
                                  > > > > > >> Corporate_Sustainability_Management@yahoogroups.com, "Mark
                                  > > > > > >> > > > >> W. McElroy" <mmcelroy@> wrote:
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Dear Friends:
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Earlier this week, we (CSI) issued a press release
                                  > > > > > >> regarding an
                                  > > > > > >> > > > >> award
                                  > > > > > >> > > > >> > we received from the State of Vermont for our
                                  > > general
                                  > > > > > >> > > approach to
                                  > > > > > >> > > > >> > Triple Bottom Line measurement, management, and
                                  > > > > reporting.
                                  > > > > > >> > > Here's
                                  > > > > > >> > > > >> > the release:
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > http://www.csrwire.com/News/15105.html
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Afterwards, a comment about the release was
                                  > > posted by
                                  > > > > > >> Chris
                                  > > > > > >> > > > >> > MacDonald, who questioned the design and
                                  > > effectiveness
                                  > > > > > >> of our
                                  > > > > > >> > > > >> > method. His post appeared on the same page as our
                                  > > > > > >> > > announcement as
                                  > > > > > >> > > > >> > you will see from the link above. There you
                                  > > will also
                                  > > > > > >> see my
                                  > > > > > >> > > > >> > response to Chris, and one or two more rounds of
                                  > > > > chatter
                                  > > > > > >> > > between
                                  > > > > > >> > > > >> us.
                                  > > > > > >> > > > >> > Here is that exchange:
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Chris MacDonald 2009-04-23 02:36:30
                                  > > > > > >> > > > >> > As far as I can see, they haven't overcome the
                                  > > > > problem of
                                  > > > > > >> > > finding a
                                  > > > > > >> > > > >> > common unit of measure for social goods and bads,
                                  > > > > or for
                                  > > > > > >> > > ecological
                                  > > > > > >> > > > >> > ones. The example provided in the "Recasting"
                                  > > report
                                  > > > > > >> > > involves using
                                  > > > > > >> > > > >> > monetary measures for social issues (i.e., teen
                                  > > > > > >> pregnancy is
                                  > > > > > >> > > > >> > understood in terms of its impact on financial
                                  > > > > > >> > > productivity). It
                                  > > > > > >> > > > >> > seems unlikely, at best, that all socially-
                                  > > relevant
                                  > > > > issues
                                  > > > > > >> > > can be
                                  > > > > > >> > > > >> > cast in financial terms. I think it's telling
                                  > > that, to
                                  > > > > > >> date,
                                  > > > > > >> > > there
                                  > > > > > >> > > > >> > has been no satisfactory reply, from TBL
                                  > > advocates,
                                  > > > > to the
                                  > > > > > >> > > critique
                                  > > > > > >> > > > >> > offered here: "Getting to the Bottom of 'Triple
                                  > > Bottom
                                  > > > > > >> Line'."
                                  > > > > > >> > > > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Chris, I will respond only to what you have said
                                  > > > > here, and
                                  > > > > > >> > > not your
                                  > > > > > >> > > > >> > 2004 paper. That we can discuss elsewhere, if you
                                  > > > > like.
                                  > > > > > >> That
                                  > > > > > >> > > said,
                                  > > > > > >> > > > >> > your criticism here is not a criticism at all, in
                                  > > > > my view,
                                  > > > > > >> > > > >> because it
                                  > > > > > >> > > > >> > is predicated on a supposed problem ("of finding a
                                  > > > > common
                                  > > > > > >> > > unit of
                                  > > > > > >> > > > >> > measure for social goods and bads....") that
                                  > > does not
                                  > > > > > >> exist.
                                  > > > > > >> > > You
                                  > > > > > >> > > > >> seem
                                  > > > > > >> > > > >> > to want to take a 'weak' sustainability stance,
                                  > > > > whereas
                                  > > > > > >> I and
                                  > > > > > >> > > > >> others
                                  > > > > > >> > > > >> > take a 'strong' one, in which capitals are not
                                  > > > > > >> substitutable
                                  > > > > > >> > > and
                                  > > > > > >> > > > >> > aggregation (i.e., your "common unit" idea) is ill
                                  > > > > > >> conceived.
                                  > > > > > >> > > > >> Absent
                                  > > > > > >> > > > >> > your starting premise, then, your criticisms fade
                                  > > > > away,
                                  > > > > > >> one and
                                  > > > > > >> > > > >> all.
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Chris MacDonald 2009-04-23 12:28:57
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Mark: Thanks for taking the time to reply. I don't
                                  > > > > have
                                  > > > > > >> a view
                                  > > > > > >> > > > >> on the
                                  > > > > > >> > > > >> > "strong vs. week." I just thought that the idea
                                  > > of a
                                  > > > > > >> "bottom
                                  > > > > > >> > > line"
                                  > > > > > >> > > > >> > requires adding stuff up. And adding stuff up
                                  > > requires
                                  > > > > > >> a common
                                  > > > > > >> > > > >> unit.
                                  > > > > > >> > > > >> > Maybe you're not after a bottom line at all,
                                  > > which is
                                  > > > > > >> fine.
                                  > > > > > >> > > Chris.
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Chris, I am indeed after a bottom line, but I
                                  > > don't
                                  > > > > agree
                                  > > > > > >> > > that it
                                  > > > > > >> > > > >> > necessarily entails single bottom lines for
                                  > > social or
                                  > > > > > >> > > environmental
                                  > > > > > >> > > > >> > performance, respectively. I think the three-
                                  > > bottom-
                                  > > > > line
                                  > > > > > >> > > > >> metaphor is
                                  > > > > > >> > > > >> > more forgiving than that. I prefer to think of it
                                  > > > > as three
                                  > > > > > >> > > > >> categories
                                  > > > > > >> > > > >> > of multiple bottom lines. Also, I suggest that
                                  > > > > before you
                                  > > > > > >> > > > >> continue to
                                  > > > > > >> > > > >> > hold the financial bottom line out as the standard
                                  > > > > that
                                  > > > > > >> the
                                  > > > > > >> > > > >> other non-
                                  > > > > > >> > > > >> > financial bottom lines should adhere to, do not
                                  > > > > lose sight
                                  > > > > > >> > > of the
                                  > > > > > >> > > > >> > fact that the financial bottom line exported its
                                  > > > > social
                                  > > > > > >> and
                                  > > > > > >> > > > >> > environmental costs, precisely because it could
                                  > > not
                                  > > > > > >> accommodate
                                  > > > > > >> > > > >> them
                                  > > > > > >> > > > >> > with its own so-called "common unit" unit of
                                  > > measure,
                                  > > > > > >> as you
                                  > > > > > >> > > put
                                  > > > > > >> > > > >> it.
                                  > > > > > >> > > > >> > So let's not pretend that the financial bottom
                                  > > line is
                                  > > > > > >> some
                                  > > > > > >> > > sort of
                                  > > > > > >> > > > >> > paragon that the other bottom lines should be
                                  > > > > judged by.
                                  > > > > > >> > > Last, me
                                  > > > > > >> > > > >> > also say that your 2004 article was an outstanding
                                  > > > > > >> piece of
                                  > > > > > >> > > > >> work, and
                                  > > > > > >> > > > >> > that what we (CSI) have done with our own Triple
                                  > > > > Bottom
                                  > > > > > >> Line
                                  > > > > > >> > > method
                                  > > > > > >> > > > >> > (as announced this week) resolves, so far as we
                                  > > are
                                  > > > > > >> concerned,
                                  > > > > > >> > > > >> all of
                                  > > > > > >> > > > >> > the issues and criticisms you and your co-author
                                  > > > > raised
                                  > > > > > >> at that
                                  > > > > > >> > > > >> time.
                                  > > > > > >> > > > >> > If you do not see this, I suggest you look closer.
                                  > > > > > >> Happy to
                                  > > > > > >> > > discuss
                                  > > > > > >> > > > >> > this further if you like. Regards, Mark
                                  > > > > > >> > > > >> > ____________________
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Given the significance of Chris's criticisms
                                  > > and the
                                  > > > > > >> > > importance of
                                  > > > > > >> > > > >> > the topic in general, I decided to take the
                                  > > discussion
                                  > > > > > >> over
                                  > > > > > >> > > to this
                                  > > > > > >> > > > >> > listserve, and have invited Chris to join us.
                                  > > It is my
                                  > > > > > >> hope
                                  > > > > > >> > > that he
                                  > > > > > >> > > > >> > will do so.
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Regards,
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Mark
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > Mark W. McElroy, Ph.D.
                                  > > > > > >> > > > >> > Executive Director
                                  > > > > > >> > > > >> > Center for Sustainable Innovation
                                  > > > > > >> > > > >> > www.sustainableinnovation.org
                                  > > > > > >> > > > >> > (802) 785-2293 (office)
                                  > > > > > >> > > > >> > (802) 296-1928 (mobile)
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >> > This message sent by a renewable-energy-powered
                                  > > > > computer
                                  > > > > > >> > > > >> >
                                  > > > > > >> > > > >>
                                  > > > > > >> > > > >>
                                  > > > > > >> > > > >
                                  > > > > > >> > > > >
                                  > > > > > >> > > > >
                                  > > > > > >> > > >
                                  > > > > > >> > >
                                  > > > > > >> > >
                                  > > > > > >> > >
                                  > > > > > >> >
                                  > > > > > >>
                                  > > > > > >>
                                  > > > > > >
                                  > > > > > >
                                  > > > > > >
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                                  >
                                • Mark W. McElroy
                                  Chris: I think the point I m trying to make about intercomparability is that every company s sustainability performance is a function of (a) who its
                                  Message 16 of 20 , Apr 27 11:33 AM
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                                    Chris:

                                    I think the point I'm trying to make about intercomparability is that every company's sustainability performance is a function of (a) who its stakeholders are, and (b) what its duties and obligations are to have impact (or not have impact) on vital capitals its stakeholders rely on for their own well-being.  If you poison my well, you put my well-being at risk.  That's mainstream sustainability theory in a nutshell.  That being the case, what makes two or more reports comparable to one another is that (a) they organize their data in the same way in terms of what the categories are and what the rules for populating them with data are, and (b) the results are plotted onto a shared sustainability performance scale.  Thus, the specifics of my non-financial impacts may be different than yours, but our scores may still be commensurable in the sense that we have organized our impacts in the same categories according to the same rules.  My contention, Chris, is that this is no different than how financial reporting takes place, except that in the case of non-financial reporting we are dealing with many non-substitutable kinds of impacts (because the capitals are different), and so we are forced to compute many sub-bottom lines before we can combine or blend them into one or two.  I believe I've made that point several times now.

                                    OK, here's an example for you.  To simplify, let's say two organizations are, in fact, using the same set of, say, six metrics, three of which consist of social metrics and the other three of environmental metrics.  The three social metrics differ from one another in that one pertains to impacts on human capital, a second pertains to impacts on social capital, and the third pertains to impacts on constructed capital.  For their part, the environmental metrics all pertain to natural capital, but different aspects of it -- say, land, water, and air.  All six metrics, then, are non-substitutable.  I can't pollute the water and expect to be able to compensate for that by making large charitable donations to the local soup kitchen.  Even if I make the donations, the water is still polluted.

                                    So basically we have six metrics that require six independent scores.  Adding or subtracting them together would make no sense.  They are non-commensurable in that regard.  What that means is that if my score on any one of them is below what it should be, it doesn't matter what my scores are for the other five. I am still irrevocably unsustainable on that one front until and unless I improve its score to meet the corresponding standard of performance.  So for the social bottom line, I must score satisfactorily on ALL three metrics; the same is true for the environmental category, because even though the three environmental metrics pertain to a common capital, I have the same substitutability problem.  If I poison the well, the fact that I may have cleaned up the air changes nothing.  The well is still poisoned.

                                    The above explains why the quotient of quotients approach is best for computing blended bottom lines.  What you refer to as incommensurable metrics may be incommensurable in one sense, I agree, but not in another.  They are all commensurable in the sense that they all represent standards of performance that must be met in order for sustainability to obtain.  The individual underlying standards are different, but so what?  All standards must be met, despite their differences!

                                    Since I know you'll want to have some examples of specific metrics, here they are: 

                                    1)  An environmental metric that measures water use relative a standard for how much water a company is entitled to use.  This can be determined by measuring precipitation in a region and allocating a share of it to a specific business or facility.  We are currently doing this with a client here in Vermont, and have proven the concept in practice.

                                    2)  A social metric that measures a company's contributions towards alleviating global poverty relative to what such contributions ought to be on a per capita basis.  This can be determined by reference to the UN's Millennium Development Goals which can be viewed as constituting standards of performance for how the developed world should assist the developing world.  This we have done independently with respect to several companies, and have proven the concept in practice.

                                    I hope this helps.

                                    Regards,

                                    Mark


                                    Mark W. McElroy, Ph.D.
                                    Executive Director
                                    Center for Sustainable Innovation
                                    www.sustainableinnovation.org
                                    (802) 785-2293 (office)
                                    (802) 296-1928 (mobile)

                                    This message sent by a renewable-energy-powered computer




                                    On Apr 27, 2009, at 1:50 PM, ethicsblogger wrote:



                                    Mark:

                                    For the sake of this discussion, I'm going to give up on intercomparability of results. As long as you're ONLY trying to help a single company track its progress, it's score doesn't need to be comparable to another company's score. Fine.

                                    The math is still sounding very unconvincing to me. A ratio of ratios of incommensurable metrics sounds meaningless. And I'm still lacking a good, clear example. Show me how a company's score on just two nameable metrics would result in a meaningful bottom line. You pick the metrics. Fictional example will do.

                                    Thanks,
                                    Chris

                                    --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
                                    >
                                    > Chris:
                                    > 
                                    > Great questions, thanks. Some quick answers:
                                    > 
                                    > 1. Sources for norms and duties are varied, depending on the 
                                    > metric. In some cases, they're regulatory or legislative or NGO- 
                                    > based, in other cases they're scientific. Ideally, yes, a source 
                                    > similar to GAAP would be nice to have, and someday I hope we do, but 
                                    > in the meantime, organizations must go it alone and develop standards 
                                    > of their own. I know this doesn't meet your need for 
                                    > commensurability, but it's better than not measuring and reporting 
                                    > performance at all. Better to have some standards as opposed to 
                                    > none, even if there is no widespread agreement behind them yet. Over 
                                    > time, commensurability will improve, but not if we just sit here and 
                                    > do nothing.
                                    > 
                                    > 2. 'Yes' is my answer to your question about income statements; they 
                                    > can simply be interpreted that way. The numerator is just a measure 
                                    > of revenue; the denominator is a measure of expenses with an implicit 
                                    > norm tacked on to it (i.e., that it should be regarded as a minimum 
                                    > performance standard for revenue, as in revenue must at least equal it).
                                    > 
                                    > 3. Regarding the 4 capitals, there is a long and venerable 
                                    > intellectual history behind that idea. It is, in my view, the least 
                                    > controversial aspect of the method we propose, and is arguably the 
                                    > dominant theory of sustainability in existence. As for the fact that 
                                    > normative claims may be contentious, I say so what? You're slipping 
                                    > back into the consensus trap, I think. You seem to need consensus in 
                                    > order to make progress, whereas I would rather evaluate proposals on 
                                    > their merits, regardless of whether or not consensus lines up behind 
                                    > them. Financial measurement and reporting is also normative and 
                                    > contentious, but that doesn't stop us from doing it. Indeed, the 
                                    > supposed commensurability of related reports is debatable. Are any 
                                    > two income statements identical in content? I don't think so, other 
                                    > than at the mid- to top-level categories. What I propose is no 
                                    > different.
                                    > 
                                    > 4. Regarding averaging, I have a completely different alternative to 
                                    > propose, a better one I think than averaging. Averaging can be done, 
                                    > but it suffers from the same problem that adding and subtracting 
                                    > does, in some cases. Namely, that unsustainable scores can be 
                                    > cancelled out by sufficiently higher sustainable scores. The fix for 
                                    > this is to avoid both averaging and summing, and to instead rely on 
                                    > the quotients approach I have proposed for individual metrics. In 
                                    > this case, I'm talking about a quotient OF quotients. Once 
                                    > individual quotient scores are computed for each metric, a blended 
                                    > score would consist of a measure of the proportion of all such scores 
                                    > that at least comply sustainability performance standards. If there 
                                    > are 15 metrics and all meet or exceed their standards, the blended 
                                    > bottom-line score would be 1.0. If only 12 did, the net bottom line 
                                    > score would be 0.8. The best possible score would be 1.0, and any 
                                    > score of less than that would signify unsustainable performance to 
                                    > some degree. I have already updated my treatment of this issue on 
                                    > slides 34 and 35 of the following presentation:
                                    > 
                                    > http://www.sustaina bleinnovation. org/Recasting- TBL.pdf
                                    > 
                                    > Regards,
                                    > 
                                    > Mark
                                    > 
                                    > 
                                    > Mark W. McElroy, Ph.D.
                                    > Executive Director
                                    > Center for Sustainable Innovation
                                    > www.sustainableinno vation.org
                                    > (802) 785-2293 (office)
                                    > (802) 296-1928 (mobile)
                                    > 
                                    > This message sent by a renewable-energy- powered computer
                                    > 
                                    > 
                                    > 
                                    > 
                                    > On Apr 27, 2009, at 11:41 AM, ethicsblogger wrote:
                                    > 
                                    > >
                                    > >
                                    > > Mark:
                                    > >
                                    > > That's a lot to chew on. I won't try to reply to it all.
                                    > >
                                    > > Where do we get the "norms or duties for what such impacts ought to 
                                    > > be"? Is there (or is there likely to be) something like GAAP for that?
                                    > >
                                    > > I need help with the idea that "In financial reporting, income 
                                    > > statements largely boil down to quotients." I take it you mean they 
                                    > > can be interpreted that way; they're not usually presented that 
                                    > > way, right? That's fine. Where does the numerator come from? And 
                                    > > what unit is the "The norm or duty represented by the denominator" 
                                    > > in? Dollars? I'm just trying to picture this clearly. I've never 
                                    > > heard of financial accounting described this way, so I want to be 
                                    > > clear.
                                    > >
                                    > > Next: the idea that in non-financial accounting there are to be 
                                    > > precisely 4 non-substitutable "capitals" immediately gets you into 
                                    > > huge, probably intracable, philosophical problems. You've got to 
                                    > > make hugely contentious normative claims to do that. Maybe you can 
                                    > > get away with that, for the relevant audiences.
                                    > >
                                    > > I'm also confused by the idea that"such scores should be averaged, 
                                    > > not summed, because again, they are not fungible." Seems to me that 
                                    > > you cannot meaningfully average things that are not fungible. 
                                    > > Averaging means adding together & dividing by the number of items 
                                    > > added. How can you meaningfully add together things that aren't 
                                    > > commensurable?
                                    > >
                                    > > Regards,
                                    > > Chris.
                                    > >
                                    > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark 
                                    > > W. McElroy" <mmcelroy@> wrote:
                                    > > >
                                    > > > Chris:
                                    > > >
                                    > > > Actually, yes, there are a few key pieces missing from the 
                                    > > discussion
                                    > > > that I really should explain. In particular, the 'adding up of goods
                                    > > > and subtracting the bads' premise you're relying on is mistaken, in
                                    > > > my view. That's really not how non-financial reporting works, nor
                                    > > > how it should work, as we see it. Moreover, it's not how financial
                                    > > > reporting works, either. Here I want to encourage you (and others)
                                    > > > to think of organizational performance reporting as: A process of
                                    > > > measuring impacts on capitals relative to norms or duties for what
                                    > > > such impacts ought to be. Metrics for such measurements can usefully
                                    > > > take the form of quotients, where numerators represent measured
                                    > > > impacts on capitals, and denominators represent norms or duties for
                                    > > > what such impacts ought to be. Now let's apply these principles and
                                    > > > see what we get, starting with financial reporting.
                                    > > >
                                    > > > In financial reporting, income statements largely boil down to
                                    > > > quotients of revenues over expenses. The type of capital involved
                                    > > > here is monetary capital. The norm or duty represented by the
                                    > > > denominator is a monetary value that the numerator (revenues) should
                                    > > > at least equal (and hopefully exceed, the more so the better!) if 
                                    > > the
                                    > > > financial performance of the organization is to be viewed as
                                    > > > sustainable, or solvent if you like. Thus, quotient values that are
                                    > > > greater than or equal to 1.0 in financial reporting signify
                                    > > > sustainable performance. Here I agree that there is adding and
                                    > > > subtracting going on, but only in the calculation of the numerator
                                    > > > and the denominator. The key sustainability metric is subsequent to
                                    > > > all of that and is a quotient, not a sum. This is the logic of
                                    > > > solvency, and it is arguably at the heart of what we mean by the
                                    > > > 'financial bottom line'.
                                    > > >
                                    > > > Here it should also be clear that there is a difference between
                                    > > > measuring financial sustainability and measuring financial
                                    > > > profitability. For the former, all we care about is whether the
                                    > > > quotient is greater than or equal to 1.0. For the latter, we, too,
                                    > > > want sustainability, of course, but we also want to maximize the
                                    > > > ratio (i.e., maximize profits). Not so for sustainability measures.
                                    > > > There, breaking even is good enough. In this regard, sustainability
                                    > > > measurement and reporting, like pregnancy, is 'binary'. You're
                                    > > > either one of the other, period.
                                    > > >
                                    > > > Now take the same principles and apply them to non-financial
                                    > > > measurement. The first thing to understand is that the capitals are
                                    > > > different. In fact, there are four of them, and they are not
                                    > > > fungible or substitutable with one another (this relates to the
                                    > > > 'strong' vs. 'weak' sustainability point I made earlier). I, and
                                    > > > many others, take the 'strong' position as I just did, which is that
                                    > > > the four capitals involved are not substitutable. In other words, an
                                    > > > organization cannot compensate for environmental bads by investing
                                    > > > more in social goods. Moreover, even good and bad impacts within
                                    > > > individual categories of capital are not necessarily fungible or
                                    > > > substitutable. I can't be absolved of polluting the water table
                                    > > > simply because I helped clean up the air, yet both are instances of
                                    > > > natural capital. The four capitals I speak of are natural, human,
                                    > > > social, and constructed (or built). I call the latter three anthro
                                    > > > capital because they are anthropogenic; natural capital is not.
                                    > > >
                                    > > > The implication of all of this is that (a) non-financial reporting
                                    > > > necessarily involves the need to produce multiple social and
                                    > > > environmental scores, (b) such multiple scores cannot be added up
                                    > > > together very well because they are not fungible, and (c) such 
                                    > > scores
                                    > > > should be averaged, not summed, because again, they are not 
                                    > > fungible,
                                    > > > and to sum them up would be to take a weak sustainability position,
                                    > > > as if social and environmental impacts share a common currency, 
                                    > > which
                                    > > > they do not! This is why I say a good TBL bottom line for social and
                                    > > > environmental performance -- if we must have single scores for each
                                    > > > -- must be the result of averaging many scores, not adding and
                                    > > > subtracting (although summing can occur beforehand as individual
                                    > > > numerators and denominators are computed).
                                    > > >
                                    > > > I also want to explain the logic of denominators further, because I
                                    > > > see misconceptions there, too, but I'll stop now and let you 
                                    > > react to
                                    > > > the above before I do.
                                    > > >
                                    > > > Regards,
                                    > > >
                                    > > > Mark
                                    > > >
                                    > > >
                                    > > > Mark W. McElroy, Ph.D.
                                    > > > Executive Director
                                    > > > Center for Sustainable Innovation
                                    > > > www.sustainableinno vation.org
                                    > > > (802) 785-2293 (office)
                                    > > > (802) 296-1928 (mobile)
                                    > > >
                                    > > > This message sent by a renewable-energy- powered computer
                                    > > >
                                    > > >
                                    > > >
                                    > > >
                                    > > > On Apr 26, 2009, at 4:01 PM, ethicsblogger wrote:
                                    > > >
                                    > > > >
                                    > > > >
                                    > > > > Mark:
                                    > > > >
                                    > > > > Sounds like you're suggesting a (reasonably) method of SEAAR. And,
                                    > > > > as we tried to make clear in our paper, we're not against SEAAR.
                                    > > > > We're just against the *implication* of intercomparability that 
                                    > > the
                                    > > > > accounting terminology implies (even if people overestimate
                                    > > > > financial accounting in that regard).
                                    > > > >
                                    > > > > Annual reports still do generate a Bottom Line, right? Assets in
                                    > > > > dollars, liabilities in dollars. Higher number is better.
                                    > > > >
                                    > > > > So, I think you're right to leave out weightings, but that looks
                                    > > > > (again) like taking an potentially- fuzzy financial concept and
                                    > > > > applying it to an even fuzzier case.
                                    > > > >
                                    > > > > p.s. I'm still lacking a good, clear, simple example of how
                                    > > > > different categories of social goods & bads would be added
                                    > > > > together, if that's still part of the agenda. Reporting gender
                                    > > > > balance on the Board is good; reporting charitable donations is
                                    > > > > good; reporting collaboration with NGO's is good. But they cannot
                                    > > > > be added together. Am I still missing something?
                                    > > > >
                                    > > > > Regards,
                                    > > > > Chris.
                                    > > > >
                                    > > > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                                    > > > > W. McElroy" <mmcelroy@> wrote:
                                    > > > > >
                                    > > > > > All:
                                    > > > > >
                                    > > > > > Upon further reflection of Chris's point about giving different
                                    > > > > > indicators different weights because of their arguably different
                                    > > > > > importance, I find myself leaning more strongly against it 
                                    > > than for
                                    > > > > > it. While there is nothing in the TBL method we propose that 
                                    > > would
                                    > > > > > prevent us from applying such variable weightings, Chris's point
                                    > > > > > about the desirability of bottom lines being commensurable or
                                    > > > > > comparable from one organization to another is a good one, I 
                                    > > think.
                                    > > > > > But how can we have it both ways? How can we have variable
                                    > > > > > weightings and commensurable reporting, when no two 
                                    > > organizations
                                    > > > > > will likely see the relative importance of various indicators 
                                    > > the
                                    > > > > same?
                                    > > > > >
                                    > > > > > The answer, I think, is to leave weightings out of reports
                                    > > > > > altogether, and to leave it to the readers or consumers of such
                                    > > > > > reports to apply their own weightings. Indeed, this is precisely
                                    > > > > > what we do with financial reports. The raw data, so to speak, is
                                    > > > > > disclosed in financial reports, without any attempt to weight 
                                    > > the
                                    > > > > > numbers. The numbers are reported just as they are. Shareholders
                                    > > > > > are then free to attach more or less importance to the 
                                    > > numbers they
                                    > > > > > read as they see fit. I see no reason to do things 
                                    > > differently in
                                    > > > > > social and environmental reporting.
                                    > > > > >
                                    > > > > > Regards,
                                    > > > > >
                                    > > > > > Mark
                                    > > > > >
                                    > > > > >
                                    > > > > > Mark W. McElroy, Ph.D.
                                    > > > > > Executive Director
                                    > > > > > Center for Sustainable Innovation
                                    > > > > > www.sustainableinno vation.org
                                    > > > > > (802) 785-2293 (office)
                                    > > > > > (802) 296-1928 (mobile)
                                    > > > > >
                                    > > > > > This message sent by a renewable-energy- powered computer
                                    > > > > >
                                    > > > > >
                                    > > > > >
                                    > > > > >
                                    > > > > > On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:
                                    > > > > >
                                    > > > > > >
                                    > > > > > >
                                    > > > > > > Chris:
                                    > > > > > >
                                    > > > > > >
                                    > > > > > > The issue you raise is not with the method, it is with 
                                    > > whether or
                                    > > > > > > not people can agree (or have agreed) on a weighting 
                                    > > scheme, and
                                    > > > > > > also on specific indicators. The non-financial accounting 
                                    > > method I
                                    > > > > > > propose is just as neutral on that issue as GAAP is on 
                                    > > financial
                                    > > > > > > matters. GAAP stops at the level of categories, and leaves 
                                    > > it to
                                    > > > > > > individual reporters to define their own underlying 
                                    > > accounts. Are
                                    > > > > > > all companies' charts of accounts identical? Of course not. 
                                    > > Why
                                    > > > > > > do you/we assume commensurability in that case but not in non-
                                    > > > > > > financial reporting? And why do you insist of having weighting
                                    > > > > > > applied in the case of non-financial reporting, but not in
                                    > > > > > > financial reporting? Let me put it this way, ASSUMING 
                                    > > people can
                                    > > > > > > come to some agreement on metrics and weighting, the kind of
                                    > > > > > > comparability you refer to will be possible, but I'm not 
                                    > > sure it's
                                    > > > > > > necessary.
                                    > > > > > >
                                    > > > > > > In the meantime, if individual companies want to pilot, 
                                    > > test, and
                                    > > > > > > evaluate schemes of their own based on a proposed conceptual
                                    > > > > > > framework such as the one we propose, that seems like an 
                                    > > entirely
                                    > > > > > > constructive step to take in my view. Consider the 
                                    > > alternative: no
                                    > > > > > > meaningful non-financial measurement and reporting takes 
                                    > > place at
                                    > > > > > > all. So let the individual claims about metrics compete in the
                                    > > > > > > intellectual marketplace, I say, and let us collectively take
                                    > > > > steps
                                    > > > > > > to evolve the kind of common index you and the rest of us 
                                    > > would
                                    > > > > > > like to see. But in order to do that, we must have a 
                                    > > conceptual
                                    > > > > > > framework in which such indicators and weighting schemes 
                                    > > can fit,
                                    > > > > > > and that is precisely what we have created. If you want to 
                                    > > talk
                                    > > > > > > about metrics, on the other hand, we have put a proposal 
                                    > > forward
                                    > > > > > > for that, too (the True Sustainability Index), and so we 
                                    > > can have
                                    > > > > > > that conversation, as well. But the TBL method we have 
                                    > > proposed
                                    > > > > > > does not come crashing down simply because people haven't
                                    > > > > agreed on
                                    > > > > > > a choice of related metrics. Should GAAP come to a 
                                    > > screeching halt
                                    > > > > > > simply because no two organizations' charts of accounts that
                                    > > > > use it
                                    > > > > > > are alike?
                                    > > > > > >
                                    > > > > > > Regards,
                                    > > > > > >
                                    > > > > > > Mark
                                    > > > > > >
                                    > > > > > >
                                    > > > > > > Mark W. McElroy, Ph.D.
                                    > > > > > > Executive Director
                                    > > > > > > Center for Sustainable Innovation
                                    > > > > > > www.sustainableinno vation.org
                                    > > > > > > (802) 785-2293 (office)
                                    > > > > > > (802) 296-1928 (mobile)
                                    > > > > > >
                                    > > > > > > This message sent by a renewable-energy- powered computer
                                    > > > > > >
                                    > > > > > >
                                    > > > > > >
                                    > > > > > >
                                    > > > > > > On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:
                                    > > > > > >
                                    > > > > > >>
                                    > > > > > >>
                                    > > > > > >> Mark:
                                    > > > > > >>
                                    > > > > > >> Weight them "any way [I] like"?
                                    > > > > > >>
                                    > > > > > >> The weighting seems crucial. No one ever doubted that you 
                                    > > could
                                    > > > > > >> apply numbers to these things. The problem is
                                    > > > > commensurability. If
                                    > > > > > >> I'm not weighting factors (for my company) the same way 
                                    > > you are
                                    > > > > > >> for yours, we can't compare progress.
                                    > > > > > >>
                                    > > > > > >> Sounds fine for an system of internal tracking, but seems 
                                    > > not to
                                    > > > > > >> live up to the term "bottom line".
                                    > > > > > >>
                                    > > > > > >> Regards,
                                    > > > > > >> Chris.
                                    > > > > > >>
                                    > > > > > >> --- In 
                                    > > Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                                    > > > > > >> W. McElroy" <mmcelroy@> wrote:
                                    > > > > > >> >
                                    > > > > > >> > Chris:
                                    > > > > > >> >
                                    > > > > > >> > I agree with you. That's why I say on slide 35 that
                                    > > > > individual sub-
                                    > > > > > >> > bottom line scores can be weighted. You're free to weight
                                    > > > > them any
                                    > > > > > >> > way you like. The method is completely open to that.
                                    > > > > > >> >
                                    > > > > > >> > Regards,
                                    > > > > > >> >
                                    > > > > > >> > Mark
                                    > > > > > >> >
                                    > > > > > >> >
                                    > > > > > >> > Mark W. McElroy, Ph.D.
                                    > > > > > >> > Executive Director
                                    > > > > > >> > Center for Sustainable Innovation
                                    > > > > > >> > www.sustainableinno vation.org
                                    > > > > > >> > (802) 785-2293 (office)
                                    > > > > > >> > (802) 296-1928 (mobile)
                                    > > > > > >> >
                                    > > > > > >> > This message sent by a renewable-energy- powered computer
                                    > > > > > >> >
                                    > > > > > >> >
                                    > > > > > >> >
                                    > > > > > >> >
                                    > > > > > >> > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                                    > > > > > >> >
                                    > > > > > >> > >
                                    > > > > > >> > >
                                    > > > > > >> > > Mark:
                                    > > > > > >> > >
                                    > > > > > >> > > Thanks.
                                    > > > > > >> > >
                                    > > > > > >> > > I still feel like -- having looked at the relevant 
                                    > > documents
                                    > > > > > >> -- I'm
                                    > > > > > >> > > lacking a good, clear, simple example of how the
                                    > > > > aggregation is
                                    > > > > > >> > > supposed to work.
                                    > > > > > >> > >
                                    > > > > > >> > > But one thing that's clear is that the method involves
                                    > > > > averaging
                                    > > > > > >> > > scores (for various sub-bottom-lines) . Averaging implies
                                    > > > > that all
                                    > > > > > >> > > the factors being averaged are equally important. I 
                                    > > don't see
                                    > > > > > >> what
                                    > > > > > >> > > justifies that assumption.
                                    > > > > > >> > >
                                    > > > > > >> > > Chris.
                                    > > > > > >> > >
                                    > > > > > >> > > --- In
                                    > > > > Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                                    > > > > > >> > > W. McElroy" <mmcelroy@> wrote:
                                    > > > > > >> > > >
                                    > > > > > >> > > > All:
                                    > > > > > >> > > >
                                    > > > > > >> > > > Back in 2004, Chris MacDonald and his co-author, Wayne
                                    > > > > Norman,
                                    > > > > > >> > > wrote:
                                    > > > > > >> > > >
                                    > > > > > >> > > > "Ultimately, we argue there are fundamental 
                                    > > philosophical
                                    > > > > > >> grounds
                                    > > > > > >> > > for
                                    > > > > > >> > > > thinking that it is impossible to develop a sound
                                    > > > > > >> methodology for
                                    > > > > > >> > > > arriving at a meaniningful social bottom line for a
                                    > > > > firm." They
                                    > > > > > >> > > > added, "...the various values involved in 
                                    > > evaluations of
                                    > > > > > >> corporate
                                    > > > > > >> > > > behavior are 'incommensurable' ".
                                    > > > > > >> > > >
                                    > > > > > >> > > > For Chris's benefit, and others', I have added two
                                    > > > > slides to
                                    > > > > > >> this
                                    > > > > > >> > > > presentation (slides 34 and 35), which show exactly how
                                    > > > > one can
                                    > > > > > >> > > > calculate a quantitative (and 'blended') social 
                                    > > bottom line
                                    > > > > > >> for a
                                    > > > > > >> > > firm:
                                    > > > > > >> > > >
                                    > > > > > >> > > > http://www.sustaina bleinnovation. org/Recasting- TBL.pdf
                                    > > > > > >> > > >
                                    > > > > > >> > > > This, of course, occurs in the context of utilizing a
                                    > > > > general
                                    > > > > > >> > > > methodology for assessing the social footprint of an
                                    > > > > > >> organization,
                                    > > > > > >> > > > which can be done using the methodology we created 
                                    > > called
                                    > > > > > >> the Social
                                    > > > > > >> > > > Footprint Method. I hope Chris will chime in and 
                                    > > comment on
                                    > > > > > >> all of
                                    > > > > > >> > > > this.
                                    > > > > > >> > > >
                                    > > > > > >> > > > Regards,
                                    > > > > > >> > > >
                                    > > > > > >> > > > Mark
                                    > > > > > >> > > >
                                    > > > > > >> > > >
                                    > > > > > >> > > > Mark W. McElroy, Ph.D.
                                    > > > > > >> > > > Executive Director
                                    > > > > > >> > > > Center for Sustainable Innovation
                                    > > > > > >> > > > www.sustainableinno vation.org
                                    > > > > > >> > > > (802) 785-2293 (office)
                                    > > > > > >> > > > (802) 296-1928 (mobile)
                                    > > > > > >> > > >
                                    > > > > > >> > > > This message sent by a renewable-energy- powered 
                                    > > computer
                                    > > > > > >> > > >
                                    > > > > > >> > > >
                                    > > > > > >> > > >
                                    > > > > > >> > > >
                                    > > > > > >> > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy wrote:
                                    > > > > > >> > > >
                                    > > > > > >> > > > >
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > Chris:
                                    > > > > > >> > > > >
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > Thanks for joining in. As you might imagine, where to
                                    > > > > look
                                    > > > > > >> depends
                                    > > > > > >> > > > > on what the specific issue is. It's a big topic 
                                    > > with many
                                    > > > > > >> > > > > dimensions. Our body of work is broad and deep, so 
                                    > > rather
                                    > > > > > >> than
                                    > > > > > >> > > > > send you off in multiple directions, let's take it 
                                    > > one
                                    > > > > > >> step at a
                                    > > > > > >> > > > > time. In your response to our press release 
                                    > > yesterday,
                                    > > > > you
                                    > > > > > >> raised
                                    > > > > > >> > > > > several issues about TBL theory in general, and the
                                    > > > > > >> problems our
                                    > > > > > >> > > > > own method may or may not have resolved. So let's 
                                    > > take
                                    > > > > > >> each of the
                                    > > > > > >> > > > > issues and criticisms you raised this week (and in 
                                    > > your
                                    > > > > > >> very fine
                                    > > > > > >> > > > > article in 2004) one at a time, and explain how we 
                                    > > (on
                                    > > > > > >> this end)
                                    > > > > > >> > > > > think we have resolved them. You go first. In the
                                    > > > > > >> meantime, let
                                    > > > > > >> > > > > me answer your question about why we should keep 
                                    > > using
                                    > > > > the
                                    > > > > > >> > > > > metaphor. Three responses:
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > 1) The metaphor is valuable in helping to call 
                                    > > attention
                                    > > > > > >> to the
                                    > > > > > >> > > > > fact that businesses have real social and 
                                    > > environmental
                                    > > > > > >> > > obligations
                                    > > > > > >> > > > > to people in the world, not just financial ones.
                                    > > > > Moreover,
                                    > > > > > >> the
                                    > > > > > >> > > > > financial bottom line concept is itself imperfect. 
                                    > > Its
                                    > > > > > >> "common
                                    > > > > > >> > > > > unit of measure" is no less illusory there than it 
                                    > > may be
                                    > > > > > >> on other
                                    > > > > > >> > > > > fronts, and yet the language of the metaphor has been
                                    > > > > useful
                                    > > > > > >> > > > > there. Why not reap its value on the social and
                                    > > > > environmental
                                    > > > > > >> > > > > fronts, as well, I wonder?
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > 2) It is, in fact, possible, we think, to compute
                                    > > > > aggregated
                                    > > > > > >> > > social
                                    > > > > > >> > > > > and environmental bottom lines at the organizational
                                    > > > > level of
                                    > > > > > >> > > > > analysis. Whether or not it makes sense to do so is
                                    > > > > another
                                    > > > > > >> > > > > matter. I hesitate to explain how to do this now,
                                    > > > > since we
                                    > > > > > >> are
                                    > > > > > >> > > > > just getting started in this conversation. Happy to
                                    > > > > > >> proceed at
                                    > > > > > >> > > > > your pace. Just ask.
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > 3) The term has taken on a life of its own. It has 
                                    > > legs.
                                    > > > > > >> It has
                                    > > > > > >> > > > > emotional value. Why not keep it for what it's 
                                    > > worth and
                                    > > > > > >> just deal
                                    > > > > > >> > > > > with its imperfections?
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > Regards,
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > Mark
                                    > > > > > >> > > > >
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > Mark W. McElroy, Ph.D.
                                    > > > > > >> > > > > Executive Director
                                    > > > > > >> > > > > Center for Sustainable Innovation
                                    > > > > > >> > > > > www.sustainableinno vation.org
                                    > > > > > >> > > > > (802) 785-2293 (office)
                                    > > > > > >> > > > > (802) 296-1928 (mobile)
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > This message sent by a renewable-energy- powered 
                                    > > computer
                                    > > > > > >> > > > >
                                    > > > > > >> > > > >
                                    > > > > > >> > > > >
                                    > > > > > >> > > > >
                                    > > > > > >> > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                                    > > > > > >> > > > >
                                    > > > > > >> > > > >>
                                    > > > > > >> > > > >>
                                    > > > > > >> > > > >> Mark:
                                    > > > > > >> > > > >>
                                    > > > > > >> > > > >> You suggest I look closer...is the "Re-Casting"
                                    > > > > document the
                                    > > > > > >> > > place
                                    > > > > > >> > > > >> to look? Or is there another source?
                                    > > > > > >> > > > >>
                                    > > > > > >> > > > >> If the bottom lines are going to multiply, then the
                                    > > > > > >> aggregation
                                    > > > > > >> > > > >> gets easier, certainly. But the misleadingness of 
                                    > > the
                                    > > > > > >> metaphor
                                    > > > > > >> > > > >> still worries me...if the financial bottom line (and
                                    > > > > > >> accounting
                                    > > > > > >> > > > >> more generally) stops being a good analogy, why keep
                                    > > > > > >> using that
                                    > > > > > >> > > > >> language?
                                    > > > > > >> > > > >>
                                    > > > > > >> > > > >> Regards,
                                    > > > > > >> > > > >>
                                    > > > > > >> > > > >> Chris.
                                    > > > > > >> > > > >>
                                    > > > > > >> > > > >> --- In
                                    > > > > > >

                                    (Message over 64 KB, truncated)

                                  • ethicsblogger
                                    Mark: As a method for SEAAR, this makes perfectly good sense. Your use of the term bottom line matches up nicely with the colloquial use of that term. You
                                    Message 17 of 20 , Apr 30 1:56 PM
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                                      Mark:

                                      As a method for SEAAR, this makes perfectly good sense.

                                      Your use of the term "bottom line" matches up nicely with the colloquial use of that term. You can certainly tell a firm, under certain circumstances, "Look, the bottom line is that your business is not sustainable." But the method you describe is simply not comparable to assets-minus-liabilities. Both your method and financial accounting can result in a "pass/fail" conclusion. But that's not enough to warrant using the bottom line vocabulary.

                                      I have nothing against colloquial use of the term "bottom line," but too many people (including ones quoted in our paper) suggest that there are social & environmental bottom lines in *just* the same sense as there is financially. I think that is a misleading oversimplification.

                                      As for examples: well, I was actually looking for examples not of metrics, but of scores & how they're combined. How do the land/water/air metrics get combined into a bottom line?

                                      Regards,
                                      Chris.


                                      --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark W. McElroy" <mmcelroy@...> wrote:
                                      >
                                      > Chris:
                                      >
                                      > I think the point I'm trying to make about intercomparability is that
                                      > every company's sustainability performance is a function of (a) who
                                      > its stakeholders are, and (b) what its duties and obligations are to
                                      > have impact (or not have impact) on vital capitals its stakeholders
                                      > rely on for their own well-being. If you poison my well, you put my
                                      > well-being at risk. That's mainstream sustainability theory in a
                                      > nutshell. That being the case, what makes two or more reports
                                      > comparable to one another is that (a) they organize their data in the
                                      > same way in terms of what the categories are and what the rules for
                                      > populating them with data are, and (b) the results are plotted onto a
                                      > shared sustainability performance scale. Thus, the specifics of my
                                      > non-financial impacts may be different than yours, but our scores may
                                      > still be commensurable in the sense that we have organized our
                                      > impacts in the same categories according to the same rules. My
                                      > contention, Chris, is that this is no different than how financial
                                      > reporting takes place, except that in the case of non-financial
                                      > reporting we are dealing with many non-substitutable kinds of impacts
                                      > (because the capitals are different), and so we are forced to compute
                                      > many sub-bottom lines before we can combine or blend them into one or
                                      > two. I believe I've made that point several times now.
                                      >
                                      > OK, here's an example for you. To simplify, let's say two
                                      > organizations are, in fact, using the same set of, say, six metrics,
                                      > three of which consist of social metrics and the other three of
                                      > environmental metrics. The three social metrics differ from one
                                      > another in that one pertains to impacts on human capital, a second
                                      > pertains to impacts on social capital, and the third pertains to
                                      > impacts on constructed capital. For their part, the environmental
                                      > metrics all pertain to natural capital, but different aspects of it
                                      > -- say, land, water, and air. All six metrics, then, are non-
                                      > substitutable. I can't pollute the water and expect to be able to
                                      > compensate for that by making large charitable donations to the local
                                      > soup kitchen. Even if I make the donations, the water is still
                                      > polluted.
                                      >
                                      > So basically we have six metrics that require six independent
                                      > scores. Adding or subtracting them together would make no sense.
                                      > They are non-commensurable in that regard. What that means is that
                                      > if my score on any one of them is below what it should be, it doesn't
                                      > matter what my scores are for the other five. I am still irrevocably
                                      > unsustainable on that one front until and unless I improve its score
                                      > to meet the corresponding standard of performance. So for the social
                                      > bottom line, I must score satisfactorily on ALL three metrics; the
                                      > same is true for the environmental category, because even though the
                                      > three environmental metrics pertain to a common capital, I have the
                                      > same substitutability problem. If I poison the well, the fact that I
                                      > may have cleaned up the air changes nothing. The well is still
                                      > poisoned.
                                      >
                                      > The above explains why the quotient of quotients approach is best for
                                      > computing blended bottom lines. What you refer to as incommensurable
                                      > metrics may be incommensurable in one sense, I agree, but not in
                                      > another. They are all commensurable in the sense that they all
                                      > represent standards of performance that must be met in order for
                                      > sustainability to obtain. The individual underlying standards are
                                      > different, but so what? All standards must be met, despite their
                                      > differences!
                                      >
                                      > Since I know you'll want to have some examples of specific metrics,
                                      > here they are:
                                      >
                                      > 1) An environmental metric that measures water use relative a
                                      > standard for how much water a company is entitled to use. This can
                                      > be determined by measuring precipitation in a region and allocating a
                                      > share of it to a specific business or facility. We are currently
                                      > doing this with a client here in Vermont, and have proven the concept
                                      > in practice.
                                      >
                                      > 2) A social metric that measures a company's contributions towards
                                      > alleviating global poverty relative to what such contributions ought
                                      > to be on a per capita basis. This can be determined by reference to
                                      > the UN's Millennium Development Goals which can be viewed as
                                      > constituting standards of performance for how the developed world
                                      > should assist the developing world. This we have done independently
                                      > with respect to several companies, and have proven the concept in
                                      > practice.
                                      >
                                      > I hope this helps.
                                      >
                                      > Regards,
                                      >
                                      > Mark
                                      >
                                      >
                                      > Mark W. McElroy, Ph.D.
                                      > Executive Director
                                      > Center for Sustainable Innovation
                                      > www.sustainableinnovation.org
                                      > (802) 785-2293 (office)
                                      > (802) 296-1928 (mobile)
                                      >
                                      > This message sent by a renewable-energy-powered computer
                                      >
                                      >
                                      >
                                      >
                                      > On Apr 27, 2009, at 1:50 PM, ethicsblogger wrote:
                                      >
                                      > >
                                      > >
                                      > > Mark:
                                      > >
                                      > > For the sake of this discussion, I'm going to give up on
                                      > > intercomparability of results. As long as you're ONLY trying to
                                      > > help a single company track its progress, it's score doesn't need
                                      > > to be comparable to another company's score. Fine.
                                      > >
                                      > > The math is still sounding very unconvincing to me. A ratio of
                                      > > ratios of incommensurable metrics sounds meaningless. And I'm still
                                      > > lacking a good, clear example. Show me how a company's score on
                                      > > just two nameable metrics would result in a meaningful bottom line.
                                      > > You pick the metrics. Fictional example will do.
                                      > >
                                      > > Thanks,
                                      > > Chris
                                      > >
                                      > > --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                                      > > W. McElroy" <mmcelroy@> wrote:
                                      > > >
                                      > > > Chris:
                                      > > >
                                      > > > Great questions, thanks. Some quick answers:
                                      > > >
                                      > > > 1. Sources for norms and duties are varied, depending on the
                                      > > > metric. In some cases, they're regulatory or legislative or NGO-
                                      > > > based, in other cases they're scientific. Ideally, yes, a source
                                      > > > similar to GAAP would be nice to have, and someday I hope we do, but
                                      > > > in the meantime, organizations must go it alone and develop
                                      > > standards
                                      > > > of their own. I know this doesn't meet your need for
                                      > > > commensurability, but it's better than not measuring and reporting
                                      > > > performance at all. Better to have some standards as opposed to
                                      > > > none, even if there is no widespread agreement behind them yet. Over
                                      > > > time, commensurability will improve, but not if we just sit here and
                                      > > > do nothing.
                                      > > >
                                      > > > 2. 'Yes' is my answer to your question about income statements; they
                                      > > > can simply be interpreted that way. The numerator is just a measure
                                      > > > of revenue; the denominator is a measure of expenses with an
                                      > > implicit
                                      > > > norm tacked on to it (i.e., that it should be regarded as a minimum
                                      > > > performance standard for revenue, as in revenue must at least
                                      > > equal it).
                                      > > >
                                      > > > 3. Regarding the 4 capitals, there is a long and venerable
                                      > > > intellectual history behind that idea. It is, in my view, the least
                                      > > > controversial aspect of the method we propose, and is arguably the
                                      > > > dominant theory of sustainability in existence. As for the fact that
                                      > > > normative claims may be contentious, I say so what? You're slipping
                                      > > > back into the consensus trap, I think. You seem to need consensus in
                                      > > > order to make progress, whereas I would rather evaluate proposals on
                                      > > > their merits, regardless of whether or not consensus lines up behind
                                      > > > them. Financial measurement and reporting is also normative and
                                      > > > contentious, but that doesn't stop us from doing it. Indeed, the
                                      > > > supposed commensurability of related reports is debatable. Are any
                                      > > > two income statements identical in content? I don't think so, other
                                      > > > than at the mid- to top-level categories. What I propose is no
                                      > > > different.
                                      > > >
                                      > > > 4. Regarding averaging, I have a completely different alternative to
                                      > > > propose, a better one I think than averaging. Averaging can be done,
                                      > > > but it suffers from the same problem that adding and subtracting
                                      > > > does, in some cases. Namely, that unsustainable scores can be
                                      > > > cancelled out by sufficiently higher sustainable scores. The fix for
                                      > > > this is to avoid both averaging and summing, and to instead rely on
                                      > > > the quotients approach I have proposed for individual metrics. In
                                      > > > this case, I'm talking about a quotient OF quotients. Once
                                      > > > individual quotient scores are computed for each metric, a blended
                                      > > > score would consist of a measure of the proportion of all such
                                      > > scores
                                      > > > that at least comply sustainability performance standards. If there
                                      > > > are 15 metrics and all meet or exceed their standards, the blended
                                      > > > bottom-line score would be 1.0. If only 12 did, the net bottom line
                                      > > > score would be 0.8. The best possible score would be 1.0, and any
                                      > > > score of less than that would signify unsustainable performance to
                                      > > > some degree. I have already updated my treatment of this issue on
                                      > > > slides 34 and 35 of the following presentation:
                                      > > >
                                      > > > http://www.sustainableinnovation.org/Recasting-TBL.pdf
                                      > > >
                                      > > > Regards,
                                      > > >
                                      > > > Mark
                                      > > >
                                      > > >
                                      > > > Mark W. McElroy, Ph.D.
                                      > > > Executive Director
                                      > > > Center for Sustainable Innovation
                                      > > > www.sustainableinnovation.org
                                      > > > (802) 785-2293 (office)
                                      > > > (802) 296-1928 (mobile)
                                      > > >
                                      > > > This message sent by a renewable-energy-powered computer
                                      > > >
                                      > > >
                                      > > >
                                      > > >
                                      > > > On Apr 27, 2009, at 11:41 AM, ethicsblogger wrote:
                                      > > >
                                      > > > >
                                      > > > >
                                      > > > > Mark:
                                      > > > >
                                      > > > > That's a lot to chew on. I won't try to reply to it all.
                                      > > > >
                                      > > > > Where do we get the "norms or duties for what such impacts
                                      > > ought to
                                      > > > > be"? Is there (or is there likely to be) something like GAAP
                                      > > for that?
                                      > > > >
                                      > > > > I need help with the idea that "In financial reporting, income
                                      > > > > statements largely boil down to quotients." I take it you mean
                                      > > they
                                      > > > > can be interpreted that way; they're not usually presented that
                                      > > > > way, right? That's fine. Where does the numerator come from? And
                                      > > > > what unit is the "The norm or duty represented by the denominator"
                                      > > > > in? Dollars? I'm just trying to picture this clearly. I've never
                                      > > > > heard of financial accounting described this way, so I want to be
                                      > > > > clear.
                                      > > > >
                                      > > > > Next: the idea that in non-financial accounting there are to be
                                      > > > > precisely 4 non-substitutable "capitals" immediately gets you into
                                      > > > > huge, probably intracable, philosophical problems. You've got to
                                      > > > > make hugely contentious normative claims to do that. Maybe you can
                                      > > > > get away with that, for the relevant audiences.
                                      > > > >
                                      > > > > I'm also confused by the idea that"such scores should be averaged,
                                      > > > > not summed, because again, they are not fungible." Seems to me
                                      > > that
                                      > > > > you cannot meaningfully average things that are not fungible.
                                      > > > > Averaging means adding together & dividing by the number of items
                                      > > > > added. How can you meaningfully add together things that aren't
                                      > > > > commensurable?
                                      > > > >
                                      > > > > Regards,
                                      > > > > Chris.
                                      > > > >
                                      > > > > --- In Corporate_Sustainability_Management@yahoogroups.com, "Mark
                                      > > > > W. McElroy" <mmcelroy@> wrote:
                                      > > > > >
                                      > > > > > Chris:
                                      > > > > >
                                      > > > > > Actually, yes, there are a few key pieces missing from the
                                      > > > > discussion
                                      > > > > > that I really should explain. In particular, the 'adding up
                                      > > of goods
                                      > > > > > and subtracting the bads' premise you're relying on is
                                      > > mistaken, in
                                      > > > > > my view. That's really not how non-financial reporting works,
                                      > > nor
                                      > > > > > how it should work, as we see it. Moreover, it's not how
                                      > > financial
                                      > > > > > reporting works, either. Here I want to encourage you (and
                                      > > others)
                                      > > > > > to think of organizational performance reporting as: A
                                      > > process of
                                      > > > > > measuring impacts on capitals relative to norms or duties for
                                      > > what
                                      > > > > > such impacts ought to be. Metrics for such measurements can
                                      > > usefully
                                      > > > > > take the form of quotients, where numerators represent measured
                                      > > > > > impacts on capitals, and denominators represent norms or
                                      > > duties for
                                      > > > > > what such impacts ought to be. Now let's apply these
                                      > > principles and
                                      > > > > > see what we get, starting with financial reporting.
                                      > > > > >
                                      > > > > > In financial reporting, income statements largely boil down to
                                      > > > > > quotients of revenues over expenses. The type of capital
                                      > > involved
                                      > > > > > here is monetary capital. The norm or duty represented by the
                                      > > > > > denominator is a monetary value that the numerator (revenues)
                                      > > should
                                      > > > > > at least equal (and hopefully exceed, the more so the
                                      > > better!) if
                                      > > > > the
                                      > > > > > financial performance of the organization is to be viewed as
                                      > > > > > sustainable, or solvent if you like. Thus, quotient values
                                      > > that are
                                      > > > > > greater than or equal to 1.0 in financial reporting signify
                                      > > > > > sustainable performance. Here I agree that there is adding and
                                      > > > > > subtracting going on, but only in the calculation of the
                                      > > numerator
                                      > > > > > and the denominator. The key sustainability metric is
                                      > > subsequent to
                                      > > > > > all of that and is a quotient, not a sum. This is the logic of
                                      > > > > > solvency, and it is arguably at the heart of what we mean by the
                                      > > > > > 'financial bottom line'.
                                      > > > > >
                                      > > > > > Here it should also be clear that there is a difference between
                                      > > > > > measuring financial sustainability and measuring financial
                                      > > > > > profitability. For the former, all we care about is whether the
                                      > > > > > quotient is greater than or equal to 1.0. For the latter, we,
                                      > > too,
                                      > > > > > want sustainability, of course, but we also want to maximize the
                                      > > > > > ratio (i.e., maximize profits). Not so for sustainability
                                      > > measures.
                                      > > > > > There, breaking even is good enough. In this regard,
                                      > > sustainability
                                      > > > > > measurement and reporting, like pregnancy, is 'binary'. You're
                                      > > > > > either one of the other, period.
                                      > > > > >
                                      > > > > > Now take the same principles and apply them to non-financial
                                      > > > > > measurement. The first thing to understand is that the
                                      > > capitals are
                                      > > > > > different. In fact, there are four of them, and they are not
                                      > > > > > fungible or substitutable with one another (this relates to the
                                      > > > > > 'strong' vs. 'weak' sustainability point I made earlier). I, and
                                      > > > > > many others, take the 'strong' position as I just did, which
                                      > > is that
                                      > > > > > the four capitals involved are not substitutable. In other
                                      > > words, an
                                      > > > > > organization cannot compensate for environmental bads by
                                      > > investing
                                      > > > > > more in social goods. Moreover, even good and bad impacts within
                                      > > > > > individual categories of capital are not necessarily fungible or
                                      > > > > > substitutable. I can't be absolved of polluting the water table
                                      > > > > > simply because I helped clean up the air, yet both are
                                      > > instances of
                                      > > > > > natural capital. The four capitals I speak of are natural,
                                      > > human,
                                      > > > > > social, and constructed (or built). I call the latter three
                                      > > anthro
                                      > > > > > capital because they are anthropogenic; natural capital is not.
                                      > > > > >
                                      > > > > > The implication of all of this is that (a) non-financial
                                      > > reporting
                                      > > > > > necessarily involves the need to produce multiple social and
                                      > > > > > environmental scores, (b) such multiple scores cannot be
                                      > > added up
                                      > > > > > together very well because they are not fungible, and (c) such
                                      > > > > scores
                                      > > > > > should be averaged, not summed, because again, they are not
                                      > > > > fungible,
                                      > > > > > and to sum them up would be to take a weak sustainability
                                      > > position,
                                      > > > > > as if social and environmental impacts share a common currency,
                                      > > > > which
                                      > > > > > they do not! This is why I say a good TBL bottom line for
                                      > > social and
                                      > > > > > environmental performance -- if we must have single scores
                                      > > for each
                                      > > > > > -- must be the result of averaging many scores, not adding and
                                      > > > > > subtracting (although summing can occur beforehand as individual
                                      > > > > > numerators and denominators are computed).
                                      > > > > >
                                      > > > > > I also want to explain the logic of denominators further,
                                      > > because I
                                      > > > > > see misconceptions there, too, but I'll stop now and let you
                                      > > > > react to
                                      > > > > > the above before I do.
                                      > > > > >
                                      > > > > > Regards,
                                      > > > > >
                                      > > > > > Mark
                                      > > > > >
                                      > > > > >
                                      > > > > > Mark W. McElroy, Ph.D.
                                      > > > > > Executive Director
                                      > > > > > Center for Sustainable Innovation
                                      > > > > > www.sustainableinnovation.org
                                      > > > > > (802) 785-2293 (office)
                                      > > > > > (802) 296-1928 (mobile)
                                      > > > > >
                                      > > > > > This message sent by a renewable-energy-powered computer
                                      > > > > >
                                      > > > > >
                                      > > > > >
                                      > > > > >
                                      > > > > > On Apr 26, 2009, at 4:01 PM, ethicsblogger wrote:
                                      > > > > >
                                      > > > > > >
                                      > > > > > >
                                      > > > > > > Mark:
                                      > > > > > >
                                      > > > > > > Sounds like you're suggesting a (reasonably) method of
                                      > > SEAAR. And,
                                      > > > > > > as we tried to make clear in our paper, we're not against
                                      > > SEAAR.
                                      > > > > > > We're just against the *implication* of intercomparability
                                      > > that
                                      > > > > the
                                      > > > > > > accounting terminology implies (even if people overestimate
                                      > > > > > > financial accounting in that regard).
                                      > > > > > >
                                      > > > > > > Annual reports still do generate a Bottom Line, right?
                                      > > Assets in
                                      > > > > > > dollars, liabilities in dollars. Higher number is better.
                                      > > > > > >
                                      > > > > > > So, I think you're right to leave out weightings, but that
                                      > > looks
                                      > > > > > > (again) like taking an potentially-fuzzy financial concept and
                                      > > > > > > applying it to an even fuzzier case.
                                      > > > > > >
                                      > > > > > > p.s. I'm still lacking a good, clear, simple example of how
                                      > > > > > > different categories of social goods & bads would be added
                                      > > > > > > together, if that's still part of the agenda. Reporting gender
                                      > > > > > > balance on the Board is good; reporting charitable
                                      > > donations is
                                      > > > > > > good; reporting collaboration with NGO's is good. But they
                                      > > cannot
                                      > > > > > > be added together. Am I still missing something?
                                      > > > > > >
                                      > > > > > > Regards,
                                      > > > > > > Chris.
                                      > > > > > >
                                      > > > > > > --- In Corporate_Sustainability_Management@yahoogroups.com,
                                      > > "Mark
                                      > > > > > > W. McElroy" <mmcelroy@> wrote:
                                      > > > > > > >
                                      > > > > > > > All:
                                      > > > > > > >
                                      > > > > > > > Upon further reflection of Chris's point about giving
                                      > > different
                                      > > > > > > > indicators different weights because of their arguably
                                      > > different
                                      > > > > > > > importance, I find myself leaning more strongly against it
                                      > > > > than for
                                      > > > > > > > it. While there is nothing in the TBL method we propose that
                                      > > > > would
                                      > > > > > > > prevent us from applying such variable weightings,
                                      > > Chris's point
                                      > > > > > > > about the desirability of bottom lines being
                                      > > commensurable or
                                      > > > > > > > comparable from one organization to another is a good one, I
                                      > > > > think.
                                      > > > > > > > But how can we have it both ways? How can we have variable
                                      > > > > > > > weightings and commensurable reporting, when no two
                                      > > > > organizations
                                      > > > > > > > will likely see the relative importance of various
                                      > > indicators
                                      > > > > the
                                      > > > > > > same?
                                      > > > > > > >
                                      > > > > > > > The answer, I think, is to leave weightings out of reports
                                      > > > > > > > altogether, and to leave it to the readers or consumers
                                      > > of such
                                      > > > > > > > reports to apply their own weightings. Indeed, this is
                                      > > precisely
                                      > > > > > > > what we do with financial reports. The raw data, so to
                                      > > speak, is
                                      > > > > > > > disclosed in financial reports, without any attempt to
                                      > > weight
                                      > > > > the
                                      > > > > > > > numbers. The numbers are reported just as they are.
                                      > > Shareholders
                                      > > > > > > > are then free to attach more or less importance to the
                                      > > > > numbers they
                                      > > > > > > > read as they see fit. I see no reason to do things
                                      > > > > differently in
                                      > > > > > > > social and environmental reporting.
                                      > > > > > > >
                                      > > > > > > > Regards,
                                      > > > > > > >
                                      > > > > > > > Mark
                                      > > > > > > >
                                      > > > > > > >
                                      > > > > > > > Mark W. McElroy, Ph.D.
                                      > > > > > > > Executive Director
                                      > > > > > > > Center for Sustainable Innovation
                                      > > > > > > > www.sustainableinnovation.org
                                      > > > > > > > (802) 785-2293 (office)
                                      > > > > > > > (802) 296-1928 (mobile)
                                      > > > > > > >
                                      > > > > > > > This message sent by a renewable-energy-powered computer
                                      > > > > > > >
                                      > > > > > > >
                                      > > > > > > >
                                      > > > > > > >
                                      > > > > > > > On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:
                                      > > > > > > >
                                      > > > > > > > >
                                      > > > > > > > >
                                      > > > > > > > > Chris:
                                      > > > > > > > >
                                      > > > > > > > >
                                      > > > > > > > > The issue you raise is not with the method, it is with
                                      > > > > whether or
                                      > > > > > > > > not people can agree (or have agreed) on a weighting
                                      > > > > scheme, and
                                      > > > > > > > > also on specific indicators. The non-financial accounting
                                      > > > > method I
                                      > > > > > > > > propose is just as neutral on that issue as GAAP is on
                                      > > > > financial
                                      > > > > > > > > matters. GAAP stops at the level of categories, and leaves
                                      > > > > it to
                                      > > > > > > > > individual reporters to define their own underlying
                                      > > > > accounts. Are
                                      > > > > > > > > all companies' charts of accounts identical? Of course
                                      > > not.
                                      > > > > Why
                                      > > > > > > > > do you/we assume commensurability in that case but not
                                      > > in non-
                                      > > > > > > > > financial reporting? And why do you insist of having
                                      > > weighting
                                      > > > > > > > > applied in the case of non-financial reporting, but not in
                                      > > > > > > > > financial reporting? Let me put it this way, ASSUMING
                                      > > > > people can
                                      > > > > > > > > come to some agreement on metrics and weighting, the
                                      > > kind of
                                      > > > > > > > > comparability you refer to will be possible, but I'm not
                                      > > > > sure it's
                                      > > > > > > > > necessary.
                                      > > > > > > > >
                                      > > > > > > > > In the meantime, if individual companies want to pilot,
                                      > > > > test, and
                                      > > > > > > > > evaluate schemes of their own based on a proposed
                                      > > conceptual
                                      > > > > > > > > framework such as the one we propose, that seems like an
                                      > > > > entirely
                                      > > > > > > > > constructive step to take in my view. Consider the
                                      > > > > alternative: no
                                      > > > > > > > > meaningful non-financial measurement and reporting takes
                                      > > > > place at
                                      > > > > > > > > all. So let the individual claims about metrics compete
                                      > > in the
                                      > > > > > > > > intellectual marketplace, I say, and let us
                                      > > collectively take
                                      > > > > > > steps
                                      > > > > > > > > to evolve the kind of common index you and the rest of us
                                      > > > > would
                                      > > > > > > > > like to see. But in order to do that, we must have a
                                      > > > > conceptual
                                      > > > > > > > > framework in which such indicators and weighting schemes
                                      > > > > can fit,
                                      > > > > > > > > and that is precisely what we have created. If you want to
                                      > > > > talk
                                      > > > > > > > > about metrics, on the other hand, we have put a proposal
                                      > > > > forward
                                      > > > > > > > > for that, too (the True Sustainability Index), and so we
                                      > > > > can have
                                      > > > > > > > > that conversation, as well. But the TBL method we have
                                      > > > > proposed
                                      > > > > > > > > does not come crashing down simply because people haven't
                                      > > > > > > agreed on
                                      > > > > > > > > a choice of related metrics. Should GAAP come to a
                                      > > > > screeching halt
                                      > > > > > > > > simply because no two organizations' charts of accounts
                                      > > that
                                      > > > > > > use it
                                      > > > > > > > > are alike?
                                      > > > > > > > >
                                      > > > > > > > > Regards,
                                      > > > > > > > >
                                      > > > > > > > > Mark
                                      > > > > > > > >
                                      > > > > > > > >
                                      > > > > > > > > Mark W. McElroy, Ph.D.
                                      > > > > > > > > Executive Director
                                      > > > > > > > > Center for Sustainable Innovation
                                      > > > > > > > > www.sustainableinnovation.org
                                      > > > > > > > > (802) 785-2293 (office)
                                      > > > > > > > > (802) 296-1928 (mobile)
                                      > > > > > > > >
                                      > > > > > > > > This message sent by a renewable-energy-powered computer
                                      > > > > > > > >
                                      > > > > > > > >
                                      > > > > > > > >
                                      > > > > > > > >
                                      > > > > > > > > On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:
                                      > > > > > > > >
                                      > > > > > > > >>
                                      > > > > > > > >>
                                      > > > > > > > >> Mark:
                                      > > > > > > > >>
                                      > > > > > > > >> Weight them "any way [I] like"?
                                      > > > > > > > >>
                                      > > > > > > > >> The weighting seems crucial. No one ever doubted that you
                                      > > > > could
                                      > > > > > > > >> apply numbers to these things. The problem is
                                      > > > > > > commensurability. If
                                      > > > > > > > >> I'm not weighting factors (for my company) the same way
                                      > > > > you are
                                      > > > > > > > >> for yours, we can't compare progress.
                                      > > > > > > > >>
                                      > > > > > > > >> Sounds fine for an system of internal tracking, but seems
                                      > > > > not to
                                      > > > > > > > >> live up to the term "bottom line".
                                      > > > > > > > >>
                                      > > > > > > > >> Regards,
                                      > > > > > > > >> Chris.
                                      > > > > > > > >>
                                      > > > > > > > >> --- In
                                      > > > > Corporate_Sustainability_Management@yahoogroups.com, "Mark
                                      > > > > > > > >> W. McElroy" <mmcelroy@> wrote:
                                      > > > > > > > >> >
                                      > > > > > > > >> > Chris:
                                      > > > > > > > >> >
                                      > > > > > > > >> > I agree with you. That's why I say on slide 35 that
                                      > > > > > > individual sub-
                                      > > > > > > > >> > bottom line scores can be weighted. You're free to
                                      > > weight
                                      > > > > > > them any
                                      > > > > > > > >> > way you like. The method is completely open to that.
                                      > > > > > > > >> >
                                      > > > > > > > >> > Regards,
                                      > > > > > > > >> >
                                      > > > > > > > >> > Mark
                                      > > > > > > > >> >
                                      > > > > > > > >> >
                                      > > > > > > > >> > Mark W. McElroy, Ph.D.
                                      > > > > > > > >> > Executive Director
                                      > > > > > > > >> > Center for Sustainable Innovation
                                      > > > > > > > >> > www.sustainableinnovation.org
                                      > > > > > > > >> > (802) 785-2293 (office)
                                      > > > > > > > >> > (802) 296-1928 (mobile)
                                      > > > > > > > >> >
                                      > > > > > > > >> > This message sent by a renewable-energy-powered
                                      > > computer
                                      > > > > > > > >> >
                                      > > > > > > > >> >
                                      > > > > > > > >> >
                                      > > > > > > > >> >
                                      > > > > > > > >> > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                                      > > > > > > > >> >
                                      > > > > > > > >> > >
                                      > > > > > > > >> > >
                                      > > > > > > > >> > > Mark:
                                      > > > > > > > >> > >
                                      > > > > > > > >> > > Thanks.
                                      > > > > > > > >> > >
                                      > > > > > > > >> > > I still feel like -- having looked at the relevant
                                      > > > > documents
                                      > > > > > > > >> -- I'm
                                      > > > > > > > >> > > lacking a good, clear, simple example of how the
                                      > > > > > > aggregation is
                                      > > > > > > > >> > > supposed to work.
                                      > > > > > > > >> > >
                                      > > > > > > > >> > > But one thing that's clear is that the method
                                      > > involves
                                      > > > > > > averaging
                                      > > > > > > > >> > > scores (for various sub-bottom-lines). Averaging
                                      > > implies
                                      > > > > > > that all
                                      > > > > > > > >> > > the factors being averaged are equally important. I
                                      > > > > don't see
                                      > > > > > > > >> what
                                      > > > > > > > >> > > justifies that assumption.
                                      > > > > > > > >> > >
                                      > > > > > > > >> > > Chris.
                                      > > > > > > > >> > >
                                      > > > > > > > >> > > --- In
                                      > > > > > > Corporate_Sustainability_Management@yahoogroups.com, "Mark
                                      > > > > > > > >> > > W. McElroy" <mmcelroy@> wrote:
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > All:
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > Back in 2004, Chris MacDonald and his co-author,
                                      > > Wayne
                                      > > > > > > Norman,
                                      > > > > > > > >> > > wrote:
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > "Ultimately, we argue there are fundamental
                                      > > > > philosophical
                                      > > > > > > > >> grounds
                                      > > > > > > > >> > > for
                                      > > > > > > > >> > > > thinking that it is impossible to develop a sound
                                      > > > > > > > >> methodology for
                                      > > > > > > > >> > > > arriving at a meaniningful social bottom line for a
                                      > > > > > > firm." They
                                      > > > > > > > >> > > > added, "...the various values involved in
                                      > > > > evaluations of
                                      > > > > > > > >> corporate
                                      > > > > > > > >> > > > behavior are 'incommensurable' ".
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > For Chris's benefit, and others', I have added two
                                      > > > > > > slides to
                                      > > > > > > > >> this
                                      > > > > > > > >> > > > presentation (slides 34 and 35), which show
                                      > > exactly how
                                      > > > > > > one can
                                      > > > > > > > >> > > > calculate a quantitative (and 'blended') social
                                      > > > > bottom line
                                      > > > > > > > >> for a
                                      > > > > > > > >> > > firm:
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > http://www.sustainableinnovation.org/Recasting-
                                      > > TBL.pdf
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > This, of course, occurs in the context of
                                      > > utilizing a
                                      > > > > > > general
                                      > > > > > > > >> > > > methodology for assessing the social footprint
                                      > > of an
                                      > > > > > > > >> organization,
                                      > > > > > > > >> > > > which can be done using the methodology we created
                                      > > > > called
                                      > > > > > > > >> the Social
                                      > > > > > > > >> > > > Footprint Method. I hope Chris will chime in and
                                      > > > > comment on
                                      > > > > > > > >> all of
                                      > > > > > > > >> > > > this.
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > Regards,
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > Mark
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > Mark W. McElroy, Ph.D.
                                      > > > > > > > >> > > > Executive Director
                                      > > > > > > > >> > > > Center for Sustainable Innovation
                                      > > > > > > > >> > > > www.sustainableinnovation.org
                                      > > > > > > > >> > > > (802) 785-2293 (office)
                                      > > > > > > > >> > > > (802) 296-1928 (mobile)
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > This message sent by a renewable-energy-powered
                                      > > > > computer
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > On Apr 23, 2009, at 10:05 PM, Mark W. McElroy
                                      > > wrote:
                                      > > > > > > > >> > > >
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > Chris:
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > Thanks for joining in. As you might imagine,
                                      > > where to
                                      > > > > > > look
                                      > > > > > > > >> depends
                                      > > > > > > > >> > > > > on what the specific issue is. It's a big topic
                                      > > > > with many
                                      > > > > > > > >> > > > > dimensions. Our body of work is broad and
                                      > > deep, so
                                      > > > > rather
                                      > > > > > > > >> than
                                      > > > > > > > >> > > > > send you off in multiple directions, let's
                                      > > take it
                                      > > > > one
                                      > > > > > > > >> step at a
                                      > > > > > > > >> > > > > time. In your response to our press release
                                      > > > > yesterday,
                                      > > > > > > you
                                      > > > > > > > >> raised
                                      > > > > > > > >> > > > > several issues about TBL theory in general,
                                      > > and the
                                      > > > > > > > >> problems our
                                      > > > > > > > >> > > > > own method may or may not have resolved. So let's
                                      > > > > take
                                      > > > > > > > >> each of the
                                      > > > > > > > >> > > > > issues and criticisms you raised this week
                                      > > (and in
                                      > > > > your
                                      > > > > > > > >> very fine
                                      > > > > > > > >> > > > > article in 2004) one at a time, and explain
                                      > > how we
                                      > > > > (on
                                      > > > > > > > >> this end)
                                      > > > > > > > >> > > > > think we have resolved them. You go first. In the
                                      > > > > > > > >> meantime, let
                                      > > > > > > > >> > > > > me answer your question about why we should keep
                                      > > > > using
                                      > > > > > > the
                                      > > > > > > > >> > > > > metaphor. Three responses:
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > 1) The metaphor is valuable in helping to call
                                      > > > > attention
                                      > > > > > > > >> to the
                                      > > > > > > > >> > > > > fact that businesses have real social and
                                      > > > > environmental
                                      > > > > > > > >> > > obligations
                                      > > > > > > > >> > > > > to people in the world, not just financial ones.
                                      > > > > > > Moreover,
                                      > > > > > > > >> the
                                      > > > > > > > >> > > > > financial bottom line concept is itself
                                      > > imperfect.
                                      > > > > Its
                                      > > > > > > > >> "common
                                      > > > > > > > >> > > > > unit of measure" is no less illusory there
                                      > > than it
                                      > > > > may be
                                      > > > > > > > >> on other
                                      > > > > > > > >> > > > > fronts, and yet the language of the metaphor
                                      > > has been
                                      > > > > > > useful
                                      > > > > > > > >> > > > > there. Why not reap its value on the social and
                                      > > > > > > environmental
                                      > > > > > > > >> > > > > fronts, as well, I wonder?
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > 2) It is, in fact, possible, we think, to compute
                                      > > > > > > aggregated
                                      > > > > > > > >> > > social
                                      > > > > > > > >> > > > > and environmental bottom lines at the
                                      > > organizational
                                      > > > > > > level of
                                      > > > > > > > >> > > > > analysis. Whether or not it makes sense to do
                                      > > so is
                                      > > > > > > another
                                      > > > > > > > >> > > > > matter. I hesitate to explain how to do this now,
                                      > > > > > > since we
                                      > > > > > > > >> are
                                      > > > > > > > >> > > > > just getting started in this conversation.
                                      > > Happy to
                                      > > > > > > > >> proceed at
                                      > > > > > > > >> > > > > your pace. Just ask.
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > 3) The term has taken on a life of its own. It
                                      > > has
                                      > > > > legs.
                                      > > > > > > > >> It has
                                      > > > > > > > >> > > > > emotional value. Why not keep it for what it's
                                      > > > > worth and
                                      > > > > > > > >> just deal
                                      > > > > > > > >> > > > > with its imperfections?
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > Regards,
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > Mark
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > Mark W. McElroy, Ph.D.
                                      > > > > > > > >> > > > > Executive Director
                                      > > > > > > > >> > > > > Center for Sustainable Innovation
                                      > > > > > > > >> > > > > www.sustainableinnovation.org
                                      > > > > > > > >> > > > > (802) 785-2293 (office)
                                      > > > > > > > >> > > > > (802) 296-1928 (mobile)
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > This message sent by a renewable-energy-powered
                                      > > > > computer
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > > On Apr 23, 2009, at 8:41 PM, ethicsblogger wrote:
                                      > > > > > > > >> > > > >
                                      > > > > > > > >> > > > >>
                                      > > > > > > > >> > > > >>
                                      > > > > > > > >> > > > >> Mark:
                                      > > > > > > > >> > > > >>
                                      > > > > > > > >> > > > >> You suggest I look closer...is the "Re-Casting"
                                      > > > > > > document the
                                      > > > > > > > >> > > place
                                      > > > > > > > >> > > > >> to look? Or is there another source?
                                      > > > > > > > >> > > > >>
                                      > > > > > > > >> > > > >> If the bottom lines are going to multiply,
                                      > > then the
                                      > > > > > > > >> aggregation
                                      > > > > > > > >> > > > >> gets easier, certainly. But the
                                      > > misleadingness of
                                      > > > > the
                                      > > > > > > > >> metaphor
                                      > > > > > > > >> > > > >> still worries me...if the financial bottom
                                      > > line (and
                                      > > > > > > > >> accounting
                                      > > > > > > > >> > > > >> more generally) stops being a good analogy,
                                      > > why keep
                                      > > > > > > > >> using that
                                      > > > > > > > >> > > > >> language?
                                      > > > > > > > >> > > > >>
                                      > > > > > > > >> > > > >> Regards,
                                      > > > > > > > >> > > > >>
                                      > > > > > > > >> > > > >> Chris.
                                      > > > > > > > >> > > > >>
                                      > > > > > > > >> > > > >> --- In
                                      > > > > > > > >> Corporate_Sustainability_Management@yahoogroups.com,
                                      > > "Mark
                                      > > > > > > > >> > > > >> W. McElroy" <mmcelroy@> wrote:
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Dear Friends:
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Earlier this week, we (CSI) issued a press
                                      > > release
                                      > > > > > > > >> regarding an
                                      > > > > > > > >> > > > >> award
                                      > > > > > > > >> > > > >> > we received from the State of Vermont for our
                                      > > > > general
                                      > > > > > > > >> > > approach to
                                      > > > > > > > >> > > > >> > Triple Bottom Line measurement, management,
                                      > > and
                                      > > > > > > reporting.
                                      > > > > > > > >> > > Here's
                                      > > > > > > > >> > > > >> > the release:
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > http://www.csrwire.com/News/15105.html
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Afterwards, a comment about the release was
                                      > > > > posted by
                                      > > > > > > > >> Chris
                                      > > > > > > > >> > > > >> > MacDonald, who questioned the design and
                                      > > > > effectiveness
                                      > > > > > > > >> of our
                                      > > > > > > > >> > > > >> > method. His post appeared on the same page
                                      > > as our
                                      > > > > > > > >> > > announcement as
                                      > > > > > > > >> > > > >> > you will see from the link above. There you
                                      > > > > will also
                                      > > > > > > > >> see my
                                      > > > > > > > >> > > > >> > response to Chris, and one or two more
                                      > > rounds of
                                      > > > > > > chatter
                                      > > > > > > > >> > > between
                                      > > > > > > > >> > > > >> us.
                                      > > > > > > > >> > > > >> > Here is that exchange:
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Chris MacDonald 2009-04-23 02:36:30
                                      > > > > > > > >> > > > >> > As far as I can see, they haven't overcome the
                                      > > > > > > problem of
                                      > > > > > > > >> > > finding a
                                      > > > > > > > >> > > > >> > common unit of measure for social goods and
                                      > > bads,
                                      > > > > > > or for
                                      > > > > > > > >> > > ecological
                                      > > > > > > > >> > > > >> > ones. The example provided in the "Recasting"
                                      > > > > report
                                      > > > > > > > >> > > involves using
                                      > > > > > > > >> > > > >> > monetary measures for social issues (i.e.,
                                      > > teen
                                      > > > > > > > >> pregnancy is
                                      > > > > > > > >> > > > >> > understood in terms of its impact on financial
                                      > > > > > > > >> > > productivity). It
                                      > > > > > > > >> > > > >> > seems unlikely, at best, that all socially-
                                      > > > > relevant
                                      > > > > > > issues
                                      > > > > > > > >> > > can be
                                      > > > > > > > >> > > > >> > cast in financial terms. I think it's telling
                                      > > > > that, to
                                      > > > > > > > >> date,
                                      > > > > > > > >> > > there
                                      > > > > > > > >> > > > >> > has been no satisfactory reply, from TBL
                                      > > > > advocates,
                                      > > > > > > to the
                                      > > > > > > > >> > > critique
                                      > > > > > > > >> > > > >> > offered here: "Getting to the Bottom of
                                      > > 'Triple
                                      > > > > Bottom
                                      > > > > > > > >> Line'."
                                      > > > > > > > >> > > > >> > Business Ethics Quarterly. 14:2. 2004. 243–262
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 09:56:28
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Chris, I will respond only to what you have
                                      > > said
                                      > > > > > > here, and
                                      > > > > > > > >> > > not your
                                      > > > > > > > >> > > > >> > 2004 paper. That we can discuss elsewhere,
                                      > > if you
                                      > > > > > > like.
                                      > > > > > > > >> That
                                      > > > > > > > >> > > said,
                                      > > > > > > > >> > > > >> > your criticism here is not a criticism at
                                      > > all, in
                                      > > > > > > my view,
                                      > > > > > > > >> > > > >> because it
                                      > > > > > > > >> > > > >> > is predicated on a supposed problem ("of
                                      > > finding a
                                      > > > > > > common
                                      > > > > > > > >> > > unit of
                                      > > > > > > > >> > > > >> > measure for social goods and bads....") that
                                      > > > > does not
                                      > > > > > > > >> exist.
                                      > > > > > > > >> > > You
                                      > > > > > > > >> > > > >> seem
                                      > > > > > > > >> > > > >> > to want to take a 'weak' sustainability
                                      > > stance,
                                      > > > > > > whereas
                                      > > > > > > > >> I and
                                      > > > > > > > >> > > > >> others
                                      > > > > > > > >> > > > >> > take a 'strong' one, in which capitals are not
                                      > > > > > > > >> substitutable
                                      > > > > > > > >> > > and
                                      > > > > > > > >> > > > >> > aggregation (i.e., your "common unit" idea)
                                      > > is ill
                                      > > > > > > > >> conceived.
                                      > > > > > > > >> > > > >> Absent
                                      > > > > > > > >> > > > >> > your starting premise, then, your
                                      > > criticisms fade
                                      > > > > > > away,
                                      > > > > > > > >> one and
                                      > > > > > > > >> > > > >> all.
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Chris MacDonald 2009-04-23 12:28:57
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Mark: Thanks for taking the time to reply.
                                      > > I don't
                                      > > > > > > have
                                      > > > > > > > >> a view
                                      > > > > > > > >> > > > >> on the
                                      > > > > > > > >> > > > >> > "strong vs. week." I just thought that the
                                      > > idea
                                      > > > > of a
                                      > > > > > > > >> "bottom
                                      > > > > > > > >> > > line"
                                      > > > > > > > >> > > > >> > requires adding stuff up. And adding stuff up
                                      > > > > requires
                                      > > > > > > > >> a common
                                      > > > > > > > >> > > > >> unit.
                                      > > > > > > > >> > > > >> > Maybe you're not after a bottom line at all,
                                      > > > > which is
                                      > > > > > > > >> fine.
                                      > > > > > > > >> > > Chris.
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Mark W. McElroy, Ph.D. 2009-04-23 18:59:07
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Chris, I am indeed after a bottom line, but I
                                      > > > > don't
                                      > > > > > > agree
                                      > > > > > > > >> > > that it
                                      > > > > > > > >> > > > >> > necessarily entails single bottom lines for
                                      > > > > social or
                                      > > > > > > > >> > > environmental
                                      > > > > > > > >> > > > >> > performance, respectively. I think the three-
                                      > > > > bottom-
                                      > > > > > > line
                                      > > > > > > > >> > > > >> metaphor is
                                      > > > > > > > >> > > > >> > more forgiving than that. I prefer to think
                                      > > of it
                                      > > > > > > as three
                                      > > > > > > > >> > > > >> categories
                                      > > > > > > > >> > > > >> > of multiple bottom lines. Also, I suggest that
                                      > > > > > > before you
                                      > > > > > > > >> > > > >> continue to
                                      > > > > > > > >> > > > >> > hold the financial bottom line out as the
                                      > > standard
                                      > > > > > > that
                                      > > > > > > > >> the
                                      > > > > > > > >> > > > >> other non-
                                      > > > > > > > >> > > > >> > financial bottom lines should adhere to, do
                                      > > not
                                      > > > > > > lose sight
                                      > > > > > > > >> > > of the
                                      > > > > > > > >> > > > >> > fact that the financial bottom line
                                      > > exported its
                                      > > > > > > social
                                      > > > > > > > >> and
                                      > > > > > > > >> > > > >> > environmental costs, precisely because it
                                      > > could
                                      > > > > not
                                      > > > > > > > >> accommodate
                                      > > > > > > > >> > > > >> them
                                      > > > > > > > >> > > > >> > with its own so-called "common unit" unit of
                                      > > > > measure,
                                      > > > > > > > >> as you
                                      > > > > > > > >> > > put
                                      > > > > > > > >> > > > >> it.
                                      > > > > > > > >> > > > >> > So let's not pretend that the financial bottom
                                      > > > > line is
                                      > > > > > > > >> some
                                      > > > > > > > >> > > sort of
                                      > > > > > > > >> > > > >> > paragon that the other bottom lines should be
                                      > > > > > > judged by.
                                      > > > > > > > >> > > Last, me
                                      > > > > > > > >> > > > >> > also say that your 2004 article was an
                                      > > outstanding
                                      > > > > > > > >> piece of
                                      > > > > > > > >> > > > >> work, and
                                      > > > > > > > >> > > > >> > that what we (CSI) have done with our own
                                      > > Triple
                                      > > > > > > Bottom
                                      > > > > > > > >> Line
                                      > > > > > > > >> > > method
                                      > > > > > > > >> > > > >> > (as announced this week) resolves, so far
                                      > > as we
                                      > > > > are
                                      > > > > > > > >> concerned,
                                      > > > > > > > >> > > > >> all of
                                      > > > > > > > >> > > > >> > the issues and criticisms you and your co-
                                      > > author
                                      > > > > > > raised
                                      > > > > > > > >> at that
                                      > > > > > > > >> > > > >> time.
                                      > > > > > > > >> > > > >> > If you do not see this, I suggest you look
                                      > > closer.
                                      > > > > > > > >> Happy to
                                      > > > > > > > >> > > discuss
                                      > > > > > > > >> > > > >> > this further if you like. Regards, Mark
                                      > > > > > > > >> > > > >> > ____________________
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Given the significance of Chris's criticisms
                                      > > > > and the
                                      > > > > > > > >> > > importance of
                                      > > > > > > > >> > > > >> > the topic in general, I decided to take the
                                      > > > > discussion
                                      > > > > > > > >> over
                                      > > > > > > > >> > > to this
                                      > > > > > > > >> > > > >> > listserve, and have invited Chris to join us.
                                      > > > > It is my
                                      > > > > > > > >> hope
                                      > > > > > > > >> > > that he
                                      > > > > > > > >> > > > >> > will do so.
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Regards,
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Mark
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > Mark W. McElroy, Ph.D.
                                      > > > > > > > >> > > > >> > Executive Director
                                      > > > > > > > >> > > > >> > Center for Sustainable Innovation
                                      > > > > > > > >> > > > >> > www.sustainableinnovation.org
                                      > > > > > > > >> > > > >> > (802) 785-2293 (office)
                                      > > > > > > > >> > > > >> > (802) 296-1928 (mobile)
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >> > This message sent by a renewable-energy-
                                      > > powered
                                      > > > > > > computer
                                      > > > > > > > >> > > > >> >
                                      > > > > > > > >> > > > >>
                                      > > > > > > > >> > > > >>
                                      > > > > > > > >> > > > >
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                                    • Mark W. McElroy
                                      Chris: While the bottom line term has always been nothing more than a metaphor on the non-financial side of things as far as I m considered, I actually do
                                      Message 18 of 20 , Apr 30 3:30 PM
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                                        Chris:

                                        While the bottom line term has always been nothing more than a metaphor on the non-financial side of things as far as I'm considered, I actually do think it literally applies in the case of social and environmental bottom lines, not just financial ones.  I also think it's important to recognize that as our knowledge of concepts improves, the terms we use to apply to concepts are liable to stretch or improve as well.  No point in being too dogmatic about things, especially when we discover errors in our thinking.

                                        That said, let me me tell you why I think the bottom line term applies literally in the non-financial case.  While it may be true that the term originated in the financial sense, what it is used to measure in that narrow case is performance relative to impacts on a type of capital, monetary capital.  Turns out there are many kinds of capital, not just monetary capital, and so in that regard the term can be applied to impacts on multiple capitals, not just monetary capital, including natural, human, social, and constructed capitals, the stuff of social and and environmental 'bottom lines'.

                                        But here we run into the issue I've raised repeatedly regarding the substitutability of capitals in accounting.  When all we are doing is financial accounting, the issue is essentially moot, because all forms of monetary capital are fungible or commensurable with one another, as you know.  If they were not, the financial bottom line would not be monolithic in form.  Hypothetically, we'd have multiple non-commensurable bottom lines in that case.  Thus, we can take the position that the financial bottom line is not immune to the substitutability criterion I speak of.  Rather, it has always simply passed the test and therefore never required any more than a single, integrated bottom line.  But it was still subject to the criterion!

                                        Turning to social and environmental bottom lines, all of the capitals involved do not pass the (commensurability) test, and must therefore be reported separately, with or without the quotient of quotients method I described earlier if one wants to integrate them at a higher or meta-level of analysis.  Still, there will be cases where non-financial capital impacts can be integrated into combined measures, but only (as always) in cases where the impacts entail substitutable capitals.  One of our metrics that deals with impacts on water, for example, makes it possible to blend water impact scores, precisely because the kinds of capitals involved are identical, and therefore substitutable (water is water).  This is especially the case where a company is taking water from a watershed and then discharges it back into the same watershed.  

                                        So I guess I want to say that we can apply the same principles to doing non-financial bottom line measurement and reporting that we apply to financial measurement and reporting, in your sense of the 'bottom line' term.  It's just that financial reporting was never really recognized or interpreted as a type of 'capital' impact/performance analysis until recently, and also never really triggered the multi-bottom line case raised by the substitutability criterion, despite that criterion having been there all along.  So what we have now is a more enlightened general theory of performance accounting that involves quantitative bottom lines that has rules which can be equally applied to financial and non-financial reporting, the outcomes of which differ according to the kinds of capitals we're dealing with.  No inconsistencies, much less a need to change how we do financial accounting.  Just a growth in our knowledge and an evolution of an old term, from a mistakenly narrow application to a more informative broader one.  It turns out the concept of capital was never really limited to monetary capital in the first place, was it?  This sort of thing happens all the time.

                                        Regards,

                                        Mark 


                                        Mark W. McElroy, Ph.D.
                                        Executive Director
                                        Center for Sustainable Innovation
                                        www.sustainableinnovation.org
                                        (802) 785-2293 (office)
                                        (802) 296-1928 (mobile)

                                        This message sent by a renewable-energy-powered computer




                                        On Apr 30, 2009, at 4:56 PM, ethicsblogger wrote:



                                        Mark:

                                        As a method for SEAAR, this makes perfectly good sense.

                                        Your use of the term "bottom line" matches up nicely with the colloquial use of that term. You can certainly tell a firm, under certain circumstances, "Look, the bottom line is that your business is not sustainable. " But the method you describe is simply not comparable to assets-minus- liabilities. Both your method and financial accounting can result in a "pass/fail" conclusion. But that's not enough to warrant using the bottom line vocabulary.

                                        I have nothing against colloquial use of the term "bottom line," but too many people (including ones quoted in our paper) suggest that there are social & environmental bottom lines in *just* the same sense as there is financially. I think that is a misleading oversimplification.

                                        As for examples: well, I was actually looking for examples not of metrics, but of scores & how they're combined. How do the land/water/air metrics get combined into a bottom line?

                                        Regards,
                                        Chris.

                                        --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
                                        >
                                        > Chris:
                                        > 
                                        > I think the point I'm trying to make about intercomparability is that 
                                        > every company's sustainability performance is a function of (a) who 
                                        > its stakeholders are, and (b) what its duties and obligations are to 
                                        > have impact (or not have impact) on vital capitals its stakeholders 
                                        > rely on for their own well-being. If you poison my well, you put my 
                                        > well-being at risk. That's mainstream sustainability theory in a 
                                        > nutshell. That being the case, what makes two or more reports 
                                        > comparable to one another is that (a) they organize their data in the 
                                        > same way in terms of what the categories are and what the rules for 
                                        > populating them with data are, and (b) the results are plotted onto a 
                                        > shared sustainability performance scale. Thus, the specifics of my 
                                        > non-financial impacts may be different than yours, but our scores may 
                                        > still be commensurable in the sense that we have organized our 
                                        > impacts in the same categories according to the same rules. My 
                                        > contention, Chris, is that this is no different than how financial 
                                        > reporting takes place, except that in the case of non-financial 
                                        > reporting we are dealing with many non-substitutable kinds of impacts 
                                        > (because the capitals are different), and so we are forced to compute 
                                        > many sub-bottom lines before we can combine or blend them into one or 
                                        > two. I believe I've made that point several times now.
                                        > 
                                        > OK, here's an example for you. To simplify, let's say two 
                                        > organizations are, in fact, using the same set of, say, six metrics, 
                                        > three of which consist of social metrics and the other three of 
                                        > environmental metrics. The three social metrics differ from one 
                                        > another in that one pertains to impacts on human capital, a second 
                                        > pertains to impacts on social capital, and the third pertains to 
                                        > impacts on constructed capital. For their part, the environmental 
                                        > metrics all pertain to natural capital, but different aspects of it 
                                        > -- say, land, water, and air. All six metrics, then, are non- 
                                        > substitutable. I can't pollute the water and expect to be able to 
                                        > compensate for that by making large charitable donations to the local 
                                        > soup kitchen. Even if I make the donations, the water is still 
                                        > polluted.
                                        > 
                                        > So basically we have six metrics that require six independent 
                                        > scores. Adding or subtracting them together would make no sense. 
                                        > They are non-commensurable in that regard. What that means is that 
                                        > if my score on any one of them is below what it should be, it doesn't 
                                        > matter what my scores are for the other five. I am still irrevocably 
                                        > unsustainable on that one front until and unless I improve its score 
                                        > to meet the corresponding standard of performance. So for the social 
                                        > bottom line, I must score satisfactorily on ALL three metrics; the 
                                        > same is true for the environmental category, because even though the 
                                        > three environmental metrics pertain to a common capital, I have the 
                                        > same substitutability problem. If I poison the well, the fact that I 
                                        > may have cleaned up the air changes nothing. The well is still 
                                        > poisoned.
                                        > 
                                        > The above explains why the quotient of quotients approach is best for 
                                        > computing blended bottom lines. What you refer to as incommensurable 
                                        > metrics may be incommensurable in one sense, I agree, but not in 
                                        > another. They are all commensurable in the sense that they all 
                                        > represent standards of performance that must be met in order for 
                                        > sustainability to obtain. The individual underlying standards are 
                                        > different, but so what? All standards must be met, despite their 
                                        > differences!
                                        > 
                                        > Since I know you'll want to have some examples of specific metrics, 
                                        > here they are:
                                        > 
                                        > 1) An environmental metric that measures water use relative a 
                                        > standard for how much water a company is entitled to use. This can 
                                        > be determined by measuring precipitation in a region and allocating a 
                                        > share of it to a specific business or facility. We are currently 
                                        > doing this with a client here in Vermont, and have proven the concept 
                                        > in practice.
                                        > 
                                        > 2) A social metric that measures a company's contributions towards 
                                        > alleviating global poverty relative to what such contributions ought 
                                        > to be on a per capita basis. This can be determined by reference to 
                                        > the UN's Millennium Development Goals which can be viewed as 
                                        > constituting standards of performance for how the developed world 
                                        > should assist the developing world. This we have done independently 
                                        > with respect to several companies, and have proven the concept in 
                                        > practice.
                                        > 
                                        > I hope this helps.
                                        > 
                                        > Regards,
                                        > 
                                        > Mark
                                        > 
                                        > 
                                        > Mark W. McElroy, Ph.D.
                                        > Executive Director
                                        > Center for Sustainable Innovation
                                        > www.sustainableinno vation.org
                                        > (802) 785-2293 (office)
                                        > (802) 296-1928 (mobile)
                                        > 
                                        > This message sent by a renewable-energy- powered computer
                                        > 
                                        > 
                                        > 
                                        > 
                                        > On Apr 27, 2009, at 1:50 PM, ethicsblogger wrote:
                                        > 
                                        > >
                                        > >
                                        > > Mark:
                                        > >
                                        > > For the sake of this discussion, I'm going to give up on 
                                        > > intercomparability of results. As long as you're ONLY trying to 
                                        > > help a single company track its progress, it's score doesn't need 
                                        > > to be comparable to another company's score. Fine.
                                        > >
                                        > > The math is still sounding very unconvincing to me. A ratio of 
                                        > > ratios of incommensurable metrics sounds meaningless. And I'm still 
                                        > > lacking a good, clear example. Show me how a company's score on 
                                        > > just two nameable metrics would result in a meaningful bottom line. 
                                        > > You pick the metrics. Fictional example will do.
                                        > >
                                        > > Thanks,
                                        > > Chris
                                        > >
                                        > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark 
                                        > > W. McElroy" <mmcelroy@> wrote:
                                        > > >
                                        > > > Chris:
                                        > > >
                                        > > > Great questions, thanks. Some quick answers:
                                        > > >
                                        > > > 1. Sources for norms and duties are varied, depending on the
                                        > > > metric. In some cases, they're regulatory or legislative or NGO-
                                        > > > based, in other cases they're scientific. Ideally, yes, a source
                                        > > > similar to GAAP would be nice to have, and someday I hope we do, but
                                        > > > in the meantime, organizations must go it alone and develop 
                                        > > standards
                                        > > > of their own. I know this doesn't meet your need for
                                        > > > commensurability, but it's better than not measuring and reporting
                                        > > > performance at all. Better to have some standards as opposed to
                                        > > > none, even if there is no widespread agreement behind them yet. Over
                                        > > > time, commensurability will improve, but not if we just sit here and
                                        > > > do nothing.
                                        > > >
                                        > > > 2. 'Yes' is my answer to your question about income statements; they
                                        > > > can simply be interpreted that way. The numerator is just a measure
                                        > > > of revenue; the denominator is a measure of expenses with an 
                                        > > implicit
                                        > > > norm tacked on to it (i.e., that it should be regarded as a minimum
                                        > > > performance standard for revenue, as in revenue must at least 
                                        > > equal it).
                                        > > >
                                        > > > 3. Regarding the 4 capitals, there is a long and venerable
                                        > > > intellectual history behind that idea. It is, in my view, the least
                                        > > > controversial aspect of the method we propose, and is arguably the
                                        > > > dominant theory of sustainability in existence. As for the fact that
                                        > > > normative claims may be contentious, I say so what? You're slipping
                                        > > > back into the consensus trap, I think. You seem to need consensus in
                                        > > > order to make progress, whereas I would rather evaluate proposals on
                                        > > > their merits, regardless of whether or not consensus lines up behind
                                        > > > them. Financial measurement and reporting is also normative and
                                        > > > contentious, but that doesn't stop us from doing it. Indeed, the
                                        > > > supposed commensurability of related reports is debatable. Are any
                                        > > > two income statements identical in content? I don't think so, other
                                        > > > than at the mid- to top-level categories. What I propose is no
                                        > > > different.
                                        > > >
                                        > > > 4. Regarding averaging, I have a completely different alternative to
                                        > > > propose, a better one I think than averaging. Averaging can be done,
                                        > > > but it suffers from the same problem that adding and subtracting
                                        > > > does, in some cases. Namely, that unsustainable scores can be
                                        > > > cancelled out by sufficiently higher sustainable scores. The fix for
                                        > > > this is to avoid both averaging and summing, and to instead rely on
                                        > > > the quotients approach I have proposed for individual metrics. In
                                        > > > this case, I'm talking about a quotient OF quotients. Once
                                        > > > individual quotient scores are computed for each metric, a blended
                                        > > > score would consist of a measure of the proportion of all such 
                                        > > scores
                                        > > > that at least comply sustainability performance standards. If there
                                        > > > are 15 metrics and all meet or exceed their standards, the blended
                                        > > > bottom-line score would be 1.0. If only 12 did, the net bottom line
                                        > > > score would be 0.8. The best possible score would be 1.0, and any
                                        > > > score of less than that would signify unsustainable performance to
                                        > > > some degree. I have already updated my treatment of this issue on
                                        > > > slides 34 and 35 of the following presentation:
                                        > > >
                                        > > > http://www.sustaina bleinnovation. org/Recasting- TBL.pdf
                                        > > >
                                        > > > Regards,
                                        > > >
                                        > > > Mark
                                        > > >
                                        > > >
                                        > > > Mark W. McElroy, Ph.D.
                                        > > > Executive Director
                                        > > > Center for Sustainable Innovation
                                        > > > www.sustainableinno vation.org
                                        > > > (802) 785-2293 (office)
                                        > > > (802) 296-1928 (mobile)
                                        > > >
                                        > > > This message sent by a renewable-energy- powered computer
                                        > > >
                                        > > >
                                        > > >
                                        > > >
                                        > > > On Apr 27, 2009, at 11:41 AM, ethicsblogger wrote:
                                        > > >
                                        > > > >
                                        > > > >
                                        > > > > Mark:
                                        > > > >
                                        > > > > That's a lot to chew on. I won't try to reply to it all.
                                        > > > >
                                        > > > > Where do we get the "norms or duties for what such impacts 
                                        > > ought to
                                        > > > > be"? Is there (or is there likely to be) something like GAAP 
                                        > > for that?
                                        > > > >
                                        > > > > I need help with the idea that "In financial reporting, income
                                        > > > > statements largely boil down to quotients." I take it you mean 
                                        > > they
                                        > > > > can be interpreted that way; they're not usually presented that
                                        > > > > way, right? That's fine. Where does the numerator come from? And
                                        > > > > what unit is the "The norm or duty represented by the denominator"
                                        > > > > in? Dollars? I'm just trying to picture this clearly. I've never
                                        > > > > heard of financial accounting described this way, so I want to be
                                        > > > > clear.
                                        > > > >
                                        > > > > Next: the idea that in non-financial accounting there are to be
                                        > > > > precisely 4 non-substitutable "capitals" immediately gets you into
                                        > > > > huge, probably intracable, philosophical problems. You've got to
                                        > > > > make hugely contentious normative claims to do that. Maybe you can
                                        > > > > get away with that, for the relevant audiences.
                                        > > > >
                                        > > > > I'm also confused by the idea that"such scores should be averaged,
                                        > > > > not summed, because again, they are not fungible." Seems to me 
                                        > > that
                                        > > > > you cannot meaningfully average things that are not fungible.
                                        > > > > Averaging means adding together & dividing by the number of items
                                        > > > > added. How can you meaningfully add together things that aren't
                                        > > > > commensurable?
                                        > > > >
                                        > > > > Regards,
                                        > > > > Chris.
                                        > > > >
                                        > > > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                                        > > > > W. McElroy" <mmcelroy@> wrote:
                                        > > > > >
                                        > > > > > Chris:
                                        > > > > >
                                        > > > > > Actually, yes, there are a few key pieces missing from the
                                        > > > > discussion
                                        > > > > > that I really should explain. In particular, the 'adding up 
                                        > > of goods
                                        > > > > > and subtracting the bads' premise you're relying on is 
                                        > > mistaken, in
                                        > > > > > my view. That's really not how non-financial reporting works, 
                                        > > nor
                                        > > > > > how it should work, as we see it. Moreover, it's not how 
                                        > > financial
                                        > > > > > reporting works, either. Here I want to encourage you (and 
                                        > > others)
                                        > > > > > to think of organizational performance reporting as: A 
                                        > > process of
                                        > > > > > measuring impacts on capitals relative to norms or duties for 
                                        > > what
                                        > > > > > such impacts ought to be. Metrics for such measurements can 
                                        > > usefully
                                        > > > > > take the form of quotients, where numerators represent measured
                                        > > > > > impacts on capitals, and denominators represent norms or 
                                        > > duties for
                                        > > > > > what such impacts ought to be. Now let's apply these 
                                        > > principles and
                                        > > > > > see what we get, starting with financial reporting.
                                        > > > > >
                                        > > > > > In financial reporting, income statements largely boil down to
                                        > > > > > quotients of revenues over expenses. The type of capital 
                                        > > involved
                                        > > > > > here is monetary capital. The norm or duty represented by the
                                        > > > > > denominator is a monetary value that the numerator (revenues) 
                                        > > should
                                        > > > > > at least equal (and hopefully exceed, the more so the 
                                        > > better!) if
                                        > > > > the
                                        > > > > > financial performance of the organization is to be viewed as
                                        > > > > > sustainable, or solvent if you like. Thus, quotient values 
                                        > > that are
                                        > > > > > greater than or equal to 1.0 in financial reporting signify
                                        > > > > > sustainable performance. Here I agree that there is adding and
                                        > > > > > subtracting going on, but only in the calculation of the 
                                        > > numerator
                                        > > > > > and the denominator. The key sustainability metric is 
                                        > > subsequent to
                                        > > > > > all of that and is a quotient, not a sum. This is the logic of
                                        > > > > > solvency, and it is arguably at the heart of what we mean by the
                                        > > > > > 'financial bottom line'.
                                        > > > > >
                                        > > > > > Here it should also be clear that there is a difference between
                                        > > > > > measuring financial sustainability and measuring financial
                                        > > > > > profitability. For the former, all we care about is whether the
                                        > > > > > quotient is greater than or equal to 1.0. For the latter, we, 
                                        > > too,
                                        > > > > > want sustainability, of course, but we also want to maximize the
                                        > > > > > ratio (i.e., maximize profits). Not so for sustainability 
                                        > > measures.
                                        > > > > > There, breaking even is good enough. In this regard, 
                                        > > sustainability
                                        > > > > > measurement and reporting, like pregnancy, is 'binary'. You're
                                        > > > > > either one of the other, period.
                                        > > > > >
                                        > > > > > Now take the same principles and apply them to non-financial
                                        > > > > > measurement. The first thing to understand is that the 
                                        > > capitals are
                                        > > > > > different. In fact, there are four of them, and they are not
                                        > > > > > fungible or substitutable with one another (this relates to the
                                        > > > > > 'strong' vs. 'weak' sustainability point I made earlier). I, and
                                        > > > > > many others, take the 'strong' position as I just did, which 
                                        > > is that
                                        > > > > > the four capitals involved are not substitutable. In other 
                                        > > words, an
                                        > > > > > organization cannot compensate for environmental bads by 
                                        > > investing
                                        > > > > > more in social goods. Moreover, even good and bad impacts within
                                        > > > > > individual categories of capital are not necessarily fungible or
                                        > > > > > substitutable. I can't be absolved of polluting the water table
                                        > > > > > simply because I helped clean up the air, yet both are 
                                        > > instances of
                                        > > > > > natural capital. The four capitals I speak of are natural, 
                                        > > human,
                                        > > > > > social, and constructed (or built). I call the latter three 
                                        > > anthro
                                        > > > > > capital because they are anthropogenic; natural capital is not.
                                        > > > > >
                                        > > > > > The implication of all of this is that (a) non-financial 
                                        > > reporting
                                        > > > > > necessarily involves the need to produce multiple social and
                                        > > > > > environmental scores, (b) such multiple scores cannot be 
                                        > > added up
                                        > > > > > together very well because they are not fungible, and (c) such
                                        > > > > scores
                                        > > > > > should be averaged, not summed, because again, they are not
                                        > > > > fungible,
                                        > > > > > and to sum them up would be to take a weak sustainability 
                                        > > position,
                                        > > > > > as if social and environmental impacts share a common currency,
                                        > > > > which
                                        > > > > > they do not! This is why I say a good TBL bottom line for 
                                        > > social and
                                        > > > > > environmental performance -- if we must have single scores 
                                        > > for each
                                        > > > > > -- must be the result of averaging many scores, not adding and
                                        > > > > > subtracting (although summing can occur beforehand as individual
                                        > > > > > numerators and denominators are computed).
                                        > > > > >
                                        > > > > > I also want to explain the logic of denominators further, 
                                        > > because I
                                        > > > > > see misconceptions there, too, but I'll stop now and let you
                                        > > > > react to
                                        > > > > > the above before I do.
                                        > > > > >
                                        > > > > > Regards,
                                        > > > > >
                                        > > > > > Mark
                                        > > > > >
                                        > > > > >
                                        > > > > > Mark W. McElroy, Ph.D.
                                        > > > > > Executive Director
                                        > > > > > Center for Sustainable Innovation
                                        > > > > > www.sustainableinno vation.org
                                        > > > > > (802) 785-2293 (office)
                                        > > > > > (802) 296-1928 (mobile)
                                        > > > > >
                                        > > > > > This message sent by a renewable-energy- powered computer
                                        > > > > >
                                        > > > > >
                                        > > > > >
                                        > > > > >
                                        > > > > > On Apr 26, 2009, at 4:01 PM, ethicsblogger wrote:
                                        > > > > >
                                        > > > > > >
                                        > > > > > >
                                        > > > > > > Mark:
                                        > > > > > >
                                        > > > > > > Sounds like you're suggesting a (reasonably) method of 
                                        > > SEAAR. And,
                                        > > > > > > as we tried to make clear in our paper, we're not against 
                                        > > SEAAR.
                                        > > > > > > We're just against the *implication* of intercomparability 
                                        > > that
                                        > > > > the
                                        > > > > > > accounting terminology implies (even if people overestimate
                                        > > > > > > financial accounting in that regard).
                                        > > > > > >
                                        > > > > > > Annual reports still do generate a Bottom Line, right? 
                                        > > Assets in
                                        > > > > > > dollars, liabilities in dollars. Higher number is better.
                                        > > > > > >
                                        > > > > > > So, I think you're right to leave out weightings, but that 
                                        > > looks
                                        > > > > > > (again) like taking an potentially- fuzzy financial concept and
                                        > > > > > > applying it to an even fuzzier case.
                                        > > > > > >
                                        > > > > > > p.s. I'm still lacking a good, clear, simple example of how
                                        > > > > > > different categories of social goods & bads would be added
                                        > > > > > > together, if that's still part of the agenda. Reporting gender
                                        > > > > > > balance on the Board is good; reporting charitable 
                                        > > donations is
                                        > > > > > > good; reporting collaboration with NGO's is good. But they 
                                        > > cannot
                                        > > > > > > be added together. Am I still missing something?
                                        > > > > > >
                                        > > > > > > Regards,
                                        > > > > > > Chris.
                                        > > > > > >
                                        > > > > > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, 
                                        > > "Mark
                                        > > > > > > W. McElroy" <mmcelroy@> wrote:
                                        > > > > > > >
                                        > > > > > > > All:
                                        > > > > > > >
                                        > > > > > > > Upon further reflection of Chris's point about giving 
                                        > > different
                                        > > > > > > > indicators different weights because of their arguably 
                                        > > different
                                        > > > > > > > importance, I find myself leaning more strongly against it
                                        > > > > than for
                                        > > > > > > > it. While there is nothing in the TBL method we propose that
                                        > > > > would
                                        > > > > > > > prevent us from applying such variable weightings, 
                                        > > Chris's point
                                        > > > > > > > about the desirability of bottom lines being 
                                        > > commensurable or
                                        > > > > > > > comparable from one organization to another is a good one, I
                                        > > > > think.
                                        > > > > > > > But how can we have it both ways? How can we have variable
                                        > > > > > > > weightings and commensurable reporting, when no two
                                        > > > > organizations
                                        > > > > > > > will likely see the relative importance of various 
                                        > > indicators
                                        > > > > the
                                        > > > > > > same?
                                        > > > > > > >
                                        > > > > > > > The answer, I think, is to leave weightings out of reports
                                        > > > > > > > altogether, and to leave it to the readers or consumers 
                                        > > of such
                                        > > > > > > > reports to apply their own weightings. Indeed, this is 
                                        > > precisely
                                        > > > > > > > what we do with financial reports. The raw data, so to 
                                        > > speak, is
                                        > > > > > > > disclosed in financial reports, without any attempt to 
                                        > > weight
                                        > > > > the
                                        > > > > > > > numbers. The numbers are reported just as they are. 
                                        > > Shareholders
                                        > > > > > > > are then free to attach more or less importance to the
                                        > > > > numbers they
                                        > > > > > > > read as they see fit. I see no reason to do things
                                        > > > > differently in
                                        > > > > > > > social and environmental reporting.
                                        > > > > > > >
                                        > > > > > > > Regards,
                                        > > > > > > >
                                        > > > > > > > Mark
                                        > > > > > > >
                                        > > > > > > >
                                        > > > > > > > Mark W. McElroy, Ph.D.
                                        > > > > > > > Executive Director
                                        > > > > > > > Center for Sustainable Innovation
                                        > > > > > > > www.sustainableinno vation.org
                                        > > > > > > > (802) 785-2293 (office)
                                        > > > > > > > (802) 296-1928 (mobile)
                                        > > > > > > >
                                        > > > > > > > This message sent by a renewable-energy- powered computer
                                        > > > > > > >
                                        > > > > > > >
                                        > > > > > > >
                                        > > > > > > >
                                        > > > > > > > On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:
                                        > > > > > > >
                                        > > > > > > > >
                                        > > > > > > > >
                                        > > > > > > > > Chris:
                                        > > > > > > > >
                                        > > > > > > > >
                                        > > > > > > > > The issue you raise is not with the method, it is with
                                        > > > > whether or
                                        > > > > > > > > not people can agree (or have agreed) on a weighting
                                        > > > > scheme, and
                                        > > > > > > > > also on specific indicators. The non-financial accounting
                                        > > > > method I
                                        > > > > > > > > propose is just as neutral on that issue as GAAP is on
                                        > > > > financial
                                        > > > > > > > > matters. GAAP stops at the level of categories, and leaves
                                        > > > > it to
                                        > > > > > > > > individual reporters to define their own underlying
                                        > > > > accounts. Are
                                        > > > > > > > > all companies' charts of accounts identical? Of course 
                                        > > not.
                                        > > > > Why
                                        > > > > > > > > do you/we assume commensurability in that case but not 
                                        > > in non-
                                        > > > > > > > > financial reporting? And why do you insist of having 
                                        > > weighting
                                        > > > > > > > > applied in the case of non-financial reporting, but not in
                                        > > > > > > > > financial reporting? Let me put it this way, ASSUMING
                                        > > > > people can
                                        > > > > > > > > come to some agreement on metrics and weighting, the 
                                        > > kind of
                                        > > > > > > > > comparability you refer to will be possible, but I'm not
                                        > > > > sure it's
                                        > > > > > > > > necessary.
                                        > > > > > > > >
                                        > > > > > > > > In the meantime, if individual companies want to pilot,
                                        > > > > test, and
                                        > > > > > > > > evaluate schemes of their own based on a proposed 
                                        > > conceptual
                                        > > > > > > > > framework such as the one we propose, that seems like an
                                        > > > > entirely
                                        > > > > > > > > constructive step to take in my view. Consider the
                                        > > > > alternative: no
                                        > > > > > > > > meaningful non-financial measurement and reporting takes
                                        > > > > place at
                                        > > > > > > > > all. So let the individual claims about metrics compete 
                                        > > in the
                                        > > > > > > > > intellectual marketplace, I say, and let us 
                                        > > collectively take
                                        > > > > > > steps
                                        > > > > > > > > to evolve the kind of common index you and the rest of us
                                        > > > > would
                                        > > > > > > > > like to see. But in order to do that, we must have a
                                        > > > > conceptual
                                        > > > > > > > > framework in which such indicators and weighting schemes
                                        > > > > can fit,
                                        > > > > > > > > and that is precisely what we have created. If you want to
                                        > > > > talk
                                        > > > > > > > > about metrics, on the other hand, we have put a proposal
                                        > > > > forward
                                        > > > > > > > > for that, too (the True Sustainability Index), and so we
                                        > > > > can have
                                        > > > > > > > > that conversation, as well. But the TBL method we have
                                        > > > > proposed
                                        > > > > > > > > does not come crashing down simply because people haven't
                                        > > > > > > agreed on
                                        > > > > > > > > a choice of related metrics. Should GAAP come to a
                                        > > > > screeching halt
                                        > > > > > > > > simply because no two organizations' charts of accounts 
                                        > > that
                                        > > > > > > use it
                                        > > > > > > > > are alike?
                                        > > > > > > > >
                                        > > > > > > > > Regards,
                                        > > > > > > > >
                                        > > > > > > > > Mark
                                        > > > > > > > >
                                        > > > > > > > >
                                        > > > > > > > > Mark W. McElroy, Ph.D.
                                        > > > > > > > > Executive Director
                                        > > > > > > > > Center for Sustainable Innovation
                                        > > > > > > > > www.sustainableinno vation.org
                                        > > > > > > > > (802) 785-2293 (office)
                                        > > > > > > > > (802) 296-1928 (mobile)
                                        > > > > > > > >
                                        > > > > > > > > This message sent by a renewable-energy- powered computer
                                        > > > > > > > >
                                        > > > > > > > >
                                        > > > > > > > >
                                        > > > > > > > >
                                        > > > > > > > > On Apr 25, 2009, at 3:20 PM, ethicsblogger wrote:
                                        > > > > > > > >
                                        > > > > > > > >>
                                        > > > > > > > >>
                                        > > > > > > > >> Mark:
                                        > > > > > > > >>
                                        > > > > > > > >> Weight them "any way [I] like"?
                                        > > > > > > > >>
                                        > > > > > > > >> The weighting seems crucial. No one ever doubted that you
                                        > > > > could
                                        > > > > > > > >> apply numbers to these things. The problem is
                                        > > > > > > commensurability. If
                                        > > > > > > > >> I'm not weighting factors (for my company) the same way
                                        > > > > you are
                                        > > > > > > > >> for yours, we can't compare progress.
                                        > > > > > > > >>
                                        > > > > > > > >> Sounds fine for an system of internal tracking, but seems
                                        > > > > not to
                                        > > > > > > > >> live up to the term "bottom line".
                                        > > > > > > > >>
                                        > > > > > > > >> Regards,
                                        > > > > > > > >> Chris.
                                        > > > > > > > >>
                                        > > > > > > > >> --- In
                                        > > > > Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                                        > > > > > > > >> W. McElroy" <mmcelroy@> wrote:
                                        > > > > > > > >> >
                                        > > > > > > > >> > Chris:
                                        > > > > > > > >> >
                                        > > > > > > > >> > I agree with you. That's why I say on slide 35 that
                                        > > > > > > individual sub-
                                        > > > > > > > >> > bottom line scores can be weighted. You're free to 
                                        > > weight
                                        > > > > > > them any
                                        > > > > > > > >> > way you like. The method is completely open to that.
                                        > > > > > > > >> >
                                        > > > > > > > >> > Regards,
                                        > > > > > > > >> >
                                        > > > > > > > >> > Mark
                                        > > > > > > > >> >
                                        > > > > > > > >> >
                                        > > > > > > > >> > Mark W. McElroy, Ph.D.
                                        > > > > > > > >> > Executive Director
                                        > > > > > > > >> > Center for Sustainable Innovation
                                        > > > > > > > >> > www.sustainableinno vation.org
                                        > > > > > > > >> > (802) 785-2293 (office)
                                        > > > > > > > >> > (802) 296-1928 (mobile)
                                        > > > > > > > >> >
                                        > > > > > > > >> > This message sent by a renewable-energy- powered 
                                        > > computer
                                        > > > > > > > >> >
                                        > > > > > > > >> >
                                        > > > > > > > >> >
                                        > > > > > > > >> >
                                        > > > > > > > >> > On Apr 25, 2009, at 1:24 PM, ethicsblogger wrote:
                                        > > > > > > > >> >
                                        > > > > > > > >> > >
                                        > > > > > > > >> > >
                                        > > > > > > > >> > > Mark:
                                        > > > > > > > >> > >
                                        > > > > > > > >> > > Thanks.
                                        > > > > > > > >> > >
                                        > > > > > > > >> > > I still feel like -- having looked at the relevant
                                        > > > > documents
                                        > > > > > > > >> -- I'm
                                        > > > > > > > >> > > lacking a good, clear, simple

                                        (Message over 64 KB, truncated)

                                      • Mark W. McElroy
                                        All: After going back and forth on this topic with Chris for several days now, with bits and pieces dribbling out on the approach I propose for computing the
                                        Message 19 of 20 , May 4, 2009
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                                          All:

                                          After going back and forth on this topic with Chris for several days now, with bits and pieces dribbling out on the approach I propose for computing the kinds of "unitary" non-financial bottom lines Chris seems to want to see, I decided to just document the full description of how to do that in the form of a short white paper.  Thus, rather than carry on in the fashion we have -- death by a thousand cuts, as it were -- here is my narrative attempt to explain things in a way that I hope Chris and others will find useful:


                                          Regards,

                                          Mark




                                          Mark W. McElroy, Ph.D.
                                          Executive Director
                                          Center for Sustainable Innovation
                                          www.sustainableinnovation.org
                                          (802) 785-2293 (office)
                                          (802) 296-1928 (mobile)

                                          This message sent by a renewable-energy-powered computer




                                          On Apr 30, 2009, at 6:30 PM, Mark W. McElroy wrote:



                                          Chris:


                                          While the bottom line term has always been nothing more than a metaphor on the non-financial side of things as far as I'm considered, I actually do think it literally applies in the case of social and environmental bottom lines, not just financial ones.  I also think it's important to recognize that as our knowledge of concepts improves, the terms we use to apply to concepts are liable to stretch or improve as well.  No point in being too dogmatic about things, especially when we discover errors in our thinking.

                                          That said, let me me tell you why I think the bottom line term applies literally in the non-financial case.  While it may be true that the term originated in the financial sense, what it is used to measure in that narrow case is performance relative to impacts on a type of capital, monetary capital.  Turns out there are many kinds of capital, not just monetary capital, and so in that regard the term can be applied to impacts on multiple capitals, not just monetary capital, including natural, human, social, and constructed capitals, the stuff of social and and environmental 'bottom lines'.

                                          But here we run into the issue I've raised repeatedly regarding the substitutability of capitals in accounting.  When all we are doing is financial accounting, the issue is essentially moot, because all forms of monetary capital are fungible or commensurable with one another, as you know.  If they were not, the financial bottom line would not be monolithic in form.  Hypothetically, we'd have multiple non-commensurable bottom lines in that case.  Thus, we can take the position that the financial bottom line is not immune to the substitutability criterion I speak of.  Rather, it has always simply passed the test and therefore never required any more than a single, integrated bottom line.  But it was still subject to the criterion!

                                          Turning to social and environmental bottom lines, all of the capitals involved do not pass the (commensurability) test, and must therefore be reported separately, with or without the quotient of quotients method I described earlier if one wants to integrate them at a higher or meta-level of analysis.  Still, there will be cases where non-financial capital impacts can be integrated into combined measures, but only (as always) in cases where the impacts entail substitutable capitals.  One of our metrics that deals with impacts on water, for example, makes it possible to blend water impact scores, precisely because the kinds of capitals involved are identical, and therefore substitutable (water is water).  This is especially the case where a company is taking water from a watershed and then discharges it back into the same watershed.  

                                          So I guess I want to say that we can apply the same principles to doing non-financial bottom line measurement and reporting that we apply to financial measurement and reporting, in your sense of the 'bottom line' term.  It's just that financial reporting was never really recognized or interpreted as a type of 'capital' impact/performance analysis until recently, and also never really triggered the multi-bottom line case raised by the substitutability criterion, despite that criterion having been there all along.  So what we have now is a more enlightened general theory of performance accounting that involves quantitative bottom lines that has rules which can be equally applied to financial and non-financial reporting, the outcomes of which differ according to the kinds of capitals we're dealing with.  No inconsistencies, much less a need to change how we do financial accounting.  Just a growth in our knowledge and an evolution of an old term, from a mistakenly narrow application to a more informative broader one.  It turns out the concept of capital was never really limited to monetary capital in the first place, was it?  This sort of thing happens all the time.

                                          Regards,

                                          Mark 


                                          Mark W. McElroy, Ph.D.
                                          Executive Director
                                          Center for Sustainable Innovation
                                          www.sustainableinno vation.org
                                          (802) 785-2293 (office)
                                          (802) 296-1928 (mobile)

                                          This message sent by a renewable-energy- powered computer




                                          On Apr 30, 2009, at 4:56 PM, ethicsblogger wrote:



                                          Mark:

                                          As a method for SEAAR, this makes perfectly good sense.

                                          Your use of the term "bottom line" matches up nicely with the colloquial use of that term. You can certainly tell a firm, under certain circumstances, "Look, the bottom line is that your business is not sustainable. " But the method you describe is simply not comparable to assets-minus- liabilities. Both your method and financial accounting can result in a "pass/fail" conclusion. But that's not enough to warrant using the bottom line vocabulary.

                                          I have nothing against colloquial use of the term "bottom line," but too many people (including ones quoted in our paper) suggest that there are social & environmental bottom lines in *just* the same sense as there is financially. I think that is a misleading oversimplification.

                                          As for examples: well, I was actually looking for examples not of metrics, but of scores & how they're combined. How do the land/water/air metrics get combined into a bottom line?

                                          Regards,
                                          Chris.

                                          --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark W. McElroy" <mmcelroy@.. .> wrote:
                                          >
                                          > Chris:
                                          > 
                                          > I think the point I'm trying to make about intercomparability is that 
                                          > every company's sustainability performance is a function of (a) who 
                                          > its stakeholders are, and (b) what its duties and obligations are to 
                                          > have impact (or not have impact) on vital capitals its stakeholders 
                                          > rely on for their own well-being. If you poison my well, you put my 
                                          > well-being at risk. That's mainstream sustainability theory in a 
                                          > nutshell. That being the case, what makes two or more reports 
                                          > comparable to one another is that (a) they organize their data in the 
                                          > same way in terms of what the categories are and what the rules for 
                                          > populating them with data are, and (b) the results are plotted onto a 
                                          > shared sustainability performance scale. Thus, the specifics of my 
                                          > non-financial impacts may be different than yours, but our scores may 
                                          > still be commensurable in the sense that we have organized our 
                                          > impacts in the same categories according to the same rules. My 
                                          > contention, Chris, is that this is no different than how financial 
                                          > reporting takes place, except that in the case of non-financial 
                                          > reporting we are dealing with many non-substitutable kinds of impacts 
                                          > (because the capitals are different), and so we are forced to compute 
                                          > many sub-bottom lines before we can combine or blend them into one or 
                                          > two. I believe I've made that point several times now.
                                          > 
                                          > OK, here's an example for you. To simplify, let's say two 
                                          > organizations are, in fact, using the same set of, say, six metrics, 
                                          > three of which consist of social metrics and the other three of 
                                          > environmental metrics. The three social metrics differ from one 
                                          > another in that one pertains to impacts on human capital, a second 
                                          > pertains to impacts on social capital, and the third pertains to 
                                          > impacts on constructed capital. For their part, the environmental 
                                          > metrics all pertain to natural capital, but different aspects of it 
                                          > -- say, land, water, and air. All six metrics, then, are non- 
                                          > substitutable. I can't pollute the water and expect to be able to 
                                          > compensate for that by making large charitable donations to the local 
                                          > soup kitchen. Even if I make the donations, the water is still 
                                          > polluted.
                                          > 
                                          > So basically we have six metrics that require six independent 
                                          > scores. Adding or subtracting them together would make no sense. 
                                          > They are non-commensurable in that regard. What that means is that 
                                          > if my score on any one of them is below what it should be, it doesn't 
                                          > matter what my scores are for the other five. I am still irrevocably 
                                          > unsustainable on that one front until and unless I improve its score 
                                          > to meet the corresponding standard of performance. So for the social 
                                          > bottom line, I must score satisfactorily on ALL three metrics; the 
                                          > same is true for the environmental category, because even though the 
                                          > three environmental metrics pertain to a common capital, I have the 
                                          > same substitutability problem. If I poison the well, the fact that I 
                                          > may have cleaned up the air changes nothing. The well is still 
                                          > poisoned.
                                          > 
                                          > The above explains why the quotient of quotients approach is best for 
                                          > computing blended bottom lines. What you refer to as incommensurable 
                                          > metrics may be incommensurable in one sense, I agree, but not in 
                                          > another. They are all commensurable in the sense that they all 
                                          > represent standards of performance that must be met in order for 
                                          > sustainability to obtain. The individual underlying standards are 
                                          > different, but so what? All standards must be met, despite their 
                                          > differences!
                                          > 
                                          > Since I know you'll want to have some examples of specific metrics, 
                                          > here they are:
                                          > 
                                          > 1) An environmental metric that measures water use relative a 
                                          > standard for how much water a company is entitled to use. This can 
                                          > be determined by measuring precipitation in a region and allocating a 
                                          > share of it to a specific business or facility. We are currently 
                                          > doing this with a client here in Vermont, and have proven the concept 
                                          > in practice.
                                          > 
                                          > 2) A social metric that measures a company's contributions towards 
                                          > alleviating global poverty relative to what such contributions ought 
                                          > to be on a per capita basis. This can be determined by reference to 
                                          > the UN's Millennium Development Goals which can be viewed as 
                                          > constituting standards of performance for how the developed world 
                                          > should assist the developing world. This we have done independently 
                                          > with respect to several companies, and have proven the concept in 
                                          > practice.
                                          > 
                                          > I hope this helps.
                                          > 
                                          > Regards,
                                          > 
                                          > Mark
                                          > 
                                          > 
                                          > Mark W. McElroy, Ph.D.
                                          > Executive Director
                                          > Center for Sustainable Innovation
                                          > www.sustainableinno vation.org
                                          > (802) 785-2293 (office)
                                          > (802) 296-1928 (mobile)
                                          > 
                                          > This message sent by a renewable-energy- powered computer
                                          > 
                                          > 
                                          > 
                                          > 
                                          > On Apr 27, 2009, at 1:50 PM, ethicsblogger wrote:
                                          > 
                                          > >
                                          > >
                                          > > Mark:
                                          > >
                                          > > For the sake of this discussion, I'm going to give up on 
                                          > > intercomparability of results. As long as you're ONLY trying to 
                                          > > help a single company track its progress, it's score doesn't need 
                                          > > to be comparable to another company's score. Fine.
                                          > >
                                          > > The math is still sounding very unconvincing to me. A ratio of 
                                          > > ratios of incommensurable metrics sounds meaningless. And I'm still 
                                          > > lacking a good, clear example. Show me how a company's score on 
                                          > > just two nameable metrics would result in a meaningful bottom line. 
                                          > > You pick the metrics. Fictional example will do.
                                          > >
                                          > > Thanks,
                                          > > Chris
                                          > >
                                          > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark 
                                          > > W. McElroy" <mmcelroy@> wrote:
                                          > > >
                                          > > > Chris:
                                          > > >
                                          > > > Great questions, thanks. Some quick answers:
                                          > > >
                                          > > > 1. Sources for norms and duties are varied, depending on the
                                          > > > metric. In some cases, they're regulatory or legislative or NGO-
                                          > > > based, in other cases they're scientific. Ideally, yes, a source
                                          > > > similar to GAAP would be nice to have, and someday I hope we do, but
                                          > > > in the meantime, organizations must go it alone and develop 
                                          > > standards
                                          > > > of their own. I know this doesn't meet your need for
                                          > > > commensurability, but it's better than not measuring and reporting
                                          > > > performance at all. Better to have some standards as opposed to
                                          > > > none, even if there is no widespread agreement behind them yet. Over
                                          > > > time, commensurability will improve, but not if we just sit here and
                                          > > > do nothing.
                                          > > >
                                          > > > 2. 'Yes' is my answer to your question about income statements; they
                                          > > > can simply be interpreted that way. The numerator is just a measure
                                          > > > of revenue; the denominator is a measure of expenses with an 
                                          > > implicit
                                          > > > norm tacked on to it (i.e., that it should be regarded as a minimum
                                          > > > performance standard for revenue, as in revenue must at least 
                                          > > equal it).
                                          > > >
                                          > > > 3. Regarding the 4 capitals, there is a long and venerable
                                          > > > intellectual history behind that idea. It is, in my view, the least
                                          > > > controversial aspect of the method we propose, and is arguably the
                                          > > > dominant theory of sustainability in existence. As for the fact that
                                          > > > normative claims may be contentious, I say so what? You're slipping
                                          > > > back into the consensus trap, I think. You seem to need consensus in
                                          > > > order to make progress, whereas I would rather evaluate proposals on
                                          > > > their merits, regardless of whether or not consensus lines up behind
                                          > > > them. Financial measurement and reporting is also normative and
                                          > > > contentious, but that doesn't stop us from doing it. Indeed, the
                                          > > > supposed commensurability of related reports is debatable. Are any
                                          > > > two income statements identical in content? I don't think so, other
                                          > > > than at the mid- to top-level categories. What I propose is no
                                          > > > different.
                                          > > >
                                          > > > 4. Regarding averaging, I have a completely different alternative to
                                          > > > propose, a better one I think than averaging. Averaging can be done,
                                          > > > but it suffers from the same problem that adding and subtracting
                                          > > > does, in some cases. Namely, that unsustainable scores can be
                                          > > > cancelled out by sufficiently higher sustainable scores. The fix for
                                          > > > this is to avoid both averaging and summing, and to instead rely on
                                          > > > the quotients approach I have proposed for individual metrics. In
                                          > > > this case, I'm talking about a quotient OF quotients. Once
                                          > > > individual quotient scores are computed for each metric, a blended
                                          > > > score would consist of a measure of the proportion of all such 
                                          > > scores
                                          > > > that at least comply sustainability performance standards. If there
                                          > > > are 15 metrics and all meet or exceed their standards, the blended
                                          > > > bottom-line score would be 1.0. If only 12 did, the net bottom line
                                          > > > score would be 0.8. The best possible score would be 1.0, and any
                                          > > > score of less than that would signify unsustainable performance to
                                          > > > some degree. I have already updated my treatment of this issue on
                                          > > > slides 34 and 35 of the following presentation:
                                          > > >
                                          > > > http://www.sustaina bleinnovation. org/Recasting- TBL.pdf
                                          > > >
                                          > > > Regards,
                                          > > >
                                          > > > Mark
                                          > > >
                                          > > >
                                          > > > Mark W. McElroy, Ph.D.
                                          > > > Executive Director
                                          > > > Center for Sustainable Innovation
                                          > > > www.sustainableinno vation.org
                                          > > > (802) 785-2293 (office)
                                          > > > (802) 296-1928 (mobile)
                                          > > >
                                          > > > This message sent by a renewable-energy- powered computer
                                          > > >
                                          > > >
                                          > > >
                                          > > >
                                          > > > On Apr 27, 2009, at 11:41 AM, ethicsblogger wrote:
                                          > > >
                                          > > > >
                                          > > > >
                                          > > > > Mark:
                                          > > > >
                                          > > > > That's a lot to chew on. I won't try to reply to it all.
                                          > > > >
                                          > > > > Where do we get the "norms or duties for what such impacts 
                                          > > ought to
                                          > > > > be"? Is there (or is there likely to be) something like GAAP 
                                          > > for that?
                                          > > > >
                                          > > > > I need help with the idea that "In financial reporting, income
                                          > > > > statements largely boil down to quotients." I take it you mean 
                                          > > they
                                          > > > > can be interpreted that way; they're not usually presented that
                                          > > > > way, right? That's fine. Where does the numerator come from? And
                                          > > > > what unit is the "The norm or duty represented by the denominator"
                                          > > > > in? Dollars? I'm just trying to picture this clearly. I've never
                                          > > > > heard of financial accounting described this way, so I want to be
                                          > > > > clear.
                                          > > > >
                                          > > > > Next: the idea that in non-financial accounting there are to be
                                          > > > > precisely 4 non-substitutable "capitals" immediately gets you into
                                          > > > > huge, probably intracable, philosophical problems. You've got to
                                          > > > > make hugely contentious normative claims to do that. Maybe you can
                                          > > > > get away with that, for the relevant audiences.
                                          > > > >
                                          > > > > I'm also confused by the idea that"such scores should be averaged,
                                          > > > > not summed, because again, they are not fungible." Seems to me 
                                          > > that
                                          > > > > you cannot meaningfully average things that are not fungible.
                                          > > > > Averaging means adding together & dividing by the number of items
                                          > > > > added. How can you meaningfully add together things that aren't
                                          > > > > commensurable?
                                          > > > >
                                          > > > > Regards,
                                          > > > > Chris.
                                          > > > >
                                          > > > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, "Mark
                                          > > > > W. McElroy" <mmcelroy@> wrote:
                                          > > > > >
                                          > > > > > Chris:
                                          > > > > >
                                          > > > > > Actually, yes, there are a few key pieces missing from the
                                          > > > > discussion
                                          > > > > > that I really should explain. In particular, the 'adding up 
                                          > > of goods
                                          > > > > > and subtracting the bads' premise you're relying on is 
                                          > > mistaken, in
                                          > > > > > my view. That's really not how non-financial reporting works, 
                                          > > nor
                                          > > > > > how it should work, as we see it. Moreover, it's not how 
                                          > > financial
                                          > > > > > reporting works, either. Here I want to encourage you (and 
                                          > > others)
                                          > > > > > to think of organizational performance reporting as: A 
                                          > > process of
                                          > > > > > measuring impacts on capitals relative to norms or duties for 
                                          > > what
                                          > > > > > such impacts ought to be. Metrics for such measurements can 
                                          > > usefully
                                          > > > > > take the form of quotients, where numerators represent measured
                                          > > > > > impacts on capitals, and denominators represent norms or 
                                          > > duties for
                                          > > > > > what such impacts ought to be. Now let's apply these 
                                          > > principles and
                                          > > > > > see what we get, starting with financial reporting.
                                          > > > > >
                                          > > > > > In financial reporting, income statements largely boil down to
                                          > > > > > quotients of revenues over expenses. The type of capital 
                                          > > involved
                                          > > > > > here is monetary capital. The norm or duty represented by the
                                          > > > > > denominator is a monetary value that the numerator (revenues) 
                                          > > should
                                          > > > > > at least equal (and hopefully exceed, the more so the 
                                          > > better!) if
                                          > > > > the
                                          > > > > > financial performance of the organization is to be viewed as
                                          > > > > > sustainable, or solvent if you like. Thus, quotient values 
                                          > > that are
                                          > > > > > greater than or equal to 1.0 in financial reporting signify
                                          > > > > > sustainable performance. Here I agree that there is adding and
                                          > > > > > subtracting going on, but only in the calculation of the 
                                          > > numerator
                                          > > > > > and the denominator. The key sustainability metric is 
                                          > > subsequent to
                                          > > > > > all of that and is a quotient, not a sum. This is the logic of
                                          > > > > > solvency, and it is arguably at the heart of what we mean by the
                                          > > > > > 'financial bottom line'.
                                          > > > > >
                                          > > > > > Here it should also be clear that there is a difference between
                                          > > > > > measuring financial sustainability and measuring financial
                                          > > > > > profitability. For the former, all we care about is whether the
                                          > > > > > quotient is greater than or equal to 1.0. For the latter, we, 
                                          > > too,
                                          > > > > > want sustainability, of course, but we also want to maximize the
                                          > > > > > ratio (i.e., maximize profits). Not so for sustainability 
                                          > > measures.
                                          > > > > > There, breaking even is good enough. In this regard, 
                                          > > sustainability
                                          > > > > > measurement and reporting, like pregnancy, is 'binary'. You're
                                          > > > > > either one of the other, period.
                                          > > > > >
                                          > > > > > Now take the same principles and apply them to non-financial
                                          > > > > > measurement. The first thing to understand is that the 
                                          > > capitals are
                                          > > > > > different. In fact, there are four of them, and they are not
                                          > > > > > fungible or substitutable with one another (this relates to the
                                          > > > > > 'strong' vs. 'weak' sustainability point I made earlier). I, and
                                          > > > > > many others, take the 'strong' position as I just did, which 
                                          > > is that
                                          > > > > > the four capitals involved are not substitutable. In other 
                                          > > words, an
                                          > > > > > organization cannot compensate for environmental bads by 
                                          > > investing
                                          > > > > > more in social goods. Moreover, even good and bad impacts within
                                          > > > > > individual categories of capital are not necessarily fungible or
                                          > > > > > substitutable. I can't be absolved of polluting the water table
                                          > > > > > simply because I helped clean up the air, yet both are 
                                          > > instances of
                                          > > > > > natural capital. The four capitals I speak of are natural, 
                                          > > human,
                                          > > > > > social, and constructed (or built). I call the latter three 
                                          > > anthro
                                          > > > > > capital because they are anthropogenic; natural capital is not.
                                          > > > > >
                                          > > > > > The implication of all of this is that (a) non-financial 
                                          > > reporting
                                          > > > > > necessarily involves the need to produce multiple social and
                                          > > > > > environmental scores, (b) such multiple scores cannot be 
                                          > > added up
                                          > > > > > together very well because they are not fungible, and (c) such
                                          > > > > scores
                                          > > > > > should be averaged, not summed, because again, they are not
                                          > > > > fungible,
                                          > > > > > and to sum them up would be to take a weak sustainability 
                                          > > position,
                                          > > > > > as if social and environmental impacts share a common currency,
                                          > > > > which
                                          > > > > > they do not! This is why I say a good TBL bottom line for 
                                          > > social and
                                          > > > > > environmental performance -- if we must have single scores 
                                          > > for each
                                          > > > > > -- must be the result of averaging many scores, not adding and
                                          > > > > > subtracting (although summing can occur beforehand as individual
                                          > > > > > numerators and denominators are computed).
                                          > > > > >
                                          > > > > > I also want to explain the logic of denominators further, 
                                          > > because I
                                          > > > > > see misconceptions there, too, but I'll stop now and let you
                                          > > > > react to
                                          > > > > > the above before I do.
                                          > > > > >
                                          > > > > > Regards,
                                          > > > > >
                                          > > > > > Mark
                                          > > > > >
                                          > > > > >
                                          > > > > > Mark W. McElroy, Ph.D.
                                          > > > > > Executive Director
                                          > > > > > Center for Sustainable Innovation
                                          > > > > > www.sustainableinno vation.org
                                          > > > > > (802) 785-2293 (office)
                                          > > > > > (802) 296-1928 (mobile)
                                          > > > > >
                                          > > > > > This message sent by a renewable-energy- powered computer
                                          > > > > >
                                          > > > > >
                                          > > > > >
                                          > > > > >
                                          > > > > > On Apr 26, 2009, at 4:01 PM, ethicsblogger wrote:
                                          > > > > >
                                          > > > > > >
                                          > > > > > >
                                          > > > > > > Mark:
                                          > > > > > >
                                          > > > > > > Sounds like you're suggesting a (reasonably) method of 
                                          > > SEAAR. And,
                                          > > > > > > as we tried to make clear in our paper, we're not against 
                                          > > SEAAR.
                                          > > > > > > We're just against the *implication* of intercomparability 
                                          > > that
                                          > > > > the
                                          > > > > > > accounting terminology implies (even if people overestimate
                                          > > > > > > financial accounting in that regard).
                                          > > > > > >
                                          > > > > > > Annual reports still do generate a Bottom Line, right? 
                                          > > Assets in
                                          > > > > > > dollars, liabilities in dollars. Higher number is better.
                                          > > > > > >
                                          > > > > > > So, I think you're right to leave out weightings, but that 
                                          > > looks
                                          > > > > > > (again) like taking an potentially- fuzzy financial concept and
                                          > > > > > > applying it to an even fuzzier case.
                                          > > > > > >
                                          > > > > > > p.s. I'm still lacking a good, clear, simple example of how
                                          > > > > > > different categories of social goods & bads would be added
                                          > > > > > > together, if that's still part of the agenda. Reporting gender
                                          > > > > > > balance on the Board is good; reporting charitable 
                                          > > donations is
                                          > > > > > > good; reporting collaboration with NGO's is good. But they 
                                          > > cannot
                                          > > > > > > be added together. Am I still missing something?
                                          > > > > > >
                                          > > > > > > Regards,
                                          > > > > > > Chris.
                                          > > > > > >
                                          > > > > > > --- In Corporate_Sustainab ility_Management @yahoogroups. com, 
                                          > > "Mark
                                          > > > > > > W. McElroy" <mmcelroy@> wrote:
                                          > > > > > > >
                                          > > > > > > > All:
                                          > > > > > > >
                                          > > > > > > > Upon further reflection of Chris's point about giving 
                                          > > different
                                          > > > > > > > indicators different weights because of their arguably 
                                          > > different
                                          > > > > > > > importance, I find myself leaning more strongly against it
                                          > > > > than for
                                          > > > > > > > it. While there is nothing in the TBL method we propose that
                                          > > > > would
                                          > > > > > > > prevent us from applying such variable weightings, 
                                          > > Chris's point
                                          > > > > > > > about the desirability of bottom lines being 
                                          > > commensurable or
                                          > > > > > > > comparable from one organization to another is a good one, I
                                          > > > > think.
                                          > > > > > > > But how can we have it both ways? How can we have variable
                                          > > > > > > > weightings and commensurable reporting, when no two
                                          > > > > organizations
                                          > > > > > > > will likely see the relative importance of various 
                                          > > indicators
                                          > > > > the
                                          > > > > > > same?
                                          > > > > > > >
                                          > > > > > > > The answer, I think, is to leave weightings out of reports
                                          > > > > > > > altogether, and to leave it to the readers or consumers 
                                          > > of such
                                          > > > > > > > reports to apply their own weightings. Indeed, this is 
                                          > > precisely
                                          > > > > > > > what we do with financial reports. The raw data, so to 
                                          > > speak, is
                                          > > > > > > > disclosed in financial reports, without any attempt to 
                                          > > weight
                                          > > > > the
                                          > > > > > > > numbers. The numbers are reported just as they are. 
                                          > > Shareholders
                                          > > > > > > > are then free to attach more or less importance to the
                                          > > > > numbers they
                                          > > > > > > > read as they see fit. I see no reason to do things
                                          > > > > differently in
                                          > > > > > > > social and environmental reporting.
                                          > > > > > > >
                                          > > > > > > > Regards,
                                          > > > > > > >
                                          > > > > > > > Mark
                                          > > > > > > >
                                          > > > > > > >
                                          > > > > > > > Mark W. McElroy, Ph.D.
                                          > > > > > > > Executive Director
                                          > > > > > > > Center for Sustainable Innovation
                                          > > > > > > > www.sustainableinno vation.org
                                          > > > > > > > (802) 785-2293 (office)
                                          > > > > > > > (802) 296-1928 (mobile)
                                          > > > > > > >
                                          > > > > > > > This message sent by a renewable-energy- powered computer
                                          > > > > > > >
                                          > > > > > > >
                                          > > > > > > >
                                          > > > > > > >
                                          > > > > > > > On Apr 25, 2009, at 4:06 PM, Mark W. McElroy wrote:
                                          > > > > > > >
                                          > > > > > > > >
                                          > > > > > > > >
                                          > > > > > > > > Chris:
                                          > > > > > > > >
                                          > > > > > > > >
                                          > > > > > > > > The issue you raise is not with the method, it is with
                                          > > > > whether or
                                          > > > > > > > > not people can agree (or have agreed) on a weighting
                                          > > > > scheme, and
                                          > > > > > > > > also on specific indicators. The non-financial accounting
                                          > > > > method I
                                          > > > > > > > > propose is just as neutral on that issue as GAAP is on
                                          > > > > financial
                                          > > > > > > > > matters. GAAP stops at the level of categories, and leaves
                                          > > > > it to
                                          > > > > > > > > individual reporters to define their own underlying
                                          > > > > accounts. Are
                                          > > > > > > > > all companies' charts of accounts identical? Of course 
                                          > > not.
                                          > > > > Why
                                          > > > > > > > > do you/we assume commensurability in that case but not 
                                          > > in non-
                                          > > > > > > > > financial reporting? And why do you insist of having 
                                          > > weighting
                                          > > > > > > > > applied in the case of non-financial reporting, but not in
                                          > > > > > > > > financial repo

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