Triple bottom line: The conceptual frontier

 

In a conversation about sustainable development, the phrase “triple bottom line” is used several ways, which can make it almost impossible to understand. Is it a policy approach, a management style, or an auditing system?

It’s easy to get lost because, in a way, they are all correct. But the true nature of triple bottom line is fairly simple: it is an accounting tool that measures the often nebulous idea of sustainability in a given development.

Traditionally in urban redevelopment sites, environmental and social considerations have been incorporated into a project through regulations or city mandates. But a new model is emerging where urban redevelopment strategies shift to preempt both regulation and public outcry through adherence to three bottom lines: economic, social and environmental.

At this point, triple bottom line (TBL), also called sustainable accounting, is a voluntary auditing process that measures a company’s or development’s progress toward certain expressed objectives in areas such as economic prosperity, environmental quality and social justice.

The idea behind TBL was first explained in John Elkington’s 1998 book “Cannibals with Forks: The Triple Bottom Line of 21st Century Business;” so the concept is really only about a decade old.

Stephen Senge, a Western Washington University accounting professor, said the idea originated from continental Europe, Australia and New Zealand.

“If you look at the economic philosophies of those countries, they’re not quite as cowboy capitalist as what one often sees in North America,” Senge said.

He said since the entire notion of TBL is so young, it is currently on a conceptual frontier.

“Right now there are lots of different models, lots of different ideas and lots of different opinions that are all vying for some kind of legitimacy,” Senge said.

Senge compared TBL’s current state of flux to financial reporting in 1932 before the U.S. Securities and Exchange Commission began regulating public trading.

“There are a few general ideas that everybody adheres to [with triple bottom line], but there’s a lot of specific nuances and different practices going on,” Senge said.

For example, an urban redevelopment can create a master plan that integrates economic, social and environmental considerations. Those considerations would be given a certain value and the project could later be evaluated based on those values and then disclosed to the community in an annual sustainability report.

But Derek Long, program director for Sustainable Connections and a Waterfront Advisory Group member, said he thinks several of Bellingham’s past developments have incorporated TBL principles even if they didn’t know it.

“Our community is a very thoughtful community,” Long said. “People come out to express their values in public process and we see those values being integrated into public projects.”

Senge said sustainable accounting is a neutral tool that doesn’t advocate for one position or another.

“It says, ‘Ok, stakeholders and community, if you feel this or that is important to you, then set it as an objective and establish measures to evaluate your progress toward that objective,’” Senge said.

Long said in all his talks with city and county officials and the design community, everyone is enthusiastic about how this idea can work in Bellingham. Every-one seems to want walkable streets, green buildings and overall sustainability, but how do we measure and assign value to that?

“Let’s not reinvent the wheel,” Long said. “Let’s go out and find something as a starting point, localize it and go from there.”

 

The waterfront district: an integrated project

The Port of Bellingham has been integrating the concept of sustainability into its development plans since the waterfront redevelopment process started in 2003, said Mike Stoner, environmental director for the Port of Bellingham.

But, he said, the idea of a TBL auditing system to measure and evaluate waterfront redevelopment came up just this year as a discussion item at one of the Waterfront Advisory Group meetings.

“So we’re five years into a triple-bottom-line kind of project here,” Stoner said. “There are many, many different ways to measure sustainability. Triple bottom line is a specific term that is just one way of measuring it.”

But before the port could implement the TBL system, the waterfront needed a rubric that assigned value to the different aspects of sustainable development and integration of environmental and social considerations.

Last year, the waterfront district got a boost in that direction when it was designated as a pilot project for the new LEED for Neighborhood Development program, which was created by the U.S. Green Building Council. The waterfront is one of 238 pilot projects from 39 states and six countries.

Long said Sustainable Connections has been advocating to the port that LEED Neighborhood Development is a good foundation for the waterfront district.

“It’s a great starting point for us to add our own Bellingham-Whatcom County flavor for holding ourselves accountable on the waterfront,” Long told city and port officials at the Waterfront Advisory Group meeting on March 12.

The LEED for Neighborhood Development program is a 106-point rating system that incorporates sustainable development principles into the first national standard for neighborhood design.

The system gives value to sustainable principles across all three spheres of consideration. For example, developments can score one to eight points for reduced automobile dependence or score one to three points for diversity of housing types. The system is divided into four categories: smart location and linkage; neighborhood pattern and design; green construction and technology; and innovation and design process. The resulting point total determines the development’s LEED rating of certified, silver, gold or platinum.

“LEED for neighborhoods is one of several accepted systems for measuring with a triple bottom line,” Stoner said. “So we have been measuring our progress under that system.”

 

Adding incentives for developers

Jim Darling, executive director for the Port of Bellingham, said many developers are voluntarily incorporating social and environmental considerations because they can get incentives from the city such as additional height for a building, which would increase economic return.

“A developer might do a project and build some open spaces and then voluntarily do some environmental enhancement,” Darling said. “Incentives could convince a developer to do an integrated project they might not have done originally.”

Ted Mischaikov, a local developer and owner of M-Kov Inc., said the TBL is a good idea, but the auditing process would need considerable vetting before it is the rule and not the exception.

“Until those accounting practices are generally accepted, it will be difficult to bring all the financing elements of a development together,” Mischaikov said.

Mischaikov added that it would be difficult to find a TBL system that would work on a countywide or statewide level. He said for projects to voluntarily take on a TBL auditing system, it needs to be easy to adopt.

“It has to be transferable,” Mischaikov said. “It has to be something you can take from project to project.”

Long said when developers incorporate community values into a project, the community is less likely to look for opportunities to delay it.

“Time is money, so when you come forward to develop a project that has community buy-in, you’re a lot less likely to get hung up on any push-backs from the city or the community,” Long said.

Darling said the old model of an adversarial public development process adds to the overall cost, which can have negative impacts on the project’s economic bottom line. But TBL can preempt the regulatory process as well as any community uproar through an integrated project approach.

“The new model is trying to leverage all these different considerations to happen together,” Darling said. “And the triple-bottom-line process measures if we did that successfully.”

This cooperative partnership between stakeholders and a development authority is fundamentally different from the traditional, adversarial model, which can create a lot of tension in the development community. But if the triple- bottom-line system continues to grow strength in the public planning process, it could be considered civic cooperation for the common good.

“So let’s all get to the table and try to put together the best project possible,” Stoner said.

Projects that meet this confluence of considerations are called integrated projects, which can be audited by a triple-bottom-line system like LEED Neighborhood Development. The waterfront district could encourage integrated projects through incentives that improve a business’s economic performance but require the integration of community and environmental considerations.

 

 

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