ShoreBank and the 'Triple Bottom Line': Too Important to Fail?

The story of ShoreBank has caught national attention, as this relatively small, so-called “community development bank” has been the target for bailout assistance via state and federal taxpayer money. In the past, particular banks have received assistance if they were deemed “too large to fail,” on the presumption is that if they did fail, they would take the banking industry — and possibly the economy itself — with them. ShoreBank, however, is a special case, and the favoritism shown it is based more on its banking philosphy than its size. What is it about ShoreBank’s philosophy that has garnered the favor of those who apparently see it not as “too large” to fail, but too important to fail? To answer that, we will be exploring the concept of the “Triple Bottom Line” (TBL or 3BL), which is the most succinct statement of Shorebank’s mission and purpose. In this series of articles we will discuss what the triple bottom line is, where it came from, and where it is leading us. We will see just how important 3BL philosophy is to those who subscribe to it and why they must protect its champion, ShoreBank, at all costs. As we explore it, we will see how it is more than just a new business model, but an maturing philosophy that begs protection from stakeholders whose goal is to establish it as a societal norm. Indeed, as we shall see, the Triple Bottom Line represents a philosophy which has been deemed “too important to fail.”

What is the Triple Bottom Line?

The Triple Bottom Line (TBL or 3BL) is the most succinct statement of Shorebank’s mission and purpose, and the bank proudly touts its commitment to the 3BL objectives. What are these objectives? Essentially, they are an organizational commitment to social and environmental concerns in addition to economic concerns (profit). Shorebank’s website summarizes it as follows:

Most businesses have a single bottom line – maximizing shareholder return. “Triple bottom line” companies typically manage to achieve three returns: profitability, social return and an environmental return. ShoreBank describes its triple bottom line as profitability, community development impact and conservation.

ShoreBank claims that pursuing profit alone is inadequate for businesses today, and therefore it feels traditional accounting measures must now also incorporate the goals of social welfare and environmental responsibility as well.

How is the Triple Bottom Line Practiced?

The vision behind 3BL is praiseworthy, as responsible and upstanding companies will by necessity conduct their business in ways friendly to their employees, customers, and community — as well as protect and preserve their environmental resources. However, how does 3BL actually work in practice? Is it a feasible and practical business model that accomplishes its stated goals? Let’s look again at ShoreBank’s website for the explanation. ShoreBank explains that it invests and loans money to foster community development and environmentally friendly projects. Then it attempts a description of how it codifies its progress towards fulfilling its 3BL aims:

By translating ShoreBank’s mission and strategies into specific objectives and measures, we make our mission very practical and tangible. ShoreBank’s annual reports include data about our annual performance in development investment and conservation loans.

Frankly, this is rather vague; we still don’t know how ShoreBank uses data that it manages to distill its progress toward values-oriented goals into objective baselines which can, for example, serve as annual performance targets. Indeed, many businesses now profess commitment to 3BL, but few explain the actual mechanisms behind it. For argument’s sake though, let’s assume ShoreBank does have a concrete means of incorporating 3BL into its bookkeeping. Perhaps it resembles the method used by a particular environmental engineering consultancy firm which has provided an explanation of how 3BL can be used by a munincipality to help it decide which pursuits to embrace. This firm actually codifies 3BL into an equation:

Alternative Rating = Σ (Score * Weighting)

This may seem like a complicated equation, but actually it is quite basic. It simply acknowleges that the city will look at many criteria when making a decision. In addition to economic feasibility (profit), it also considers various social criteria (such as working conditions) and environmental criteria (such as sustainability). Any given project is scored on a scale of 1 to 5 to reflect how well it is likely to honor these criteria. What’s more, each of these criteria are independently weighted, so those deemed most important will have the greatest effect on the total outcome when all the scores are compiled into the final “Alternative Rating.”

At least in this instance, the 3BL goals are codified into numbers. However, it is worth noting that the methodology remains subjective. In this case, the weighting was to be determined by city staff. (Interestingly, environmental sustainability was deemed the most important criteria for any proposed project, receiving a full 25% of the weighting, while environmental considerations on the whole — including sustainability — received 40% of the total score). We are left to trust that the staff’s values reflect the values of the city, which seems no small task given the differences in values among any group of individuals. In any case, you may view the report detailing this equation in its entirety >>.

Now that we know what 3BL is and how it might be implemented, we should ask whether it can deliver on its promise. Can 3BL truly provide a concrete, unbiased, and objective set of benchmarks worthy of incorporation into traditional accounting measures judging corporate health? We are confident that you can judge that for yourself.

In our next article we will move on to explore the history that has led to today’s formalization and implementation of the Triple Bottom Line philosophy.