Greening the Bottom Line

In the business world, profit has long been the standard for performance. Red ink on the bottom line raises red flags with investors. However, companies are increasingly judged on their social and environmental behavior as well as economics. Business researchers are thus focusing on what they call the “triple bottom line” — the economic, social and environmental aspects of sustainability — to evaluate company operations.

“When we talk about sustainability, we’re really saying we have to redefine business performance,” says Mark Pagell, associate professor in the OSU College of Business. “Our research looks at performance in all three areas.”

Pagell directs research for the college’s Sustainable Business Initiative and specializes in operational evaluation and supply chain management. What he and OSU emeritus professor David Gobeli found in a 2004 survey suggests that many business managers do not put the notion of a “triple bottom line” into practice. Managers report a willingness to address social (defined as protecting employee well-being) and economic issues, but they are reluctant to deal with environmental issues. The OSU survey is one of the first attempts to understand managerial attitudes toward sustainability.

Since the mid-1990s, business researchers, including Pagell and Gobeli, have consistently found that environmental improvements are good for profits. The OSU team suggests that academics and regulators need to do a better job of communicating that message. “Companies have to be shown that that common wisdom — that dealing with environmental issues is bad for profits — is wrong,” says Pagell.

Clearly, many companies have gotten it. The Oregon Sustainability Board features sustainable business case histories on its Web site ( Meadowood Industries, Inc. (Albany) manufactures building materials from straw that is left from the annual harvest of ryegrass seed. Coastwide Laboratories (Wilsonville) has earned U.S. Environmental Protection Agency praise for its Sustainable Earth® floor cleaning products. Hewlett-Packard (manufacturing plant in Corvallis) has a global program to recycle printer cartridges and other e-waste. Last January, Sustainable Northwest, a Portland-based non-profit, recognized Stahlbush Island Farms of Corvallis and Norm Thompson Outfitters of Portland with its first Cecil D. Andrus Award for Leadership in Sustainability and Conservation.

Despite the positive publicity, some business owners look forward to the day when sustainable practices are simply business-as-usual. “Sustainability shouldn’t be a hip thing or a buzzword,” Stahlbush Island Farms co-owner and OSU alumna Karla Chambers told The Daily Journal of Commerce in January. “It should be a very practical concept for resource use and allocation.”

One of the challenges in a global economy and a focus of Pagell’s research is the supply chain. “When you look at manufacturing in general, about 60 percent of the cost is outsourced. Most companies are buying far more than they are doing themselves,” says Pagell. Suppliers generate social and environmental impacts, even though their names may not show up on clothing labels and new-car stickers.

Pagell and Zhoahui Wu, assistant professor in the College of Business, are collecting data from companies to determine what a sustainable supply chain might look like. “We’re looking all over for companies that have figured out a part of this,” companies that are good at one or two things, such as product design, risk reduction or internal operations.

Monitoring the “triple bottom line” performance of every business partner, no matter how small, is daunting. No one has come up with a truly sustainable supply chain, adds Pagell. Nevertheless, the challenge is critical to measurements of business performance and to investor confidence. Companies that can put sustainability into practice across the board are likely to be the business leaders of the future.