The triple bottom line—people, planet and profit—is a fundamental concept that underscores business sustainability. However, economic viability is usually prioritised over an organisation's impact on society and the environment by traditional business leaders.
In an inaugural webinar as part of the LKCSB Ideas Shaping Tomorrow series, Prof Shantanu Bhattacharya, Lee Kong Chian Professor of Operations Management, Deputy Dean (Programmes) and Academic Director, PhD in Business; and SMU Master of Tri-Sector Collaboration programme alumni David Chen, and Co-Founder and Chief Operating Officer of Golden Sunland; discuss the economic implications sustainability has on the food and beverages sector.
“The triple bottom line basically says, ‘profits are important for organisations, but also consider society and the environment of the planet’,” says Prof Shantanu. “At the same time, society as a stakeholder must be satisfied, the planet has to be left better than the condition it was in before we arrived. So how do you try to satisfy all three?”
Unfortunately, according to Prof Shantanu, a lot of business leaders pay lip service to sustainability with various CSR programmes or by gathering employees together for activities like a picnic or building houses for the less fortunate.
He adds: “That is at a local organisational level, but the problem is it is not sustained, that becomes more of a photo opportunity, more of a way of publicising your efforts, rather than doing it on a sustained basis.”
Instead, a triple bottom line mentality requires a dramatic mindset shift for business owners, stakeholder, and consumers alike, and a transformation in traditional approaches to productivity, consumption and accountability.
A bottom-up solution
The Tragedy of the Commons is an economics conundrum which sees individuals consume a common resource without replenishing it for others, leading to a degradation of resources in the long run—much like how shepherds take their flock to graze in common fields and not their own farms, resulting in the common land losing its fertility over time.
“This cost of the Commons is borne by all users,” explains Prof Shantanu.
“The common resources get degraded over time, but no one wants to take care of common resources, you only take care of your private resources. This is true of water, of air, of all other common resources on the planet as well. Everybody says, ‘I will keep manufacturing chemicals because it's economically profitable for me. If chemicals are releasing vapours in the air that are degrading the environment of the earth, I don't care’.”
However, research has shown that top-down approaches imposed by governments with a carbon footprint tax, such as the Kyoto Protocol, an international agreement aimed at reducing carbon dioxide emissions, have largely been ineffective.
“The way to solve the tragedy of the commons is for local communities, organisations and individuals to get together in a bottom-up approach,” says Prof Shantanu.
In the case of Nestle, the world’s largest F&B organisation, the concept of creating shared value for itself, for its shareholders, and for society was a long-term solution for business sustainability. And one of the ways in which they achieved this is through close collaboration with small farming communities, highly susceptible to the effects of the climate on their yields.
“If Nestle can work with their suppliers (the farmers), they will have a more resilient stream of supply,” notes Prof Shantanu.
“By increasing the yields, they will be able to get a higher capacity in terms of food. Developing small stakeholders by working with them to generate economies of scale will lead to better logistics for the food. If you can work closely with vendors, you can ensure a sustainable stream of supply from vendors in the long run.”
Prof Shantanu cites dairy farms as an example, as they have among the highest carbon footprint because cows generate enormous amounts of methane. As such, Nestle controls the carbon footprint of dairy farms by growing green locations around those dairy farms.
Moreover, the company acknowledges the importance of crop diversity at the farm level to rejuvenate the fertility of the land. It provides incentives to its large network of farmers to encourage crop rotation, and has the bandwidth to purchase a wide range of crops from cocoa to coffee, to supply the production of its many SKUs.
Over at Golden Sunland, Mr Chen also engages with local “partner farmers” in Myanmar to ensure sustainability for his business, as well as for the environment. The Singapore rice company works with farmers on responsible farming methods, and uses high yielding seeds that can be collected from data to enhance the company’s farm advisory to the farmers.
“The second thing that we're doing for the farmers is more of a social innovation, we are providing fairer and more transparent funding contracts to a local farmer with a guaranteed buyback system,” reveals Mr Chen.
“And this is also to help the farmers mitigate market fluctuation.”
Short term impact for long term returns
In an ideal business world, the triple bottom line can be achieved seamlessly and simultaneously. Realistically, however, the journey towards environmental, social and economic responsibility is one riddled with obstacles. From global F&B behemoths like Nestle to startups such as Golden Sunland, sustainability is a long term investment that may involve short term financial hurdles.
“People are willing to pay more for sustainable products up to a limit,” admits Prof Shantanu. As Mr Chen also found out, the current consumer market is also not quite willing to pay the hefty premium for rice—a daily staple especially for Asian families—grown organically. In Singapore, the cheapest house brand rice goes for about under $2 per kilogram, while organic rice is between $6 and $10 per kilogram.
“When you walk down the aisle and you pick a packet of organic rice, it simply means that it is not fumigated and no chemical has been used either in the form of fertilisers or pesticides” explains Mr Chen.
“On a very micro scale, it is super good for the environment. But it is also known for lower productivity. Now on a macro scale, we are losing water resources and we are also losing arable land. So how do we justify having both parameters on a decline concurrently, just as we need more food?”
But Prof Shantanu is adamant that people, profits and the planet indeed are aligned, with a bit of patience and a lot of optimism for the greater good.
“Even though you may take a short term hit in terms of profits for producing sustainably with green electricity, for example, over time, your shareholders will get more value because customers and investors will see that your business will be existing for a longer period of time,” notes Prof Shantanu.
“Hence, they will get a higher shareholder value and a higher share price to account for that sustainability over a longer period of time.”
For a startup like Golden Sunland, which was founded in 2016 as Singapore’s first rice-growing company, a mission to change the livelihoods of farmers also requires pragmatism, as well as financial and mental resilience. The business adopts a sustainable rice farming platform that is less stringent than organic farming, but restricts the use of fertilisers to chemicals that are least damaging to the environment. Together with the distribution of high yielding seeds to smallholder farmers, the initiative has seen a growth in productivity.
“This [rice farming programme] is a multi-prong approach with some initial sacrifices and compromises for a more sustainable production system,” says Mr Chee.
“We have actually been burning cash for the last three years to achieve the ‘our people, our planet’ goal and hopefully by next year we can achieve our profitability goal.”
In the face of an ongoing pandemic and economic recovery shaken by continued global lockdowns, the notion of prioritising our people and planet alongside profit may be a daunting strategy for corporate decision-makers to adopt. However, perhaps more than ever before, doing good will have far-reaching effects on business longevity, boosting brand reputation, ensuring customer engagement, shareholder perception and even long-term profitability—in both good times and bad.
