Triple threat

Traditional financial accounting practices guide companies making decisions about how to spend, invest and allocate resources among competing demands. Today, companies are trying to use lessons from accounting to make similar decisions about corporate social responsibility (CSR). But is triple-bottom-line accounting really possible?

In 2008, carpet maker Interface Inc. (NYSE: IFSIA) announced its best second-quarter performance ever. Sales were up, profit margins were up, and the company was gobbling up market share. In large part, the impressive quarterly results were due to the company’s market-leading focus on modular carpets, which were first embraced by the green-building community and are now landing in mainstream commercial and industrial buildings.

But scan through earnings statements the company has filed—both recently and in years past—with the U.S. Securities and Exchange Commission, and page after page, there’s little indication that behind the 10-Q and 8-K filings Interface has undergone a major transformation in its approach to doing business.

Interface’s story is well-known in sustainable business circles. A leader in the global rug and carpet business, Interface went public in June 1983; 11 years later (1994) the company’s founder and chairman Ray Anderson had what is famously known as his “spear in the chest” moment after reading Paul Hawken’s “Ecology of Commerce.” In the years since, the company joined the nonprofit Global Reporting Index to track its triplebottom- line performance along 70 metrics, and continues to publicly report its progress: Waste reduction efforts have helped it avoid more than $372 million in costs since 1995; energy-efficiency initiatives dropped energy consumption 45 percent since 1996; and the company has increased training, slashed on-the-job injuries by 60 percent and steadily increased its donations to nonprofit organizations.

So, if a company such as Interface is able to identify clear success—even demonstrating material-cost savings from its activities—why doesn’t its financial statements reflect its achievements?

Blind leading the blind
Businesses use detailed frameworks for decision making, evaluation and understanding corporate performance in terms of financial data. The Global Accounting Standards Board, Financial Accounting Standards Board, the Securities and Exchange Commission and other regulatory bodies have established standardized, legal frameworks for what to measure, how to measure it, how to report it and how to interpret it.