Paul Tero a member of our Emerging Fellows program inspects the structure of business and the changing environment in a digital economy. The views expressed are those of the author and not necessarily those of the APF or its other members.
There are a number of ways in which companies account for the environment. It could be a seasonal perspective in terms of the variations in goods and services brought to market, another is from an environmental perspective in terms of energy usage as well as production and packaging materials, and a third is from a shareholder and stakeholder perspective in terms of statutory requirements. In recent years the triple bottom line reporting framework has made its way into corporate practices. Where companies, for reasons due either to regulatory compliance or enlightened executives, report on profit, people and planet. That is in addition to their standard financial statements. Organizations are reporting on metrics related to their staff and their impact upon the environment.
Building on the acceptance of reporting on more than one performance parameter, there is a nascent movement to embrace the quadruple bottom line. Where this fourth performance parameter is "purpose". Defined as the ethics, culture and desires of the organization. The administrative policies and processes that are established by government bodies, and are used to govern companies and organisations, change over time. Long gone is the notion that business reputation is solely built on a profit and loss statement.
Into this governance implication let us now draw two threads of previous thought: the structure of business and the changing environment. First, we know that the process business engages in to make a profit will change in the decades ahead. Pervasive digitisation will drive an increasingly ubiquitous phenomena of process automation and forms of cognitive processing. Limiting the typical set of tasks available for the human workforce to those requiring people skills and/or thinking skills. Secondly, while this trend of digitisation gathers apace the climate and natural environment in which business and the digital economy is beholden to will still be changing. There are two responses to these macro changes. The first, described as a pathway of current and common ambition, is to succeed in humanity having a light footprint on the environment. On the other hand, the pathway of lackluster ambition necessarily leads to outcomes that are less than optimal for all life forms.
There is currently a broad acceptance of the concept of a global carbon budget. Therefore, one can envisage that, over the course of the time horizon we are concerned with, this principle of a global budget being established in corporate governance practices. Where economic entities are given a "profile" to work within. Thus, realising a transition from triple bottom line reporting through quadruple to quintuple. That is adding "profile" to the currently recognised profit, people, planet and purpose.
With respect to the triple and quadruple bottom line reporting the sense is that these governance outcomes are the result of internal motivations. The result of what the business decides to do. With the "profile" metric, the sense is that the reporting is on the outcomes with respect to the environmental budget that any business is given to work within. This "profile" metric, a response to a set of imposed environmental limits, is relevant to both climate outcomes. Through either an enforced collaboration upon all businesses to ensure a continued light footprint, or a set of rules to limit the damage upon our common habitat.
The image of this future for business, the government and the economy is where the operational milieu of business is characterised as an expanse of intensely interconnected entities that are data and computationally rich. Where the description has morphed from being called a digital economy into an intelligence economy. Where the wisdom of the quintuple bottom line enforces the boundaries of all behaviour.
In a fully digital world companies will not only need to account for the environment. They will be required to.
© Paul Tero 2019