At the turn of the century, Canadian-born’ US economist David Henderson offered a warning that was unfashionable then and is assiduously ignored today: that the doctrine of corporate social responsibility (CSR) and “sustainability” is not merely confused; it is corrosive.
More than two decades later that doctrine has been rebadged, expanded and institutionalised as ESG, shorthand for environmental, social & governance issues, each of these concepts with vastly different areas of focus, origins and applications.
At the centre of this edifice sits the beguiling fiction of the “triple bottom line” — the claim that firms should pursue not one objective, being profit, but three: profit, social good and environmental virtue, accompanied by impeccable corporate governance credentials. It is a phrase of considerable rhetorical charm. It is also a conceptual error.
In truth, there is only one bottom line. Profit is not a moral indulgence; it is an informational necessity. It aggregates dispersed knowledge about costs, preferences, risk and time. It disciplines managers, signals scarcity and directs capital to its most productive uses. Without it, economic calculation becomes guesswork.
Having parallel “bottom lines” does not enrich this process; it obscures it. Social and environmental outcomes, however important, are not commensurable with profit. They cannot be combined into a single metric without arbitrary weights and subjective judgments.
