ShoreBank and the ‘Triple Bottom Line’: Too Important to Fail?
by Central Illinois 9/12 ProjectThe story of ShoreBank has caught national attention, as this relatively small, so-called ”community development bank” has been the target for bailout assistance via state and federal taxpayer money. In the past, particular banks have received assistance if they were deemed “too large to fail,” on the presumption is that if they did fail, they would take the banking industry — and possibly the economy itself — with them. ShoreBank, however, is a special case, and the favoritism shown it is based more on its banking philosphy than its size. What is it about ShoreBank’s philosophy that has garnered the favor of those who apparently see it not as “too large” to fail, but too important to fail? To answer that, we will be exploring the concept of the “Triple Bottom Line” (TBL or 3BL), which is the most succinct statement of Shorebank’s mission and purpose. In this series of articles we will discuss what the triple bottom line is, where it came from, and where it is leading us. We will see just how important 3BL philosophy is to those who subscribe to it and why they must protect its champion, ShoreBank, at all costs. As we explore it, we will see how it is more than just a new business model, but an maturing philosophy that begs protection from stakeholders whose goal is to establish it as a societal norm. Indeed, as we shall see, the Triple Bottom Line represents a philosophy which has been deemed “too important to fail.”
What is the Triple Bottom Line?
The Triple Bottom Line (TBL or 3BL) is the most succinct statement of Shorebank’s mission and purpose, and the bank proudly touts its commitment to the 3BL objectives. What are these objectives? Essentially, they are an organizational commitment to social and environmental concerns in addition to economic concerns (profit). Shorebank’s website summarizes it as follows:
Most businesses have a single bottom line – maximizing shareholder return. “Triple bottom line” companies typically manage to achieve three returns: profitability, social return and an environmental return. ShoreBank describes its triple bottom line as profitability, community development impact and conservation.
ShoreBank claims that pursuing profit alone is inadequate for businesses today, and therefore it feels traditional accounting measures must now also incorporate the goals of social welfare and environmental responsibility as well.
How is the Triple Bottom Line Practiced?
The vision behind 3BL is praiseworthy, as responsible and upstanding companies will by necessity conduct their business in ways friendly to their employees, customers, and community — as well as protect and preserve their environmental resources. However, how does 3BL actually work in practice? Is it a feasible and practical business model that accomplishes its stated goals? Let’s look again at ShoreBank’s website for the explanation. ShoreBank explains that it invests and loans money to foster community development and environmentally friendly projects. Then it attempts a description of how it codifies its progress towards fulfilling its 3BL aims:
By translating ShoreBank’s mission and strategies into specific objectives and measures, we make our mission very practical and tangible. ShoreBank’s annual reports include data about our annual performance in development investment and conservation loans.
Frankly, this is rather vague; we still don’t know how ShoreBank uses data that it manages to distill its progress toward values-oriented goals into objective baselines which can, for example, serve as annual performance targets. Indeed, many businesses now profess commitment to 3BL, but few explain the actual mechanisms behind it. For argument’s sake though, let’s assume ShoreBank does have a concrete means of incorporating 3BL into its bookkeeping. Perhaps it resembles the method used by a particular environmental engineering consultancy firm which has provided an explanation of how 3BL can be used by a munincipality to help it decide which pursuits to embrace. This firm actually codifies 3BL into an equation:
Alternative Rating = Σ (Score * Weighting)
This may seem like a complicated equation, but actually it is quite basic. It simply acknowleges that the city will look at many criteria when making a decision. In addition to economic feasibility (profit), it also considers various social criteria (such as working conditions) and environmental criteria (such as sustainability). Any given project is scored on a scale of 1 to 5 to reflect how well it is likely to honor these criteria. What’s more, each of these criteria are independently weighted, so those deemed most important will have the greatest effect on the total outcome when all the scores are compiled into the final “Alternative Rating.”
At least in this instance, the 3BL goals are codified into numbers. However, it is worth noting that the methodology remains subjective. In this case, the weighting was to be determined by city staff. (Interestingly, environmental sustainability was deemed the most important criteria for any proposed project, receiving a full 25% of the weighting, while environmental considerations on the whole — including sustainability – received 40% of the total score). We are left to trust that the staff’s values reflect the values of the city, which seems no small task given the differences in values among any group of individuals. In any case, you may view the report detailing this equation in its entirety <<<here>>>.
Now that we know what 3BL is and how it might be implemented, we should ask whether it can deliver on its promise. Can 3BL truly provide a concrete, unbiased, and objective set of benchmarks worthy of incorporation into traditional accounting measures judging corporate health? We are confident that you can judge that for yourself.
In our next article we will move on to explore the history that has led to today’s formalization and implementation of the Triple Bottom Line philosophy.
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32 Comments
Banks practicing social welfare? and global warming? Stick to banking! We have enough over-reach in Fed Govt.
Triple bottom line.
I thought you meant they kept three sets of books.
Hey now we know where the money went, out the 'free money, reparations window' …
Frankly, I have no problem with a bank practicing social welfare or being 'environmentally friendly' (whatever that means).
The problem is:
THEY NEED TO RELY ON THEIR OWN PROFITS TO ACCOMPLISH THOSE GOALS.
There should really be a fourth line on the bottom, making it 4BL:
Personal Accountability.
The whole 'grading' system is a sham. We do audits at our plants where I work. We run a lean business and do 5S audits of the facilities. They are supposedly objective, but each audit is conducted by a different person with a different take on the grading system. And, the section the person works in certainly influences their perception on what is important. That makes it subjective…..anyway…..the whole 3BL is a scam. It's designed to force a non-sustainable banking model on us that will help redistribute money from profitable endeavor to non-self sustaining social causes.
Nothing to see here.
That was funny! The sad part is, they’re serious about it.
The PBS/NPR of " banking". Looks like just another charity to me. Obviously the model isn't working.
It's all part of this movement to ignore the market.
It's as if these folks simply don't understand (or choose to ignore, i guess) supply and demand.
Government spending doesn't create jobs. People or companies with disposable income or money to invest create a need for products and services. That creates jobs.
Banks lending money to unprofitable or even losing investments doesn't better the economy or create anything. Other than the opportunity to provide taxpayer funded bailouts.
It's really simple:
If you can't afford something, and you can't afford to pay back a loan for something: YOU DON'T GET THAT SOMETHING!!!
How friggin hard a concept is this?
The notion that you can impower folks that have thus far been incapable of fully taking care of themselves by giving them loans is just DUMB.
If someone has not been able to figure out how to pay their bills through hard work and taking advantage of the opportunities they are amply provided: How are they going to do anything worthwhile with a loan? And how are they gonna pay it back.
They can't and won't.
But, we will call the entity that gives them the money a 3BL company and say that it is a company that deserves investment $ because they score high in social issues.
This whole thing is a joke.
"Triple bottom line"= profitability, profitability, profitability. Oh, did we mwntion NO oversight? This bank's shareholders are too important to fail……………..;-) +Hanzo+
Pure unadulterated Socialist BABBLE. Taking from the haves to spread the wealth to their incompetent elites and trickle down some to the ignorant unqualified poor.
In days of old, there were either hunters, gatherers and a third class of men that hung around the camps waiting for the spoils because they were incapable of contributing to the community. So these loafers decided they needed to feel they were important so they created commitees amongst thier fellow loafers to decide how to divide up the resources that the hunters and gatherers brought home. Nothing has changed. Must be a genetic thing with progressives.
If Shore Bank were the last bank left, I would NOT bank there! Reminds me of the socialist Obama Admin. I call for an audit of Shore Bank!
Shore bank is clearly part of the huge web that the progressives are designing, and implementing. Beck has clearly demonstrated this. The primary motivator of this insidious plot is all about cap and trade. The huge monies involved with carbon credit trading is clearly tied to shore bank holders. The above article only reflects a weak attempt at proving they are the 'good guys' and trying to develop a 'new' banking model that many, many, people will regret. Weighted values based on the values of only the in-house staff members, indeed!!!!
Too politically correct to fail.
Too politically connected to fail.
Take your pick.
With the US banking system interconnected and insured by the government, there is no such thing as relying on their own profits. It is too easy to shift your losses to Uncle Sam and walk away.
Shorebank was too connected to Obama to fail.
Fight back by supporting Joel Pollack for congress — he's been hammering them on this issue. He's going against corrupt Shackowsky who arranged for Shorebanks bailouts. Shorebank then gave $10 to Rev Wright, big $$ to Rezko, and the rest of the crooks.
They all should be in jail.
Social justice? Economic justice?
What about using old english words like revenge? Payback time?
Actually the dirty accounts are in my opinion the problem. If the Feds shutter the bank, some eyes will see some shady deals and you know how crazy people get when they are exposed and embarassed.
Dirty accounts are different than mere non performing accounts/assets.
SHOREBANK…….. I would look for ties to the Chicago Climate Exchange ( Al Gore).
This article and outcome demonstrates the fallibility of the fractional-reserve banking system. It is not self-sustaining in nature because it is founded on the principle of playing musical chairs with people's money, all the time knowing that if the music stops and the bank fails, the other players will have to give the bank a new chair. In essence, the bank never loses and the other players can never win. This is how fractional-reserve banking works.
Now here comes the part that will make you climb the walls…
It doesn't even have to be this way. Fractional-reserve banking comes from the time when doctors bled people who had headaches and used leeches. It's an anachronism from another age that only serves one purpose: it allows the banking industry to exercise an exclusive monopoly that includes the moral hazard of foisting the losses upon the people and keeping all of the profits. Even when they lose they win. Fractional-reserve banking allows banks to discriminate – and because we all need to use banking and have access to capital and credit, fractional-reserve banking allows banks (and politicians and governments) to pick the winners and losers in our society.
You ever wonder why 5% of households control more than 50% of the wealth in our country? Here's the real reason. Think I'm wrong? Really? Go list your credit score for sale on eBay and tell us what you get for it. Sucker. Credit scores, reputation, experience – all subjective measures that banks use to arbitrarily decide who gets credit and who gets the middle finger.
We can fix this by changing over to another method of banking – one that has completely different outcomes and completely different ways of operating. Can you imagine a loan that has no monthly payment book? Can you imagine obtaining credit the same way you would obtain any other commodity – just pay the price and its yours? Can you imagine a banking system that governments and insiders can't corrupt for their advantage?
It's called defeasance banking and the premise uses self-liquidating loans. Corporate America has been using defeasance since 1984 when ExxonMobil (then just plain ol' Exxon) defeased a corporate bond issue and this has been shown (by actual use) to be safe, efficient and much more attractive, but we don't use it because this approach to banking doesn't offer any exclusive monopolies.
The next time you make a loan payment, smile and remember you are doing it to yourself just as if you took a leech and attached it to your face. Hope if feels good…
Fractional lending itself is not the problem, If a business is not allowed to take a risk, there is no real gain to be had. The problem here is that government "regulation" has removed the responsibility from the entity taking the risk and shifted it to the tax payers billfold.
The free market, private two party contracts and personal responsibility for one's own actions is the answer.
Okay, I acctually studied a LOT of TBL when i got my masters degree in all things, an MBA in sustainability. I am also a carbon consultant who has NEVER once suggested a mitigation project that doesn't have a payback within an organizations financial planning horizon (the ones that lower costs and the ones that raise it are easy to seperate). So let me see if i can clarify how TBL SHOULD go.
the triple bottom line and by extension sustainability have actually existed for a long time but have been perverted by academics who need to churn out their next paper – so they invented a new word for it – green, sustainability, whatever. The word that they should have been looking for is simply….value. Think about it, what product or service provides a value that is neither financial, social, or environmental? It doesn't exist.
Now where people usually mess it all up is by forgetting that profit, is not a function of financial value, its a function of value – period. In other words, you make money by providing the largest overall value. Meaning, profit is still the most reliable means of measuring success. So if a company is not making profit, it should not be "bailed out" or given a loan on the merits of one of the other parts of the TBL because it is obviously neglecting something somewhere.
To conclude, the hippies got it wrong. It's still about the economy. In fact, it is the only way to actually improve and/or green the world because it is the only reliable method we have of knowing whether or not there is a value in some aspect of the triple bottom line. So if theres a loan to give out, these banks should first ask, will this client ever "show me the money"?
Hey Andrew, I thought this was a free country with a free market. That's what you are in favor of, right? So if private investors want to base their investing decisions on a triple bottom line, they are allowed to in a free country with a free market. You may disagree, but it's their money. And if your reply is about special perks, subsidies, special treatment etc. given to community development banks, why don't you do some homework and total up all the special benefits community banks have received since the Community Reinvestment Act of 1977 was passed, and compare that with all the tax breaks and subsidies the petroleum industry has received or major agribusiness. Face it, we have never had a totally free market in this country, free of one group or industry association or another lobbying for special benefits. Why should triple bottom line banks sit on the sidelines while every other organized industry in this country spends tens of billions of dollars lobbying in DC? You're holding community development banks to a standard that I don't see you applying to your advertisers like Fifth Third Bank.
I'm waiting for John Stewart to do his next imitation of Glenn Beck at the blackboard. Here's how it goes: First, a picture of Glenn Beck (smiling). Then an arrow to a picture of Rupert Murdoch, Glenn's boss and owner of Fox News, and one of the world's biggest investors of Communist China, and one of the Communists best capitalist friends (bigger smile). Then an arrow to a picture of Chairman Mao (biggest smile)! Bingo! So Glenn Beck really works for the Chinese Communists, or at least, he works for News Corp, which invests in China, which helps the Communists deprive people of their rights, puts them in jail for free speech, shoots democracy demonstrators (Tiananmen Square), etc. Hey Glenn, does guilt by association seem fair when it's your associations being scrutinized?
If you were in my economics class I would give you an F. Government spending does create jobs. Look at all the people who work for the government: teachers, police, firefighters, postal workers, garbagemen, bureaucrats, etc. Not all of them are useful and productive, but not all of them are waste either. Do you want to put out your own fires, start a citizen posse to catch crooks (when you fire all the police), or deliver your own mail? The answer as always is in the middle not at the extremes. Some government spending is good, and some essential. Some is a total waste, and some is stolen by corrupt politicians. The hard part is sorting it all out, which takes time, patience, hard work and good politics, which we lack right now with all the shouters who don't want to think too hard. Like black and white answers? Keep reading fairytales.
Cloward and Piven Strategy fully in process. A process to overwhelm our systems of government, to bring it down. Then the fundamental transformation begins.
http://www.americanthinker.com/2009/02/the_clowar...
And "bribery" and "extortion"?
If it fails, the FDIC, OCC, and other regulators swarm in, pick the place apart, and what they find goes into the public record or can be obtained through FOIA.
If that happens, my guess is that a LOT of what Team Obama doesn't want to see the light of day will emerge in all its slimy, corrupt, glory.
Everyone needs to just remind there Bankers of this one statement;
The next time you encounter one of those "public-spirited" dreamers who tells you rancorously that "some very desirable goals cannot be achieved without everybody's participation," tell him that if he cannot obtain everybody's voluntary participation, his goals had better remain unachieved – and that men's lives are not his to dispose of.
Shorebank and other banks that follow this strategy need to be removed from the protection of the FDIC. They would be lucky if anyone uses them if that were the case. They are trying to justify the ability to give bad loans with no accountability if the borrowers default because they had good intentions. The projects they take on may be high risk, but that's okay for them if they have positive economic or environmental impact. Do they think they are an arm of the government?
"community development" is code talk for giving loans to unqualified blacks.
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