Sustainability and ESG Performance Measures: Three Pillars, Triple Bottom Line and Reporting

A cement company in Ogun State reports a good profit. But its kilns are the main source of dust in three villages, its water use is lowering the local water table. The workers’ injury rate is above the industry average. None of this appears in the profit figure.

In time it will appear in fines, legal claims, lost licences, higher insurance, difficulty recruiting and customers who prefer a cleaner supplier. Profit measures the economic result for owners. It does not measure what the business does to the people around it or to the environment, which in the long run decide whether the business can continue. Sustainability measures add these.

This topic explains the idea of a sustainable business and the three pillars (people, planet, profit), why stakeholders beyond the owners matter, triple bottom line reporting, typical environmental and social indicators (including the carbon footprint), the modern grouping of these as environmental, social and governance (ESG) measures, how to design a reporting system, and the limits of the measures.

It builds on the earlier topic on short-termism and financial manipulation of results. The next topic covers the balanced scorecard.

Sustainability, stakeholders and the triple bottom line

The three pillars

A sustainable business meets today’s needs without damaging the ability to meet future needs. Performance objectives are set for three aspects, known as the three pillars of sustainability or the three Ps:

• People (social): fair and beneficial business practices for employees, the community in which the company operates, and customers.
• Planet (natural capital): sustainable environmental practices. Indicators include improving energy efficiency, minimising pollution, using renewable materials and sources of energy and avoiding non-renewable ones, and minimising waste, for example by recycling.
• Profit (economic): the economic value created after deducting the cost of all inputs, including the capital tied up; the real economic impact of the organisation on its economic environment.

A business is unlikely to survive over the long term unless it gives due weight to people and planet as well as to profit.

Stakeholders

A stakeholder is a person, group or organisation that has an interest in an organisation: anybody who can affect it or is affected by it. The primary stakeholders are owners, employees, customers and suppliers. Globalisation, environmental and social awareness and faster communication have widened the view to include the community at large and regulators.

There is a growing understanding that companies may increase economic wealth while society becomes poorer through damage to the environment. A successful business must be financially secure, limit its harm and meet the expectations of society. Many companies therefore report social and environmental goals and results in a strategic report or sustainability report, as well as their financial statements.

Triple bottom line

In traditional reporting the “bottom line” is the profit or loss. Critics argue that it leaves out the full cost of the business. If a mine makes a profit but pollutes the local water, causing illness among people and livestock, the financial statements show only the profit and not the cost to society.

The triple bottom line (TBL or 3BL) adds two further bottom lines, social and environmental, to the economic, as a framework that builds sustainability into decisions and evaluates performance more broadly.

Measures, ESG and reporting

Environmental measures

Measures differ with the size and nature of the business. A major global company using TBL reported energy use (thousands of GWh), carbon dioxide emissions (tonnes) and production of non-recycled waste (tonnes). Emissions of other gases can be converted into a carbon dioxide equivalent so that all emissions are expressed in one measure; the total is the company’s carbon footprint.

Others: water use, share of recycled materials, share of renewable energy, spills and fines. Some companies publish targets, for instance to replace non-recyclable plastic with recyclable or biodegradable materials.

Social measures

Donations to communities and sponsorships; diversity (percentage of women and of minority groups among employees); the number of discrimination complaints; employee satisfaction from surveys; and the recordable injury rate per 1,000 employees; also training, staff turnover, pay equity and local sourcing.

ESG

Investors, lenders and regulators now use the grouping environmental, social and governance (ESG). Governance measures concern how the company is run: independence and diversity of the board, ethics and anti-corruption policies, whistleblowing, executive pay linked to long-term and sustainability targets, and risk management.

In Nigeria the Financial Reporting Council has adopted the IFRS sustainability standards (IFRS S1 and S2) without local change and set a roadmap (amended in 2026): public interest entities, including public companies, must report for periods beginning on or after 1 January 2028 and small and medium-sized entities from 1 January 2030, after a readiness test.

The Securities and Exchange Commission has asked public companies for adoption plans, so these measures are moving from voluntary reports into regulated reporting. This was checked against current sources in November 2026; check again before an exam, as dates can change.

A system for social and environmental reporting

Traditional performance systems serve owners and management and are extensions of the financial reporting system, so they do not explain social and environmental effects. To design one that does, a company should:

1. Identify its stakeholders.
2. Find out what aspects of performance matter to each group.
3. Design metrics to show performance in each area.
4. Set targets for each metric and communicate them to stakeholders.
5. Design information systems that combine data collection and processing so that performance can be measured against the metrics.
6. Report transparently to stakeholder groups.

Limits and problems

• Measures differ widely between companies, so comparison is hard; there is no single total comparable to profit.
• Measurement and cost. Data may be hard to collect reliably; some effects (harm to a community) cannot be valued in money.
• Conflict with short-term profit and with other targets, particularly where managers are paid on annual profit.
• Greenwashing: claims of environmental performance that are exaggerated or misleading, which damage trust.
• Focus on what is measured. Managers may improve the indicator, not the real impact.

Management accountants help by designing the measures, linking them to strategy (for example as a perspective of the balanced scorecard), costing environmental projects, and checking the reliability of reported data.

Layouts for sustainability measures

1. Convert each gas to carbon dioxide equivalent using the conversion factor; add for the footprint.
2. Intensity: emissions ÷ revenue (or output).
3. Change against last year and against target.
4. Social rates: number ÷ employees (× 1,000 for injuries); percentages.
5. Comment and link to risk and strategy.

Conversion factors are given in a question; here methane is taken as 28 and nitrous oxide as 265 times carbon dioxide over 100 years.

Worked examples

1. Methane.
   400 × 28 = 11,200 tonnes CO₂e.
   Nitrous oxide: 50 × 265 = 13,250.
2. Footprint.
   12,000 + 11,200 + 13,250 = 36,450 tonnes CO₂e.
3. Intensity.
   36,450 ÷ 9,000 = 4.05 tonnes per ₦m of revenue.
4. Target.
   An 8% reduction: 36,450 × 0.92 = 33,534 tonnes.
5. Comment. Methane and nitrous oxide together are more than two-thirds of the footprint, although they are only 450 tonnes in weight, so a plan that looked at carbon dioxide alone would miss most of the problem.

1. Injury rate.
   This year 18 ÷ 2,400 × 1,000 = 7.5 per 1,000
   last year 27 ÷ 2,250 × 1,000 = 12.0.
   Safety has improved by 37.5%.
2. Women.
   540 ÷ 2,400 = 22.5%.
3. Comment. The fall in injuries is a good sign, but the figure should be compared with the industry and with a target. The 22.5% for women may be below the company’s diversity aim.

Expect variants: conversion of several gases, a requirement to design indicators for stakeholders named in the case, a discussion of why a company should report beyond profit, and a requirement to describe a sustainability report.

Environmental management accounting

Environmental management accounting (EMA) identifies, measures and uses information on the environmental effects of an organisation, in physical terms (energy, water, materials, waste, emissions) and in money terms (the cost of waste, pollution control, clean-up and fines, and the savings from using less). It helps to find hidden costs, such as the purchase cost of materials that end up as waste, to set targets and to cost environmental projects.

Reasons why companies need to report their environmental activities in Nigeria include:

• legal and regulatory requirements
• the move of sustainability reporting towards mandatory status for public interest entities
• the expectations of investors and lenders who judge risk
• the licence to operate granted by local communities
• reputation and brand value
• cost savings from efficient use of resources
• the avoidance of fines, claims and clean-up costs

Common mistakes

• Confusing the three Ps. People is social, planet is environment, profit is economic.
• Forgetting to convert gases to a common measure.
• Listing measures without linking them to a stakeholder or objective.
• Treating sustainability as separate from profit. Long-term profit depends on it.
• Ignoring limits such as comparability and greenwashing.
• Quoting regulation without checking it is current.

Quick revision

• Three Ps: people, planet, profit. Triple bottom line: economic, social, environmental.
• Carbon footprint = all emissions in CO₂ equivalent. Injury rate per 1,000 employees.
• ESG adds governance. Reporting system: stakeholders → interests → metrics → targets → systems → report.

How the marks are earned

• Definitions and the link to long-term success.
• Measures chosen for the stakeholder.
• Limits and a view on their use.

Practice questions

These are original questions, written in the style of the Skills examination. Work each one before you open the answer.

Recall check: multiple choice

Section B style: written questions

Model answers

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