What is triple bottom line?
The triple bottom line (TBL) is an accounting framework that includes social, environmental and financial results as bottom lines. Businesses, nonprofits and government entities use TBL to evaluate their financial gains, as well as their social and environmental impact.
Rather than only focusing on the standard bottom line, TBL adds social and environmental concerns to help measure an organization's impact on its surroundings. This is typically measured using the three P's: profit, people and the planet.
The idea behind the TBL is to gauge an organization's commitment to corporate, environmental and social responsibilities. Large organizations tend to have a bigger effect on the surrounding people and environment, so expanding their typical bottom line by considering both people and the planet can help improve people's lives and the planet's well-being.
The three P's
Although there is no single established way to measure each bottom line, common methods do appear in each.
- Profit. Organizations mostly depend on financial performance to gauge performance. Profits tend to focus on aspects of a business that generate revenue, such as business decisions made, strategic planning, or performance and cost reduction methods.
- People. This measures an organization's social impact. This bottom line should help measure the organization's commitment to people. This includes all stakeholders, employees, individuals throughout the supply chain, customers, the organization's surrounding community and future generations. Methods to help measure this bottom line include advancing human rights; volunteering; donating to the global poor or hungry; promoting diversity, race and gender equity; and improving life expectancies.
- Planet. This measures an organization's environmental impact. Companies have contributed to poor air quality and pollution, affecting the environment and climate change at staggering rates. This bottom line should help measure and improve an organization's commitment to reducing its environmental footprint. Methods to help measure this bottom line include reducing carbon footprints by cutting down on energy consumption, reducing consumption and reliance on fossil fuels, improving waste management, streamlining shipment practices and using ethically sourced materials.
Why is triple bottom line important?
Triple bottom line is important because it affects everyone. It does not just focus on business and corporate leaders, but also social communities and the business's impact on the planet. This accounting framework provides:
- A more sustainable future that considers both social and environmental sustainability.
- Methods to set goals and measure and improve sustainable systems.
- New ways to generate profit, such as attracting new customers who want to lessen their impact on the environment.
- A healthier work environment that focuses not only on employees, but the organization's standing in its surrounding social environment.
Business benefits of triple bottom line
Organizations that practice the triple bottom line may reap benefits such as:
- Reduced energy consumption and carbon footprint by focusing on the environment.
- Higher employee retention rates by making the work environment more pleasant for workers.
- Enhanced brand perception and reputation by showing others the organization stands for more than just making profits.
- Improved productivity and reduced costs through sustainability efforts.
- Increased transparency and accountability of operations, potentially attracting new investors.
Challenges and criticism of triple bottom line
However, triple bottom line also comes with its share of criticism. This includes:
- There are no specific guidelines to accurately measure TBL, as it is a vague framework. Even though there are ways to measure an organization's commitment to people and the planet, there are no specific ways to quantify them the same way as profits.
- Reaching a global standard and having enough companies abide by that standard would be difficult and would require consumers to pay more for ethically grown or sourced materials and products.
- Because of a lacking standard in measuring TBL, business leadership can put in minimal effort to follow the framework, while reaping the social benefits of claiming they follow the framework.
Real-world triple bottom line examples
Some examples of organizations that use the triple bottom line framework include:
- In the past, Ben & Jerry's ice cream company has offered voter registration with its ice cream, donated to charities, offered employees living wages -- even going so far as rejecting a buyout option for fear of reverting back to a financial-only bottom line. The business also has a goal of reducing carbon emissions by 45% by 2030.
- Better World Books sells used books and then donates part of its profits to fund literacy programs. The organization has raised millions of dollars for literacy programs while providing a home for used books.
- Lego is committed to reducing its carbon footprint, creating a goal to attain 100% renewable energy resources by 2030. The organization has also forged partnerships with organizations such as the World Wildlife Fund and has donated Lego sets to children through its Build to Give charity campaign.