What Is A Triple Bottom Line?

The concept of ‘Triple Bottom Line’ (TBL) was created to expand the way businesses gauge success. Instead of just focusing on the financial bottom-line, a more wholesome approach would be to also consider what the business has accomplished in terms of limiting its environmental impact, and maximizing its social responsibility. The term triple bottom line’ was originally coined in the 1990s by an author, business advisor and entrepreneur named John Elkington. Elkington acknowledged that it would be difficult to quantify the environmental and social impacts of companies, which is why it would be necessary to evaluate each of the three bottom lines separately, using different metrics.

TBL has 3 key components: people, planet, and profits. Its core assertion is quite simpleorganisations should be run not just to make profits but to also improve human lives and to sustain the planet.

What to consider when assessing a companys TBL

TBL is meant to advance the sustainability agenda and to make it a central focus in modern business practices. Traditionally, companies would equate their net income to their bottom line, but Elkingtons method of quantifying the true cost of doing business has fundamentally changed that perception. Before launching ventures or making business decisions, business leaders who are cognizant of the triple bottom line must ask themselves How will this decision affect the environment and the planet? and How will this decision affect the people involved and the society in general? When cash, labour, and other resources are put into achieving a certain business goal, they should be deployed with all three components of TBL in mind and not just profitability.

The maximization of profit should not be prioritized at the expense of the environment and the people. When companies ignore the other 2 components of TBL, there are always serious consequences. Some of the consequences that we have witnessed on a massive scale include the use of child labour, dehumanizing working conditions in factories, the disappearance of the rain forest, and the destruction of the ozone layer. All of these things happen because the companies that are involved only care about net profit.

Why should companies care about TBL?

Think of a hypothetical manufacturing company that wants to maximize its profits. Ideally, this company would set up its factories where they can find the cheapest possible labour and raw materials, use the cheapest fuel in its manufacturing process, and dump its waste without spending money on waste treatment and proper disposal. Thanks to the low production costs, this company would be on the way to making massive profits. There may be government regulations that set certain limits for such companies, but those regulations dont always go far enough in enforcing social and environmental responsibility. The best deterrent yet for such companies is the modern consumer.

More than ever, consumers today care about the business practices of the companies and corporations that provide them with products and services. Most consumers wouldnt mind paying a little extra for a product if they understand that poor people werent exploited when making it, and that the environment wasnt destroyed when the raw material was being sourced. In fact, many consumers, especially the younger generations, are very keen on understanding the unintended consequences of their consumption habits. Consumers want to know that the workers who make their clothes are being paid a decent living wage. The modern consumer cares if the farm produce she buys is grown with harmful chemical fertilizers. Consumers are always asking for more transparency from companies and brands, so the values of the consumer should be enough of an incentive to make companies care about the social and environmental bottom line. Companies and businesses can improve their planet’ and people’ bottom line by adopting various practices.

How TBL is measured

TBL is quite difficult to quantify because while it’s easy to attach a numerical value on profitability, environmental impact and social responsibility can be subjective. For example, a wage that sounds low in a first world country may be enough to lift people out of poverty in a third world country, so observers from those two parts of the world may attach different social values to the same action by a company. Its almost impossible to standardize the metric by which environmental and social values are measured, but that just means that every organization can adopt a system that makes the most sense given its operations. Manufacturers can strive to reduce wastage and dispose of their by-products in a safe manner, while food service businesses can donate their leftover food to shelters and orphanages.

Organisations should self-report on the actions that they are taking in the name of social responsibility and environmental sustainability. Companies that care about TBL need to be transparent about the progress that they are making.