The Triple Bottom Line Concept broadens the focus of business on the financial bottom line to include social and environmental factors as the vital considerations. The triple bottom line measures a company’s degree of economic value, social responsibility and its impact on the environment.
The phrase was coined and introduced in the year of 1994 by John Elkington and later used in his 1997 book “Cannibals with Forks: The Triple Bottom Line of 21st Century Business.
One of the key challenges with the Triple Bottom Line Concept is the difficulty of measuring the social and environmental bottom lines, which necessitates the three separate accounts being evaluated on their own merits and related factors affecting them.
Anatomy of the Triple Bottom Line Concept :
Normally, a company’s bottom line on its income statement is its net income, i.e., its profits but in the case of Triple Bottom Line Concept it is intended to advance the objective of sustainability in the overall business practices, in which the focus of companies is extended beyond just higher sales and profits and includes social and environmental issues to measure the total cost of doing business.
The company that intends to pursue the Triple Bottom Line Concept must consciously consider the social and environmental factors, in addition to the economic bottom line, in making investment and business decisions.
Deploying money and other resources, such as labor to a project or an investment can either contribute to all these three goals or focus on profit at the expense of one or both of the other two.
Some of the repercussions that have come about from ignoring the concept in the name of profits include the destruction of the rainforest, exploitation of labor, and damage to the ozone layer amongst other such crucial effects on the environment and human resources.
The concept has actually changed the way businesses, nonprofits, and government organizations measure the factors of sustainability and the performance of projects or policies. Beyond the foundation of measuring sustainability on three fronts—people, planet and profits—the flexibility of the concept allows the organizations to apply the concept in a manner suitable to their specific needs and requirements and as per the merit of the case.
Though there are certain challenges to putting the Triple Bottom Line Concept into the actual practice. The challenges include measuring each of the three categories, finding applicable data, and calculating a project or contribution to sustainability. However, keeping these challenges aside, the framework allows organizations to evaluate the consequences of their decisions from a truly long-term perspective.
Measuring the Triple Bottom Line Concept :
The triple bottom line can be quite difficult to measure because while the issue of profitability is in the aspects of black and white, what constitutes social and environmental responsibility is quite subjective in nature.
The upside of this obstacle of standardized measurement is that the various other metrics can be adopted that make the most sense for organization, project or location. For example, a fine dining restaurant could measure and report on how much it reduces its waste by switching to environmentally friendly packaging and serving leftover food to a local homeless shelter that would otherwise be thrown out.
Other key factors to report on, depending on the organization, might include job creation, turnover of the company, fossil fuel consumption, management of hazardous waste material, percentage of women and minorities employed in the overall management positions, charity contributions by the company, how employee income and benefits compare with a living wage, and number of employees taking advantage of workplace benefits for pursuing higher education as a learning curve for their career graph.
Federal, state and local governments, as well as non-profit organizations, have also implemented the Triple Bottom Line Concept. For example, Grand Rapids, MI, has applied the concept to creating a sustainable local economy through focused efforts related to environmental quality, economic prosperity, and equity.
The measures of Triple Bottom Line Concept :
1) Economic Measures
Economic measures work on the bottom line and the flow of money within the organization. It looks at factors such as income or expenditures, taxes, business climate factors, employment, and business diversity factors.
- Personal income
- Cost of underemployment
- Establishment churn
- Establishment sizes
- Job growth and future prospects
- Employment distribution by sector
- Percentage of firms in each sector
2) Environmental Measures
Environmental variables in the concept represent measurements of natural resources and reflect potential influences to its overall viability. It could incorporate air and water quality, natural resources, solid and toxic waste, and land use/land cover energy consumption. Ideally, having long-range trends available for each of the environmental variables would help organizations identify the impacts a project would have on the operational business area.
- Sulfur dioxide concentration
- The concentration of nitrogen oxides
- Selected priority pollutants
- Excessive nutrients
- Electricity consumption
- Fossil fuel consumption
- Solid waste management
- Hazardous waste management
- Change in land use/land cover
3) Social Measures
Social measures refer to the social dimensions of a community or region and could include measurements of education, equity, and access to social resources, health and well-being, quality of life, and social capital.
- Unemployment rate
- Female labor force participation rate
- Median household income
- Relative poverty
- The percentage level of the population with the post-secondary degree or certificate to get a good job in hand
- Average commute time
- Violent crimes per capita
- Health-adjusted life expectancy
People + Planet = Social + Environmental Responsibility
- It can be quite challenging for the organization to maximize financial returns and profits while also doing the greatest deeds for the society and the environment. Consider the example of the clothing manufacturer whose best way to maximize the profits for his firm might be to hire the least expensive labor possible and to dispose of manufacturing waste in the cheapest possible way. This might result in the high amount of profits for the company but miserable working and living conditions for laborers, and damage to the natural environment and the people who live in that environment. In the previous times, such practices were socially acceptable, but today with the growing awareness and knowledge many customers are willing to pay more for clothing and other products even if it means that workers are paid a living wage and the environment is not affected at all. Many consumers want companies to be transparent about their practices and to be considerate of all the stakeholders and doing business in an ethical manner.
- Adding the element of people to social responsibility to corporate bottom lines shifts the focus to the fair treatment of employees and labor, as well as enacting favorable practices in the communities where companies conduct business.
- The bottom line referred to as the planet that represents the implementation of sustainable practices and the reduction of environmental impact. These measures range in scope from green initiatives such as recycling programs within the companies dedicated to manufacturing products using only sustainable materials and practices.