Triple Bottom Line

Triple Bottom Line


What is the Triple Bottom Line?

The triple bottom line (TBL), which consists of the three Ps: People, Planet, and Profit, suggests that businesses should consider social matters, environmental concerns, and profits to maintain economic sustainability.

For example, Google has committed to operating carbon-free by 2030, Walmart has promised to reach zero emissions by 2040, and Morgan Stanley has vowed to reach zero emissions by 2050.

The idea is that while profit is the top priority for any business, there should also be other priorities. It means that companies should focus more on social welfare and environmental concerns than on profits.

Key Highlights

  • The triple bottom line concept proposes that businesses pay as much attention to society and the environment as they do to profits.
  • It comprises three components: profit, people, and the environment.
  • It measures a company’s long-term social, financial, and environmental performance.
  • It improves staff retention, increases outside investments, increases sales from clients interested in ESG, and has the deep-rooted operational capability.
  • It can be costly to implement, difficult to audit and result in conflicting approaches among triple bottom-line components.

3 Ps of the TBL

Let’s take a real-life example to understand the 3 Ps.

#1: IKEA

IKEA, a Swedish company, has pledged to follow TBL till 2030. Here is how it plans to bring changes:

Planet

  • Ikea has pledged to use renewable and recycled materials till 2030.
  • It has a tie-up with the H&M brand and introduces new fiber made up of cellulose from wood.

People

  • It targets to inspire 1 billion people to live sustainably within the planet’s boundaries.
  • The company introduced IWAY standards where suppliers must follow animal cruelty-free products.

Profit

  • Previously, profit was the priority for IKEA; however, the profit shares focus on two other bottom lines, i.e., the planet and people.

#2: PATAGONIA

Patagonia is an American outdoor clothing trader for men and women. The company has been using the TBL for a long time. Here is how it is executing its business.

Planet

  • Patagonia’s founder Yvon started the initiative 1% for the planet in 1985, and since then, it has started contributing 10% of its profit to save the environment.
  • Further, to support the Planet, Patagonia started investing in companies working on conserving water, renewable energy solutions, productive agriculture, and creating sustainable materials.

People

  • The company offers two months of parental leave and 100% employee health insurance.
  • It has opened childcare centers for its employees.

Profit

  • It has implemented TBL with its marketing strategy and continuously gains loyal customers. In 2022, it has a turnover of $1 billion.

Who uses the Triple Bottom Line?

  • A business’s stakeholders use the TBL to learn about the company’s profit, social contribution, and how it saves the planet.
  • Stakeholders have a comprehensive vision nowadays. They consider the factors that are socio-economic and environment related before investing in any company, whether it is money or any other resource.
  • Stakeholders can be the government, environmental organizations, people, and competitors who use the TBL.
  • Companies use the TBL as financial perks, including employee benefit schemes and social bonuses—for example, the inclusivity of minorities and the LGBTQ community for social well-being.

The Importance of TBL

  • Accountability: A company is accountable to investors, people, and the planet. Profit was the only consideration when starting a business in the past. Today, companies make liable, ethical, and socially responsible profits.
  • Ethical code of conduct: The ethical code of conduct here refers to making a profit ethically, for example, practicing non-exploitative policies, obtaining resources ethically, and having an accountable moral conscience towards society and the environment.
  • Healthier work environment: Companies that focus on the TBL help to focus on other non-financial factors, such as social, environmental, and philanthropic goals. Thus, the working culture automatically becomes healthier.
  • Refined process: The TBL makes businesses follow a refined process from the initial level. It helps them measure, improve, and set benchmarks/goals, eventually sustainably making profits.

Advantages

  • Reduction of carbon footprints: The TBL reduces carbon footprints by reducing fuel consumption, energy consumption, managing waste materials, and using ethical resources.
  • Greater productivity: Bottom line helps businesses to focus on existing employees rather than wasting resources on hiring new ones. Thus, the existing employees with job satisfaction lead to greater productivity.
  • Better brand perception: A brand represents its employees and customers. Sustainable brands inspire trust in all those who interact with them (staff and customers). It allows them to attract more customers, which increases profits.
  • Better accountability: TBL helps businesses track their achievements. Better accountability increases operations transparency, leading investors to assess the company better.

Disadvantages

  • Non-quantitative: As the people and the planet aspect are non-quantitative, they are less effective and contagious than the profit aspect. For example, employee benefits cannot bring satisfaction to every employee of an organization. For one employee, a gym may boost their morale; monetary perks might satisfy others.
  • Difficult to set a global standard: Qualitative measures for a company in the United States and Bangladesh can differ. Employees at both companies will have different priorities. For instance, employees in Bangladesh may prefer higher pay than a coffee machine in the workplace.

Final Thoughts

The Triple Bottom Line requires businesses to be responsible for social and environmental factors in addition to profits. The concept is still evolving but is a step in the right direction. It eventually leads to a better society and a more sustainable planet. The goal is to ensure that humanity and the environment are not affected while making a profit.

Frequently Asked Questions (FAQs)

Q1. How is the Triple Bottom Line different from the traditional financial bottom line?

Answer: The traditional financial bottom line focuses solely on the company’s ability to generate profits. TBL, on the other hand, focuses on profitability and the company’s impact on society and the environment.

Q2. If the Triple Bottom Line needs to be quantitatively accurate, why is it being considered?

Answer: Even if it is not quantitatively accurate, it provides a roadmap to a better and sustainable future. The accuracy is not a priority at this stage, but the inclusiveness of TBL is.

Q3. Why was the Triple Bottom Line Created?

Answer: In 1994, businessman and author John Elkington came up with the idea of the TBL while working at the Think Tank Sustain Ability. He believes that one can make a profit without harming the environment.

Q4. What is the scope of TBL?

Answer: TBL might become one of the crucial indicators while assessing any company. As of today, sustainability has become a vital part of living in society; the TBL will help to track the impact of businesses on society, the economy, and the environment.

Q5. Why is the triple bottom line important?

Answer: The TBL is an accounting framework considering financial, social, and environmental outcomes as its three main bottom lines. It is a tool used by corporations, charities, and governments to assess their financial gains and social and environmental impacts.

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