Triple bottom lines: what are they, how to implement them and . . . should you?
For some, the phrase ‘triple bottom line’ poses a contradiction. We’ve been schooled into treating ‘the bottom line’ with a kind of singular finality; representing the pinnacle of a company’s prosperity in the form of net profit.
And, for centuries, profit — along with other monetary markers including ROI, shareholder value, cash flow and more — has governed business’ missions, methods and measurements of success.
The triple bottom line turned all that on its head.
Often described as an accounting framework, the concept was founded in 1994 by serial entrepreneur John Elkington as a way to measure and evaluate business’ increasing interest in climate and social justice. Put simply, the triple bottom line (TBL) uses the power of three — people, planet, and profit — to measure the health and quality of a business’ impact.
Twenty five years on, it has given rise to a plethora of responsible business models, frameworks, and operational methodologies from Social Return on Investment (SRoI) to Environmental, Social and Corporate Governance (ESG), as well as proving an early inspiration for the rise of the sharing and circular economies.
As such, the TBL has been fundamental in the growth of the sustainability sector (the UN’s Sustainable Development Goals are forecast to generate market opportunities of over $12 trillion a year by 2030) and the emergence more generally of the Corporate Social Responsibility reporting culture.
How do triple bottom lines work, and what are the business benefits?
Scholarly and social descriptions of the TBL framework invariably involve metaphors (and plenty of them).
But however you visualise it — in overlapping spheres, pyramid charts or as a circular process diagram — the TBL places profit as only one piece in a much wider business picture. While profit is naturally needed in order to fulfill and further a company’s mission, it exists neither in isolation from — nor is it diametrically opposed to — the sustainability of people or planet.
Businesses that operate using the TBL philosophy, therefore, not only measure the worth of their output using these ‘3 Ps’ but also — crucially — construct and execute their short- and long-term business goals around them too.
It’s a commitment, for sure, but the benefits of implementing a triple bottom line are threefold.
Firstly from a ‘people’ perspective, companies who place equal importance on all three categories enjoy stronger, more cohesive teams, improved recruitment, higher employee morale and increased brand loyalty than those run from a profit-first one.
Secondly, when you treat the environment as an equal stakeholder, the planetary benefits are clear for all to see; the rewards evidenced in the long-term sustainability of both our natural and business ecosystems.
And finally, businesses that practice what they preach and embed the TBL framework into every aspect of their models enjoy a whole range of financial boosts — and often significant cost savings, too. The World Wildlife Fund’s 2013 report ‘The 3% Solution’ put the potential monetary gain of curbing US carbon emissions by 3% at $780 billion a year. In many countries there are also government and state financial incentives for implementing environmentally-friendly business practices.
But it’s also important to remember that because of the co-dependence between the three ‘bottom-lines’, making improvements in one area will nearly always positively impact your efforts in another — and is why the TBL is often referred to as a ‘win-win-win’ business strategy.
That’s not to say there won’t ever be individual trade-offs along the way with activities that weigh slightly heavier in one area than another; nevertheless, the all-time aim of a business run on TBL principles is for that sweet-spot of sustainability in the middle.
From theory to reality: how can businesses implement triple bottom lines?
It is, as you might assume, easier to embed trilateral sustainability into the fabric of your business from the word go than shift from a profit-first model further down the road. Nevertheless, it can (and has, by many) been done. Here’s how:
Businesses need to reevaluate what is meant by ‘success’ — both at its most granular level and on a corporate scale. Taking into account the above evidenced benefits, it is clear to see that our ‘money makes the world go round’ days are numbered.
A new approach is needed. As business leaders, measurement is hard-wired into the culture of capitalism; we have daily check-ins, weekly metrics, monthly assessments and annual reports. But when it comes to people and planet, how can we calculate the impact our business has on both?
Environmentally, a business should ideally know the quantifiable effect of its carbon emissions, electricity consumption, waste output, biodiversity impact, and habitat destruction. And, in the true definition of the model, these metrics will need to be as specific, measurable and actionable as any other within your business.
Similarly, what is the current human cost of a company’s policies and practices on the people that work for it and those that the company works for? At the most basic level, that means holding internal procedures to account: maternity allowance, fair pay, pension schemes, access to flexible working and more. Next, what does a company do to actively improve racial, gender and economic diversity both inside and outside its office walls? Further still, what safeguards does the company have in place to identify and prevent slavery within its supply chain?
Critics of the TBL framework muse on how best to integrate these triple-markers across a business in a meaningful way. Some suggest that a common unit of measurement is the only way, with money — the current standard global unit of worth — as the answer. But this naturally raises its own challenges; how can we truly cost and control the financial worth of human and environmental capital?
Some say a better (more comprehensive and more meaningful) option is to abide by a globally recognised index, which plots independently verified data points for cross-industry comparison. Currently, 75% of the largest 250 companies in the world use the Global Reporting Initiative (GRI) to measure sustainability, with increasing efforts to encourage SMEs to do the same. Businesses of any size can take advantage of free B Impact Assessment tools to “measure its impact on its workers, community and environment, and customers”.
However we measure their impact, accounting, data collection and reporting are retrospective tools that should be used as a launchpad to long-term action.
And with that in mind, TBL thinking should be applied to strategic decision making in every aspect of your business. As such, it requires both buy-in and action from stakeholders at all levels — from suppliers to the shop floor. Practically, departmental heads and executives will need to ensure that all measures of success are tied to the overarching people-planet-profit objectives. On a truly granular level, personal performance and employee development goals will also need to be reassessed in confluence with the new sustainability criteria.
To summarise using the language of tech: a triple bottom line framework works best when embraced as a new operating system, rather than as a patch add-on.
Success stories: companies operating using the TBL framework.
Famously, Denmark’s Novo Nordisk rechartered itself around the triple bottom line in 2004, anchoring its intention within the company’s Articles of Association and thereby publicly committing to pursue profit, planet, and people-led goals in equal shares. Novo Nordisk’s annual report openly details company performance along all three lines: financial, environmental and social — and its closing share price came in at 31% higher in 2017 compared to 2016.
More recently, shipping giant DHL has announced a group-wide environmental and social protection program citing specific global targets (including zero emissions by 2050) alongside achievements such as a 70% reduction in food waste transport costs.
Meanwhile, Dell’s ‘Legacy of Good’ programme — which outlined its strategic vision for the year 2020 — appears to be principally on track with its goals, having already managed to divert 99% of total manufacturing waste from landfill and reached 74% of their goal to provide 5 million cumulative hours of community service via paid volunteer opportunities for employees.
But in a sense, the phrase ‘triple bottom line’ has been slightly superseded by other aforementioned movements of a similar ilk. There are, for example, over 2,500 B-Corp certified companies worldwide, all of whom are broadly configured around TBL principles.
There are, as with any business framework, critiques of the triple bottom line system — on the 25th anniversary of its inception, founder John Elkington published a controversial ‘product recall’ for the movement citing that it had “failed to bury the single bottom line paradigm” due to its “proliferation of potential solutions, providing businesses with an alibi for inaction”.
While it is true that the TBL has spawned more mimics than it has gained ‘true followers’ — and that there is currently no universally-applied method for calculating impact — neither point renders it ineffective on a grand scale. On the contrary, investment firm BlackRock’s recent open letter to business leaders in the New York Times affirming its commitment to businesses with a social and environmental responsibility represents somewhat of a watershed moment — on Wall Street, at least.
Ultimately, the triple bottom line represents a regenerative future of business in which profit is only the means to an end (sustainability of the planet and its people) rather than the end-goal.
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