The Triple Bottom Line (TBL) is an accounting framework which incorporates the principles of sustainability into decision making in business. It encourages and evaluates a business’ Corporate Social Responsibility (CSR) performance by incorporating three dimensions: social (people), environmental (planet) and financial (profit). The three Ps of people, planet and profit are the core pillars of sustainability measurements in many business sectors. Widely used in both for-profit and non-profit government sectors the TBL is adopted to evaluate performance in a broader context. The phrase, “people, planet and profit”, was coined by John Elkington in 1994 and it nicely summarises the ethos of the TBL.
Businesses should operate in a way that is morally fair and meets legal and regulatory requirements in relation to trade, labour and equality rights. ‘People’ refers to all associated stakeholders such as suppliers, customers and communities and not simply just the employees and shareholders of a business.
Businesses should endeavour to not only limit the negative impacts they create on the environment but also aim to make a positive contribution to the environment. Sustainable environmental practices may include reductions in waste, consumption and energy usage as well as an awareness of the types of resources being used and disposed.
Businesses should aim to create profit through their actions in order to be sustainable. In the TBL profit is measured as the value created by a business after deducing the cost of all inputs, including the cost of any associated capital. In simple terms, profit is a measurement of the real economic impact the business has on its associated economic environment.
Traditional accounting measures have previously focused only on the financial performance of business covering nothing more than ‘profit and loss’ equations. This financially focused evaluation of performance is referred to as the ‘bottom line’ or the ‘very bottom line’ but with the broader inclusion of environmental and social outcomes the TBL enriches this measurement. It allows businesses to identify how they have achieved their financial gains whilst simultaneously contributing positively to society and the environment.
For example, if a business reports an increase in profits but in achieving this has caused harm to society and the environment the TBL measure will highlight this fact. Similarly, if a business reports an increase in profit but can also identify a positive contribution to society and the environment this will be a more successful TBL measure. The TBL aims to provide a framework to enable businesses to move away from purely financial thinking towards new business models and activities which incorporate additional considerations of the wider society and environment they operate in.
A Social Enterprise is a good example of a business that aims to meet the framework of the TBL. They function with a purpose of addressing and supporting social and environmental issues whilst also simultaneously making money in the process. If implemented effectively this model of doing business meets the three pillars of the TBL.
The fundamental principles of the TBL demands that business leaders focus their attention on their stakeholders as opposed to just focusing on their shareholders. Although shareholders are a stakeholder and should be highly valued they are not the only stakeholder that you have a moral responsibility towards. There is a fairly new entrepreneurial movement known as Stakeholder Entrepreneurship which takes the notion of stakeholder theory to the next level and one that I would encourage you to explore.
The three dimensions of the TBL (people, planet and profit) should be incorporated into the core operation of business and should be stakeholder focused in their implementation. The TBL is a widely used framework with CSR practice and although there is a need for further development and enhanced measurement accuracy in this area it is a significant concept which has modelled the CSR movement over recent years.
Please post a comment below sharing how you as an employee or business leader attempt to be sustainable by addressing the three dimensions of the TBL. I would love to hear about your experiences and ideas so please share your thoughts on this topic.