Son of Five Rivers Blog

For the advancement of Entrepreneurship, Sustainability & the Ecology of Everyday Life

The Triple Bottom Line (3BL)

The triple bottom line (abbreviated as “TBL” or “3BL“, and also known as “people, planet, profit“) captures an expanded spectrum of values and criteria for measuring organizational (and societal) success: economic, ecological and social.  In the private sector, a commitment to corporate social responsibility implies a commitment to some form of TBL reporting. This is distinct from the more limited changes required to deal only with ecological issues.

In practical terms, triple bottom line accounting means expanding the traditional reporting framework to take into account ecological and social performance in addition to financial performance.  The concept of TBL demands that a company’s responsibility be to stakeholders rather than shareholders. In this case, “stakeholders” refers to anyone who is influenced, either directly or indirectly, by the actions of the firm. According to the stakeholder theory, the business entity should be used as a vehicle for coordinating stakeholder interests, instead of maximizing shareholder (owner) profit.

“People, planet and profit” succinctly describes the triple bottom lines and the goal of sustainability.

“People” (human capital) pertains to fair and beneficial business practices toward labour and the community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well being of corporate, labour and other stakeholder interests are interdependent.

A triple bottom line enterprise seeks to benefit many constituencies, not exploit or endanger any group of them. The “upstreaming” of a portion of profit from the marketing of finished goods back to the original producer of raw materials, i.e., a farmer in fair trade agricultural practice, is a not unusual feature. In concrete terms, a TBL business would not use child labour and monitor all contracted companies for child labour exploitation, would pay fair salaries to its workers, would maintain a safe work environment and tolerable working hours, and would not otherwise exploit a community or its labour force. A TBL business also typically seeks to “give back” by contributing to the strength and growth of its community with such things as health care and education. Quantifying this bottom line is relatively new, problematic and often subjective. The Global Reporting Initiative (GRI) has developed guidelines to enable corporations andNGOs alike to comparably report on the social impact of a business.

“Planet” (natural capital) refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtail environmental impact. A TBL endeavor reduces its ecological footprint by, among other things, carefully managing its consumption of energy and non-renewables and reducing manufacturing waste as well as rendering waste less toxic before disposing of it in a safe and legal manner. “Cradle to grave” is uppermost in the thoughts of TBL manufacturing businesses which typically conduct a life cycle assessment of products to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user. A triple bottom line company does not produce harmful or destructive products such as weapons, toxic chemicals or batteries containing dangerous heavy metals for example.

Currently, the cost of disposing of non-degradable or toxic products is borne financially by governments and environmentally by the residents near the disposal site and elsewhere. In TBL thinking, an enterprise which produces and markets a product which will create a waste problem should not be given a free ride by society. It would be more equitable for the business which manufactures and sells a problematic product to bear part of the cost of its ultimate disposal.

Ecologically destructive practices, such as overfishing or other endangering depletions of resources are avoided by TBL companies. Often environmental sustainability is the more profitable course for a business in the long run. Arguments that it costs more to be environmentally sound are often specious when the course of the business is analyzed over a period of time. Generally, sustainability reporting metrics are better quantified and standardized for environmental issues than for social ones. A number of respected reporting institutes and registries exist including the Global Reporting Initiative, CERES, Institute 4 Sustainability and others.

“Profit” is the bottom line shared by all commerce, conscientious or not. In the original concept, within a sustainability framework, the “profit” aspect needs to be seen as the economic benefit enjoyed by the host society. It is the lasting economic impact the organization has on its economic environment. This is often confused to be limited to the internal profit made by a company or organization. Therefore, a TBL approach cannot be interpreted as traditional corporate accounting plus social and environmental impact.

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July 19, 2009 - Posted by | Business Development, Definitions, Sustainability | , , ,

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