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The primary goal of most businesses is, first and foremost, profit. But there are many ways to pursue profit, and some of them benefit more than just the shareholders.
What is the triple bottom line? It’s a different kind of framework for businesses to use when they want to evaluate their success. In addition to profit, it takes two more variables into account: their impact on society and their effects on the environment.
The idea is that to be truly successful, a company should give profit, people, and the planet equal importance in its considerations.
Key Points
• The triple bottom line is a business framework that evaluates success beyond profit by also considering a company’s impact on society and the environment.
• The framework centers on three Ps — profit, people, and planet — to give companies a more holistic lens for measuring overall success.
• The people pillar encourages businesses to invest in employees and communities through fair wages, diversity initiatives, charitable contributions, and robust benefits programs.
• The planet pillar requires companies to limit their environmental footprint through practices such as recycling, energy management, waste reduction, and limiting greenhouse gas emissions.
• Companies demonstrate their adherence to the planet pillar through ethical sourcing, sustainable materials, and environmental activism.
Triple Bottom Line Definition
Triple bottom line’s definition: a business framework in which companies measure their effects on society and the environment alongside profit to measure success.
For most businesses, the standard bottom line is simply profit. The triple bottom line (TBL) asks companies to go further by also including their impact on the world around them when they’re evaluating their successes and failures. Are they encouraging positive change? Or are they producing negative effects on people and the planet?
The ultimate goal of the TBL is to convince businesses to balance profit with societal and environmental responsibility; to have them self-regulate and exist harmoniously with the world around them; and to encourage them to be a force for positive change.
Financial concerns such as whether it’s more advantageous to take out small business financing or apply for small business grants still exist within the framework, but they, too, are meant to take into account the possible effects on people and the environment.
The History of the Triple Bottom Line
British management consultant John Elkington created the concept of the triple bottom line in 1994. Initially, he was concerned that a company could appear successful on paper while being detrimental to the world around it. A manufacturing company may record enormous profits, for example, but also be polluting surrounding rivers and creating harsh work environments for its employees.
In other words, focusing on profits alone may mean success for shareholders, but it doesn’t exclude harm to anyone else.
It may be tempting to think of the TBL as an alternative accounting method. But in reality, it’s a method to encourage critical thinking and a way for companies to ask themselves how they can create positive change.
The Three Ps of the Triple Bottom Line
Within the triple bottom line framework, there are three Ps that companies should measure: Profit, people, and planet.
Profit
Small business financial ratios and other business fundamentals are geared to help business owners maintain their finances and the traditional bottom line – profit. However, profit can be more complicated than people realize, especially as a company grows and expands and its operations become more complex and varied.
Nonetheless, in the past, profit was primarily what a company was concerned with. How much profit could it provide for its shareholders? What actions could it take to expedite growth and cut production costs? None of these questions necessarily involved company leaders asking how they could be more inclusive or environmentally friendly.
A company operating under the TBL framework, however, can be dramatically different because its priorities are broader.
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People
The people component doesn’t just ask companies to provide a safe workplace for their employees. It also requires companies to consider factors such as:
• Focusing on diversity and inclusion
• Contributing to charities and nonprofits
• Providing fair wages
• Supporting their local communities
• Offering benefits and employee training
The goal is that companies view their brick-and-mortar locations not as real estate investments, but rather as places for them to spread roots and make meaningful connections.
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Planet
The planet component involves companies weighing and evaluating their effect on the environment. Whether it’s through recycling, waste management, energy consumption, or greenhouse gas emissions, the ways a company curbs its environmental impact can be varied and diverse. Therefore, the planet part of the TBL can take many forms.
For the foreseeable future, a company will always leave some kind of footprint. But as new technologies and opportunities arise, companies should strive to minimize their environmental impact as much as possible. The important thing in TBL frameworks is that steps are taken to protect the planet.
Benefits of Adopting the Triple Bottom Line Framework
The TBL is not about trying to make companies become martyrs. Adopting the TBL as a framework for long-term goals and day-to-day operations does offer potential financial incentives.
For example, a TBL company may often have a more positive brand reputation with its customers and employees. Because of this, brand and workforce loyalty to the company can significantly improve. Reducing employee turnover strengthens a company financially, as does client retention.
Another incentive is that investors often look for companies to invest in using ESG metrics. ESG, which stands for Environmental, Social, and Governance, is another framework that helps investors determine which companies are focused on positive impact. Companies that follow the TBL framework should typically score well on ESG metrics.
Challenges and Criticisms of the Triple Bottom Line
How does the triple bottom line look for every company? That’s one of the difficulties. Because there are many types of business entities, measuring TBL can be a challenge. There isn’t a universal system that can grade a company’s TBL performance.
Another factor to consider is that companies that adopt the TBL mindset may do so to their own detriment. In the best circumstances, TBL can offer financial benefits, but that’s not always the case. For instance, being environmentally friendly can be costly and cut into profits significantly.
Lastly, because there’s little oversight of these issues, another risk is that companies could be only superficially engaged. On paper, they might appear to be moving in the right direction, but in actuality, they could be doing the bare minimum to take people and the planet into account.
Triple Bottom Line Examples
There are many types of companies that are clearly pursuing a TBL agenda.
One of the best-known examples is Ben and Jerry’s. The company website states that it is focused on human rights and dignity, social and economic justice; and environmental protection, restoration, and regeneration.
Likewise, Starbucks focuses on ethically sourcing its coffee beans and providing a positive work environment. Patagonia uses sustainable materials and is known for its environmental activism. For example, the company has a self-imposed 1% Earth tax, which it puts toward nonprofits fighting to keep the planet clean. Even Lego seems to be following TBL goals by working to increase its use of recycled materials.
Once you start looking, it’s clear that many companies have adopted some degree of TBL and are using it to guide their business decisions.
The Takeaway
While nothing can guarantee business longevity, companies using the triple bottom line may have a better chance of withstanding the ebbs and flows of market fluctuation because their values are aligned with those of their customers and employees. If companies truly focus on the three Ps — profit, people, and planet — they can make a profit and be a force for positive change in the world.
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FAQ
What is the triple bottom line in simple terms?
The triple bottom line (TBL) is a model for companies seeking to broaden their idea of success and consider whether they’re acting as a force for positive change. Profit is only one measure of success, according to the TBL framework. True success should also include the company’s effects on society and the planet.
How is the triple bottom line measured?
This is one of the TBL’s biggest challenges. Companies that have adopted the TBL framework are generally concerned with their carbon footprint and their employees’ satisfaction. However, each company may measure its performance differently.
What companies use the triple bottom line?
Many companies use principles that are aligned with or are similar to the triple bottom line (TBL). Renewable energy companies, for example, often embody the spirit of the TBL. Other examples are the many businesses that routinely donate a percentage of their profits to global causes.
What is the difference between the triple bottom line and ESG?
The triple bottom line (TBL) is a framework that encourages businesses to think beyond profit when making decisions. Environmental, social, and governance (ESG), on the other hand, is a similar framework that’s meant more for investors than business leaders. Investors use ESG as a metric to decide which companies to add to their portfolios based on shared values.
What are the main criticisms of the triple bottom line?
One of the main criticisms of the triple bottom line (TBL) is that it can be very difficult to measure. How do you accurately and consistently measure societal or global impact? There are some metrics in place, but for many companies, they aren’t applicable. Another criticism is that companies could engage with causes superficially, but not actually make a significant effort to enact positive change.
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