The business writer John Elkington claims to have coined the phrase Triple Bottom Line in 1994.
What is Triple Bottom Line?
Triple Bottom Line is an accounting framework with three parts: social, environmental (or ecological) and economic.
It says that business decisions should not only consider financial aspects of running a business organization (earning money for shareholders), but also the society and the natural environment. Breaking-even and making profit should be as important as the well-being of local communities and clean natural environment when making business decisions.
Therefore, business decisions should consider all three aspects: economic, social and environmental.
3 categories in Triple Bottom Line
Triple Bottom Line can be broken down into the following three categories:
- Profit. The traditional financial bottom line, which measures a company’s financial performance. A business can increase its profits by reducing costs, improving efficiency, and developing new products and services.
- People. This category includes measures such as employee satisfaction, customer satisfaction, community impact, and human rights. A business can improve its social performance by offering competitive wages and benefits, investing in employee training and development, and supporting diversity and inclusion.
- Planet. This category includes measures such as environmental impact, resource use, and pollution emissions. A business can reduce its environmental impact by using renewable energy, reducing waste, and sourcing sustainable materials.
The goal of Triple Bottom Line is to encourage businesses to consider their social and environmental impact in addition to their financial performance. This can lead to more sustainable and ethical business practices.
What does Triple Bottom Line apply to?
Triple Bottom Line shall apply to the entire organization.
Although Triple Bottom Line is relevant for all four business functions, it is particularly important for operations because manufacturing activities may have more negative impacts than advertising campaigns or financial transactions.
Challenges related to Triple Bottom Line
Triple Bottom Line is not without its challenges. It can be difficult to measure and quantify social and environmental impacts. Additionally, businesses may need to invest in new technologies and processes to implement sustainable practices.
However, the benefits of Triple Bottom Line can be significant, including improved brand reputation, increased customer loyalty, and reduced risk. Some organizations have adopted the Triple Bottom Line framework to evaluate their performance in a broader perspective to create greater business value.
In summary, Triple Bottom Line still remains an ideal to strive for rather than a reality. It is because economic aspects largely drive most for-profit business organizations.
