Historically, most companies’ time, energy and resources have focused on their bottom lines – securing the best financial performance for their shareholders. However, times are changing, and today’s consumers and employees are more engaged and socially conscious. They want to work for companies and support businesses that make money while also positively contributing to society and working for the greater good. They hold businesses accountable for their choices and the impact those choices have on a local and global scale.
In response, companies of all sorts and sizes have adopted standards of sustainability and social responsibility. In fact, according to a 2017 sustainability survey by Cox Conserves, 88% of small and midsize businesses have implemented sustainable activities.
But once you adopt these activities, how do you track them? Many business, nonprofit and government entities have taken the approach of the triple bottom line.
Defining the triple bottom line
In the mid-1990s, serial entrepreneur and Volans co-founder John Elkington coined the phrase “triple bottom line” as he sought to measure the emerging concept of sustainability performance in corporate America. The triple bottom line expands the traditional accounting framework beyond measuring profits and shareholder value to include an organization’s environmental and social impact.
By focusing on comprehensive investment results along the intertwined dimensions of profits, people and planet, the triple bottom line is a valuable marker of how well a business is meeting its sustainability goals. While the triple bottom line is an accounting and reporting tool, according to Elkington, it is also a means of thinking about the future of capitalism and next-generation market solutions.
According to Andrew Savitz, principal consultant at Sustainable Business Strategies, the triple bottom line “captures the essence of sustainability by both measuring the impact of an organization’s activities on the world … including both its shareholder values and its social, human and environmental capital.”
“The core concept is sustainability here,” added Avinash Chandra, founder and CEO of BrandLoom. “In other words, it can be defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs.”
The 3 P’s of the triple bottom line
What is the triple bottom line?
The triple bottom line is a sustainability-based accounting method that focuses on people, profit and planet. The triple bottom line differs from traditional reporting frameworks because it includes ecological and social aspects that are often difficult to measure. The idea is that by improving in any one sector, you’ll improve the company overall. The TBL pillars are also commonly called the three P’s: people, planet and profits.
“The triple bottom line can be envisioned as a three-legged stool, with one leg representing people, one leg representing the planet and one leg representing profit,” said Josh Prigge, CEO of Sustridge.
This bottom line measures businesses’ impact on human capital. A company using the triple bottom line has a responsibility to not only shareholders but also employees, vendors, customers, the community where it does business and anyone else impacted by the organization, whether directly or indirectly. It recognizes the interdependency of all the human relationships and interactions that enable the company to operate. This can translate into actions such as providing quality healthcare benefits and flexible work schedules to employees, offering opportunities for professional or educational advancement, creating a safe work environment, and engaging in fair labor practices.
Companies following the TBL model work to reduce their ecological footprint. They recognize that the smaller environmental impact a company has, the longer it can operate. At its most basic level, this involves not producing products that are unsafe or unhealthy for the planet and the people on it, but it also includes reducing consumption, waste and emissions. It involves specific actions, such as using renewable energy sources, reducing energy use, disposing of toxic materials safely and adopting a host of green corporate policies.
All companies are concerned about their financial standing, but businesses committed to the triple bottom line look at profits in terms of not just what they can do for shareholders, but also how they can help the broader community. In this model, a company helps stimulate economic growth and create wealth by compensating employees fairly, supporting local suppliers with its business, generating innovation, and paying its fair share of taxes. It also makes financially prudent but ethically driven decisions about how and where to source materials, products or labor.
Did you know? The triple bottom line is a sustainability-based accounting method that focuses on people, profit and planet.
Benefits of the triple bottom line
On its own, the triple bottom line is simply a reporting tool, so it isn’t going to improve society or protect the environment. It can drive change, though, because both people and the planet benefit when a company decides to adopt a socially responsible model.
“Managing a business to a triple bottom line approach makes good sense,” said Samuel Adams, CEO and co-founder of Vert Asset Management. “If you look after your people – including employees, customers, suppliers, neighbors and communities – you are likely to have less employee turnover, more repeat customers, less disputes and more goodwill. If you look after the planet, you are likely to use less resources, which can save you money, and create less pollution, which will reduce regulatory problems.”
Chandra pointed out that the triple bottom line can also improve your financial performance, reduce operating costs, enhance your brand image and reputation, increase sales and customer loyalty, and boost productivity.
Triple bottom line in practice
Many businesses incorporate triple bottom line principles into their structure. Here are a few companies, in various industries, that hold themselves accountable for their social, environmental and economic impact.
Better World Books – This organization sells used books and donates a portion of the profits to help fund literacy programs and libraries. It has raised more than $28 million for literacy programs and kept millions of used books out of landfills while creating hundreds of jobs in the process.
DHL – This shipping giant has upgraded its delivery trucks to vehicles that are hybrid, more fuel-efficient or capable of running on alternative energy. Its GoGreen initiative streamlines logistical operations and has trucks take the shortest route. It captures 62% of its electricity from renewable energy and uses couriers on bicycles in many European countries, which alone will reduce its carbon dioxide emissions by 152 metric tons per year. It also implements a host of other practices to secure its status as a good neighbor, such as supporting U.N. disaster management efforts, helping airports get ready for natural disasters, and partnering with international organizations to improve the education of children and young people.
Glassybaby – This company, which sells hand-blown votives and drinking glasses, was founded by a three-time cancer survivor as a way to support other cancer patients, many of whom she had seen struggle to afford basic needs during treatment. The company donates $3 from the sale of each item to charities through the Glassybaby White Light Fund, its charitable giving program. It has donated over $10 million since its establishment in 2001 to some 1,500 nonprofits helping people, animals and the planet. Additionally, its products are all made in the U.S., and their packaging is made from 100% recycled materials. The company’s artisans are well compensated and receive full benefits if they work at least 29.5 hours per week.
Patagonia – This manufacturer of outdoor clothing and gear actively encourages customers to minimize their consumerism and environmental footprint. It donates 10% of its profits to environmental causes and groups, runs the largest clothing repair facility in North America, and encourages customers to return worn-out clothing so it can be recycled or repurposed. It does not use any chemicals in its production processes and often uses recycled, organic or environmentally sound materials. It also offers employees ways to get involved with the company’s environmental and sustainability efforts in addition to several quality-of-life resources, such as in-office child care, flexible work schedules, and the day off on Election Day. Patagonia has a corporate venture capital fund, which invests in environmentally and socially responsible startup companies.
South Mountain Company – This architecture, engineering, building and renewable energy firm is employee-owned and committed to progressive business practices. It hires locally, provides living wages and offers quality benefits. It uses environmentally friendly building practices, is committed to making zero-energy buildings, and serves as one of the top solar power integrators in Martha’s Vineyard. The company donates 10% of its profits to charity and another 10% to pro bono work. South Mountain is focused on becoming a zero-net-energy and zero-waste business and has developed a methodology to measure its overall carbon footprint, which has led to the implementation of new carbon footprint reduction initiatives.
Challenges of measuring environmental and social impact
FYI: There is no universal standard for calculating the triple bottom line and it varies by company.
Of the three branches of the triple bottom line, only one is easily measured, which is one of the leading complaints about this approach. Profits are measured in dollars, but how do you measure social capital? Or environmental and ecological health?
Some advocate for monetizing all dimensions of the triple bottom line, including social welfare and environmental damage. While a common unit would make things simple, there are objections to putting a dollar value on wetlands, endangered species and other valuable grounds.
“Part of the challenge of managing to the triple bottom line is that it can be hard to put specific dollar figures on all the benefits of your efforts,” said Adams. “What is the value of reducing your CO2 emissions? How much employee well-being will that flexible work policy create, and what is its worth?”
He added, “Some of these people and planet benefits accrue over the long term – they might pencil out over a five-year timeframe but would be hard to justify over a shorter reporting cycle. Will your company board get behind that? Will your investors?”
Another solution would be to calculate the triple bottom line in terms of an index. According to the Indiana Business Review, this eliminates the incompatible units issue and allows for comparisons between entities.
There is no universal standard method for calculating the triple bottom line. Neither is there a universally accepted standard for the measures that comprise the three categories. Ultimately, triple bottom line calculations will be driven by stakeholders, subject matter experts and data availability, which will vary by company.
The University of Scranton recommends evaluating your business’s initial triple bottom line with the following measures.
- Average incomes
- Underemployment costs
- Employment distribution by sector
- Revenue by sector
- Greenhouse gas emissions
- Amount of waste generated
- Use of post-consumer, recycled material
- Water and electricity consumption
- Fossil fuel consumption
- Waste management
- Median household income
- Unemployment rate
- Crime per capita
- Average life expectancy
- Education levels
The triple bottom line can be used by businesses, nonprofits and governments, but the way they measure the three categories of outcomes differs, just as it will for businesses of different industries and sizes.
Becoming a B-corp
Businesses that have already adopted the triple bottom line and are ready to take things to the next level may want to consider becoming a Certified B Corporation. To qualify for B-corp status, a company needs to be certified by the nonprofit organization B Lab as meeting certain standards for environmental and social performance, sustainability, transparency, and accountability.
“A triple bottom line model and/or B Corporation certification can be a support to enable a company’s mission to grow their impact,” said JoAnn Rizzo, eco chair at AE Works.
Prigge recommends businesses use the free B Impact Assessment as a framework for a TBL evaluation. It’s currently used by some big names, including Ben & Jerry’s, Etsy, Patagonia and Kickstarter.
You answer a series of questions to evaluate your company and learn ways you can improve. It will also reveal how your company stacks up against the competition. B Lab says you can get a snapshot in around 30 minutes, but for a full evaluation, you’ll need to set aside two to three hours.
“The assessment looks at every facet of your business, from your environmental impacts – including energy, water, waste and greenhouse gas emissions – to community impacts, health and wellness programs, employee benefits, employee diversity, equity, salary, and many other factors,” Prigge said.
To qualify for B Corporation certification, your organization needs to score at least 80 out of 200 points on the B Impact Assessment. The information is self-reported, but each year, B Labs randomly selects 10% of its certified companies for onsite reviews. Over 2,750 companies in 150 industries and 64 countries have achieved certification as a B Corporation.
Moving your business toward the triple bottom line
If you’re not ready to complete the rigorous B-corp certification or jump headfirst into the triple bottom line, you can start by simply asking if your organization is truly creating value from a holistic standpoint, said Kyle J. Brost, CEO of Spark Insight Partners.
“With this consideration, you can truly maximize value,” he said, “because while the triple bottom line occasionally treats profit, people and planet distinctively, they are not mutually exclusive, and improving in the right way in one area will positively impact your efforts in another.”
Next, take a few baby steps that everyone can get behind for visible and near-instant gratification. This may just be the catalyst your organization needs to adopt a TBL state of mind.
“The best way to apply triple bottom line is to get everyone on board,” said Adams. “Take on some easy projects early to prove the concept. Good examples of these include retrofitting with LED lightbulbs – easy, fast, and saves money quickly.”
Another way to get your team on board is to provide opportunities for employees to volunteer, on paid company time, for a cause they personally support or that reflects your company values. You might also consider gifting your products or services to nonprofit organizations or underserved populations that could benefit from them. Similarly, you could make financial donations to nonprofits that address issues your company supports.
It’s also a good idea to review your employee policies and benefits – including salaries, health insurance, flexibility and time off – to determine just how well you treat your workforce. You can also assess if there are any areas where you could reduce consumption or waste and make green initiatives.
Regardless of what actions a business takes to adopt a triple bottom line approach, what matters most is that its employees and management team are motivated by more than just profit.
“The triple bottom line needs to be a part of a company’s culture and values to be most successful,” said Rizzo. “Everyone wants to be a part of something that makes a larger impact in the world.”
Carlyann Edwards contributed to the reporting and writing in this article. Some source interviews were conducted for a previous version of this article.