Breaking Down the Triple Bottom Line

September 28, 2020 | By: Molly Looman
FacebookTwitter

The triple bottom line is a term thrown around in economics and ethics courses to describe a new focus for organizations. Instead of focusing solely on the gain in the form of profits, organizations are encouraged to look at gains from a social and environmental standpoint as well. The goal is to be able to gauge contributions an organization is making to society as a whole rather than just economically. It also is a good measure of a group’s corporate social responsibility, a factor that is becoming increasingly important in customers’ spending practices.

 

People

The first aspect of the triple bottom line is people as in employees. A corporation that seeks to increase its impact in its area will pay attention to working conditions, employee satisfaction, and turnover rate. It also factors in the diversity of the organizations and an individual’s ability to move within the company.

Another aspect of people in the community around the organization. When calculating a triple bottom line, an economist might look at the poverty rate, unemployment rate, average commute time, or median household income. The people measure is meant to covey what level of social and community impact an organization is having around it. Often initiatives in this area fall under the category of enlightened self-interest. This is a term used to describe actions that benefit a larger group while still bringing publicity or benefit to the one facilitating.

 

Planet

The sustainability sector has the potential to generate over $12 trillion a year in market opportunities by 2030 according to the U.N Sustainable Development Goals forecast. This sector is growing rapidly and companies that aim to positively affect the environment will see more increases in the “planet” section of their triple bottom line.

Reducing waste and investing in renewable energy are not only cost-saving line items for a property, but they have a positive impact on the environment. Environmental responsibility is also becoming an increasing interest for tenants. Many are beginning to request on-property gardens, composting programs, or even beehives. Large-scale companies and organizations can be some of the largest energy and resource users, so the changes they make can have a large impact on the environment and health of the community around it.

 

Profit

Most companies are designed to make money. This traditional measure of profits and losses has not gone away, nor is it less important. It has simply become one of many factors that contribute to an organization’s success or impact. Financial profitability is what allows companies to make environmental and societal changes within their property or organization, so it is still a paramount factor.

 

The triple bottom line has been around for decades. It is considered to be coined by John Elkington in 1994. The collective knowledge around societal and environmental struggle has changed and even Elkington has said the term is due for a fine-tuning. These are evolving considerations, but organizations that take the time to research and invest may likely see returns in both a financial and societal medium.

Sources:

https://hbr.org/2018/06/25-years-ago-i-coined-the-phrase-triple-bottom-line-heres-why-im-giving-up-on-it

https://sustain.wisconsin.edu/sustainability/triple-bottom-line/

https://www.ibrc.indiana.edu/ibr/2011/spring/article2.html

https://www.forbes.com/sites/jeroenkraaijenbrink/2019/12/10/what-the-3ps-of-the-triple-bottom-line-really-mean/#23d929514359

https://www.investopedia.com/terms/t/triple-bottom-line.asp#:~:text=What%20Is%20the%20Triple%20Bottom,%2C%20people%2C%20and%20the%20planet.