The Triple Bottom Line

Measuring Your Organization's Wider Impact

© iStockphoto

Imagine going to work everyday for a company that you are truly excited about, and proud to be a part of.

Sure, the pay is decent and there's a company crèche, but those aren't the only reasons why you love working there.

You're proud to be a part of this company because they're honorable.

They stand out from the typical "cut-throat" business world by the way they treat suppliers, their commitment to environmental sustainability, and their desire to empower and promote their team members instead of dragging them down. There is a constant air of excitement and possibility at the office, and you love coming to work everyday.

Sounds pretty amazing, right? Well, a company like this isn't just a fantasy anymore. And one approach to building this type of company like this, and monitoring what it does, is to use "the triple bottom line".

What is the Triple Bottom Line?

The triple bottom line was first fully explained by John Elkington in his 1997 book "Cannibals With Forks: The Triple Bottom Line of 21st Century Business". It's a bottom line that continues to measure profits, but also measures the organization's impact on people and on the planet. The triple bottom line is a way of expressing a company's impact and sustainability on both a local and a global scale.

The concept behind the triple bottom line is that companies are responsible first and foremost to all their stakeholders, and these include everyone that is involved with the company whether directly or indirectly, as well as the planet we're all living on. This approach sees shareholders as part of the stakeholder group, but only as part of it.

At first, this approach can seem naïve. However, a number of important trends support the need for organizations to be benevolent, at least to some extent:

  • Many organizations are critically dependent for success on hiring, motivating and retaining good people. At the extreme, think of leading sports teams or media organizations, in which the people earning big money are the stars, not the shareholders. These organizations have no option but to be focused on their people.
  • In many parts of the world, particularly in certain industries, good people are in short supply. Baby Boomers are moving out of the workplace into retirement, and there are fewer people in the following generations. Organizations that don't look after their workforces will quickly find they can't attract and retain the people they need.
  • Different generations have different attitudes to work. While earlier generations may have tolerated impoverished conditions at work, people in generations X and Y are likely to be looking for more meaning. Unless they find this meaning, they'll move on.
  • Consumers and potential recruits have many more choices than they had in the past, and are more aware of the ethical and environmental stance of large companies. Some base their purchase and career decisions on these things.

So let's look at the three bottom lines in more detail:

People

Companies that follow the triple bottom line way of doing business think about the impact their actions have on all the people involved with them. This can include everybody from farmers supplying raw materials, on up to the CEO of the company. Everyone's well being is taken into consideration. The company offers health care, good working hours, a healthy, safe place to work, opportunities for advancement and education, and does not exploit their labor force (by using child labor or offering sweatshop wages). In some cases, the "people" bottom line can also include the community where the company does business.

While the concept of the people bottom line is certainly attractive, the difficulty comes in deciding how far you go with this. Do you apply it to employees? Their families? Suppliers? People near company buildings? How near? And what should you do if you need to restructure the business to remain competitive and shed some staff? Should your concern for people mean that you refuse to make redundancies even though this risks the long term viability of the organization for all staff?

Planet

Triple bottom line companies take pains to reduce or eliminate their ecological footprint. They strive for sustainability, recognizing the fact that "going green" may be more profitable in the long run. But it's not just about the money. Triple bottom line companies look at the entire life cycle of their actions and try to determine the true cost of what they're doing in regards to the environment. They take pains to reduce their energy usage, they dispose of any toxic waste in a safe way, they try to use renewable energy sources and they don't produce products that are unsafe or unhealthy for people and the planet.

Profit

The financial bottom line is the one that all companies share, whether they're using triple bottom line or not. When looking at profit from a triple bottom line standpoint, the idea is that profits will help empower and sustain the community as a whole, and not just flow to the CEO and shareholders.

The Triple Bottom Line in Practice

While you may or may not consider the Triple Bottom Line appropriate for your business, it makes sense to recognize the way in which the workplace is changing, and consider whether you need to adapt your approach to business to reflect this.

If you decide to explore the concept further, start out by researching what other companies are doing to make a positive change in the way they do business. Looking at the steps they've taken will save you time brainstorming on ways to improve your own business. Some examples from different industries include:

  • An international shipment and packaging company has taken drastic steps to reduce its ecological footprint, and currently has about 30% of its stores using renewable energy.
  • An ice cream business has set a goal to reduce its carbon dioxide emissions by 10% over the next few years. It also has started investigating more environmentally friendly ways to package its ice cream, and plans to cut waste by at least 1,000 tons.
  • A coffee company only buys its beans from farmers who grow coffee in an environmentally friendly manner, and it takes pains to ensure that all its workers are treated fairly, and receive a living wage for their skills.
  • A computer company focuses a lot of its community efforts towards training and education programs. It helps underprivileged kids by giving them access to technology, and has goals to recycle 60% of its annual waste.

By taking the time to start using the triple bottom line approach, you might be surprised at just how positive the reaction will be from your colleagues and your customers.

When to Use the Triple Bottom Line

The Triple Bottom Line is essentially a reporting system. Of itself, it doesn't actually improve the company's impact on people or the environment, any more than the action of producing a set of management accounts would affect profits.

However, it can be used to drive improvements in the way an organization impacts people and the environment by helping managers focus on what they need to do to improve all of the bottom lines, and keeping this work high on their agendas. In this case, the Triple Bottom Line is being used as a type of Balanced Scorecard  .

As with all measurement systems, though, the cost of monitoring and calculating three bottom lines can be considerable. And you can only justify this cost if you can do some greater good as a result of having the figures. What's more, you certainly don't have to have Triple Bottom Line reporting in place to treat people well, or be conscientious about your impact on the environment. In many cases, money that could be spent on monitoring the Triple Bottom Line could better be used on people- or planet-friendly initiatives.

Tip:

This also needs to be considered in the context of monitoring and managing the organization's progress towards achieving its Critical Success Factors  .

Key Points

The Triple Bottom Line is a way of measuring an organization's impact on people and the environment as well as its finances.

Some companies find that using it to monitor more than just the financial line helps them improve the way that they treat people both within and outside the organization, and reduce their adverse impact on the environment.

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Comments (3)
  • Dianna wrote Over a month ago
    That sounds like a wonderful book marni. Welcome to the forum!

    Thanks very much for the recommendation. Social responsibility is certainly something that we can't afford not to take seriously. I believe that along with improving ourselves we should be doing things that improve the bigger picture as well. What that "thing" is takes on different meaning and magnitude for all of us, however, whether it's helping build a better workplace, community, country, or world the effort is well worth it and much appreciated.

    Thanks again and I hope to chat again.

    Dianna
  • marni wrote Over a month ago
    In a similar vein, you might be interested in the 2004 book by Philip Kotler and Nancy Lee titled, Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause. Here's Amazon.com's description of the book:

    Today, corporations are expected to give something back to their communities in the form of charitable projects. In Corporate Social Responsibility, Philip Kotler, one of the world's foremost voices on business and marketing, and coauthor Nancy Lee explain why charity is both good P.R. and good for business. They show business leaders how to choose social causes, design charity initiatives, gain employee support, and evaluate their efforts. They also provide all the best practices and cutting-edge ideas that leaders need to maximize their contributions to social causes and do the most good. With personal stories from twenty-five business leaders from socially responsible companies, this is the bible for today's good corporate citizen.
    [quote]

    Marni
  • mayc wrote Over a month ago
    I was really proud to be part of my company last year when it took a stand against landlords exploiting people who worked for us in the field. Because the demand for accommodation was so high and the rents were getting beyond ridiculous, our company decided to build it's own housing complex. The owners and executive really struggled with the idea of not "sticking to the knitting" and getting into real estate development. The capital costs alone will take years to recover. It's been a fabulous decision though and we have some of the lowest turnover in field staff of anyone. It proves you can put things other than profit first and continue to thrive and prosper.

    May

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