Triple Bottom Line: Business Framework

Triple bottom line is a philosophy that encourages businesses to optimize for more than just profit. Most businesses operate squarely within a capitalist framework. For most of the history of capitalism, the goal of commercial activity has been increased profit. However, profits are far from the only way of defining a company’s interactions with the economy and the world. The Triple Bottom Line complicates the normal picture, suggesting that companies should prioritize more than just profit growth.

Triple Bottom Line, Business Framework, triple bottom line definition, what is the triple bottom line, triple bottom line sustainability, triple bottom line companies, triple bottom line examples

What Is the Triple Bottom Line?

Let’s look at a Triple Bottom Line definition—also known as the 3 Ps or the 3BL. The Triple Bottom Line is a business framework that suggests management consider three different kinds of bottom line: People, Planet, and Profit. This framework was invented by the British sustainability advocate and management consultant John Elkington in 1994.

What is the triple bottom line? The most detailed answer to this question is a methodical review of each of the Ps:

People Bottom Line

The People Bottom Line asks a company to consider its impacts on all stakeholders, not merely shareholders. Other important stakeholders implicated in a business’s operations include employees and their families, customers and their families, suppliers, and local community members.

Planet Bottom Line

The Planet bottom line asks a company to consider its consumption of natural resources; its emissions of carbon and other greenhouse gases, as well as other pollutants and toxic materials; its creation and removal of waste materials; and the responsibility to restore any natural environments, through, for example, reforestation or regenerative agriculture.

Profit Bottom Line

The Profit bottom line is primarily about the traditional measure of business profit. Companies do need to focus on maximizing their cash flow and profit and loss accounting metrics.

But some suggest this bottom line should also account for the impacts on the rest of the economy, both on a local as well as an international scale. Does this company’s behavior increase inequality? In recent years, it has been suggested that companies think about the concept of Prosperity instead of just Profit, as prosperity encompasses the financial health of the broader community. One might argue, however, that these points circle back to a different “P,” the people bottom line.

Triple Bottom Line Sustainability

Recent decades have demonstrated just how disruptive and catastrophic the profit motive can be in a globalized economy. Negative impacts as a result of industry include deforestation, climate change, depletion of the ozone layer, and more. These sorts of negative consequences of corporate irresponsibility used to be considered externalities, meaning they were somehow external to any transaction and the company’s sphere of interest.

However, Elkington’s idea of the Triple Bottom Line suggests that corporations need to stop thinking of negative consequences as purely external. Evaluating exclusively in terms of profit means failing to consider the larger network of causes and effects, which translates to an inability to consider the full cost of doing business. In other words, unsustainable practices are not sound. Triple Bottom Line sustainability tries to get businesses to consider, among other things, the sustainability of their business practices.

Idea “Recalled”

The terminology of the Triple Bottom Line, however, may not be sustainable itself. Though its popularity continues to spread in the business community, Elkington “recalled” the idea in 2018. The problem wasn’t so much the idea of the Triple Bottom Line as the way companies were using it. They were employing it as a device for rhetorically signaling brand values while obscuring the fact that profit remains the paramount motivation for companies’ behavior. The original goal of the Triple Bottom Line was more to encourage a reconceptualization of capitalism and a change to the entire system, with new values, perspectives, incentives, and outcomes.

Despite its shortcomings, the concept of the Triple Bottom Line has done a great deal to spread the basic ideas and values of sustainability. Traces of its thinking can be found in other frameworks as well, including the Trucost approach, the ESG approach taken by many investors (which involves accounting for Environmental, Social, and Governance factors), and the concept of SROI, or Social Return on Investment.

Triple Bottom Line Companies

The emphasis on profit is intensified with publicly traded companies. These companies are deemed to have a fiduciary responsibility to their shareholders that is commonly understood as a responsibility to maximize profits. However, many popular companies have embraced the idea of the 3P or 3BL concept and are effectively triple bottom line companies, at least in branding. Do they truly often choose to sacrifice profit for one or the other P? That can be debated.

Triple bottom line companies include Ben & Jerry’s and Starbucks. Both these companies have embraced the idea of corporate social responsibility as a signature feature of their respective brands. Their success demonstrates that publicly embracing the 3 P’s does not necessarily mean sacrificing profits.

Triple Bottom Line Examples

If one is looking for specific triple bottom line examples beyond major brands like Ben & Jerry’s and Starbucks, a company called Axion Structural Innovations deserves focus. Axion emphasizes sustainability in their manufacturing of rail equipment. Axion replaces many conventionally extracted materials with recycled waste. Their success demonstrates that embracing the Triple Bottom Line does not mean a company must sacrifice product quality, even in the case of very important industrial products.

Conclusion

Getting large companies to take responsibility for their actions has been a long and difficult process. The centrality of the profit motive has sometimes inhibited companies from making a positive impact on the world around them. But the scale of such modern crises as climate chaos, global inequality, violent extremism, and more means that corporate management must start thinking in new ways about the impacts their decisions have on the outside world. This was the thinking that inspired the Triple Bottom Line, and its simultaneous prioritization of People, Planet, and Profit.

The 3 P’s may not have succeeded in achieving 100% of their founder’s ambitions, such as systematically re-shaping the way companies operate in the capitalist milieu. But the notions of corporate responsibility and sustainability clearly have more currency in 2020 than they did before the invention of the Triple Bottom Line in 1994. The Triple Bottom Line is an important part of that change.

Additional Reading:

 

Filed Under: business consulting, Consulting skills