What is the triple bottom line?
Get an overview of the triple bottom line, its three pillars, and what to watch out for with TBL reporting.
What is the triple bottom line?
The triple bottom line (TBL) is a framework that measures a company's performance and success in three key dimensions: economic, social, and environmental. It is a holistic approach to business that goes beyond financial profit and takes into account the broader impacts and corporate social responsibilities of an organisation. The three pillars of the triple bottom line, also known as the “3 Ps”, are Profit, People, and Planet.
The 3 pillars of the triple bottom line
01
People
The People dimension focuses on the social and human aspects of a company's operations. It considers factors such as employee well-being, workplace diversity and inclusion, labour practices, community engagement, and the company's impact on society. It answers questions like: How does the company treat its employees, and what is its contribution to the community
02
Planet
The Planet dimension evaluates the environmental impact of a company's activities. It includes considerations like resource conservation, energy efficiency, waste reduction, carbon emissions, and overall sustainability efforts. It addresses questions like: Is the company environmentally responsible, and how does it minimise its ecological footprint?
03
Profit
The Profit dimension represents the traditional financial bottom line. It assesses a company's economic performance and profitability. It includes measures of revenue, profit margins, return on investment (ROI), and other financial performance metrics. Essentially, it answers the question: Is the company making money?
The triple bottom line and Environmental, Social, Governance (ESG) are both frameworks used by organisations to assess their impact and sustainability, but they differ in their scope and focus:
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Triple bottom line is a broader framework that aims to measure an organisation's overall sustainability. TBL doesn't prescribe specific metrics but encourages organisations to develop their own indicators for each dimension. It's more flexible and allows for customisation.
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ESG, on the other hand, aims to evaluate how well a company manages and addresses specific risks and opportunities related to environmental, social, and governance issues. It provides more standardised metrics and reporting guidelines, making it easier for investors and stakeholders to compare and evaluate companies based on ESG criteria.
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Triple bottom line vs ESG
The importance of the triple bottom line in business
It’s important for organisations to report on their economic, social and environmental performance for the following reasons.​
Stakeholder expectations
Stakeholders, including customers, investors, employees, and communities, are increasingly concerned about the social and environmental impacts of businesses. They expect companies to operate responsibly and contribute positively to society and the environment. Adopting the TBL framework helps businesses meet these expectations and build trust with stakeholders.
Risk mitigation
Environmental and social issues, such as climate change, resource scarcity, and labour practices, pose risks to businesses. Companies that integrate TBL principles into their operations are better prepared to identify and mitigate these risks.
Competitive advantage
Sustainability and responsible business practices can provide a competitive edge. Consumers are more inclined to support brands that align with their values, and investors increasingly consider ESG (Environmental, Social, and Governance) factors when making investment decisions. By focusing on the TBL, businesses can differentiate themselves and attract a broader customer base and investment.
Cost savings
Environmental sustainability often leads to cost savings through reduced energy consumption, waste reduction, and resource efficiency. By implementing eco-friendly practices, companies can lower their operational expenses.
Innovation and adaptation
Businesses that prioritise the TBL are more likely to innovate and adapt to changing market dynamics. Sustainability challenges often drive innovation, encouraging companies to evolve. The result is often new products, services and processes that are more efficient, less resource-intensive and environmentally friendly.
Long-term viability
Companies that focus solely on short-term financial gains may neglect long-term sustainability. Embracing the TBL framework encourages businesses to consider the long-term consequences of their actions and make decisions that improve their resilience.
Regulatory compliance
Many governments worldwide are implementing regulations and standards related to environmental and social responsibility. Adhering to the TBL principles can help businesses stay in compliance. See also: ESG Reporting
The triple bottom line
reporting challenge
The triple bottom line is here to stay. However, to adopt TBL reporting, business must first overcome one major hurdle:
No common unit of measurement
The 3Ps don't share the same unit of measurement. This makes comparing and calculating them difficult. So the first step organisations must take is to come up with a standard measurement for benchmarking.​
As a guide, the Genuine Progress Indicator (GPI) uses 25 factors related to economics, society, and the environment. These factors are then converted into dollars to create a single unit of measurement.