The Triple Bottom Line
Monday, November 25, 2013
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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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.
