Why 3BL is Good (for) Business

Most businesses operate for gaining financial benefit -- commonly referred to as 'profit'. However, as this pure profit motive has come under increasing scrutiny over the past 25 years, initiatives have since been introduced into business environments for enhancing this motive and the subsequent activities they drive at any given company.

One such initiative is known as the Triple Bottom Line, a concept defined in 1994 by British management consultant and sustainability guru John Elkington. Triple Bottom Line theory refers to the transformation of business objectives from the financially oriented only to ones of greater complexity and with broader perspectives. Essentially, Elkington advocates that a business adopt a greater obligation to stewardship in its purpose. That a company be managed in a way that not only generates profit but in a way that addresses the state of both society and the environment.

With the introduction of the Triple Bottom Line, organizations are increasingly aware not just of the relationship between their operations and successes, but of the impact their operations have on society and the environment as a whole.

As it stands, profit-and-loss statements are insufficient for deciding whether the company is on its way to a brighter future. A clearer picture can only be revealed through an in-depth exploration of the relationship with the environment, community, and economy. But this is no easy feat, hence these '3BL' (or 'TBL') guidelines.

It is worth pointing out how such initiatives have also precipitated the creation of new business types. A good example is Certified B Corporations which seek to balance purpose and profit.  Interestingly, they draw from the 3BL model.

With sustainability goals gaining greater and greater relevance these days, this article aims at exploring the 3BL model. It also provides initiatives for implementing best practices in order to better balance a business's purpose and profit.  

What Is the Triple Bottom Line?

 

The Triple Bottom Line is an accounting model comprising three elements: social, environmental and financial. It is a framework frequently implemented for evaluating a company's performance from varying perspectives.

The general assumption is that a business must focus solely on 'the bottom line'. By contrast, the Triple Bottom Line model posits that companies should place an equal amount of attention on social and environmental concerns as they do on financial outcomes.

The TBL concept consists of three elements: profit, people, and the planet. Since it aims at measuring the impact of business operations on broadly defined elements of its environment, the Triple Bottom Line concept is naturally linked to that of 'CSR'-- corporate social responsibility

One of the assertions supporting the Triple Bottom Line model is that a company must always factor in both people and the planet, as only then will it have fully accounted for the cost of doing business.

The Triple Bottom Line framework has undoubtedly transformed the way businesses operate, providing them with tools for benchmarking, goal-setting, practice measuring and improvement and thus direction towards a more sustainable future.

Consequently, the Triple Bottom Line can be a crucial element in planning a strategy for long-term success.

The social bottom line

The social bottom line refers to human capital and urges that a company introduce practices that positively impact the communities this capital makes up. Indeed, the needs of all stakeholders must be fulfilled. 

As a particular example, a company wishing to introduce a social bottom line “would not use child labour and monitor all contracted companies for child labour exploitation, would pay fair salaries to its workers, would maintain a safe work environment and tolerable working hours, and would not otherwise exploit a community or its labour force”. 

This bottom line, therefore, encompasses all other initiatives employed to improve a community's internal growth; one example being through enhanced private health care.

The environmental bottom line

The environmental bottom line refers to the planet and natural capital. This encompasses all sustainable practices which a company should consider when planning its operations so as to minimize all potential negative impacts on the environment. 

One good example of such practices could be all activities that aim at reducing the ecological footprint, using renewable energy, materials, managing the waste in a responsible manner.

The economic bottom line

The economic bottom line refers to the profit or the economic value created by the company. More importantly, the 3BL model defines such profit as the real economic benefit enjoyed by society. Hence, the economic bottom line defines the real economic impact on its environment. In other words, it must be linked to social benefits. 

How Does The Triple Bottom Line Work?

Once defined, you then must know how to introduce and put it into practice. 

Calculating the Triple Bottom Line

Although calculating profit is an easy task, it might not be the case for the other two Ps - planet and people. The question arising, then, is how to measure social capital and the environmental impact? What common unit of reference is to be used?

In the documentation, you might find two approaches to determining this measurement. One is based on the financial factor, with all elements of the 3BL being monetized. However, such an approach becomes rather abstract when considering the plight of endangered species, for example, and how this issue could ever be expressed in financial terms.

The second approach is to calculate 3BL as an index. This facilitates the process of calculation and enables comparisons between various companies or even internally between projects.

What Measures Go into the Index?

As mentioned, there is no one method for calculating the Triple Bottom Line and it will of course have its pros and cons. 

However, one advantage could be the adaptability of an index for the needs of different bodies, projects or policies. Here are some ideas of what could be introduced to the index in particular bottom lines:

Economic Measures

• Personal income

• Job growth

• Employment distribution by sector

• Percentage of firms in each sector

• Revenue by sector contributing to gross state product

• Economic Performance

• Market Presence

• Indirect Economic Impacts

• Procurement Practices

• Anti-corruption

• Anti-competitive behaviour

Environmental Measures

• Electricity consumption

• Fossil fuel consumption

• Solid waste management

• Hazardous waste management

• Change in land use/land cover

Social Measures

• Female participation rate

• Percentage of population with a post-secondary degree or certificate

• Average commute time

• Employment

• Labor/Management Relations

• Occupational Health and Safety

• Training and Education

• Diversity and Equal Opportunity

• Non-discrimination

• Freedom of Association and Collective Bargaining

• Human Rights Assessment

• Customer Health Safety

• Marketing and Labeling

• Customer Privacy

How Software Solutions Can Help With 3BL

Software solutions can be extremely helpful while calculating and monitoring the particular bottom lines. 

Software for Carbon Footprint

It can help entrepreneurs make smarter decisions, particularly where the environmental bottom line is concerned. There are also software-based solutions that can help you calculate and compensate for your carbon footprint, with Chooose, Ducky and Persefoni as prime examples.

Software for Waste Management

Then there are platforms for streamlining waste management - check out Waste.iq and Nordsense. If you need help with energy usage, investigate apps like Trueenegry or platforms such as Station A.

Gensuite: 3BL in the Cloud

There are more advanced solutions available. One is Gensuite - Environmental Compliance Cloud-Based Applications and was created especially for 3BL purposes. Gensuite consists of three modules - Eco Inventory, Eco Treasure Hunt, Eco Project Deck which help fulfil 3BL objectives.

SDH for 3BL software

Hopefully, you’ve found some inspiration in this article to get you thinking about adopting the 3BL model into your own business operations; if you have any questions or need more advice on your sustainability software project, feel free to drop us a line at hello@start-up.house.

If you want to find out the best ways to build out greener objectives for your business, join us during our webinar - Cost - Quality - Scale - Sustainability!