The Triple Bottom Line (TBL) is a theory that seeks to gauge the level of corporate social responsibility in business. Instead of a single bottom line associated with profit, the TBL theory argues that there should be two more: people and the planet. By balancing people, the planet, and profit, it’s possible to build a more sustainable business model and a circular firm.
Understanding the triple bottom line
Sustainability in business is often difficult to understand. How is it measured or defined? How does a business make sustainability financially viable?
The triple bottom line theory seeks to address these questions by making sustainability a key performance metric.
Fundamentally, the TBL theory holds businesses accountable for their actions and provides a holistic approach to doing business that is not primarily concerned with profits.
The three Ps of the TBL theory
Companies must work simultaneously on the three bottom lines of:
1 – People
This encompasses the wide range of people that a business comes into contact with.
This includes employees, suppliers, distributors, and the wider community.
Triple bottom line companies ensure humane working conditions and pay their staff a reasonable wage.
They also give back to the community. For example, 3M uses its scientific background to solve the world’s toughest challenges.
The company has, among other things, funded STEM education around the world to improve and empower local communities.
2 – Planet
For businesses, the planet’s bottom line means finding ways to reduce their ecological footprint.
Broadly speaking, this means manufacturing products that are not harmful to the planet while also reducing wastage, natural resource dependence, and greenhouse gas emissions.
Apple is a clear leader in planet-driven initiatives, with over 93% of its energy coming from renewable sources.
Its large and resource-intensive data centers are also certified by the U.S. Green Building Council.
3 – Profit
Profit is the traditional measure of corporate success.
But increasingly, businesses are realizing that people and the planet do not have to compromise profitability.
Swedish furniture giant IKEA maintains profitability and sales in the billions of dollars while focusing on green initiatives.
For example, the company recycles much of its waste back into some of its bestselling products, with 98% of its home furnishing products (including packaging) derived from renewable or recyclable materials.
Advantages of the triple bottom line theory
Businesses that adopt the TBL theory are more resilient to environmental stressors such as climate change.
Businesses that see people and the planet as important parts of their strategy moving forward enjoy better relations with consumers.
They are likely to be seen as progressive and sustainable organizations with the best interests of society at heart.
This has positive effects on brand equity and profit generation.
The TBL theory gives theories of sustainability and social responsibility more weight, especially as they are adopted by increasing numbers of influential businesses.
Disadvantages of the triple bottom line theory
Since the TBL theory is rather vague and has no specific guidelines, businesses can preach they are using the theory without backing up their words with actions or verifiable data.
Indeed, while profit is measured in dollars, it is much more problematic to measure social capital or environmental health, for example.
In some respects, the TBL theory espouses the benefits of people and the planet if (and only if) they help increase profits.
Capitalism for the sake of the environment is still capitalism, and some posit that people and the planet should be given higher priority than making money.
Triple bottom line, GPI, and GRI
Many businesses, governments, and non-profits use the Genuine Progress Indicator (GPI) to measure standardized data across multiple economic, social, and environmental variables.
The GPI is used in various contexts with the practitioner able to alter each variable to suit.
For example, the State of Maryland used a combination of TBL and GPI to analyze the impact of investing in clean energy versus maintaining the status quo or pursuing other options.
The Canadian government also used aspects of GPI to measure public wellbeing and how it affects the economy.
In terms of business sustainability, many use the following multidimensional approach:
To measure environmental variables.
Each variable is converted into a monetary unit and then summed to arrive at a dollar-denominated measure.
To measure social variables.
The Global Reporting Initiative (GRI) is an international organization that has developed standards for measuring and reporting social impact and responsibility, among other standards.
With all of that said, let’s take a look at some of the social and environmental variables a business can analyze under the TBL theory.
Note that not all variables will apply to every business, government, or non-profit.
Cost of water pollution
A reduction in water quality due to erosion, sedimentation, or nutrient and chemical runoff.
Cost of air pollution
Material and vegetational damage, remediation of damage resulting from acid rain or soot, and costs associated with a reduction in visual amenity and surrounding property values.
Cost of noise pollution
In factories, noise pollution causes permanent hearing loss which must be compensated. It can also cause sleep deprivation and a loss of productivity.
Loss of wetlands
These costs relate to the services wetlands provide, such as water purification, habitat for wildlife, and protection from weather such as storm surges and subsequent flooding.
Loss of farmland and soil quality or degradation
As the result of compaction, erosion, and urbanization.
This cost is cumulative and is measured for the total number of primary production years lost.
Loss of primary forest and damage from associated infrastructure
This is also a cumulative cost that can be measured via soil quality, water quality, biodiversity loss, recreation potential, and carbon sequestration.
The cost associated with releasing carbon dioxide into the atmosphere, measured on a per-ton basis.
Cost of ozone depletion
Or the cost of associated cancers, cataracts, and plant decline.
Depletion of non-renewables
Oere, the cost is measured by calculating the cost of switching to renewable sources.
Let’s now take a look at some of the variables defined by the GRI.
Is remuneration equal for men and women?
This encompasses occupational health and safety, training, education, diversity, and leader-subordinate relationships.
Segmented by employment type, contract, region, and gender.
Or the total number and rate of new hires and employee turnover based on metrics including gender, age group, or region.
This encompasses education, training, prevention, and risk-control programs that are provided to employees, families, and communities to prevent health issues.
Some firms have initiatives in place for repetitive strain injuries, stress management, and safe and secure travel.
Skills and learning
These describe initiatives that support continuous employee learning or assist in the smooth transition to retirement, such as sabbaticals, transition assistance, and financial goal setting for retirees.
Freedom of association, collective bargaining, and the avoidance of child or forced labor.
A broad field including data privacy, security, providing access to education opportunities, anti-competitive behavior, community impact assessment, and development programs.
Beware of Greenwashing
In a world where new generations seem interested in “sustainability,” greenwashing has become a common practice for many brands to change their public perception with deceptive marketing tactics.
The so-called six sins of greenwashing are:
When looking at the triple bottom line, it’s critical not to fall into greenwashing, so based on the attributes above, it’s possible to discern who’s really following a triple bottom line approach, vs. who’s just greenwashing.
Standards like the Genuine Progress Indicator (GPI) and Global Reporting Initiative (GRI) might be helpful in tracking progress.
However, those can also be easily gamed.
Thus, it’s critical as a consumer to have your own judgment beyond those standardized initiatives.
Triple bottom-line example: Patagonia
Patagonia follows a triple-bottom-line approach where it tries to align people, the planet, and profit with a movement that moves toward slow fashion.
This moves in the opposite direction of fast fashion models like Zara.
Ultra-fast fashion models like ASOS.
Or yet real-time retail models like Shein.
On the opposite spectrum, Patagonia follows a slow fashion approach.
This has been imbued within Patagonia’s organizational structure.
Thus the triple-bottom-line approach is built into Patagonia’s business model, with a complete restructuring of its organizational structure, rather than just in its marketing or communication (which is usually what happens in greenwashing).
- The triple bottom line theory is a measure of an organization’s ultimate sustainability. The theory argues that companies must work on the three bottom lines of people, planet, and profits.
- While the TBL theory improves company resilience and brand equity, it can be difficult to quantify and thus is vulnerable to exploitation.
- Businesses can incorporate Genuine Progress Indicator (GPI) and Global Reporting Initiative (GRI) standards to help them measure and analyze environmental and social initiatives respectively.
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