triple-bottom-line

What Is The Triple Bottom Line And Why It Matters To Build A Sustainable Business

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, 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. “People” include 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 their 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 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 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. In fact, 98% of their home furnishing products (including packaging) are derived from renewable or recyclable materials.

Advantages and disadvantages of the Triple Bottom Line theory

Advantages

  • Resilience. Businesses who adopt the TBL theory are more resilient to environmental stressors such as climate change.
  • Public relations. Businesses who see people and planet as important parts of their strategy moving forward enjoy better relations with consumers. In other words, they are likely to be seen as progressive and sustainable organizations with the best interests of others at heart. This has positive effects on brand equity and profit generation.
  • Legitimacy. The TBL theory gives theories of sustainability and social responsibility more weight, especially as they are adopted by increasing numbers of influential businesses.

Disadvantages

  • Accountability. 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.
  • Capitalist slant. In some respects, the TBL theory espouses the benefits of people and planet if (and only if) they help increase profits. Capitalism for the sake of the environment is still capitalism, and some have argued that people and planet should be given higher priority than making money.

Key takeaways

  • The Triple Bottom Line theory is a measure of an organization’s ultimate sustainability.
  • The TBL 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.

Other strategy frameworks

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here