What is a Triple Bottom Line?
The Triple bottom line is a framework which seeks to measure the performance of a company in terms of the social, environmental and economic spheres. The phrase was coined by John Elkington in 1994.
He was of the view that businesses should broaden their focus from the financial aspects to social and environmental responsibilities.
The Triple Bottom line was primarily intended to promote sustainability of business practices beyond the usual. Many businesses are driven by the profit motive in their day to day operations.
This drive is good but modern day businesses ought to factor in the social and environmental impacts so that they are in a good position to know the wholesome impact business operations have.
How to Conceptualize the Triple Bottom Line
The social aspect aforementioned corresponds to ‘people’, the economic aspect corresponds to ‘profits’ whereas the environmental aspect corresponds to the ‘planet’. These represent the elements of the triple bottom line.
Therefore a manager or business leader will be said to be on the right track when all of the three elements are in optimum.
However, it has practically been impossible to find a situation where all the three elements are in optimum. This is greatly compounded by the difficulty in measuring the environmental and social impacts. One of the reasons is because the three elements are measured in totally different ways. They all lack a common unit of measurement. Also, the financial aspect will always be the dominating factor as far the organization is concerned.
Having a ‘people’ element on an organization’s bottom line fosters the fair and equal treatment of employees.
The ‘planet’ element focuses on the measures that promote environmental conservation, recycling initiatives and the wide range of activities that enhance sustainability.
Annual Reports of a Company
The triple bottom line can be used to inform the annual report of a company. Since the company is supposed to account for its performance socially, financially and environmentally, the triple bottom line framework may be of vital importance.
An argument has also arisen with respect to the triple bottom line. It posits that the triple bottom line is a manifestation of the renowned balance score card. The argument stresses that the underlying principle of the balanced scorecard and the premise of the triple bottom line are convergent.
This is because of the fact that one measures what they are able to get is a clear indication that one can measure what they can also pay attention to. Thus, the application of this is that when organizations measure their social and environment implications, the resultant effect is creating more responsible organizations. This is because they will pay more attention to the two spheres.
Used in Contemporary Time
In contemporary time, many companies are experiencing malpractices in these three areas. They have been further forced to re-examine their corporate policies specifically with regard to the three areas in a bid to enhance ethical standards.
This is so especially in situations where there is no regulation in labor markets. The development of the Fair trade movement has been greatly enhanced with a focus on social and environmental standards in the addition of products in its brand.
Therefore, we can deduce that the triple bottom line indeed is a positive force that has positive implications.
In a general sense, what are some of the key measures used in the triple bottom? Well as far as the economic measures are concerned, there is:
- Income( specifically personal income)
- Distribution of employment in sectors
- Number of firms in sectors ( presented in percentage)
- Contribution to the Gross National Product
- Growth in the number of jobs
Environmental measures generally rotate around natural resources. They could include:
- Management of Solid waste
- Consumption of Electricity
- Consumption of fossil fuels
- Management of hazardous waste
- Air and water pollutants
Organizations could identify a specific aspect from the above and focus on it.
Lastly, Social measures could generally include education, health, social capital, quality of life and access to social resources. More specifically they could include:
- Life expectancy
- Poverty levels
- Rate of unemployment
- Rate of participation of the female labor force
- Rate of violent crimes
- Number of people with basic education expressed in percentage
The organization may use the above measures as a guideline but it is entirely up to them to know which adequately represents their specific environments.