May 6, 2013
What is the Triple Bottom Line?
The triple bottom line (also known as 3BL, the three Ps and the three pillars) puts into concrete terms what we already know: there’s more to business than just making money. You could even say that there’s more to making money than making money…at least the traditional way.
The three pillars are a key component to good corporate citizenship through sustainability. 3BL is a holistic approach to business that sees people, the planet and profitability (the three Ps) as equal pillars in a corporate mission. This mission has become so popular amongst the public that it’s now a widely heeded business prerogative by global brands ranging from FedEx Kinkos, Nike and Tesco, by small mom-and-pop shops like Jessica Alba’s non-toxic baby product company, The Honest Co., and by companies everywhere in between.
So what are the 3 Ps all about?
The three pillars demystified Profit is obvious. It’s the golden mantra of every businessman. But 3BL sees profit as only one part of a business plan. Profit is seen in terms of total value, with all input costs deducted, including tied-up capital. Further, profit in this case is seen as what economically benefits society at large.
Planet is the pillar concerned with environmentally sustainable business practices, achieved by maximizing benefits while minimizing detriments. This can range from electronics recycling to business plans that eschew the use of dangerous chemicals or destructive practices. Dell provides an outstanding example of what happens to companies who ignore this “P.” In 2002, the company provided a way to recycle computers in Europe (for a fee), but not in the United States. Why? Because it was required by law in the EU. This was bad publicity, as was using conscripted prison labor when they finally started offering computer recycling. It took 18 months of public pressure to finally get Dell doing the right thing by recycling any computer a consumer brought to them.
People respects labor, the community and the region in which a corporation does business. Businesses that write the triple bottom line into their business plans seek to increase benefits for all stakeholders without exploiting or endangering any. Fair trade, where small producers in developing countries practice sustainable business, is perhaps the best example of this pillar in action.
Why Embrace The Triple Bottom Line? An ethic of corporate social responsibility is a powerful reason to bring the three Ps to your business plan. However, it’s not the only one. A recent MIT study is only one of many that shows how corporate sustainability is profitable. The results are somewhat intangible, related to competitive advantages, brand reputations and improved innovation. Perhaps most strikingly, the study found that companies must set concrete goals and draft targeted plans to reap the benefits of sustainability; in other words, sustainability needs to be treated seriously to really pay off.
3BL opens new markets and expands existing ones. Think of how many people prefer to purchase fair trade options wherever possible. Or consider geotourism and ecotourism, which have brought even more tourists — and their much-needed hard currency — to places like Lebanon and the Dominican Republic. Perhaps most importantly, if non-renewable resources or indeed the planet itself are depleted, there’s nothing left for anyone to profit from. The planet pillar views profits on a longer, sustainable timetable.
As part of an overall corporate social responsibility plan, the three Ps provide tangible benefits in the form of employee retention and employee engagement. Active CSR programs translate into higher levels of engagement, and studies show that companies with a high level of engagement are more successful than those with lower engagement. Still other studies show that more engaged employees create a more effective culture of social responsibility. Thus, there is a feedback loop between the right employees and the right corporate culture that benefits your company while helping the community.
One need not have any interest in the philanthropy part of corporate philanthropy to see the benefits of the triple bottom line, only an interest in operating the most successful company in your industry. What CEO could refuse such a prospect?
Posted by Ryan Scott on Fri, Sep 14, 2012 @ 03:25 PM
This post was featured in Forbes.com.
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