The Triple Bottom Line Explained

The Triple Bottom Line Explained
Wayne D. King

You may have heard representatives of companies talking about their Triple Bottom Line. You probably stayed quiet because you held to the tenet that it is far better to keep your mouth closed and be thought a fool than to open your mouth and remove all doubt. At the same time, you made a mental note to look it up on Wikipedia when you were in front of your computer. You may have forgotten to do this so we're providing you with a brief explanation here with references to some other places to learn more.

The concept of the Triple Bottom Line in its simplest terms describes expanding the traditional business reporting framework to take into account the environmental and social performance of a business in addition to their financial performance.

The concept comes from a term coined by John Elkington, founder of the think tank and consultancy SustainAbility. First adopted by the nonprofit world - and specifically those NGOs and NPOs whose missions were synergistic, it is now finding a place in the corporate world with large and small companies embracing the concept, if not the practice.

The triple bottom line is made up of three different bottom lines: separate but interrelated within the concepual framework of the Triple Bottom Line:

• social costs and benefits;
• economic costs and benefits; and,
• environmental costs and benefits.

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Social Costs and Benefits: By keeping human capital in mind, from both the perspective of your workforce as well as the community, a Triple Bottom Line business integrates the well-being of the company, the employees and the community.

Environmental Costs and Benefits: A Triple Bottom Line business integrates the natural environment into its inventory of concerns at the top level. Using best practices a Triple Bottom Line business seeks to minimize its environmental impact and non renewable energy consumption.

Economic Costs and Benefits: In a Triple Bottom Line company profit takes on a broader meaning than in a company where corporate responsibility is held silent. The company is profitable in the classic sense but the profit concept is expanded to the broader community as well.

Consideration of the Triple Bottom Line can take root in a simple philosophical standard that becomes more sophisticated as the business grows or be implimented immediately as a set of standards into the accounting practices of the company. In the case of the later approach it takes on a much more complex and costly form, though - by virtue of it demonstrability - that cost may be justifiable in the market.

For this and other reasons, it is often best for companies to use consultants to develop their approach to the triple bottom line, where larger companies can afford full time employees dedicated to the process, smaller companies n a temporary basis who can bring the most current best practices to light.

Bearing in mind that Economics is not a hard science to begin with, a concept like the Triple Bottom Line is open to interpretation but, most important, by embracing a broader conceptual framework for a company's bottom line it opens up a much broader and dynamic array of best practices.

For example: the practice of recycling is in the process of evolving from a "cradle to grave" approach to a "cradle to cradle" approach. A cradle to grave approach examines the product after conception and production. In other words, a product is created and the emphasis of recycling focuses on creating the best possible way to reuse as many components as possible. In the new "cradle to cradle" approach, the corporation that produces the product considers the environmental issues initially in the conceptual stages in order to maximize the recyclability of the product and minimize the waste produced after complete recycling. Additionally the company that is employing best practices under a Triple Bottom Line imperative, gravitates to the product that has been created with a cradle to cradle approach.

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