The Triple Bottom Line

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QUESTION

In 1994, a British man named John Elkington coined the phrase “triple bottom line” (TBL) as a memorable way of encouraging business leaders to pay more attention to the impact of their operations on people and the planet.
The triple bottom line is a business concept that posits firms should commit to measuring their social and environmental impact—in addition to their financial performance—rather than solely focusing on generating profit, or the standard “bottom line.” It can be broken down into “three Ps”: profit, people, and the planet.
Profit
In a capitalist economy, a firm’s success most heavily depends on its financial performance, or the profit it generates for shareholders. Strategic planning initiatives and key business decisions are generally carefully designed to maximize profits while reducing costs and mitigating risk.
In the past, many firms’ goals have ended there. Now, purpose-driven leaders are discovering they have the power to use their businesses to effect positive change in the world without hampering financial performance. In many cases, adopting sustainability initiatives has proven to drive business success.

People
The second component of the triple bottom line highlights a business’s societal impact, or its commitment to people.
It’s important to make the distinction between a firm’s shareholders and stakeholders. Traditionally, businesses have favored shareholder value as an indicator of success, meaning they strive to generate value for those who own shares of the company. As firms have increasingly embraced sustainability, they’ve shifted their focus toward creating value for all stakeholders impacted by business decisions, including customers, employees, and community members.
Some simple ways companies can serve society include ensuring fair hiring practices and encouraging volunteerism in the workplace. They can also look externally to effect change on a larger scale. For instance, many organizations have formed successful strategic partnerships with nonprofit organizations that share a common purpose-driven goal.

The Planet
The final component of the triple bottom line is concerned with making a positive impact on the planet.
Since the birth of the Industrial Revolution, large corporations have contributed a staggering amount of pollution to the environment, which has been a key driver of climate change. A recent report (pdf) found that 100 companies in the energy sector are responsible for roughly 71 percent of all industrial emissions.

While businesses have historically been the greatest contributors to climate change, they also hold the keys to driving positive change. Many business leaders are now recognizing their responsibility to do so. This effort isn’t solely on the shoulders of the world’s largest corporations—virtually all businesses have opportunities to make changes that reduce their carbon footprint. Adjustments like using ethically sourced materials, cutting down on energy consumption, and streamlining shipping practices are steps in the right direction.
WHY IS THE TRIPLE BOTTOM LINE IMPORTANT?
To some, adopting a triple bottom line approach may seem idealistic in a world that emphasizes profit over purpose. Innovative companies, however, have shown time and again that it’s possible to do well by doing good.
The triple bottom line doesn’t inherently value societal and environmental impact at the expense of financial profitability. Instead, many firms have reaped financial benefits by committing to sustainable business practices.
“In many situations, it’s possible to do the right thing and make money at the same time,” Harvard Business School Professor Rebecca Henderson says in Sustainable Business Strategy. “Indeed, there’s good reason to believe that solving the world’s problems presents trillions of dollars worth of economic opportunity.”
Case in point: Research by Nielsen found that 48 percent of US consumers would change their consumption habits to lessen their impact on the environment. In 2018 alone, this sentiment translated to roughly $128.5 billion in sales of sustainable, fast-moving consumer goods.
Beyond helping companies capitalize on a growing market for sustainable goods, embracing sustainable business strategies can be highly attractive to investors. According to Sustainable Business Strategy, evidence has increasingly shown that firms with promising environmental, social, and governance (ESG) metrics tend to produce superior financial returns. As a result, more investors have begun focusing on ESG metrics when making investment decisions.
Questions:
Assignment One:
1. Do you think that it is the responsibility of businesses to track and manage the social, economic, and environmental impacts of their actions? Why or why not?
2. What value does using the TBL bring to a business, and is it worth the potential drawbacks of incorporating it?
3. What value do businesses using the TBL bring to society, and how might society be impacted if TBL were not a common business practice?

Assignment Two:
Overview
In this module, you have learned about the benefits, drawbacks, and overall value of using the triple bottom line (TBL) in business. In this assignment, you will take a closer look at how strategies for incorporating this framework are similar and different across the manufacturing industry and the service industry.
Prompt
Imagine you are a sustainability consultant, and you’ve been asked to create a simple handout that clarifies the similarities and differences between strategies used to incorporate the TBL into the manufacturing industry and the service industry. The handout will be provided to individuals at large and small group trainings.
Specifically, you must address the following rubric criteria:
• Similarities: Explain the similarities that exist between incorporating the TBL framework into both the service industry and the manufacturing industry, and why.
• Differences: Explain the differences that exist between incorporating the TBL framework into the service industry and the manufacturing industry, and why.
• Example Strategies: Provide an example of a strategy that is appropriate to use across both the service and the manufacturing industries, and provide an example that is specific to either the service or the manufacturing industry when considering people, planet, or profit through the TBL framework. Include a brief explanation of what each example demonstrates.

Sample Solutions
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