Report

“Triple Bottom Line (TBL) and Business Sustainability”

Submitted to:
Professor Md. Zakir Hossain,
School of Humanities and Social Sciences

Course: PHI401
Section:03

Submitted by:
Nazmus Sakib Ahmed
ID: 1711739030

Date- 10/04/2020
 Abstract
Triple bottom line (TBL) framework and sustainability are used synonymously every now and
then in the corporate world and also in the literatures. (Alhaddi, 2015) In this essay a review of
various literatures has been performed. The TBL concept is an integration of the social,
environmental and economic lines and has been widely adopted by many companies leading to its
popularity. Companies are thinking about how their business activities are affecting the
environment and the very existence and sustainability of the world’s physical and human resources
and capabilities as they are moving on towards incorporating sustainable business strategies in
their business models. Taking into account People, Planet, and Profit rather than just profit alone
can pave the path for potentially unexpected benefits that go beyond corporate social
responsibility. (Sunpower, 2017) Though TBL seems like the obvious answers to businesses for
becoming sustainable, it also comes with certain challenges especially for the SMEs, and gets
certain criticisms. This essay digs deep into these matters so as to figure whether businesses can
really be sustainable with the Triple bottom line framework.

Methodology
In this study, an extensive review of the existing literatures has been done to give a clear and
authentic definition of the Triple bottom line and Sustainability. Various research papers have been
scrutinized to find the essence of this framework, and how this may lead to sustainability and or
sustainable businesses, that are often used interchangeably.
 Introduction
Before the term sustainability made itself known among the business world and similarly among
the business people, companies were merely concerned about the environmental or social impact
of their actions, and their sole concern seemed to be revolving around the only bottom line-
financial performance such as revenue, profits, share price etc. The companies later started to see
the bigger picture- they are exhausting natural resources faster than can be replenished, and are
having a negative impact on the environment and society overall with their activities, leading to
limiting their scopes of doing or even surviving their business in the long-run. Not only that,
customers and employees of today have become more responsible, engaged and socially conscious
about what products and whose products they buy and thus support, and who do they work for.
Hence, the businesses started to contemplate and favor propositions of sustainability or sustainable
businesses. This led to the Triple bottom line (TBL) framework which is a ground for sustainable
business. However, incorporation of sustainable business practices in the strategies of business,
and into business models may not be as easy as it seems. For some companies, it brought about a
paradigm shift in the way that they do business, made possible through changes not only in their
mindsets, but also in the management structure and business values of the company.

Triple Bottom Line (TBL)

Triple bottom line is a sustainability related build that was coined by the social entrepreneur and
business author John Elkington in 1994. (Elkington, 2004) (Alhaddi, 2015). He is considered to
be a world authority on corporate responsibility and sustainable development. (Sunpower, 2017)
Sustainability is often considered to be one of the primary goals of a business, though actually
measuring sustainability can be a daunting task. ( The University of Scranton, n.d.). TBL has
become prominent with the arrival of the term “sustainable development” from the Brundtland
Report in 1987 where it was defined as the “development that meets the needs of the present
generations without compromising the ability of the future generations to meet their own needs”
(Brundtland, 1987, p 43). (Alhaddi, 2015)
One of the bases of sustainability is the Triple Bottom Line (TBL) framework. The TBL is
commonly called the three Ps: Profit, People and Planet. It incorporates three lines of a company
performance: financial, social and environmental – also known as the 3 pillars of sustainability.
(OSM, 2017). TBL, in essence, expresses the expansion of the environmental agenda in a way that
integrates the economic and social lines (Elkington, 2004). The triple bottom line demands
companies to go beyond the traditional accounting method of measuring profits and shareholders
value in order to add their environmental and social impacts. (Elkington, 2004)

As Paula suggests “By focusing on comprehensive investment results along the intertwined
dimensions of profits, people and planet, the triple bottom line is a valuable marker of how well a
business is meeting its sustainability goals.” TBL also serves as a mode of thinking about the future
of capitalism and next-generation market solutions besides serving as an accounting and reporting
tool. (Fernandes, 2020)

Andrew Savitz, principal consultant at Sustainable Business Strategies, mentions that the triple
bottom line "captures the essence of sustainability by both measuring the impact of an
organization's activities on the world … including both its shareholder values and its social, human
and environmental capital." (Fernandes, 2020)

The three P’s of the Triple Bottom Line (TBL)

Triple bottom line as mentioned is the accounting framework which urges the managers of
companies to integrate social and environmental factors alongside the financial aspects.
(Elkington, 2004) A company must give significant attention to its social and environmental
responsibilities besides emphasizing on its financial performances for it to be really sustainable.
The pillars of TBL are often known as the three P’s:

• People
• Planet
• Profit
People
People is a measure of the impact a business has on the labor, human capital and community.
(Elkington, 2004). A company that uses the triple bottom line has a responsibility towards all its
stakeholders and not just limited to its shareholders. This includes employees, vendors, customers,
the community where it does business and anyone else impacted by the organization, whether
directly or indirectly (stakeholders). It acknowledges that all the human relationships and
interactions that enable a company’s operation are interdependent. This can be reflected in actions
such as providing quality healthcare benefits and flexible work schedules to employees, offering
scopes for professional or educational development, creating a safe work environment, and
engaging in fair labor practices such as fair wages and helping in providing quality of life. There
can be economic costs involved with disregarding social responsibility. (Fernandes, 2020),
(Alhaddi, 2015), (Amos Ojo Arowoshegbe, 2018)

Planet
With this bottom line, the aim for companies is to reduce their ecological footprint. (Fernandes,
2020). They understand that minimizing their impact (negative impact) on the environment will
enable them to operate for longer periods of time. In essence, it includes not producing goods that
are harmful or unhealthy for the planet and the people on it. Also, minimizing consumption, waste
and greenhouse gas emissions are some of its key aspects. It also comprises of certain measures
such as using renewable energy sources, cutting down energy use, dumping of toxic materials
safely and adopting a host of green corporate policies. (Alhaddi, 2015), (Amos Ojo Arowoshegbe,
2018)

Profit
Financial performance in terms of profit or similar financial values is often considered as the
absolute bottom line as it is essential for private firms to generate profits and cash flow to sustain
business operations. However, businesses devoted to the TBL framework broaden their view in not
just what they can do for shareholders, but also how they can contribute for the greater good of the
society or broader community. (Elkington, 2004). From the ‘Profit’ aspect, a company can help to
boost the economic growth and generate wealth by compensating employees fairly, supporting
local suppliers with its business, creating innovation, and paying its fair share of taxes. (Fernandes,
2020). Making financially wise but ethically driven decisions about how and where to procure
materials, products or labor is also a crucial part of this model. (Amos Ojo Arowoshegbe, 2018)

The aforementioned models can be easily understood by taking IKEA as an example. IKEA, a
world famous read-to-assemble furniture brand from Sweden, turns a portion of its profits in
recycling the waste materials like the remaining of the tree and utilized that wastage in making
some of its top-selling products. Now, it is recognized as the company that adds “zero waste to
landfill.” Hence, the main point here is a company’s economic value promotes and supports the
people of tomorrow when they perform all their business operations with the inclusion of the
environmental sustainability aspect. (SG, 2013)

Advantages of the Triple Bottom Line (TBL)

The TBL model is merely a reporting tool, which on its own, will not improve the society or
conserve the environment. It can be used to drive upgrades, though, as both people and the planet
will be benefitted when a company decides to adopt a socially responsible model. Some benefits
of TBL are listed below:

• Raises transparency that mitigates the shareholder’s concerns of concealed information

• Involves accountability of organizations’ actions
• Delivers growth and better economic situations for your company
• Gives a competitive advantage over industry peers
 • Strengthen your business purposes
• Enables you to be a part of world betterment
• Minimizes the risks of public scrutiny
• Propels us to make our world ‘a better place to live.’
• Leads to less employee turnover.
• Creates more repeat consumers meaning increased sales and customer loyalty.
• Makes less disputes.
• Contributes to more goodwill and enhanced brand image and reputation.
• Saves production and operating costs by using less resources and being more efficient.
• Creates less pollution reducing regulatory problems. (Fernandes, 2020), (SG, 2013),
(Amos Ojo Arowoshegbe, 2018)

Disadvantages of the Triple Bottom Line (TBL)

• As with any new regulation or procedure, resistance may come from “the fear of the
unknown” in embracing sustainability.
• Companies may be uneasy about giving up control.
• It may be time consuming and expensive to execute.
• There may be differing expectations.
• A company’s actions might not support their intentions.
• Following guidelines of TBL can be difficult to maintain as corporate supremacy can affect
appropriate reporting.
• Risks may be involved as companies step into uncharted waters by changing company
infrastructure.
• Extensive re-adjustment of company ‘s operation might be required. (Amos Ojo
Arowoshegbe, 2018)

Triple Bottom Line (TBL) in practice

TBL and its main value of sustainability have become convincing in the world of business owing
to collection of narrative proof of crucial long-term profitability. Reducing waste from packaging
can also reduce costs, for instance. (Timothy F. Slaper, 2013) Better World Books is one of the
many businesses that has adopted TBL principles in their business model. “This organization sells
used books and donates a portion of the profits to help fund literacy programs and libraries. It has
raised more than $28 million for literacy programs and kept millions of used books out of landfills
while creating hundreds of jobs in the process.” (Fernandes, 2020) Other companies that have set
examples in embracing TBL are- Unilever, DHL, Green Energy Corp, Patagonia, Coca cola
company, Apple and Novo Nordisk just to name a few. (SG, 2013)

Calculating the Triple Bottom Line (TBL)

Triple bottom line includes the social and environmental aspects of a company making it different
from the traditional reporting methods. However, measuring these social and environmental
aspects can be really challenging since these are not as quantifiable as the financial line which can
be easily calculated in terms of profits (e.g. in $), ROI, share value etc. Therefore, the trick is not
defining TBL but measuring it. Some propose to monetize the social welfare and environmental
damage like the economic sustainability but is disapproving in terms of philosophical grounds as
well as in accuracy terms. Another solution would be to calculate the triple bottom line in terms
of an index. This will help to eliminate the incompatible unit issue and allow for comparisons
between entities as suggested Indiana Business Review. (Fernandes, 2020), (Timothy F. Slaper,
2013)
What measures go into the Index?
There is no one-size-fits-all method for calculating the triple bottom line. Neither is there a
universally received standard for the measures that comprise the three categories. Ultimately, triple
bottom line calculations will be driven by stakeholders, subject matter experts and data availability,
which will vary by company. (Fernandes, 2020) According to University of Scranton, a business’s
triple bottom line can be gauged with the following measures:

Economic measures

• Average incomes

• Underemployment costs

• Employment distribution by sector

• Revenue by sector

Environmental measures

• Greenhouse gas emissions

• Amount of waste generated

• Use of post-consumer, recycled material

• Water and electricity consumption

• Fossil fuel consumption

• Waste management

Social measures

• Median household income

• Unemployment rate

• Crime per capita

• Average life expectancy

• Education levels
The triple bottom line can be put into use by businesses, nonprofits and governments, but the
method of measuring the three categories of outcomes differs, just as it will for businesses of
different industries and sizes. (Timothy F. Slaper, 2013), ( The University of Scranton, n.d.)

The Triple Bottom Line (TBL) is related to sustainable business

Yes, I agree that the three bottom lines and business sustainability are interrelated.

“A focus on sustainability (for private businesses) can be thought of as a management strategy that
helps businesses set goals and prioritize resource allocations.” (Saylor Academy, 2012) And one
of the bases of sustainability is the TBL structure. Shared value is one of the key objectives and
outcomes of sustainable business models. (OSM, 2017)

Andrea suggests “From a business perspective sustainability means having a long-term view,
enhancing the company resiliency. Instead of focusing on the maximum profit today, exhausting
all resources, the company will focus on how to continue doing business in a long term. This
represents a big change on the business model, moving from creating value for shareholders to
creating value for call the company’s stakeholders.” (OSM, 2017)

At a basic level, a business operating profitably is having a net positive social impact presuming
that the business has no external impact, whether positive or negative, on the society or
environment. Nonetheless, there are businesses that are profitable in the short term but are having
a negative impact in the long run. For instance, a timber or wood company that possesses timber
reserves could yield all of its wood resources in one year producing a significant profit for that one
year. However, if in doing this the company overlooked the costs and damages involved with
destroying the forest and the capability of the forest to replenish the timbers, then the net impact
could be detrimental. By exhausting the resource base of the company, short-term gain can lead to
long-term financial failure for the company. This example emphasizes the necessity for sustainable
thinking in business. For business to be sustainable in a financial term, businesses must more and
more consider the longer term and broader consequences of decisions. (Saylor Academy, 2012)

Some business people and critics might argue that enacting TBL into the businesses, especially
for the start-ups may hurt profitability. But there is sufficient proof that operating a company
with benevolent outlook offers significant strategic advantages. “When a startup inserts TBL
principles into its mission--and makes that mission widely known--Fleming says what it's doing
will matter to a niche in the market, whether it's eco-friendly practices or a commitment to
support and give back to the community. Ideally, that niche could sustain a new business through
those lean first years until it reaches a bigger audience and scale.” (Davis, 2013)

An analysis by Kearney (2009) was done on several sustainability-driven organizations across

multiple industries (technology, food, automobile, retail etc.) to assess the effect of environmental
activities on the performance of the organization. The research methodology targeted towards
determining whether organizations with sustainable practices are more likely to withstand the
economic downturn. The study showed that during the economic downturn, organizations having
practices aimed toward protecting the environment and enhancing the social well-being of the
stakeholders while adding value to the shareholders have outperformed their industry peers
financially. The financial edge has resulted from lower operational costs (energy and water usage,
etc.) and increased revenues from the development of innovative green products. (Alhaddi, 2015)

The TBL approach to business will come in great relevance for businesses and other sectors with
the proliferation in global populations and increase in demand for energy, water, and other
resources causing Earth to face resource scarcity. (Saylor Academy, 2012) It is well demonstrated
in the current worldwide pandemic of Covid-19. While some Bangladeshi RMGs like SP group
took loan to pay in advance the wages of the workers while their garments remain in shutdown, to
ensure the well-being of the workers and also to curb the spread of the virus. Some other garment
factories are still open trying to reap economic benefits momentarily, by producing and exporting
PPEs to European countries putting the labors, the society, the environment and ultimately the
country in harm’s way. SP group for the time being may not be as profitable but will certainly reap
benefits of higher customer base from recognition rather than the backlash the other garments will
face in the future.
 Conclusion
With the Triple Bottom Line concept developed by John Elkington the way businesses, nonprofits
and governments measure sustainability and the performance of projects or policies will never be
the same. (Timothy F. Slaper, 2013) Beyond the grounds of measuring sustainability on the three
pillars- People, Planet, and Profits- the adaptability of the TBL enables organizations to use the
concept in a manner that will cater to their specific needs. There are hurdles to putting the TBL
into practice. These challenges include measuring each of the three categories, finding applicable
data and calculating a project or policy's contribution to sustainability. Having said that, the TBL
framework allows organizations to evaluate the ramifications of their decisions and the impact that
their operations have on the community, nature and economy from a truly long-run perspective
and paves the path for achieving sustainability and doing sustainable business.
 References
References
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Bottom Line. Retrieved from The University of Scranton:
https://elearning.scranton.edu/resource/business-leadership/ideas-for-creating-an-index-
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Alhaddi, H. (2015). Triple Bottom Line and Sustainability: A Literature Review. 6-10. Detroit,
Michigan, USA.
Amos Ojo Arowoshegbe, U. E. (2018). SUSTAINABILITY AND TRIPLE BOTTOM LINE:
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Davis, G. (2013, April 24). The Triple Bottom Line Goal of Sustainable Businesses. Retrieved
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