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Two of the most basic metrics for business success are “bottom” and “top” lines; net-profit is referred to as the “bottom line” while gross revenue is the “top line.” To many investors and business owners, the bottom line is an incredibly important—if not the most important—number to consider when analyzing business performance overtime. For decades, most business leaders designed strategies around net profit growth. Now, in the era of climate change, a theory known as the “triple bottom line” is impacting investors’ and business leaders’ decisions. The triple bottom line, coined by corporate social responsibility expert John Elkington in 1994, expands upon profit to include two more performance metrics: people and the planet. Instead of viewing monetary growth as separate from environmental and societal impact, all three are combined to capture a more comprehensive view of business success and potential for future growth.
Bottom line 1: Profit
According to the theory, profit is only one consideration of a larger business plan that includes performance measured by company impact. The triple bottom line emphasizes that profit does not exist in opposition to people and the planet; business practices that are environmentally friendly or account for social impact can be incredibly lucrative. For example, finding innovative uses for waste or decreasing energy usage can result in spike in sales or decreases in utility costs. As environmental threats put supply chains at risks, businesses must consider their plans for sustainability in an uncertain future. Sustainable businesses consider people and the planet at every decision regarding profit.
Bottom Line 2: People
There are two components of the “people”aspect in the triple bottom line theory. “People” includes employees, investors, and board members while also accounting for the general public and specific communities impacted by company practices. Business leaders should focus on improving employee satisfaction and giving back to their community. This can be achieved in a myriad of ways. For example, employees should be guaranteed fair wages, safety, and their input on the business practices should be considered. Additionally, business owners and stakeholders should consider their impact on society.
Some methods of ensuring that businesses support the people they affect include donations, volunteer opportunities for employees, and establishing dialogue with community leaders. However, there is no standard unit of measure for societal or environmental impact as defined by the triple bottom line theory. This allows businesses to have complete freedom in determining the way that they choose to calculate their impact upon society. Further, there are limitless paths to positively affecting change in social groups.
Bottom line 3: Planet
A company that considers the planet as a part of its business plan will be transparent about its environmental impact and work to reduce its ecological footprint as much as possible. This component of the triple bottom line is expansive and could take any number of forms in practice. Businesses should analyze their energy usage and waste management in all of its forms and seek out renewable energy options over unsustainable natural resource consumption. Additionally, to positively impact the planet companies should analyze the impact of each stakeholder they interact with throughout the value chain and eliminate those that contribute to climate destruction.
As with the people aspect of the triple bottom line theory, there is no universally accepted metric for environmental impact measurement. This allows for companies to determine the most effective and appropriate methods of ecological impact reduction for their functions. For example, a paper company might contribute to habitat restoration for endangered forest-dwelling species, while a shipping company might transition to an electric vehicle fleet. Through both of these examples, it is apparent how impact upon the planet can translate into increases in profit. Investments in renewable energy and resource conservation ultimately benefit business practices in the long-term.
The triple bottom line theory illustrates how closely tied profit is to people and the planet. These aspects of analytics work together to indicate business performance and impact. As the effects of climate change continue to manifest globally, the triple bottom line is essential in determining the longevity of a business. A company that accounts for people and the planet will maximize its profits and have high long-term growth potential due to resilience against climatic changes. In order to maintain a business, sustainability in each component of the triple bottom line is key.
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