The triple bottom line and why it matters

THE TRIPLE BOTTOM LINE AND WHY IT MATTERS

The current business context is made up of made up of organisations that are more conscious than ever of their social and environmental responsibility

Many customers are fine with paying more for products and services if they know that workers who make such are paid a living wage and the environment is being respected in the production process

But even with all that you still need to remember that profit is at the core of all business activities! If you are not making profit, you are not going to be in business for a long time

How do you do this in a context where it would seem that profit makes more sense than purpose? By focusing on the triple bottom line.

 

WHAT IS THE TRIPLE BOTTOM LINE?

The ‘triple bottom line’ is a phrase that was coined by John Elkington a British management consultant and sustainability guru

The thing with the triple bottom line and why it matters is that it was designed to show that it is possible to run businesses in a way that not only makes money but also improve people’s lives and the well-being of the planet, simply by focusing on profit, people and planet

And so, as a business concept the triple bottom line states that “In pursuit of sustainability companies are suppose to commit to measuring their social and environmental impact just as much as their financial performance rather than solely focusing on generating profit, or the standard ‘bottom line’.“

REGARDING THE 3PS IN THE TRIPLE BOTTOM LINE

So far, we know that the 3 Ps stand for profit, people and planet but how do we put that together in a practical business context?

And in this case, we are going to assume that we are running a beverage business so let’s start with the first P, that is, profit

PROFIT

This we can also look at as the economic bottom line

If you are running a business then the first measure of success will be how much profit you are generating, this way your shareholders are happy with the rise in share price and dividends if declared.

But then you still have the concept of sustainability which means you don’t just make profit by any means!

And so, in the case of our beverage business this can mean focusing on reducing costs by making our operations efficient and paying attention to where we source for raw materials

When it comes to sourcing you have to be careful to evaluate your suppliers because your customers may not care about your upstream activities, your supplier and their suppliers, if there is a scandal in the supply chain. All they see is you who sold them the drink!

These extra measure taken will obvious cost the business hence it could be necessary to come up with a pricing strategy that reflects the value customers place on sustainability,  this way you can capture a market willing to pay a premium for eco-friendly products.

PEOPLE

This Is the second component of the triple bottom line and people can be looked at as the social bottom line

People relates to socially responsible corporate awareness and behaviour, both internally and in the wider community

This is where the distinction between shareholders and stakeholders is important, and yes shareholders are stakeholders but with stakeholders we are talking about; Anyone who can affect or be affected by the business either directly or indirectly

In the business this can mean

1. Ensuring workers receive a fair wage in a safe environment that encourages professional development.
2. Ensuring a diverse set of suppliers are used and prioritizing small businesses when appropriate.
3. Ensuring customers have fair access to products and their feedback regarding equity or safety are considered.

Regarding the ingredients used the business can source locally whenever that becomes possible, this way the business is supporting local farmers and communities, and is also supporting local economic development.

PLANET

With planet we are talking about the environmental bottom line

This is one of the really challenging aspect of the triple bottom line because it means that companies are now forced to make a decision between a lower-cost option or a more environmentally-friendly alternative.

A company may have to ignore a faster delivery channel in favour of an eco-friendly one, which may be slow.

The other challenge with planet is how one can know the impact they are having on the environment and so companies find it easier to assess the impacts of the alternatives chosen by the company and report that.

Meaning what? Meaning as a company you can redesign your distribution channels to reduce the energy used and such an activity would be reported as saving a certain amount of greenhouse gas emissions.

CONCLUSION

When it comes to the triple bottom line and why it matters, you just have to look at it from the sustainability point of view. If one uses resources in a way that makes it impossible for people in the future to access and use such resources then the whole thing is not sustainable. And to achieve suitability companies need to look at how their activities play out in terms of the profit they aim at, the people involved and the planet at large.