What is the Triple Bottom Line?
Triple Bottom Line (TBL) is a theory that states that companies should make efforts to capture social as well as environmental prospects in its primary objectives, along with the goal of earning profits. John Elkington coined the framework for long sustainability of the business run by the corporates.
The Triple Bottom Line theory focuses on the 3Ps of the corporate objective:
- First P (Profits): This is the primary purpose for the company to run the business. It has a responsibility to pay for its lenders, operational creditors, employees, etc. to ensure the smooth running of the business.
- Second P (People): This the second & foremost objective after profits. Companies are liable to contribute to the well being of the social environment around it.
- Third P (Planet): This is the area or location of the company. The company should ensure that at least the area surrounded by its vicinity are clean. Many companies extend this objective to the city or the state where the company premises are situated.
Example of Triple Bottom Line
Real-life examples should ideally drive every concept. Here are some of the examples of big corporate giants:
#1 – Unilever
Unilever has aimed to “reuse”, “recycle” or “compost” 100% of plastic packaging by the year 2025. One of the strong images populated by Unilever is as follows:
#2 – DHL
It has specified four milestones to be achieved by 2050
4.9 (831 ratings) 117 Courses | 25+ Projects | 600+ Hours | Full Lifetime Access | Certificate of Completion
#3 – Coca-Cola
This company has the ambition to recycle every bottle by the year 2030.
Conclusion: Even if some corporates around the globe are using TBL as a marketing strategy, something is moving towards achieving the greater good.
Who Uses Triple Bottom Line?
#1 – Business Entities
A company runs a business with the long-term objective of earning profits. Companies can use Triple Bottom Line by inculcating the other two objectives, i.e. people and planet. For people’s objective, it can provide financial support for employees with low economic background, or it can provide educational facilities at a very nominal price to the children of the said city. For the environmental objective, it can make sure that its business processes are not harming the environment or reducing its impact.
#2 – Governmental Entities
Here, the organisation is already achieving people’s objective. Such companies are never run on losses since the finance providers are government entities itself. It can achieve the third objective by including the expenses towards the well-being of the environment.
#3 – Not-for-profit Entities
Another term for these entities is NPOs (i.e. Non-Profit Organisation). Here, the sole objective is not driven by earning profits but achieving a social or environmental or socio-environmental cause. It can include the other two objectives by ensuring that the operation providers are not at a loss & the environment/social fronts are saved.
- For some organisation, it becomes challenging to keep all the objectives in the same basket. They either choose one or two objectives only. Sometimes, companies miss their primary objective while achieving secondary objectives.
- Corporate Social Responsibility (CSR) is often a term used by corporates to ensure that social & environment objectives are sustained. However, many a time CSR is done as a medium of marketing the Company’s existence or its products & services.
- TBL is a complex tool & not easy for a layman to understand its importance. People involved in the process usually do not understand the end objective.
- The biggest challenge is measuring the Triple Bottom Line. You cannot easily quantify the TBL. It is simple to measure the profits but not so simple to measure or quantify the other two objectives.
- The three objectives under TBL are altogether different in its approach. It is the reason why business entities prefer to make a separate entity for achieving the other objectives of social & environmental cause. Doing good for society cannot be easily mixed with the objective of earning high returns for self-growth.
- The TBL usually is made compulsive through laws of the domestic country, which forces companies to inculcate the socio-economic objectives.
- The process of Triple Bottom Line is easy for that management personnel who are spiritually touched for the objectives towards people & environment.
- Due to the TBL concept, businesses today own a different meaning for their existence.
- The approach of the entities changes for the greater good;
- Company redistributes the returns from the entity to those who helped to earn it.
- Companies are able to move towards more sustainability.
- Companies which are good for the environment easily attract new customers for its business & helps retain the existing customer base.
This article has been a guide to the Triple Bottom Line (TBL) and its definition. Here we discuss its example, criticism, challenges and benefits. You may learn more about financing from the following articles –