Understanding the Triple Bottom Line
The Triple Bottom Line (TBL) was coined by John Elkington, a serial entrepreneur, in 1994. It refers to a piece of framework with three components – ecological, financial and social – that has been taken on by several organisations looking to evaluate their performance to create greater business value. The framework aims to assign value to the ecological and social aspects, which are usually challenging to be given appropriate manners of measurement, especially when it comes to financial measurement.
It may already be apparent that measuring the TBL is a feat in itself, as profits are measured in hard currency, but social capital and environmental gain have nothing similar. There is, of course, the option to assign value to a forest or a park, but this comes with a range of issues. Equally, another solution is to calculate the TBL as an index, and allows for easy comparisons between different items. The issue here is the weighting, as each aspect of the TBL may get different weighting assigned to it.
Issues aside, the TBL incorporates the following aspects, split into their respective ecological, financial and social brackets:
Environmental | Financial | Social |
Sulphur dioxide concentration | Personal income | Unemployment rate |
Concentration of nitrogen oxides | Cost of underemployment | Female labor force participation rate |
Selected priority pollutants | Establishment churn | Median household income |
Excessive nutrients | Establishment sizes | Relative poverty |
Electricity consumption | Job growth | Percentage of population with a post-secondary degree or certificate |
Fossil fuel consumption | Employment distribution by sector | Average commute time |
Solid waste management | Percentage of firms in each sector | Violent crimes per capita |
Hazardous waste management | Revenue by sector contributing to gross state product | Health-adjusted life expectancy |
Change in land use/land cover |
It may be hard to recognize why something like the TBL is important, but it is, in reality, crucial. Enabling businesses to implement the TBL can boost both profitability and sustainability, without compromising either. For example, developing ecotourism in an existing tourism market, such as South America, can have social, environmental and economic benefits with no hindrances. Moreover, though quite cynical, implementing the TBL makes for fantastic public relations, which in turn can yield indirect profit.
Besides profit, TBL can be used by businesses to demonstrate the wider value they provide by fulfilling in socially responsible activities. Businesses no longer provide just a product – they provide a brand people can associate with and feel represented by. Hence, consumers will often prefer to support a business that engages in responsible activities, be they outside of the workplace by directly volunteering on a sustainability project, or simply by reducing their water and power usage in their factories, for example.