The concept of Triple Bottom Line (TBL or 3BL) is a popular concept that has been applied in the understanding of social duties among companies that are looking forward for the incorporation of non monetary values in their businesses. Its notion has become of much fashion in management, investing and management over the last few years. It has been explained that the ultimate success of corporations ought to be measured not just by the use of traditional financial bottom line, but need also to be measured by on the ethical and environmental factors. In fact most individuals have accepted that, organizations have a lot of responsibilities to their stakeholders to have responsible behaviors. In addition, it is also true that, it is not possible for firms in the long run to be successful if they disregard key stakeholders interests. Its apparent novelty lines in the contention of its supporters that the overall attainment of duties to the society, clients, employees as well as suppliers should be either calculated or audited and even report presented just like financial performance of public firms have been for over a century now.
As a matter of fact, Triple Bottom line can not be taken as if it is an award, certification or even an accreditation that can be earned, but it is a continuous process that just helps companies to keep on ensuring that they are working towards greener business, as well as the demonstrating to the local community that, they are not just working towards enriching themselves, but also to the common good. Its major aim is to ensure sustainable development strategy.
Historical Perspective of Triple Bottom Line
The origin of Triple Bottom Line dates back in 1990s, when the management thought accountability started using the phrase in its work. In 1997, the phrase got currency with “British edition of John Elkington’s Cannibals with Forks: The Triple Bottom Line of 21st Century Business”. As a matter of fact, there were very few literature’s on it, and many individuals thought that, Elkington coined the idea. However, after its publication, it has spread just like bush wire. It has been embraced and promoted by different organizations like the Global Reporting Initiative by applying its concept in corporate world. Not being taken as a surprise, most firms accounting firms have incorporated the concept in an approval way when offering services that help companies that want to audit or even measure their additional bottom lines. In the same way, there have been sizable portion of industrial investment that have been devoted their energy din the processes of screening firms on the foundation of their environmental as well as ethical/social undertakings. As a matter of fact, most of them use Triple Bottom line language.
Not only companies, but different governments, government departments as well as political parties have also been well represented in the increasing documentation of those proposing the fact. The Triple Bottom line was originally inspired by Patrick Geddes, who came up with similar ideas at the start of 20th century. These concepts depends much on the triad of “folk, work, and place,” which encouraged the use of a multifaceted approach to policy and economic analysis. At the later stage, in a similar function, the aspect was adopted by both environmental and business theorists. In particular, the most renown theorists was Elkington, with his intention of coming up with an approach to social/ethical responsibility that was far much practical for business managers and leaders. This is based on the fact that, it does not regard or even water down the social/ethical as well as environmental values of much more ethical business. There have been a number of different approaches have been trying to come up with a very better metrics, that are far much helpful in the calculation of a triple bottom line since that time.
Essentially, the aspects of Triple Bottom line were just an attempt of introducing a paradigm of accounting to the social environmental domains. Originally, the concept was just introduced as a tool of corporate tool of business. As an effect, individuals wonder if during its introduction, the notion was that the phrase would be picked and applied universally as it is now. To some extent, the phrase is not as new as such, this is based on the fact that, the concept just applies accounting knowledge to what was formally called corporate social responsibility.
Sometimes back, lots of companies used to scorn the notion of Triple Bottom Line reporting systems; currently, there are those who have taken its task fully. Its effects have been experienced in the positive flow on their suppliers. Since chains of supply are also accountable to the company’s performances, they are also scrutinized well in the Triple Bottom Line audits. The best examples in U.S are some big box stores which are greening up their actions, and as an effect, demanding their suppliers to use less packaging.
Elements of Triple Bottom Line Concept
The elements of Triple Bottom Line include Profit (Economic Values), People (Social Values) and Planet (Ecological Values).
1. People (Social Values)
People element of Triple Bottom Line concept refers to the and fair and beneficial business operations towards labor and the community and region under which the firm carries its activities. A Triple Bottom Line firm aims at benefiting many constituencies; by ensuring that it does not endanger any group neither destroys it. Part of the profits gained from finished product marketing back to the original raw materials producer. As a matter of fact, Triple Bottom Line business never uses child labor and will always monitor contracted firms for the exploitation of child labor. Such firms will also pay better salaries as well as maintaining safe working conditions, along with tolerable working hours. They also look forward to giving back to the community, by contributing to its growth with things like health care and schools.
2. Profit (Economic Values)
This can be termed as the economic value that is usually created by any organization after the deduction of all expenses of any input, even after the exclusion of tied up capital. As an effect, it differs much from the traditional accounting definitions of what the profit is. Originally within sustainability framework, the concept of profit is supposed to be seen as being the real benefits that the host community enjoys. It is presumed to being the economic impacts that an organization might have on its economic environment. This in most cases is confused with the limited to the internal profit made by a company or organization (which nevertheless remains an essential starting point for the computation). As an effect, the original Triple Bottom Line approach can not in any way be interpreted as being traditional corporate accounting profits on top of social and environmental effects, except when the profits of other entities have been included as social gains.
Just as any other element of Triple Bottom Line, the point of profit includes net profits or losses. All business practices that leads to the creation of both environmental social advantages, but ends up losing money, is considered as not being sustainable in any way. This was not based on the fact that, at one point the business might lack its operations funding. As a result, the Triple Bottom Line does not have any intention of excluding profit incentive from operations. It exists to balance the profit incentive with the costs of production decisions that are often externalized, both environment and social bills. Those proposing sustainability Triple Bottom Line initiative, explain that operations that in one way or the other, but only create costs similarly not suitable are unsustainable as well.
3. Planet (Ecological Values)
One of the elements that make up Triple Bottom Line concept is ecological values. In its sense, it refers to environmental practices that are sustainable. The Triple Bottom Line company struggles itself to ensure that it has benefited the natural order as much as it could, or at least to the level that it will not harm and curtail environmental effects. A Triple Bottom Line endeavor ensures that it has reduced its ecological footprint by considering other factors. This is usually done through; careful management of its energy consumption as well as the non-renewable. This usually goes hand in hand with the reduction of waste manufacture, along with rendering waste products less toxic before disposing them din a safe and legal manner. The phrase “Cradle to grave” is uppermost in the thoughts of Triple Bottom Line manufacturing businesses which typically conduct a life cycle assessment of products to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user.
In the current times, the expenses involved during dumping of non-degradable products or even toxic waste products, is very high. As a result, are borne financially by different stakeholders like for instance, Governments and environmentally by those individual who reside near the dumping site and also elsewhere. According to the thinking of a triple bottom line, an industry which engages itself in the production as well as marketing a product which will at one point create a waste problem, should never at any cost be provided with an easy ride by the society as a whole, even the government should never provide any incentive on it. It will be considered more equitable for all businesses that involves themselves and sales products which might be taken as problematic, or might cause some troubles in future, , need to bear part of the expenses of its ultimate disposal.
Practices which can be considered as being ecologically, for instance, mining activities or any other activity that in one way or the other tries to endanger the depletion of some resources are all avoided by a triple bottom line company. In most cases, environmental sustainability is a more profitable course for investors in the long run. However, arguments stated that it is much expensive to be environmentally sound are often specious when the course of the business is analyzed over a period of time. Generally, sustainability reporting metrics are better quantified and standardized for environmental issues than for social ones.
The reality so far is that, practice or companies that that create a lot of economic wealth, but do not at any cost prevent the depletion of natural resource, eventually can be considered as sustainable triple bottom line. This is based on the fact that, at one single time, the product or organization, will at one time lacks natural resources to continue its operation. In addition, it has been proved that, operations that do not factor at any level environmental costs of production sends false signals to customers and government. If in any case a business entails in the externalization of business environment, in most cases consumers tent to believe that, the cost of producing such a product is much lower than reality, due to lower prices for instance, demand tents to be higher. Tipple bottom line sustainability, looks forward in addressing such like issues.
Impacts of Triple Bottom Line
Positive Impacts of Triple Bottom Line
The company might experience increased income and market share. This suggests that, managers believe that, their organizations have the ability of benefiting a lot from the Triple Bottom Line efforts. Market share impact also indicates that the management believes that, both customers and stakeholders have responded positively to the action. As a fact, managers will be seeing economic value; cause, it can help in cost saving along with incomes from new markets and innovation opportunities.
There is also increased employee retention after Triple Bottom Line (TBL) implementation. Having stronger sustainability is helpful in the retention as well as recruitment of better talents. Research has shown that, employees in US prefer getting lower salaries but work with responsible institutions. Managers look at increased societal support as being an advantage to Triple Bottom Line. This sis based on the fact that, the local society influences firm’s operation license. When firms engage in societal activities, like addressing community problems and engaging in social impacts, it is presented as a good citizen corporate and partners. As an effect, managers view this as a chance of opening dialogue door and positive stakeholders. The Triple Bottom Line implementation also assists in the avoidance of legal issues, and angering special interest teams while encouraging good publicity.
Managers look at increased societal support as another positive impact of Triple Bottom Line. Companies that provide support to society, impact their environment beyond the firm’s boundaries. Activities like development of education and health system, leads to a reduced risk. This means that, when organizations implement Triple Bottom Line, they become safer enterprises, hence, to them, funds procurement is much easier.
As an effect, an organization might use such positive impacts for the creation of a framework that rewards practices and decisions made by its management for the support of sustainability along with Triple Bottom Line. In general, Triple Bottom Line leads to the hiring of top talent, higher retention of top talent, increased employee productivity, reduced manufacturing expenses, reduced expenses at commercial sites, increased revenues and market share, reduced risk, and easier financing.
Negative Impacts of Triple Bottom Line
Division of labor is one of the characteristic of rich societies, and a major reason that leads to massive accumulation of wealth. This then leads to the point that organizations’ contributions are majorly to the welfare of the community in all areas when managers are focusing on what they can do best, for the benefit of all. At the same time, business is satisfying the society, Triple Bottom Line is then thought to be very harmful, as it diverts business attention far from its main goals and values. For instance, just like charitable organization like Red Cross are not expected to handle environmental issues. As an effect, mangers have to know that they are not required to concentrate on concerns outside company’s main objective, given that the enterprise is not doing any harm to the environment or people.
The concern for social and environmental issues is hardly found in poor communities, it is only a concern for richer societies. As an effect, application of Triple Bottom Line acts as an example of choices available to the citizens of a society made wealthy by businesses attending to business. As an effect, the creative attention to only business makes the business to contribute effectively to the betterment of all society angles, like social, environmental as well as economic.
Though socially responsible managers will say that is harmful to the society, however, Triple Bottom Line pressurizes libertarian managers to a mechanism that might or might not be the best option. It is not ethical to force businesses to undertake duties that are outside there core area of concentration. This is so particularly in areas that the firm does not harm either the environment or people in any way.
In the implementation Triple Bottom Line, most managers face the difficulty of achieving global agreement on simultaneous policy that might render such like measures found in Triple Bottom Line at the best advisory, hence unenforceable. For instance, individuals might not be willing to face depression or recession with the aim of replenishing lost ecosystem.
One of the major shortcomings of Triple Bottom Line framework application is capability of being applicable in monetary-based economic system. Since there has been never and still there will be no single way in monetary terminologies that can be used to measure society and environment as there is with profits. Triple Bottom Line does not allow mangers to get the sum of all three bottom lines. Due to this, it is far much difficult for managers to recognize the benefits of Triple Bottom Line implementation in the firm.