(first published September 2008, updated January 2010)
In any business, there’s always a bundle of jargon to go with it and green business is no exception.
If you’re about to launch a new green business or are considering steering an existing business to more environmentally friendly practices (or perhaps encouraging your employer to do so); you may have heard the term “triple bottom line”. The phrase was first used in 1989 by John Elkington, co-founder of a consultancy focused on sustainability.
So what does it mean?
Sometimes referred to as “TBL”, or “3BL. Triple bottom line simply stands for
Sounds warm and fuzzy doesn’t it! But it’s actually a serious and increasingly recognized concept. Triple Bottom Line reporting is becoming an accepted way for businesses to demonstrate they have strategies for sustainable growth.
The triple bottom line is a form of reporting that takes into account the impact your business has in terms of social and environmental values along with financial returns.
Whereas traditional models were all about profit, profit and more profit; triple bottom line accounting recognizes that without happy, healthy people to staff a business and the natural environment able to sustain those people and supply resources for trade; business is, well, simply unsustainable in the long run.
Let’s break down the three terms and how they apply:
This is also known as Human Capital. It really just means treating your employees right, but furthermore also the community where your business operates. In this part of the Triple Bottom Line model, business not only ensures a fair day’s work for a fair day’s pay; but also reinvesting back some of its gains into the surrounding community through sponsorships, donation or projects that go towards the common good. This reinvestment can usually be written off come tax time as part of business operating expenses.
This is Natural Capital. A business will strive to minimize its ecological impact in all areas – from sourcing raw materials, to production processes, to shipping and administration. It’s a “cradle to grave” approach and in some cases “cradle to cradle” i.e. taking some responsibility for goods after they’ve been sold – for example, offering a recycling or take-back program. A 3BL business will also refrain from the production of toxic items.
This is more about making a honest profit than raking a profit at any cost – it must be made in harmony with the other two principles of People and Planet.
While many major corporations used to sneer at the idea of a Triple Bottom Line reporting system; some have taken the bull by the horns; with a positive flow on effect to their suppliers. Because supply chains are also accountable to the overall impact of a company, they also come under scrutiny in the triple bottom line audits. A good example of this is some big box stores “greening” up their act and in doing so, demanding that their suppliers use less packaging, offering concentrated products or banning certain ingredients from products.
The importance of Triple Bottom Line
Here’s a somewhat unsettling fact – according to CorpWatch, of the 100 largest economies in the world, 51 are businesses; the other 49 are countries. This is why Triple Bottom Line concepts are so important – it’s not just about commerce, it’s about civilization.
Triple Bottom Line is not an award, accreditation or a certification you can achieve – it’s an ongoing process that just helps a company keep on track towards running a greener business and demonstrates to the community at large they are working not just towards riches, but the greater common good – and that’s what consumers are increasingly wanting to see these days.
Green business is simply good business and hopefully before too long it will be the only way to engage in commerce.