Understanding the triple bottom line (TBL)
What is TBL?
Profits. People. Planet. In economics, there is a theory saying that these three should be a company's priority, and it is called the "triple bottom line." This theory is something that every company should carry out. While profit is an obvious priority, social and environmental concerns should also be on the list. TBL aims to measure how committed one company is to its corporate responsibility and its effects on the environment in the long run.
The man behind the TBL
The triple bottom line came from a British management consultant and sustainability expert named John Elkington in 1994. The term became a performance measurement of US corporations. It states that while a company can make money, it should also positively impact the people and the environment.
Why recognize TBL?
The answer to this question is somehow obvious. However, some companies fail to accomplish everything that the TBL aims. There are many companies whose bottom line is profits alone. Elkington's TBL would beg to disagree. It says that a business should have sustainability as a goal. Also, they should consider social and environmental issues when they measure the actual costs of doing business. Social and ecological problems should matter just as much as financial issues to see the bigger picture.
The TRIPLE bottom line
Now, let us elaborate more on the three things that we keep mentioning since we started. If an entity follows the TBL, then these three would have equal measure.
- Profit. The P&L account (profit and loss) is the most common measure of corporate profit.
- People. It measures the social responsibility of an entity not only currently but also throughout history.
- Planet. It measures the environmental awareness and commitment of an entity.
Why won't many entities follow or apply the TBL?
It is a challenge for many to apply the TBL. The first reason would be the measurement. While it is easy to measure profit quantitatively, the people and planet part is more complex because it is subjective. A small effort from one entity may be massive for some and vice versa. Also, it may be a challenge to many if they need to maximize financial returns and do a great thing for society.
So, what now if many won't apply TBL?
If profits are the only thing a company prioritizes, we know that it will hurt the environment. There is no replacement for the Earth, and it shall be the same place where our children and grandchildren will be. Also, some companies choose to pay their workers way less than they deserve. So, they can barely buy their basic necessities, let alone their wants.
Today's highlights
The triple bottom line
concept of John Elkington encourages companies to focus on social and
environmental issues just as much as they focus on financial matters. Hence,
TBL's three main elements are profit, people, and the planet. Its goal is to
measure a company's financial, social, and even environmental performance in
the long run. A company that only focuses on profits does not realize the
actual cost of doing business.
