What is the triple bottom line?

What is the triple bottom line (TBL)? It’s a concept designed to reshape business strategies in line with sustainability practices. 

At its core, the TBL is an accounting framework that broadens a business’s focus on the more traditional bottom line: that of profit and loss. The TBL adds to this with an expanded focus on social and environmental considerations. 

This guide explores what the triple bottom line is, its components, and its significance in today’s business world.

It’s an accounting framework with three parts: social, environmental, and financial. These three pillars are often called “people, planet, and profits.” 

The TBL encourages businesses to venture out from the traditional focus on profits and consider their impacts on society and the environment as concluding metrics of success as well. 

As you might have noticed, the areas above overlap a lot with ESG (environment, social, and governance) criteria, which dominate discussion in many boardrooms worldwide. 

At their most basic levels, ESG is a tool for investors and regulators to determine a company’s commitment to causes, and the triple bottom line is a financial framework; they’re technically different, but both are relevant to each other, especially when gauging long-term success. 

1. People (social responsibility). This pillar focuses on the social dimensions of a business and measures its commitment to fair labour, community engagement, employee welfare, and contributions to society. The goal is to ensure that the activities of the business have a beneficial impact on the communities where they operate.
2. Planet (environmental sustainability). The environmental pillar emphasises anything considered “green”, “sustainable”, “net-zero” or other relevant classifications. It assesses the business’s impact on the earth’s ecosystems, aiming to minimise negative effects such as carbon footprint, waste production, and resource depletion. 
3. Profits (economic viability). You can focus on the above two pillars all you like, but there’s no escaping the need for a business to be economically viable. This third and final pillar ensures financial health, but in a way that doesn’t compromise the social and environmental pillars. 

Putting the three of these together in a balanced way – where no single pillar threatens either of the others – creates long-lasting and strategic success in today’s business world.

It’s incredibly relevant to modern business. 

While that’s a sweeping statement, and there will always be regional variation, corporate leaders are rapidly accepting that to create success in this day and age, you need a well-rounded strategy that incorporates things like the triple bottom line as a critical metric. 

Consumer moods across the globe are shifting towards sustainability and social inclusion. Investors follow that mood because they know it’s where the money will be for decades to come. Meanwhile, regulators will embrace that mood because they’ve been chosen to represent those same consumers at the ballot box. 

Moreover, the TBL is a crucial tool providing an accessible summary of a lot of information. That is vital in an era of complex data analysis and endless discussion and reporting. 

The TBL ultimately provides a window into a company’s health, corporate responsibility, competitiveness, and stakeholder engagement, all with quick figures.

Boards are crucial overseers of strategic direction, the link between workers and shareholders, and the source of corporate culture. It’s a no-brainer they have a strong connection to the triple bottom line. 

At the outset, directors should ensure they understand the concept. They should also be able to communicate its importance to stakeholders and explain each component when called upon. 

Effectively overseeing the integration of the TBL framework means boards need the right skills and perspectives. Because of that, they should ensure their recruitment reflects this need in every way. A board without appropriate finance, social impact, and sustainability expertise can’t hope to incorporate the TBL framework meaningfully into its strategies. 

Embracing the TBL approach allows boards to lead by example, demonstrating a commitment to a sustainable future and aligning with the evolving expectations of investors, consumers, and society.

The triple bottom line represents a shift in how businesses measure success. By valuing people, planet, and profits equally, companies can contribute to a more sustainable and equitable world. Implementing the TBL framework requires innovation, time, and expertise, but the rewards are significant.