Triple bottom line
It consists of three Ps:
profit, people and planet
The phrase “the triple bottom line” was
first coined in 1994 by John Elkington, the founder of a British consultancy
called SustainAbility. His argument was that companies should be preparing
three different (and quite separate) bottom lines. One is the traditional
measure of corporate profit—the “bottom line” of the profit and loss account.
The second is the bottom line of a company's “people account”—a measure in some
shape or form of how socially responsible an organisation has been throughout
its operations. The third is the bottom line of the company's “planet”
account—a measure of how environmentally responsible it has been. The triple
bottom line (TBL) thus consists of three Ps: profit, people and planet. It aims
to measure the financial, social and environmental performance of the
corporation over a period of time. Only a company that produces a TBL is taking
account of the full cost involved in doing business.
In some senses the TBL is a
particular manifestation of the balanced scorecard. Behind it lies the same
fundamental principle: what you measure is what you get, because what you
measure is what you are likely to pay attention to. Only when companies measure
their social and environmental impact will we have socially and environmentally
responsible organisations.
The idea enjoyed some success in the
turn-of-the-century zeitgeist of corporate social
responsibility, climate change and fair trade. After more than a decade in
which cost-cutting had been the number-one business priority, the hidden social
and environmental costs of transferring production and services to low-cost countries
such as China, India and Brazil became increasingly apparent to western
consumers. These included such things as the indiscriminate logging of the
Amazon basin, the excessive use of hydrocarbons and the exploitation of cheap
labour.
Growing awareness of corporate
malpractice in these areas forced several companies, including Nike and Tesco,
to re-examine their sourcing policies and to keep a closer eye on the ethical
standards of their suppliers in places as far apart as Mexico and Bangladesh,
where labour markets are unregulated and manufacturers are able to ride
roughshod over social and environmental standards. It also encouraged the
growth of the Fairtrade movement, which adds its brand to products that have
been produced and traded in an environmentally and socially “fair” way (of
course, that concept is open to interpretation). From small beginnings, the
movement has picked up steam in the past five years. Nevertheless, the
Fairtrade movement is still only small, focused essentially on coffee, tea,
bananas and cotton, and accounting for less than 0.2% of all UK grocery sales
in 2006.
One problem with the triple bottom
line is that the three separate accounts cannot easily be added up. It is
difficult to measure the planet and people accounts in the same terms as
profits—that is, in terms of cash. The full cost of an oil-tanker spillage, for
example, is probably immeasurable in monetary terms, as is the cost of
displacing whole communities to clear forests, or the cost of depriving
children of their freedom to learn in order to make them work at a young age.
Elkington, J., “Cannibals with Forks:
the Triple Bottom Line of 21st Century Business”, Capstone, 1997
