What is the triple bottom line?

The triple bottom line feels like a relatively new term to emphasise the importance of the impact that a company is having alongside its raw profit or loss. The first use of the term was in the early 90's meaning that in 2024 it is celebrating its 30th birthday. In this blog, we look at what it is and why it is important. 

We’re all aware of the traditional business notion of “The bottom line” – profit (or loss) that the company has made in that year. The triple bottom line expands this out and says that economic factors are not the only important element when considering business impact, but you have to take into account social and environmental factors as well. This leads to two other factors besides profit being added to this accounting framework: people and planet. 

The key reason for the increasing prominence of frameworks like the triple bottom line is the worsening environmental situation worldwide and the acknowledgement of the impact that corporations have in relation to it. Alongside customer awareness of issues like modern slavery and child labour, it has become incumbent on organisations to demonstrate their commitment to a cleaner, safer society alongside their desire for profit and growth. 

People

People, or social impact is a measure which looks at an organisation’s impact on the community around it. This can mean many things – the people who work for you, the families and dependents of your team, your stakeholders as well as the community at large. For example, Tony’s Chocolate have made it central to their organisation to be a provider of slavery free chocolate, and take that further and have a mission statement to make slavery free chocolate the norm in that industry. This focus on societal impact beyond their own organisation is one of the key markers of an organisation with a focus beyond profit. 

Planet

The environmental impact that an organisation has is the obvious alternative to the profit motive. Many organisations are either starting to bring sustainability impact into consideration at board level or are moving ahead of government legislation to report and improve on their environmental credentials. 

The important consideration here is not just the impact of the operations of the company itself but the input and output impact as well. For example, procuring steel at the dirtiest but cheapest steel mill is not an environmentally responsible move, even if the actual operation of the company once the steel arrives on site is carbon neutral. Likewise the onwards shipping and usage of a company’s products can have environmental impact which needs to be taken into consideration. 

Studies have shown that contrary to early fears in industry, real, heartfelt and deeply permeated environmental awareness is actually a competitive advantage as consumers increasingly look for this in their suppliers. However, the modern customer is very aware and cautious of ‘green-washing’, or companies that pretend an environmental awareness that is not real.  

Profit

The final bottom line is the traditional one. I don’t like to call this profit although it aligns with the handy “3P” alliteration! We work with plenty of not-for-profit organisations who wouldn’t recognise the imperative for profit as a driver. However, all organisations still need to focus on effective financial management in order to remain economically viable.  

The importance of the economic view in a triple bottom line conversation is that there should be economic advantage to the rest of society as well as to the company itself and its employees – a business which sucks money out of society and doesn’t enable the whole community to rise with it is one which would not be seen as truly profitable in this view. 

Why do we care?

What does the triple bottom line have to do with Inciper, a Microsoft business applications consultancy? Our approach to our customers has always been that we want to start by understanding what is valuable to them. This is true whether the value is in people, planet or profit. When we talk to the c-suite at our client organisations, we are always looking at the plan for the business over the next 3 to 5 years. Increasingly, we are finding that the discussion includes someone c-level with accountability for sustainability explaining how the next 3 years will look from that perspective. Our engagement with our customers will always be to find ways of helping them to achieve their business goals from within the Microsoft technology stack. 

Whichever of the three markers is important to our client business, we find that the same structured process is still necessary to move towards improvement: Understand the mission, understand the measures by which success will be measured, and finally understand what is stopping you from getting there.  

Aligning your business plan

As your business evolves and adapts to the changing landscape, you will start to use a framework like the triple bottom line to bring further influences into your strategic planning. You need to look at the wider context of your business and identify what is important to you, whether it is community involvement, cleaning up your supply chain or minimising your day-to-day environmental impact. You should also recognise that your whole team will have an opinion on where your focus should be in this regard. In a similar way to establishing a mission statement or a core set of values, making the exercise reach across the company will massively increase buy in to the sustainability aims.

Incorporating the triple bottom line into your 3-year plan is not just about meeting current trends; it's about future-proofing your organisation. As I said earlier, studies have shown that companies with a strong commitment to social and environmental responsibility not only enjoy a competitive advantage but also demonstrate resilience in the face of evolving market expectations.

In essence, aligning the triple bottom line with the business plan is a strategic move that positions your organisation for sustained success in a world where economic, social, and environmental considerations are increasingly intertwined. It's a commitment to building a legacy that extends beyond profit margins, resonating positively with stakeholders and the world at large.