Triple Bottomline Reporting

18 March 2010 |

The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success -- and How You Can TooThe triple bottom line (abbreviated as "TBL" or "3BL", and also known as "people, planet, profit" or "the three pillars" captures an expanded spectrum of values and criteria for measuring organizational (and societal) success: economic, ecological and social. With the ratification of the United Nations and ICLEI TBL standard for urban and community accounting in early 2007, this became the dominant approach to public sector full cost accounting. Similar UN standards apply to natural capital and human capital measurement to assist in measurements required by TBL, e.g. the ecoBudget standard for reporting ecological footprint.

Triple bottom line reporting makes companies accountable for economic, social and environmental effects of doing business. This is a popular form of accounting for nonprofit companies and government organizations to show a commitment to corporate social responsibilities. For these companies, social and ecological performance is just as important as financial performance.

Let's break down the three terms and how they apply:

People

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.

Planet

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.

Profit

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

Sources:
  1. Wikipedia
  2. eHow
  3. Green living Tips
Further Reading

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