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
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:
Further Reading
- The triple bottom line - Does it add value
- The Sustainability Advantage : Seven Business Case benefits
- Profit for Life: How Capitalism Excels
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