Triple Bottom Line: From macro to micro

Image: Keerati-FreeDigitalPhotos.netThe triple bottom line is, in my opinion, a wonderful way of measuring the true success of a business. When I think back to my economics undergrad, investment exams, and certification material, nowhere did the phrase “Triple Bottom Line” appear. I was taught that the sole purpose of a business is profit. Most simply put, a business must make a profit in order to validate its existence and prove its success. This is and always will be the case; however, with triple bottom line accounting, profit is no longer the sole measure of a business’s success.

 

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Now a company’s success can be defined by how well it balances social responsibility and environmental sustainability as well as profitability. People, planet and profit; only when all three of these are in play and balanced is the company truly sustainable for the long-run.


Bottom Lines Explained

 

People: Human Capital. A company must have beneficial business practices toward its own employees and the community where it conducts its business. This is demonstrated by fair wages, safe work environments and non-exploitive labour practices. In other words, well paid, respected and educated labour.


Planet: Natural Capital. A company must also have sustainable environmental practices. A business should strive to reduce its ecological footprint by reducing waste and managing consumption of energy and non-renewable resources. Non-ecologically destructive practices.


Profit: Financial Capital. A company must have saved-up financial wealth after all expenses in order to continue. Profit can be used as investment capital to grow the business or pay out to workers.


A three-legged stool is often used as a metaphor for triple bottom line sustainability. When the stool’s three legs – three bottom lines – are in equal proportion, the stool is sturdy and bears weight well. It is sustainable. However, if one of the legs is not held in equal proportion, the stool is weakened and it becomes imbalanced or unsustainable.

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