The Triple Bottom Line: What It Is & Why It's Important

Mar 1, 2022 | by Yosy Christy Natalia

What is the triple bottom line approach?

Triple bottom line (TBL) is an approach to ensure a company’s CSR commitment. It is an accounting framework that has two aspects in addition to financial—social and environmental. In simple terms, it is a way to ensure that a company adheres to staying committed to sustainability other than just reaping profits. Find out another frameworks for your CSR reporting.

Harvard Business School online defines TBL as a business concept that, “posits firms should commit to measuring their social and environmental impact—in addition to their financial performance—rather than solely focusing on generating profit, or the standard “bottom line.”

The approach consists of a tripartite of people, planet and profit. The term was coined in the early 90s by a renowned British entrepreneur and management consultant John Elkington. The term ‘bottom line’ refers to a company’s profit, with an added emphasis on sustainability and environmental issues. 

The significance

With the sustainability movement gaining steam and momentum like never before, there is a pressing need for companies to go beyond CSR activities and adopt social responsibility as part of their agenda and business vision. TBL ensures that besides focusing on profits, a company actively works in the direction of improving lives and paving the way for a better future. 

Inclusion of social, human, and environmental capital to a company’s financial capital enables getting a more accurate picture of a company’s impact.

How can companies report it? 

TBL, as a reporting framework, is pretty standard and institutionalized in today’s date. It serves as an apt parameter to measure and report on a business’s overall performance and impact. The Global Reporting Initiative (GRI) provides the TBL framework. Many conglomerates and global giants, such as Dow Chemical Company, Microsoft Corporation, among others, are known to use TBL reporting measures. 

Companies across the globe adopt TBL in a range of ways. While some have mandatory policies in place – labor, wage, equal pay, etc, others commit to employing more locals or developing a backward region in the area of its operation. 

TBL reporting can work a lot like sustainability or impact reporting. Simply put, if a company is adding more to the environmental woes and issues, such as pollution, wastage, deforestation, it is a clear indication of a violation or non-compliance with the TBL approach. 

All in all, TBL adoption can go a long way in maximizing profits, enhancing brand image, attracting new customers, investors, resources, and talent. An increasing number of stakeholders and users are known to invest or get associated with brands and companies with a holistic vision of doing business for the welfare of all.

Read also:

Corporate Social Responsibility (CSR) Activities: Examples

What is Sustainability Reporting?

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