Triple Bottom Line

The triple bottom line is a business concept that states 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.”

Three P’S

The 3 P’s of the Triple Bottom Line are

• Profit: The financial return an organization generates for shareholders
• People: An organization’s commitment to positively impacting society
• Planet: An organization’s effort on the environment

Profit

In an capitalist economy, a firm’s success most heavily depends on its financial performance, or the profit it generates for shareholders.

People

This component focuses on a business’s societal impact, or its commitment to people.

It’s important to make the distinction between a firm’s shareholders and stakeholders. Traditionally, a business have favored shareholder value as an indicator of success, meaning they strive to generate value for those who own shares of the company. As firms have increasingly embraced sustainability, they’ve shifted their focus toward creating value for all stakeholders impacted by business decisions, including customers, employees, and community members.

The Planet

The final component of the triple bottom line is concerned with making a positive impact on the planet.

While businesses have historically been the greatest contributors to climate change, they also hold the keys to driving positive change. Many business leaders are now recognizing their social responsibility to do so.

Source

Information from: The Triple Bottom Line: What It Is & Why It’s Important

Written during: HBA1 CEL