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The Triple Bottom Line: What Is It and How Does It Work?: Business
The Triple Bottom Line: What Is It and How Does It Work?: Business
Tanya J. Hall: Economic Research Analyst, Indiana Business Research Center, Indiana University Kelley School of Business
S
ustainability has been an performance: social, environmental putting a dollar value on wetlands
often mentioned goal of and financial. This differs from or endangered species on strictly
businesses, nonprofits and traditional reporting frameworks philosophical grounds. Others
governments in the past decade, yet as it includes ecological (or question the method of finding
measuring the degree to which an environmental) and social measures the right price for lost wetlands or
organization is being sustainable or that can be difficult to assign endangered species.
pursuing sustainable growth can be appropriate means of measurement. Another solution would be to
difficult. The TBL dimensions are also calculate the TBL in terms of an
John Elkington strove to measure commonly called the three Ps: people, index. In this way, one eliminates
sustainability during the mid-1990s planet and profits. We will refer to the incompatible units issue and,
by encompassing a new framework these as the 3Ps. as long as there is a universally
to measure performance in Well before Elkington introduced accepted accounting method, allows
corporate America.1 This accounting the sustainability concept as “triple for comparisons between entities,
framework, called the triple bottom line,” environmentalists e.g., comparing performance between
bottom line (TBL), went beyond the wrestled with measures of, and companies, cities, development
traditional measures of profits, return frameworks for, sustainability. projects or some other benchmark.
on investment, and shareholder Academic disciplines organized An example of an index that
value to include environmental and around sustainability have multiplied compares a county versus the
social dimensions. By focusing on over the last 30 years. People inside nation’s performance for a variety of
comprehensive investment results— and outside academia who have components is the Indiana Business
that is, with respect to performance studied and practiced sustainability Research Center’s Innovation Index.
along the interrelated dimensions would agree with the general There remains some subjectivity
of profits, people and the planet— definition of Andrew Savitz for even when using an index however.
triple bottom line reporting can TBL. The TBL “captures the essence For example, how are the index
be an important tool to support of sustainability by measuring the components weighted? Would each
sustainability goals. impact of an organization’s activities “P” get equal weighting? What about
Interest in triple bottom line on the world ... including both the sub-components within each “P”?
accounting has been growing across its profitability and shareholder Do they each get equal weighting? Is
for-profit, nonprofit and government values and its social, human and the people category more important
sectors. Many businesses and environmental capital.”2 than the planet? Who decides?
nonprofit organizations have adopted The trick isn’t defining TBL. The Another option would do away
the TBL sustainability framework to trick is measuring it. with measuring sustainability using
evaluate their performance, and a dollars or using an index. If the users
similar approach has gained currency Calculating the TBL of the TBL had the stomach for it,
with governments at the federal, state The 3Ps do not have a common each sustainability measure would
and local levels. unit of measure. Profits are stand alone. “Acres of wetlands”
This article reviews the TBL measured in dollars. What is would be a measure, for example,
concept, explains how it can be useful social capital measured in? What and progress would be gauged based
for businesses, policy-makers and about environmental or ecological on wetland creation, destruction or
economic development practitioners health? Finding a common unit of status quo over time. The downside
and highlights some current measurement is one challenge. to this approach is the proliferation
examples of putting the TBL into Some advocate monetizing all of metrics that may be pertinent to
practice. the dimensions of the TBL, including measuring sustainability. The TBL
social welfare or environmental user may get metric fatigue.
The Triple Bottom Line Defined damage. While that would have Having discussed the difficulties
The TBL is an accounting framework the benefit of having a common with calculating the TBL, we turn
that incorporates three dimensions of unit—dollars—many object to our attention to potential metrics