The Triple Bottom Line

The Triple Bottom Line is an accounting approach that measures the success of a business or organization using three criteria: People, Planet and Profit. John Elkington conceived of the Triple Bottom Line in 1994 to come up with a more complete method of assessing a business or organization’s practices. Typical accounting uses profit as the sole measure of success. The Triple Bottom Line factors in the environment and society in addition to profit, giving a more holistic accounting.

An important concept in the Triple Bottom Line is that a business should be responsible to a ‘stakeholder’ instead of a ‘shareholder.’ Typically, businesses are run to maximize profits to the shareholders, e.g. owners. In Triple

Bottom Line accounting, the business must be responsible to its stakeholders, which are the business’ owners as well as the people and places that are impacted by the business.

Businesses or organizations that adhere to the Triple Bottom Line are altruistic because they do not take advantage of negative externalities. An externality, as defined in economics, is a side effect of a business practice that impacts a third party. Coal-fired power generation is an example of an industry that has huge negative externalities. When coal is burned to create electricity, particulate matter is released into the air causing acid rain and air pollution. Acid rain and air pollution damage the environment, people included. Power companies that operate the coal-fired power plant generally are not paying for the environmental damage or human sicknesses that arise from their pollution. The government and the private sector end up paying for the “externalized” cost of coal-fired power pollution through environmental remediation programs and health care.

The Triple Bottom Line incorporates the externalities of a businesses’ practice into that businesses’ accounting. This is done by assessing the well being of stakeholders instead of shareholders. Using the previous example, if coal fired power generation companies used the Triple Bottom Line and accounted for the well being of their stakeholders, those companies would figure out a way to make a profit while also cleaning up their pollution because of the negative effects of their pollution on their stakeholders.

The coffee industry has done an excellent job of embracing and enabling coffee suppliers to use the Triple Bottom Line. The coffee industry has done this through the promotion of Fair Trade Certification, Organic Certification, and Shade-Grown Certification. Coffee suppliers who adopt the Triple Bottom Line can purchase Fair Trade certified coffee to ensure that the farmers who grew the coffee were paid a Living Wage. Coffee suppliers can likewise make certain that environmentally sustainable farming techniques were being used by purchasing coffee that is Certified Organic and Shade-Grown certified. By promoting the fact that their coffee is Fair Trade Certified, Certified Organic, and Shade-Grown Certified, coffee suppliers can make a profit by selling their coffee to conscious buyers who pay a premium for coffee that was grown in an environmentally and socially conscious manner.

If you are interested in adopting the Triple Bottom Line approach to your business or organization, start by identifying your businesses’ stakeholders. Stakeholders include the environment and everyone impacted by your business, from your employees to the employees of your subcontractors/suppliers. Next, research how your current business practices impact the stakeholders. It can be difficult to assess the practices of your suppliers/subcontractors, as they frequently do not tell the truth about their environmentally and socially harmful business practices (Kathy Lee Gifford and child sweatshops come to mind). Certification programs such as Organic and Fair Trade are great ways to ensure that you are not getting misled by your suppliers. Lastly, change any of your business practices that have a negative impact on society, the environment or your profit.

MOSAIC Community Lifestyle Realty adopts the triple bottom line. We have preferable commission splits for agents, and we have programs such as the Energy Retrofit Program and Be the Change Program.

For more information on the Triple Bottom Line, read The Triple Bottom Line by Andrew Savitz.