What is the Triple Bottom Line (TBL)?

Using a triple bottom line is like scoring a baseball team three different ways…

Instead of just tallying the number of runs your team gets, you might also score them on the number of times they shake hands with opposing players or the number of paper cups they recycle. After the game is done, you can report back to fans how the team played, how kind they were to the visiting team, and whether they did a good job recycling.

Companies traditionally only focus on a single bottom line: profit. The amount of profit (also known as net income) that a company generates is typically the main metric managers and investors use to gauge a company’s success. The triple bottom line (TBL) framework challenges that concept by encouraging companies to place equal focus on how their business practices impact the environment and society.

Instead of one bottom line, TBL expands the traditional accounting framework to three bottom lines: people, planet, and profits.

The triple bottom line system was developed in 1994 by British entrepreneur and sustainability advocate John Elkington. He argued that companies that focus only on profits don’t measure the full cost of doing business. They are not considering the long-term effects of their operations on society or the planet.

By combining traditional profit and loss accounting with measures of social and environmental responsibility, Elkington argued that the TBL framework can capture the full cost of doing business. Adopting the TBL is one way companies can show stakeholders and consumers that they are committed to corporate sustainability.

TBL is essentially a sustainability scorecard that companies, charities, and governments across the world use as part of their wider accounting frameworks. It’s important to note that TBL does not include any fixed measures of environmental or social impact. Companies typically create measurable goals specific to their business and industry.

There are three dimensions of the triple bottom line (TBL) framework: people, planet, and profits. Triple bottom line advocates often refer to these dimensions as “the three Ps.”

This TBL dimension focuses on the human or social cost of doing business. It considers human capital, labor, and the wider community a company operates in and takes into account how a company benefits society.

A company’s “people” bottom line goes beyond customers and workers. Instead, companies might consider their impact on a wide array of stakeholders, from neighbors of a factory to farmers involved in a supply chain.

The social capital component of a TBL index might measure employee wages to demonstrate fair pay, health and safety conditions, or volunteer hours working on community projects.

The second component of a TBL strategy is the “planet.” This is designed to measure a company’s impact on the natural environment. Some of the most common metrics include fossil fuel usage, recycling rates, waste disposal, use of natural resources, or overall carbon footprint.

On a TBL index, a company might track participation in a carbon credit system, recycling rates, or a transition to renewable energy.

Profits are the easiest element of TBL to measure because most companies already do. Most entrepreneurs go into business to make money, and the traditional bottom line they tend to focus on is profit. Profit usually refers to net income (total revenue minus all expenses and taxes).

Triple bottom line (TBL) works differently for every company, so each company that adopts the framework must come up with its own ways to define and measure the three Ps.

Because TBL is essentially a sustainability scorecard, it primarily serves as a reporting tool. In practice, companies committed to TBL continue to monitor their profits as usual. At the same time, they establish and track relevant social and environmental sustainability goals.

The TPL is often most visible in a company’s quarterly or annual reports. Management can demonstrate a company’s commitment to TBL by documenting progress in all three areas.

Although there is no universal TBL index, several well-known corporate social responsibility indices exist that align with the TBL concept. For example, the Global Reporting Initiative's (GRI) Sustainability Reporting Standards offer a wide set of indicators companies can track that cover the three Ps.

One benefit of the triple bottom line (TBL) is that it can improve a brand’s reputation. A 2018 Nielsen study found that 81 percent of global consumers feel strongly that companies should work to improve the environment. And 73 percent said they would “definitely or probably” change consumption habits to reduce harm to the environment.

Socially and environmentally responsible practices can create loyalty among workers and consumers, in some cases translating to higher revenues. A business can also experience long-term benefits from prioritizing working good working conditions, because it means workers are more likely to be happy and healthy.

Another benefit of TBL is simply ethical. Some business leaders may find it a moral imperative to monitor and improve their company’s impact on society and nature. But the benefits of TBL can be tangible as well: Companies can sometimes reduce overhead through sustainability practices like curbing waste or using recycled materials to manufacture products.

The greatest challenge companies experience when applying the triple bottom line (TBL) is that it’s not a systematic framework. Although the concept outlines the three bottom lines advocates believe companies should focus on, it doesn’t offer universal measurements they can use.

Profitability is traditionally expressed in dollars, so it’s easy to measure. Tracking a company’s social or environmental impacts isn’t as straightforward. Without a set formula, individual companies must come up with their own ways to measure these concepts.

Companies trying to apply the TBL may also struggle with prioritization. The TBL concept places equal emphasis on people, planet, and profits. Companies can report on all three aspects regularly, but they may lack adequate resources to tackle social or environmental challenges. As a result, some organizations might find it difficult to choose which bottom line to focus on.

Although the triple bottom line (TBL) can be a tricky framework for some businesses to deploy, there are a number of successful examples.

Global consumer goods corporation Unilever is one company that promotes the triple bottom line. The firm produced a net annual profit of €6B (around $6.5B) in 2019. Unilever also monitors its environmental and social impacts in an annual Sustainable Living Report, which uses TBL-friendly frameworks like the Global Reporting Initiative’s Sustainability Reporting Standards to benchmark its commitments.

Another example of TBL in action is outdoor retailer Patagonia. Since it was founded in the 1970s, Patagonia has developed a broad corporate social responsibility program. The company donates 1 percent of its global sales to environmental preservation projects, and 72 percent of its clothing lines use recycled materials. The company is also working on making its supply chain carbon-neutral by 2025.

Meanwhile, Patagonia’s aims for all of its apparel products to be made in factories that pay workers a living wage by 2025. By 2030, the company wants its entire cotton and hemp fiber line to be Regenerative Organic Certified, meaning the materials are harvested in a way that promotes sustainability in agriculture. Patagonia’s third bottom line has performed pretty well, too. The company reportedly had $800M in annual sales in 2019. In keeping with the company’s TBL commitments, billionaire owner Yvon Chouinard announced in 2020 that Patagonia would continue to pay all its employees despite the company’s retail stores being shut during the COVID-19 pandemic.