The term “triple bottom line” was first used by John Elkington in 1994.
But what is the triple bottom line and how is it used in the business world? Elkington defined triple bottom line companies as those that focus as much effort on improving lives and the planet as they do on generating profits for shareholders.
And from those humble beginnings 26 years ago came an incredible big idea. The big idea was that businesses exist to not just make money for shareholders, but to also do good things for people and the planet.
Said another way, companies that are good triple bottom line examples give significant focus on three key areas: profits, people and planet.
Evaluating financial profitability is done more easily by looking at a business’s financial statements. Evaluating how a company and its business leaders treats people and the planet can be more subjective. Here are some examples how a business’s impact on people and the planet could be evaluated:
In fact, there is a good-sized industry that has developed because of the triple bottom line. Independent firms that will evaluate the social and environmental impact of a business using a sustainability framework.
As a result of this independent evaluation around environmental sustainability and corporate social responsibility investors are able to somewhat compare businesses.
Some investors believe in sustainability so much that they will only invest in companies that take their responsibility for people and planet as seriously as they take their responsibility for profits.
As the chart above illustrates, it is more than a few investors that are catching on to the trend about investing in companies that take the triple bottom line seriously. Now there are trillions of dollars under management focused on these types of companies. And we are still in the early innings of a megatrend around this area.
Most people agree that a triple bottom line framework (i.e. TBL framework) makes sense. A TBL framework set the rules on what you will or will not invest in based on the business’s focus on people and planet. If investing returns are acceptable to me using this framework, then why would I invest in companies that are treating people unfairly or are polluting the world?
Take Exxon, one of the world’s largest fossil fuel companies. They destroy the environment to extract the fossil fuel from the ground. Then, their customers pollute the air when they use the product in their cars. A triple bottom line investor would not even consider an investment in Exxon, or any fossil fuel company.
Instead, triple bottom line investors would look for investment opportunities in renewable energy areas like hydro, wind and solar.
Let’s look at two triple bottom line examples that are well respected for their commitment to people and the planet that goes hand in hand with them being a for profit entity. These business know how to have a large positive economic impact for their investors, but do it in a way that that results in a positive social and environmental performance.
Often when talking about the triple bottom line, folks will point to Ben and Jerry’s, the quirky and popular ice cream business that was founded in Vermont in 1978.
From the beginning the founders saw the need for using the business not just as a profit generating entity. But they used the Ben and Jerry’s platform as a tool for social responsibility.
In 2005 they were the first ice cream maker to use Fairtrade certified ingredients. Fairtrade is important because it assures a fair price for small scale farming products. These smaller scale farms cannot compete on price with much larger farms that have economies of scale. These Fairtrade deals are essentially Ben and Jerrys paying more than then need to for their ingredients in order to keep smaller farmers in business. They do it because it is the right thing to do.
Fairtrade was a simple example of Ben and Jerry’s culture around “linked prosperity”, which is another name for social responsibility. In the Ben and Jerrys culture, linked prosperity was the idea that those that were successful should work to improve the world around them. Now that is a concept we can all get behind.
Another great example of the triple bottom line in action is Salesforce, the successful software company.
Salesforce is an incredibly successful technology company with more than $20 billion in annual revenue.
But equally impressive is the culture instilled by founder and chief executive officer Marc Benioff. They have a 1-1-1 model that pledges 1% of equity, product, and employee time to the communities it serves via various charitable activities. As just one example of this model in action, since inception Salesforce has given more than 3.8 million volunteer hours back to the communities where its employees live and where they do business.
This is a great example of a successful company with a powerful philanthropic vision.
In Summary:
Consider how businesses you invest in balance the triple bottom line.
To do this you will need to develop a TBL framework and then monitor your investments to assure that they are staying true to their triple bottom line commitments.
Don’t think that a business can’t be profitable and do good for society and the environment. There are lots of these kinds of businesses out their doing a great job.
Use our two examples to help get you started with your research.
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