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The Triple Bottom Line

June 22, 2019 (657 words)

Profit is the bottom line, as we all know. But how many of us are familiar with the Triple Bottom Line? It consists of Profit, People, and Planet. Though the term is said to have been coined way back in 1994, I only just heard about it this week, from an official with Cross Catholic Outreach, while driving through the mountainous countryside of Guatemala.

The TBL (as insiders like to casually refer to it) is a framework that recommends companies focus not just on their immediate profitability, but on the social and environmental impact of their operations as well. The idea of “corporate social responsibility” which we hear bandied about on a regular basis these days is closely associated with this theory.

British management consultant John Elkington is credited with identifying the “triple bottom line” as a more enlightened way to measure corporate performance. He thought a company could be strategically managed so as to not only make money, but to improve people’s lives and the planet.

the difficulty of measuring non-monetary goals…

One obvious difficulty in implementing the TBL is trying to measure non-monetary goals. Profitability is inherently quantitative, so that one is easy to pin down. But what exactly constitutes social and environmental responsibility? It’s a much more subjective conversation. How do you measure the impact of avoiding an oil spill?

And it can be tough for companies to switch gears between priorities that are diverse, if not in downright opposition to each other: maximizing financial returns while also doing the greatest good for society.

Determining the appropriate deployment of money and other resources to all three bottom lines is a tricky proposition. How to avoid favoring one at the expense of the others? But Elkington’s theory contends a company that looks only at profits, and ignores the well-being of its people and the planet, cannot give a true reckoning of the “full cost” of doing business.

negative repercussions of focusing on profit alone…

As we have lately been made aware, forsaking the TBL in the name of profit can result in some dire environmental repercussions. Causes such as damage to the ozone layer and destruction of the rain forest have attracted some high-profile activism.

But a far more familiar and immediate problem that hasn’t gotten quite the same level of celebrity-sponsored publicity is the age-old exploitation of labor.

Some consumers have demonstrated a willingness to pay a premium for products when workers are given a living wage, and the environment is being respected in the production process. But by-and-large most of still go for the best deal, which we instinctively equate with being the lowest price.

While the corporate world as a whole is more conscious of its social and environmental responsibility, and certain trendy consumer-product companies are adopting or ramping up their social programs, our largest employers in this market segment, like Wall-Mart, McDonalds’s, Google and Amazon have not quite embraced the idea.

but the major players only give lip service…

Oh, sure, all the big boys give lip service to the idea of social responsibility. But their sophisticated business models are based on a tried-and-true formula: hiring the cheapest labor possible. This inevitably results in miserable working and living conditions for a large swatch of their rank-and-file workforce.

So cheers to John Elkington for putting his best foot forward in a good cause, some twenty-five years ago. But his message needs to spread beyond a small cadre of niche businesses.

We shouldn’t let ourselves be lulled into believing our contemporary version of capitalism isn’t really so bad after all, just by repeating the hopeful mantra of “profit-people-planet” to ourselves, over and over again.

The challenge of properly balancing the rights and obligations of capital and labor will require much more effort on the part of corporate America, if we are ever going to get this right.

Robert J. Cavanaugh, Jr.
June 22, 2019

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