The triple bottom line is one of the fundamental principles of sustainable business. The bottom line refers, literally, to the last line on an income statement that shows the profits made by a business. Traditionally, business has been all about the bottom line and profits.
That is all changing now.
A business that focuses only on profits ignores two critical elements necessary to its success: human capital and natural capital. Simply put, a company cannot operate without people to carry out the operations or without natural resources to provide raw materials that can be turned into a finished product. Thus, to look at a business solely in terms of profit is to ignore two of the necessary components of a viable business.
The triple bottom line attempts to rectify this situation. Rather than looking just at profits, the triple bottom line takes into consideration both people and the planet as well. What are the social and environmental impacts of a business in its pursuit of profits? Or, how are people, planet, and profit interrelated in a business?
The triple bottom line has been recast in several related ways, such as environment, economy, equity and human, natural and financial resources. In the case of Cultivating Capital, I prefer to think of it as human, natural, and financial capital.
Businesses that work to implement the triple bottom line are recognizing that a business model focused solely on financial profit is inherently unsustainable. The focus on the triple bottom line provides a more holistic understanding about the business, which can also help savvy owners and managers identify both risks and opportunities that might not be readily apparent when taking a more traditional, one-dimensional perspective of the business.
A triple bottom line business, therefore, will consider its social and environmental impacts when making business decisions. In many cases, this means that the business will report not just on financial performance but also on social and environmental performance. This has also given rise to corporate social responsibility, the practice of businesses assuming responsibility for their social and environmental impacts.
Are you interested in learning more? If so, you might want to read the next post about “Natural Capital: What It Is and What It Means for Your Business.”
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