Triple Bottom Line Framework & Corporate Responsibility

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  • 0:05 Definition of Triple…
  • 1:32 The First Pillar: People
  • 2:41 The Second Pillar: Planet
  • 3:31 The Third Pillar: Profit
  • 3:50 Triple Bottom Line Limitations
  • 5:28 Lesson Summary
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Lesson Transcript
Instructor: Beth Loy

Dr. Loy has a Ph.D. in Resource Economics; master's degrees in economics, human resources, and safety; and has taught masters and doctorate level courses in statistics, research methods, economics, and management.

In this lesson, we look at an accounting framework called triple bottom line. We focus on its three pillars of sustainability: people, planet, and profit. During the lesson, you'll see how triple bottom line connects with corporate responsibility.

Definition of Triple Bottom Line

Let's say that we are an accountant for a natural gas company called JList Drilling. Our company specializes in retrieving natural gas. The accountant prior to you focused on providing financial ledgers that only included profit. You want to implement something called triple bottom line.

The corporate officers are curious and ask that you try this as a way to update the company's strategic thinking. With bad press related to water contamination, road damage, and misleading contract practices, the company wants to use this information as an opportunity to project an image of corporate responsibility. Let's get some background on what this means for your job tasks.

Triple bottom line (TBL or 3BL) is an accounting framework with three integral parts:

  1. Social
  2. Environmental (or ecological)
  3. Financial

These three parts are also known as the three pillars of sustainability:

  1. People
  2. Planet
  3. Profit

TBL is a concept that was developed in 1994 by John Elkington. He advised companies to create three bottom lines and measure a company's full economic value, not just profit. The economic values include measures of social, environmental, and financial responsibility, which make up corporate responsibility. The goal is to give a big picture of the company's investments, not just assets and liabilities. Let's look at each pillar.

The First Pillar: People

The first pillar of sustainability, people, taps the company's dedication to social responsibility and investment in human capital. This is where a company gets involved in making the world a better place through investing in its employees and people in the community. Activities that improve quality of life, education, health and welfare, homelessness, and poverty levels would be included here.

To improve its social bottom line, JList Drilling could undergo an effort to help employ people with disabilities. Ideas on how to improve its social responsibility would be:

  • Sponsoring a job fair for people with disabilities
  • Contributing to the purchase of service dogs for veterans with mental health limitations
  • Offering the corporate grounds as a place for a Special Olympics fundraiser
  • Undergoing a hiring initiative to have 10% of their workforce be people with disabilities
  • Offering training to workers on disability etiquette.

These programs would increase the diversity of JList Drilling's workforce, which would contribute to an improved company culture. These activities would also show the community that the company is dedicated to hiring locally and hiring individuals with different abilities.

The Second Pillar: Planet

The second pillar, planet, looks at how much the company has invested in environmental responsibility. These are things that improve the natural capital, or ecology, of our surroundings, like water and air. Activities to save energy, create animal safe havens, and increase the use of public transportation would also be included here. Ways for JList Drilling to improve its environmental responsibility are:

  • Developing a recycling initiative
  • Switching to hybrid vehicles
  • Contributing to a composting project for local schools
  • Going to a paperless workplace
  • Working with vendors to reduce packaging materials
  • Removing suppliers that are cited for environmental hazards
  • Sponsoring a college scholarship in renewable energy

These activities will help the company reduce its carbon footprint and give the company something it can use in its marketing materials.

The Third Pillar: Profit

The third pillar, profit, is a typical bottom line that measures the company's profit. Usually this entails calculating your costs, expenses, and sales. Then, you can look at your total profit and calculate your profit margin, which is the net profits divided by sales. This is what company executives are used to seeing as a bottom line report.

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