Triple bottom line : incorporating total cost

Submitted by More Better on Thu, 11/03/2005 - 19:29.

Please post comments and suggestions regarding triple bottom line and implementing total cost

( categories: )

Talking about the Triple Bottom Line

I thought I'd provide some long-held thoughts here that can help clarify the topic.  The triple bottom line refers to a business view that reaches beyond the solely financial bottom line (Profit) to one which encompasses People, Planet, and Profit.  When one talks of incorporating total cost, this is very much related to understanding the dynamics around these three focal points.  Allow me to explain:  the triple bottom line paradigm allows one to embrace a stakeholder-based view rather than a shareholder-based one.  People and Planet refer to stakeholders, as we shall see below.

People refers to the value of human equity - people are any organization's greatest asset and represent the source of creative potential.  When we account for people we realize that the experience gained by people is key to  individual and organizational development.  The positive impact on people isn't always taken into account regarding sustainability initiatives, but it should.  People benefit from initiatives that provide a greener, healthier workplace and the result is nearly always greater levels of happiness and productivity.  Herman Miller is a perfect example of an organization that took the initiative and implemented greening efforts that resulted in higher initial cost but greater long-term benefits.  The secondary benefits need to be accounted for also- happier healthier employees are not only more productive, but they incur less healthcare expenses that affect benefits plans.  People are also a key stakeholder in the immediate environment of the organization in question - so the impacts on those individuals that are affected by a certain initiative (like reducing pollution) need to be considered in the cost-benefit equation.  Those happier customers or potential customers represent growing and emerging markets of eco-friendly individuals and organizations.  The appreciation factor creates reciprocative benefits and outcomes.

 Planet refers to sensitivity to environmental impacts and how concern for the environment makes sound business sense.  This speaks to conservation of natural resources, preservation of green and natural spaces (which ties back in to People being happier and more productive) and resulting improvements on quality of life for all stakeholders of the system.

Profit refers to  to the commonly understood financial bottom line which so many managers are focused on today in business.  The point is that shifting from the short term focus on financial bottom line impact is necessary to allow for investment in  longer-term sustainability initiatives.  Managers are, unfortunately, rarely given the luxury of wider timeframes to produce ROI targets.  The investment in proactive strategies like pollution reduction technology can reap long term benefit through preparation for likely legislative changes and the mitigation of litigation down the road.

In the long run people and planet inclusion as described above creates a more systemic view of sustainable solutions that actually does result in greater ROI and financial bottom line outcomes in the long run.  The three items are truly interconnected and considering all of them creates a more holistic appreciation and necessary longer-term outlook for investment initiatives.

The incorporation of total cost becomes easier through this framework - one can realize the true cost of fossil fuel use by a factory is much higher when we consider adverse effects in terms of global warming and respiratory ailments. And the cost of training programs for people that empower and inspire them to peform better on the job doesn't seem so high when the impacts on health, happiness, and motivation of employees are accounted for as well.