In the 1990s, Elkington proposed a framework for measuring and quantifying an organization’s economic activities that had a direct impact on society and the environment, thus moving beyond traditional performance measures such as profit, return on investment and shareholder value to incorporate creation of social and environmental value and the impact of operations on all of the organization’s stakeholders (i.e., shareholders, customers, employees, business partners, governments and local communities). Elkington referred to his framework as the “triple bottom-line”, described by others as an expansion of the “traditional accounting and performance framework to encompass its ecological and social impact, in addition to its financial impact”. The constituent aspects of the triple bottom-line have become known as the “3 P’s” (i.e., People, Planet and Profit), and can be briefly described as follows:
- People: This aspect focuses on how companies behave with respect to addressing social and ethical issues such as fair treatment for employees and promotion of social cohesion. Issues that need to be addressed include, job creation, protection of human rights, non-indulgence towards fraud and corruption, use of child labor, gender relationships and discrimination in the workplace, workplace safety, labor participation in management and profits, implementation and enforcement of behavior codes and social cohesion (i.e., fulfilling individual and community needs). Companies must not only adhere to formal labor regulations but also must voluntarily and purposely adopt self-imposed systems to manage these issues. Companies should provide fair salaries, tolerable working hours and conditions and meaningful benefits such as health care and insurance, and should also demonstrate their understanding of the value of their workforce through hiring, developing and training the “right” people that complement their sustainable business objectives. Training should not only meet the current needs of the company but also include a “knowledge” component that strengthens the ability of employees to survive in a competitive labor marketplace.
- Planet: The second aspect recognizes that sustainability is crucial to the longevity of the planet and its inhabitants and calls on companies to measure and manage the impact of its activities on natural resources and the landscape. Unsustainable use and abuse of natural resources will ultimately cause companies to lose their people, employees and customers, and destroy their profitability and economic viability. Among the specific issues that need to be considered are environmental care, supply chain management, eco-efficiency, clean products, sustainable technology development, sustainable industry fields and eco-design. In many instances, protecting the environment is a real and substantial constraint on profit maximization for companies; however, the triple bottom-line places environmental integrity side-by-side with profit seeking as overall goals and purposes for the organization. As is the case with the People aspect, companies must not only deal with environmental laws and regulations but also a broad and continuously growing array of self-regulatory standards.
- Profit: The third aspect, profit, is certainly not new to commercial ventures and it can be expected that companies will be concerned about the financial results of their business activities. Simply put, companies cannot achieve the long-term value for Planet and People described above unless they are financially viable and sustainable and thus able to survive and ultimately achieve the goals and purposes originally stabled by the entrepreneurs who founded the venture. However, success with regard to profitability in the triple bottom-line framework is gauged by additional factors such as allocating excess funds away from self-gratification and into meaningful, helpful ways such as investments in machines and infrastructure, sponsoring and donating and equitable distribution of financial profits (e.g. labor participation). In addition, the framework also takes into account the economic benefits that society in general enjoys from the business activities of the company including profits realized by supply chain members and other business partners which must be understood and valued as social benefits.
|Illustrative Areas for the “Triple Bottom Line”|
In explaining the role that lawyers and the legal profession have with respect to corporate social responsibility, the Council of Bars and Law Societies of Europe explained that the “triple bottom line” framework was designed to provide a road map for companies to understand how they should be contributing to sustainability in their relationships with human beings, or “people” (i.e., employees, suppliers, customers, local communities and other stakeholders); the external environment, or the “planet” (e.g., biodiversity and animal welfare); and the economy, referred to as “profit” and including the economy of the communities in which they operated. The Council provided the list of illustrative areas under each of the categories of the “triple bottom line”:
Social Responsibility (People)
· Labor rights: Slave, forced or compulsory labor; child labor; freedom of association/collective bargaining; non-discrimination/equal opportunities; rest, leisure and holidays; minimum wages; health and safety
· Right to work: Protection against unjustified dismissals and technical/vocational guidance and training
· Right to life
· Development rights: Right to education; to health; to adequate food and fair distribution of food; to clothing; to housing; to social security; to enjoy technological development
· Right to hold opinions and freedom of expression, thought, conscience and religion
· Right to a family life
· Right to privacy (e.g. surveillance, personal information, drug testing)
· Minority rights to culture, religious practice and language and cultural rights (indigenous peoples)
· Right to peaceful assembly
· Right to take part in political life
· Informed consent to medical/biological trials
· Moral and material interests from inventions
Environmental Responsibility (Planet)
· UN Convention on Bio-Diversity: in-situ and ex-situ conservation, impact on diversity, use of genetic material, technology transfer
· The Precautionary Principle (if in doubt about negative environmental impact of a given action – abstain)
· Use and handling of GMOs (Genetically Modified Organisms)
· Air emissions and impact on global warming (greenhouse gases)
· Impact on the ozone layer (Montreal Protocol Annexes)
· Prohibition of use of certain materials and substances, hereunder safe handling/transport of dangerous substances
· Distance to residential neighborhoods for production sites
· Soil, ground water and surface water contamination
· Treatment and reduction of waste water
· Water consumption and leakage
· “Eco-efficiency”, consumption of raw materials, and consumption of energy
· Export of waste and re-use of material
· Subsidizing environmental projects (e. g., protection of the rainforest)
· Animal welfare
Economic Responsibility (Profit)
· Financial profit, economic growth and asset creation
· Business ethics, corruption and bribery, conflict of interest
· Direct and indirect economic impact on communities through spending power (suppliers, consumers, investors, tax payments and investments), and geographic economic impact
· Economic impact through business process: outsourcing, knowledge, innovation, social investments in employees and consumers
· Monetary support for political parties, lobbying, and other ‘political’ activities
· External economic impact from pollution, internalization of externalities, value of consuming products
· Stock exchange behavior, including insider trading
· Economic regulation, tax incentives, redistribution
· State contracts and State Subsidies
· Intellectual property rights, hereunder patents, pricing and the impact on economic and societal development potential
· Antitrust and competition, including market impact and “alliances”
· Board and executive remuneration and role of accountants
· Taxes, including “transfer pricing”
Source: Corporate Social Responsibility and the Role of the Legal Profession: A Guide for European Lawyers (Council of Bars and Law Societies of Europe, June 2008).
While each of the 3 P’s can be understood and appreciated in isolation, the challenge for companies lies in achieving and maintaining the appropriate balance among the three areas, a task that is particularly difficult given that companies operate in a turbulent and evolving external market that is constantly changing and thus requires a series of twists and turns in business strategy and the areas of immediate focus. For example, the need to generate revenues to maintain operations and invest in new equipment and personnel required to grow the business may lead to temptations to cut corners on using eco-friendly materials that may be more costly. Sustainable entrepreneurs may also find that their desire to protect and reward their employees threatens the long-term viability of the business during recessionary times when sales are down due to factors outside the control of the company. Similarly, donations and sponsorships may need to be cut back during times that excess capital needs to be diverted to upgrading products to address changing customer requirements. In all of these instances, the impact of changes in strategy and tactics needs to be analyzed and communicated to the involved stakeholders
While the “triple bottom-line” has been well-known and recognized, a strong perception remains that financial and social returns are mutually exclusive and that improvements on one of these dimensions will be accompanied by reductions on the other dimension. Commentators have argued that it should not be a question of whether to focus on creating financial wealth or social change but rather on conceptualizing the path of the organization as concurrently pursuing both economic and social value. Bergh described that “blended value proposition” developed by Emerson et al., which is based on the belief that “the nature of value is integrated and non-divisible; that value attained as an outcome of an activity has financial, social and environmental elements integrated at the core of the value proposition”. What this means is that the focus of analysis should be on whole value created for all of the stakeholders, not just investors but also other impacted groups and society in general. Richomme-Huet and De Freyman have also stressed that sustainable entrepreneurs should create values that produces economic prosperity, together with social justice and environmental protection. In other words, there should not be a zero-sum game or tradeoff between profit and other non-profit aspects, such as environmental well-being or social welfare.
One issue that makes it difficult for companies to simultaneously manage People, Planet and Profits is that while there are accepted and reasonably objective ways to measure financial performance it is problematic to gauge the actual impact of a company’s behavior on nature and the communities in which it operates and thus assess the company’s overall performance along all included dimensions. Racelis cited an example provided by Sir Partha Dasgupta, who was involved in the development of the Inclusive Wealth Index: “If a national accountant claims the savings ratio of a country like Brazil or Costa Rica is 15%, but doesn’t take into account the natural capital, the forests being razed, then it is not a true indication of the accumulation of wealth. If depreciation of forests is deducted from savings, the picture looks significantly different.” 
An obvious problem is that there is no common unit of measurement, which makes it difficult to afford equal weight to each of the three dimensions. While there have been suggestions that social welfare and environmental damage can and should be measured using monetary values, the reality it is problematic, if not impossible, to put a price on social and environmental issues such as endangered species, nuclear disasters and soil degradation. Critics have claimed that companies have taken advantage of the lack of measurement tools to inaccurately report their triple bottom-line performances, with Pojasek arguing that while many companies have made a great public show of embracing the triple bottom-line, they often have used it in ways that have “provided a smokescreen behind which firms can avoid truly effective and environmental reporting and performance”.
In 2006, Savitz and Weber proposed a menu of economic, environmental and social performance measures based on information drawn from different functions within the company—accounting, marketing and human resources—that could provide a clear picture of a company’s management of the triple bottom-line and opportunities for reporting and assessing results:
- Economic: Traditional economic measures such as sales, profits and return on investment should be supplemented by taxes paid, monetary flows and jobs created (e.g., job growth and cost of underemployment.
- Environmental: Objective/quantitative measures can be obtained for air and water quality, energy usage (e.g., electricity and fossil fuel consumption) and waste production (e.g., hazardous and solid waste management).
- Social: Labor practices (e.g., unemployment rate and female labor force participation rate), community impacts (e.g., relative poverty, health adjusted life expectancy and violent crimes per capita), human rights and product safety and responsibility.
Majid and Koe observed that the use of the triple bottom line, often referred to as the “TBL”, had been extended beyond being a means for explaining or describing sustainable development to being recognized as a “tool or device for sustainable reporting under the headings of environmental quality, social justice and economic prosperity by organizations; due to its ease in monitoring the effects of business activities on the three dimensions in TBL”.
Many businesses, non-profit organizations and government agencies have cited the triple bottom line as the foundation for their measurement and reporting of sustainability performance; however, many of have complained that significant shortcomings remain in developing reliable, objective and wide accepted standards for measuring performance on the environmental and social dimensions of the triple bottom line and simultaneously integrating the performance on each of the dimensions to arrive at a viable measure of overall return on investment. Racelis criticized the efficacy of the “triple bottom line” as a measurement tool for sustainable entrepreneurship due to its failure to clearly mention the degree of emphasis that should be given to the domains identified in the model. Others have attempted to solve the puzzle of how to balance the domains by maintaining that equal priority should be given to each of the domains in the model, a stance taken by Majid and Koe for their model, discussed below, that includes four domains: economic, social, ecological, and cultural.
This post is part of the Sustainable Entrepreneurship Project’s extensive materials on Sustainability and Entrepreneurship.
 J. Elkington, Cannibals with Forks: the Triple Bottom-Line of 21st Century Business (Oxford: Capstone, 1998).
 Green Marketing TV: empowering green & Social Entrepreneurs (2011) (as cited in J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 4).
 The descriptions of the 3 P’s are adapted from E. Crals and L. Vereeck, “Sustainable entrepreneurship in SMEs—Theory and Practice”, http://www.inter-disciplinary.net/ptb/ejgc/ejgc3/cralsvereeck%20paper.pdf [accessed July 18, 2016], 3-4; J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 4-5; and L. Rey, Sustainable Entrepreneurship and its Viability (Rotterdam: Master Thesis for MS in Entrepreneurship, Strategy and Organizations Economics from Erasmus School of Economics, December 2011), 19-20. See also E. Crals and L. Vereeck, Sustainable Entrepreneurship in SMEs. Theory and Practice (Belgium: Limburgs Universitair Centrum, 2004).
 K. Langdon, The 3 P’s of Sustainability (2010) (as cited in J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 5).
 E. Crals and L. Vereeck, Sustainable Entrepreneurship in SMEs: Theory and Practice. Conference proceedings in 3rd Global Conference on Environmental Justice and Global Citizenship, February 12-14, 2004, Copenhagen, Denmark.; J. Austin, H. Stevenson and J. Wei-Skillern, “Social and Commercial Entrepreneurship: Same, Different or Both?”, Entrepreneurship Theory and Practice, January 2006, 1; and J. Hall, G. Daneke and M. Lenox, Sustainable Development and Entrepreneurship: Past Contributions and Future Directions, Journal of Business Venturing, 25(5) (2010), 439.
 L. Bergh, Sustainability-Driven Entrepreneurship: Perceptions of Challenges and Obstacles in a South African Context (Cambridge UK: Master Thesis for MS in Sustainability Leadership, July 2013), 6 (citing J. Emerson, S. Bonini and K. Brehm, The blended value map: Tracking the intersects and opportunities of economic, social and environmental value creation (2003)).
 I. Majid and W-L. Koe, “Sustainable Entrepreneurship (SE): A Revised Model Based on Triple Bottom Line (TBL)”, International Journal of Academic Research in Business and Social Sciences, 2(6) (June 2012), 293, 303 (citing K. Richomme-Huet and J. Freyman, What Sustainable Entrepreneurship Looks Like: An Exploratory Study from a Student Perspective. Conference proceedings in 56th Annual International Council for Small Business (ICSB) World Conference, June 15-18, 2011, Stockholm, Sweden).
 A. Racelis, “Sustainable Entrepreneurship in Asia: A Proposed Theoretical Framework Based on Literature Review”, Journal of Management for Global Sustainability, 2 (2014), 16 (citing UN Environment Programme, Inclusive Wealth Report 2012: measuring progress toward sustainability (Bonn: United Nations University-International Human Dimensions Programme, 2012)).
 T. Slaper and T. Hall, “The Triple Bottom Line: What is it and how does it work?”, Indiana Business Review, (2011), 4.
 J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 5.
 R. Pojasek, Debunking the Notion of a Triple Bottom Line (2009) (as cited in J. Bell and J. Stellingwerf, Sustainable Entrepreneurship: The Motivations & Challenges of Sustainable Entrepreneurs in the Renewable Energy Industry (Jonkoping, Sweden: Jonkoping International Business School Master Thesis in Business Administration, 2012), 5).
 A. Savitz and K. Weber, The triple bottom line: how today’s best-run companies are achieving economic, social, and environmental success – and how you can you too (San Francisco: Jossey-Bass, 2006).
 I. Majid and W-L. Koe, “Sustainable Entrepreneurship (SE): A Revised Model Based on Triple Bottom Line (TBL)”, International Journal of Academic Research in Business and Social Sciences, 2(6) (June 2012), 293, 300 (citing J. McCartney and P. Rouse, A Framework for Sustainability, Strategy and Management Control. Conference proceedings in 4th Asia Pacific Interdisciplinary Research in Accounting Conference, July 4-6, 2004, Singapore; and M. Mitchell, A. Curtis and P. Davidson, Can the “Triple Bottom Line” Concept Help Organizations Respond to Sustainability Issues? Conference proceedings in 5th Australian Stream Management Conference, May 21-25, 2007, New South Wales, Australia).
 See M. Mitchell, A. Curtis and P. Davidson, Can the “Triple Bottom Line” Concept Help Organizations Respond to Sustainability Issues? Conference proceedings in 5th Australian Stream Management Conference, May 21-25, 2007, New South Wales, Australia; and T. Slaper and T. Hall, “The Triple Bottom Line: What Is It and How Does It Work?” Indiana Business Review, Spring 2011, 4.
 I. Majid and W-L. Koe, “Sustainable Entrepreneurship (SE): A Revised Model Based on Triple Bottom Line (TBL)”, International Journal of Academic Research in Business and Social Sciences, 2(6) (June 2012), 293.