What is TBL?
What is TBL?
Introduction:
In economics, the triple bottom line (TBL) maintains that companies should commit to focusing as much on social and environmental concerns as they do on profits. TBL theory posits that instead of one bottom line, there should be three: profit, people, and the planet. A TBL seeks to gauge a corporation's level of commitment to corporate social responsibility and its impact on the environment over time. In 1994, John Elkington—the famed British management consultant and sustainability guru—coined the phrase "triple bottom line" as his way of measuring performance in corporate America. The idea was that a company can be managed in a way that not only makes money but which also improves people's lives and the well-being of the planet.
KEY TAKEAWAYS
- The concept behind the triple bottom line is that companies should focus as much on social and environmental issues as they do on profits.
- The TBL consists of three elements: profit, people, and the planet.
- The triple bottom line aims to measure the financial, social, and environmental performance of a company over time.
- TBL theory holds that if a firm looks at profits only, ignoring people and the planet, it cannot account for the full cost of doing business.
Understanding the Triple Bottom Line
In finance, when speaking of a company's Bottom line , we usually mean its profits. Elkington's TBL framework advances the goal of sustainability in business practices, in which companies look beyond profits to include social and environmental issues to measure the full cost of doing business. Triple-bottom-line theory says that companies should focus as much attention on social and environmental issues as they do on financial issues.
Challenges of Applying the Triple Bottom Line
The following are challenges that companies can face when applying the triple bottom line.
Measuring the TBL
A key challenge of the TBL, according to Elkington, is the difficulty of measuring the social and environmental bottom lines. Profitability is inherently quantitative, so it is easy to measure. What constitutes social and environmental responsibility, however, is somewhat subjective. How do you put a dollar value on an oil spill—or on preventing one—for example?1
Mixing inverse elements
It can be difficult to switch gears between priorities that are seemingly antithetical—such as maximizing individual financial returns while also doing the greatest good for society. Some companies might struggle to balance deploying money and other resources, such as human capital , to all three bottom lines without favoring one at the expense of another.2
