Elkington's Triple Bottom Line

What is the Triple Bottom Line?

• A way of assessing business performance based on three important areas:

  • Profit

  • People

  • Planet

The Traditional ‘Bottom Line’:

• Businesses assumed to be profit-maximisers

• Traditional measure of business success

• Closely linked with business value (e.g share price)

• Often the basis for financial incentives (e.g. bonuses)

The ‘Triple Bottom Line’ suggests there is more to business success than profit:

• It aims to measure the financial, social and environmental performance of a business over a period of time

Profit:

• Familiar to manager

• Identified from income statement

• Audited=reiable figure

Planet:

• Measures the impact of business on the environment

• More tangible- e.g. emissions, use of sustainable inputs

People:

• Measures the extent to which a business is socially responsible

• It is hard to calculate, report reliably and consistently

Benefits and Value of the Triple Bottom Line:

• Encourages businesses to think beyond narrow measures of performance (profit)

• Encourages CSR reporting

• Supports measurement of environmental impact & extent of sustainability

Drawbacks and Criticisms of the Triple Bottom Line:

• It is not very useful as an overall measure of business performance

• It is hard to reliably and consistently measure People & Planet's bottom line

• No legal requirement to report it, so take-up has been poor