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17/06/2020 08:27:45 PM

The Triple Bottom line

The TBL is an accounting framework that incorporates three dimensions of performance: social, environmental and financial. This differs from traditional reporting frameworks as it includes ecological (or environmental) and social measures that can be difficult to assign appropriate means of measurement. The TBL dimensions are also commonly called the three Ps: people, planet and profits. We will refer to these as the 3Ps.

The triple bottom line or 3BL as it has been termed is founded on the belief that a business’s overall success cannot be attributed only to its financial position but also to its ability to address its ethical and environmental performance. Ultimately a sustainable organisation is one which creates value for the shareholders whilst having  concern  for  the  environment  and  the  interests  of  society  in  general. Businesses  have  long  been  required  to  report  on  their  financial  performance through their income statement and statement of financial position; advocates of the triple bottom line believe that the organisation should give the same attention to reporting on its environmental and social position and impact.
The  profit  objectives  and  measures  are  no  different  to  those  encountered previously and will include return on investment (ROI), sales and profit growth, control of liquidity and gearing.
With regards to the planet the measures for success will include the efficient and effective use of the resources utilised in the organisation’s operations and the by-products of the operations.
The people measures will include those which relate to customer satisfaction, employee relations and the impact on the wider community. The 3BL has a number of benefits for organisations which choose to implement its philosophy:
+ The ability to focus on costs which the organisation may have previously felt were out of its control and be able to achieve cost savings in them, is a big advantage, this can be closely linked to ABC drivers.
+ The provision of this style of external environmental reporting will provide useful  information  to  customers  and  suppliers  as  well  as  shareholders  and the public at large which can make the organisation more appealing. It can be used as part of an organisation’s commitments to corporate social responsibility (CSR).
However, the 3BL has not been as widely adopted as the BSC, this may be due to the fact that the social and environmental goals are difficult to measure and control and are likely to be unique to individual organisations or industries. Additionally in industries where there is little legislation or a spotlight on environmental issues it can be considered an unnecessary expense.