A concept developed back in 1994, when business consultant John Elkington argued that a firm’s bottom line should go beyond dollars-and-cents, the triple bottom line (TBL) comprises three key components: people, planet, and profit. Focused on measuring an organization’s financial, social, and environmental performance over a period of time, TBL factors in the full cost of doing business.
Here’s how the components break down:
People. A TBL organization ensures that its operations benefit the company's employees as well as the community where it does business. They’re concerned not just with providing adequate compensation to its workers, “but also with creating a safe and pleasant working environment and helping employees find value in their work,” Arlette Measures points out in “What Is a 3P Triple Bottom Line Company?”
Planet. Companies that are dedicated to TBL avoid activities that harm the environment and seek out ways to reduce any negative impact that their operations may have on the ecosystem. They also control energy consumption and take measures to reduce their carbon emissions. “Many TBL companies go beyond these basic measures by taking advantage of other means of sustainable development, such as using wind power,” Measures adds.
Profit. This is a measure that all companies share, whether they’re using the triple bottom line or not. When looking at profit from a triple bottom line standpoint, the idea is that profits will help empower and sustain the community as a whole, and not just flow to the CEO and shareholders.
In exploring “How a triple bottom line approach benefits your company,” Alan R. Earls points to Patagonia’s 2016 decision to donate all of its Black Friday sales to environmental causes as one example of how such causes resonate at the customer level. “Instead of the approximately $2 million in sales the company said it expected,” Earls writes, “sales climbed to $10 million, which, in turn, went to underfunded grassroots environmental groups.”
Procurement departments can play a key role in helping firms attain their TBL goals. In “Sustainable sourcing is more cost-effective than you think,” Rich Weissman discusses how many buyers are caught between social responsibility and economics. “Those working in low-cost-at-all-cost operations are often forced to make procurement decisions that violate their own personal sustainability and social responsibility beliefs,” he writes.
Many times, procurement departments center on “sustainable strategic sourcing,” or the greening of the supply chain, only when it is the lowest-cost alternative to an existing non-sustainable product. “Cost pressures often win the day,” Weissman adds, noting that the gap between sustainable and low-cost procurement is narrowing.
“Buyers have greater choices in sourcing sustainable products from suppliers with a strong belief in corporate social responsibility,” he adds. “An increasing number of suppliers have embraced sustainability as an operational philosophy, and that has changed pricing and market strategies.” (The Institute for Supply Management defines socially responsible procurement as a framework of measurable corporate policies and procedures and resulting behavior designed to benefit the workplace and, by extension, the individual, the organization, and the community.)
“While it is best for all company strategies to align, the buying organization—and even the individual buyer—has the power to select sources that are socially responsible,” Weissman concludes. “The strategic sourcing model is focused on supplier performance, and to many being socially responsible is part of that performance.”
It’s Just Smart Business
In Industry Week’s “A Sustainable Supply Chain: It Begins with Trust,” the authors of The Sustainability Edge: How To Drive Top-Line Growth With Triple-Bottom-Line Thinking, show how procurement can partner with suppliers to develop sustainable supply chains, and how doing so provides distinct competitive advantages. These include protection against reputational damage; reduced environmental impact and costs; and better supply continuity.
“Working with suppliers to develop robust and resilient supply chains that can withstand unforeseen environmental, social, and political challenges,” they write, “is smart business for both customer and supplier businesses.”