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Date: 2024-05-19 Page is: DBtxt003.php txt00019533

Management
Triple Bottom Line

What is the Triple Bottom Line and Why is it Crucial for Business Success?

Burgess COMMENTARY

Peter Burgess
What is the Triple Bottom Line and Why is it Crucial for Business Success?



The ‘triple bottom line,’ a phrase first coined by John Elkington in 1994, is a concept that expands how a business’s performance is measured to include social and environmental goals to its financial bottom line.

The triple bottom line is therefore used as a measure of a company’s economic performance and valuation, its level of corporate social responsibility (CSR), as well as its environmental sustainability standards and impacts. And it matters: for example, a 2013 study by Cone Communications and Echo Research showed that 82 percent of consumers in the United States considered the company’s CSR when deciding where to purchase goods and services.

According to a The Guardian, a compilation of over 50 studies from financial organizations such as Goldman Sachs shows “companies that are the leaders in environment, social and good governance policies are financially outperforming their less sustainable peers. Sustainability is better business–and we can prove it.” For example, a study conducted by CDP and WWF showed that if companies were able to cut their carbon emissions by roughly 3% per year, they could save $780 billion over 10 years, or in the shorter term, $190 billion in 2020 alone.

So how can companies and startups leverage this power?

One example of social responsibility is the concept of Fair Trade, a movement that advocates for assisting producers in developing nations to achieve better trading conditions and wages. For example, the Fair Trade Accountability Watch (FTAW) is an online watch system that empowers both stakeholders and the public to highlight issues or concerns about a World Fair Trade Organization (WFTO) member’s level of compliance with WFTO’s Standards. The WFTO also provides a searchable database to facilitate finding fair trade products and suppliers, in addition to ‘Guaranteed WFTO’ members. There are also opportunities for promotion of Fair Trade such as the recent launch of the Fair Trade Charter, with global activities and opportunities.

How else can social responsibility ensure sustainability? According to Deloitte, sustainability is a “comprehensive approach to management of organizations focused on creating and maximizing long-term economic, social and environmental value.” Deloitte adds that this approach is a response to the unique “challenges of the modern world facing organizations from the public and private sectors.”

Furthermore, the ideals and goals of sustainability include an awareness that the business entity is ‘surrounded by stakeholders’ and therefore developing positive relationships and facilitating communication with stakeholders is crucial both in managing potential risks and in providing a competitive edge for businesses.

So what are the potential benefits for businesses and why should startups be concerned with ensuring environmental, economic, and social responsibility and sustainability?

Deloitte summarizes the benefits of sustainability for businesses as enabling:
  • Minimization of operating costs thanks to more efficient and sustainable management of resources throughout the entiresupply chain
  • Successful management of economic, social, and environmental risks and threats
  • Pinpointing the organization’s long-term value
  • Cultivating an image of trustworthiness and maintaining customers’ trust and loyalty through active engagement and communication
  • Stability of customers thanks to developing and sustaining positive relationships with stakeholders
A Well-Defined Goal

A well-defined social purpose and sense of responsibility can help set a startup or small business apart and benefit its development and growth. As highlighted in a 2012 study by Edelman, over 50% of consumers consulted stated that that if the price and quality of brands were equal, a brand’s social purpose would be the most important factor when considering a purchase. Therefore, startups and small businesses can enhance this competitive edge by making “social responsibility a pillar of their purpose, not an afterthought”.

Customer Loyalty Ensuring performance against environmental and social standards, in addition to economic performance, has the synergistic effects of generating social benefits, ensuring protection of environmental standards and sustainability, and also increasing financial profit and business value. As highlighted in a previous study by Edelman, the mutually beneficial practice of ensuring a ‘good purpose’ also leads to customer loyalty. 70% of global consumers stated they would stay loyal to a brand if it was shown that the organization ensured social responsibility. Moreover, in addition to customer longevity, ensuring social and environmental responsibility leads to greater pride and satisfaction among organization employees, further motivating employees and fostering “cohesion among the staff at all levels.” Trustworthiness and reputation Another crucial benefit of making a commitment to environmental and social sustainability is the enhancement of a company’s reputation. In particular, it can be challenging for startups to build the trust and support of clients and encourage new customers. Social and environmental sustainability and ideals can help develop trust. For example, the web-based market startup WebpageFX has shown that the initiatives and programs to promote social good has helped them develop trust and gain the support of potential clients. The startup’s #FXbuilds program rewards the goal accomplishments of their employees by donating money to help build schools in developing countries. WebpageFX explains that “we accept responsibility, work with integrity, and give back to others. We believe in giving back to our communities and to the world—so much that we’ve made it one of our core values.” Green Leadership Along these lines, Leaders in Energy’s fourth Green Career Momentum (GCM) sessionheld in June at Green America focused on how to establish integrity as a green leader. Beth Offenbacker, principal at Waterford, opened the session by explaining that “as green leaders we’re bringing our reputations with us. So, how do we reinforce our personal brandand not undermine it with things that may undermine our credibility?” This support for an environmentally and socially conscious brand applies both to individuals as well as to companies, and it is particularly important for startups looking to establish credibility, trustworthiness, and reliability, and grow a loyal client base. Changing Business for Good Neil Gaught, author of “CORE: How a Single Organizing Idea Can Change Business for Good” writes about the necessary change that needs to take place for businesses to pursue both profit and social purpose. His book discusses how businesses need to change in a fundamental way to contribute to society through a Single Organizing Idea (SOI). An SOI ties together the profit and social purpose of an enterprise that multiple stakeholders can both contribute to and benefit from. One example he gives is the UK-based Community Clothing, a cooperative network and a commercially competitive fashion brand with a social purpose. Stay tuned for our forthcoming interview with Neil, where we’ll discuss this topic in more detail! Want to Learn More? Leaders in Energy has compiled a list of resources for sustainable and socially responsible investing. Also, if you are a young entrepreneur and have a business idea for social good that you’d like to pitch, you can enter for the chance to win valuable funding and mentorship at the Global Youth Forum this December in Paris. Miriam Aczel is a President’s Scholar PhD Candidate at Imperial College London’s Centre for Environmental Policy. Her research focus is on international energy science and policy, with a focus on mitigation of environmental and health impacts of shale gas. She is also co-founder and co-director of the Amir D. Aczel Foundation for Research and Education in Science and Mathematics, a nonprofit based in Cambodia.
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