Increasingly, successful enterprises are embracing a “triple bottom line” business model focusing on sustainability. Without a new kind of capitalism, one that replenishes the human and environmental resources that drive it, continued production will become increasingly difficult and expensive and, eventually, impossible.
Conceptual Triple Bottom Line
A company’s goals must look beyond short-term profitability to sustainable profitability, and that will require businesses to embrace a three-fold plan that creates economic, social and environmental value. This triple bottom line is one conceptual way to structure a corporate business model for a truly sustainable business, incorporating a business plan that addresses not just net profit or loss (economic sustainability), but also the planet (environmental sustainability) and people (sustainability in terms of customers, employees, vendors/suppliers and investors).
No business model can ignore the fact that profit is the traditional measure of business success. People go into business, and invest in businesses, to profit monetarily. The triple bottom line does not place environmental or social considerations above this profit incentive, because a business that does not profit is not sustainable-it will not be around long to provide any kind of benefit. However, in contrast to the industrial revolution-era business theories that assumed an inexhaustible supply of natural resources and willing workers, the triple bottom line acknowledges the modern reality that environmental and social resources are limited, and the progressive scarcity of those resources could eventually destroy business.
The triple bottom line theory pushes businesses to stop thinking of environmental and social responsibilities as a burden. Instead, sustainability in these areas offers opportunity to businesses that formulate and execute this business model. The triple bottom line business does not just absorb benefit from its surroundings; to do so will eventually exhaust the environmental and social bases on which the business relies. In order to be truly sustainable as a profitable enterprise, a business must provide as much benefit as it absorbs, in order to nurture the environmental and social resources that allow it to profit.
A 2009 report from the MIT Sloan Management Review and the Boston Consulting Group points out several examples of larger businesses that are profiting from enhanced environmental awareness in their business programs. Most notably, they include giants such as GE, Nike, Shell and Wal-Mart. But smaller businesses can see advantages from the triple bottom line business model, as well.
Every business consumes natural resources in the ordinary course of operating. A triple bottom line business concedes that these resources are limited, and that true sustainability as a business model requires it to do what is necessary to maintain those natural resources. Every business, no matter how small, contributes to the environmental impact of industry, and every business will derive ultimate benefit from reducing its negative effects on the planet.
One of the potential positive economic benefits of a triple bottom line business plan for a small business is the availability of financing. While many banks already require environmental due diligence before lending, there are signs that they may soon begin to require environmental accountability, forcing businesses that seek financing to provide business plans that include demonstrable environmental sustainability. Additional funding is available from both private and government sources for businesses that pursue environmental initiatives. Green makes good sense for modern business.
A business cannot succeed in the long-term, without good employees and good community relations. Exploiting employees may lead to short-term profits, but it will exhaust the supply of good employees, which will eventually make the business unsustainable. One report suggests that by looking on a global level at groups that generally go unnoticed due to their low economic standing, corporate assistance in raising their standard of living in a sensitive and responsible way will lead them to participate in the world economy.
Reports from strategic management research in various industries are developing proof that the triple bottom line’s insistence on maintaining a social base for business provides competitive advantages for those companies that seize the day. The triple bottom line’s social component can be even more significant at a local level for a small company. A business can quickly gain a bad reputation by treating employees poorly and responding to customer and supplier concerns with indifference. The result is an unsustainable and failed business.
The triple bottom line business model is achievable for small companies, and the business advantages that can be derived from it are potentially vast, with some being known now and some yet to be seen. A business can begin by examining its products, its employee base, its purchasing, manufacturing and distribution processes, its physical effects on the immediate environment via its building and operations and its internal policies, all with an eye to the three concerned areas of impact: profit, planet and people.