The Need of a New Triple Bottom Line: What Went Wrong.

Julio F. Campos*

Back in 1994, John Elkington coined the Triple Bottom Line (here referred to as Elkington’s TBL, or eTBL) concept, which was rapidly adopted by the market and is now widely referred to as the accounting pillar when it comes to corporate sustainability.

The TBL states that a corporation system can only be sustainable if its environmental, social and economic impacts are managed to stay as close as possible to a balance between its three components.

Although it seems a straight forward approach, he decided that TBL needed a recall, for it wasn’t being used as he intended it to be.

What went wrong?

We can narrow down to two reasons why a recall, with an explanation on how it supposed to work, was needed.

The first one was business appropriation adapting the TBL (here referred to as business TBL, or bTBL) to a more palatable conceptual structure. Purposely the first paragraph, in contrast with the second one, of this text presented the wrong view, the business view, of eTBL. According to Elkington himself, it was never supposed to be only an accounting framework, but also a management one.

Its original proposal was a new managing way of think about business environmental, social and economic (not financial) values (tangible and intangible, monetarily measurable or not) generated by the business, with a core mindset about the intrinsic trade-offs between the three components and therefore the inherent need of balance amongst them, with equal importance is given to all.

When business converted it to an accounting structure, bringing it to a more comfortable working zone, the financial one, the eTBL was reduced to a matter of profits/losses analysis,  and the environment, society, and economy changed to more practical components of the planet, people and profits, widely known as PPP.

With economy changing towards a component closest to the corporation operations, society reduced to those somehow related to the corporation business.

The environment component curiously moved from something that was closest to manageable business impacts to a higher level of abstraction. Any action related to the “planet” can now be accounted for.

The direct consequence was the move from the original balance of the values from the three components to a profit/loss analysis. The good and comfortable cost/benefit analysis, resumed  the TBL to business responsibility.

A significant change in mentality about how to deal with business sustainability.

Could the business approach work?

No, it can’t..

Current business is based on a single bottom line, profits. Whatever is beneficial to profitability is accepted and whatever is prejudicial is rejected. That draws the line defining from how much effort a corporation will put into its sustainability actions.

To understand why it can’t work we must adjust bTBL to represent the original business focus on the three components.

Obviously, it’s not proportional, as society and environment would be nearly invisible. The balance clearly shifts towards profitability.

What becomes obvious is that the only movement available to the corporation, to reach the required balance, would be a drastic cut of the profits. And that’s bad for the annual bonuses.

However, business myopic perception is also clear. As eTBL depends upon the intrinsic interconnection of the components, to stay within its core concept, the business fails to understand that cutting profits isn’t related to a loss of sorts, but rather to share its economic value more equally amongst all components.

It’s not about losing value, it’s about rearranging it and, as consequence, increasing the system resilience. 

The business overall value wouldn’t change and afterward could increase, if not financially, sustainably.

Amazingly, as an example of how fast business works to appropriate and change concepts, Elkington’s “Green Swan” concept form his, yet to be released book, already has alternate definitions, which resulted in another article to bring some focus over it.

Unfortunately, while what counts is more important than what can’t be counted, nothing will change and probably the eTBL recall would fall in deaf ears or, most probably be adapted again to fit business interests.

Although a great and important effort even if Elkington, again, makes it clear how TBL should be used to shift business from accountability to resilience, unless that business mindset changes, little if any change is expected to happen.

* Acknowledgement

The author would like to thank John Elkington for his helpful advice and criticisms during the elaboration of this article.