Triple Bottom Line

The phrase triple bottom line (often abbreviated as TBL or 3BL) refers to an expansion of the factors to be considered in evaluating the success of a corporation or other organization. Besides the traditional bottom line of profitability, the 3BL requires accounting for the effects of the corporation's operations on the physical and social environments (sometimes characterized as natural capital and human capital in analogy with the economic capital that is the focus of the traditional bottom line). The notion of the 3BL was developed in the 1990s as an effort to popularize the notion of corporate responsibility in the ecological and social spheres by broadening the accountability of a corporation beyond the economic interests of the shareholders to include societal stakeholders, who might be affected by the corporation's activities (for instance, a community might be affected by the pollution emitted by a plant and employees might be affected by unsafe working conditions within a plant). These concerns are sometimes expressed with the phrase “people, planet, profit” or “P+,” popularized by Royal Dutch/Shell.

Although many would endorse the notion of increased corporate responsibility toward the physical and social environment, there is no obvious way to measure effects in these spheres analogous to the generally accepted standards of financial accounting. For this reason, some critics feel that the very notion of 3BL is misleading because it implies a precision that is not possible to achieve.

In 2003, Wayne Norman and Chris MacDonald charged that 3BL is “inherently misleading” in their seminal paper, “Getting to the Bottom of the ‘Triple Bottom Line.’” In their view, linking 3BL to traditional financial accounting is inappropriate as a comprehensive methodology for the evaluation of a company's social or environmental responsibility, and that the term could provide a smoke screen allowing firms to avoid truly effective social, environmental, and economic reporting and performance. Notably, they did not say any supporters of 3BL actually claim to aggregate the data in this way, but only that they would have to do so if their analogy with financial accounting were to have any credibility.

Norman and MacDonald's paper started a debate which continues in academic circles some six years later, but has had less practical effect: the phrase remains in common use in the business world, and consultants are still selling services to help corporations produce nonfinancial reports with a 3BL theme. In many cases, these reports seek to convince stakeholders that they should take seriously the social and environmental “bottom lines” to the same extent that they accept the financial bottom line in the financial statement. Sustainability reports use a wide variety of interpretive tools, including dashboards and scorecards, to augment narrative reporting and graphs, but none of these provide the aggregate measure promised by 3BL. Aside from the problem of there being no universally [Page 520]accepted metrics for environmental and social accounting, the reports are not subject to regulation in the way that financial annual reports are. Few include verification of their claims by outside agencies, making them an excellent opportunity for greenwashing (attempts by a corporation to seem more environmentally responsible than they really are), and given increasing consumer interest in purchasing products which they feel are ecologically and socially responsible, 3BL can easily become just another marketing tool.

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