A way of assessing business performance based on three important measures: people, profit and planet.
The Traditional Bottom Line
- Businesses assumed to be profit-maximisers
- Traditional measure of business success
- Closely linked with business value (eg, share price)
- Often the basis for financial incentives like bonuses
The Triple Bottom Line
- It aims to measure the financial, social and environmental performance of a business over a period of time
- Profit
- Familiar to managers
- Identified from income statement
- Audited—reliable figure
- Planet
- Measures impact of business on environment
- More tangible, eg emissions, use of sustainable inputs
- People
- Measures extent to which business is socially responsible
- Hard to calculate & report reliably & consistently
Mini case study: Novo Nordisk
- Profit
- Novo Nordisk is already highly profitable so does not need to work heavily in this area
- Primary objective is to develop and market treatments
- People
- Novo Nordisk Foundation has the majority of the voting power in their shareholder structure
- Develop/provide life saving medications
- Planet
- Commit to 100% renewable production sites
- Investing in research
- Zero environmental impact by 2030
Benefits & Value of the triple bottom line
- Encourages businesses to think beyond narrow measure of performance (profit)
- Encourages CSR reporting
- Supports the measurement of environmental impact and the extent of sustainability
Drawbacks & Criticisms of the triple bottom line
- Not very useful as an overall measure of business performance
- Hard to reliably and consistently measure people & planet bottom-lines
- No legal requirement to report it so take-up has been poor