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