The bottom line is… not just about money. Barney Jeffries provides a primer to triple bottom line accounting.
So what is the bottom line? When you’ve totted up all your income and expenditure, the final figure gives your net profit (or, if you’re not so lucky, loss). Because this figure is traditionally found on the last line of your profit and loss statement, the ‘bottom line’ has become a euphemism for profit. By extension, it’s come to mean the fundamental or most important point.
Profit is everything, right? Well, you won’t stay in business long if you’re making a loss. But increasingly businesses are realising there are other goals as well. The term triple bottom line (TBL), coined by John Elkington in 1994, refers to social and environmental, as well as financial, performance. Put another way: “People, Planet, Profit”. It’s become the most widely accepted method for reporting on a business’ ethical performance.
It’s easy enough to see if you’ve made a profit, but how do you add up the people and planet parts? Calculating your social and environmental impact isn’t a simple numbers game (“Exploited child labour in Indonesian sweatshop: minus 100. Gave money to local charity: plus 50”). But accountancy isn’t just about numbers: it’s about giving a full account of your actions, and about accountability.
We always try to do the right thing – why do we need formal accounts? By reporting on something – the living conditions of overseas suppliers, the proportion of waste you recycle – you can begin to measure it. That allows you to track your progress. This helps you see where you need to make improvements. It’s also something you can show potential investors – and customers.
Isn’t it all rather subjective? Some things – like your carbon emissions, recycling rates or workers’ benefits – can be measured according to objective standards. As increasing numbers of businesses adopt TBL accounting practices, recognised standards are being developed. The Global Reporting Initiative (www.globalreporting.org), for example, produces guidelines for reporting on sustainability. These are widely recognised, and are used by more than 1000 organisations in 60 countries.
Does the triple bottom line have any legal status? Not yet, though some companies have adopted the triple bottom line as part of their own constitution. However, the new Climate Change Bill will make it mandatory for UK companies to report on their carbon emissions. Various local and international laws demand that businesses meet certain ethical standards. TBL companies are well placed to surpass these.
