Sustainability and the Triple Bottom Line

This blog was posted by the Conveyor and Sortation Systems (CSS) industry group of MHI.

Sustainability is a term we often hear in business. We hear many times how a certain practice or implementation is sustainable. Yet sustainability can be so much more. If we take a holistic approach, many break down sustainability into three equal parts: People, Planet, Profit. This is often called the Triple Bottom Line (TBL).

The phrase “Triple Bottom Line” was first coined in 1994 by John Elkington, the founder of a British consultancy called SustainAbility. His argument was that companies should be preparing three different (and quite separate) bottom lines. One is the traditional measure of corporate profit—the “bottom line” of the profit and loss account. The second is the bottom line of a company’s “people account”—a measure in some shape or form of how socially responsible an organization has been throughout its operations. The third is the bottom line of the company’s “planet account”—a measure of how environmentally responsible it has been.

However, while all three accounts are considered important, it can be difficult to measure the planet and people accounts in the same terms as profits—that is, in terms of cash.

Some advocate monetizing all the dimensions of the TBL, including social welfare or environmental damage. While that would have the benefit of having a common unit, many object to putting a dollar value on non-tradable commodities, such as wetlands or endangered species, on strictly philosophical grounds. Others question the method of finding the right price for things without a easily determinable monetary value.

To avoid the problems associated with reducing everything to a monetary value, another proposed solution is to calculate the TBL in terms of an index. Using an index eliminates the incompatible units issue and, as long as there is a universally accepted accounting method, allows for comparisons between entities.

A third way to account for each branch of the TBL would do away with comparisons altogether. While more difficult to justify using traditional business methods (ROI for example), measuring each sustainability bottom line on its own can allow for more flexibility and customization to let each branch be as successful as possible.

Selecting a method to measure the Triple Bottom Line is up to each individual organization, and should take into consideration corporate culture and which method best matches the business plan. No matter which method is chosen, it is important to create accountable sustainability initiatives and expand all three bottom lines.

If you’re reading this, you probably have a pretty good idea of how increasing profits works in business. But how do we invest in the people and planet branches of a sustainability plan?

People initiatives need to relate to… well, people. These programs should participate in being socially responsible to the people or community in which you belong. A few examples of ways companies can get involved are to:

  1. Donate time. A good way to build team morale, as well as contributing to your community, is to have your employees volunteer—on paid company time—for a good cause.
  2. Donate products or services. Your products and services are designed to help your customers, so they can help your community too.
  3. Donate money. Make it clear that a certain percent of your pre- or post-profit sales will go to a specific organization.

For planet initiatives, these programs should focus on doing your part in staying as environmentally friendly as possible. (For tips on making a business case for environmentally friendly initiatives, check out this article from the Harvard Business Review.) As far as selecting which program works best for your company, a few programs well suited to the material handling industry are:

  1. Increasing energy efficiency. Implementing programs within the workplace to alter behavioral operational changes not only allows for reduction in energy consumption but can also reduce operational costs. Companies often find that implementing these changes add operational efficiencies as well.
  2. Reducing fuel consumption. Large materials handling operations are now looking for ways to reduce fuel consumption of their equipment. In recent years, significant advances in technology have allowed for improvements in not only the efficiency and durability of equipment but have also allowed for greater fuel efficiency—or even fuel independence.
  3. Managing waste effectively. Implementing a waste management practice can include internal programs designed to help reduce waste within the workplace as well as product design initiatives to ensure the company’s products can be used by consumers in a sustainable fashion. Recycling efforts in order to reduce waste or effectively manage the waste can cut costs for an organization and also contribute to a more sustainable and environmentally friendly workplace.

Commitment to sustainability and the Triple Bottom Line is simply good business. More and more customers, suppliers and investors are making ethical sustainability a priority when selecting who they do business with, so it’s important to get started today.