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People, planet, profit (PPP)
The ‘Triple Bottom Line’ of People, Planet and Profit (PPP, 3Ps, TBL or 3BL) is a term relevant to investors and business decision-making. Rather than making investment decisions purely based on expected returns (i.e., only based on the ‘profit’ element of PPP), investment decisions are increasingly considering environmental and social returns as factors.
The TBL recommends that companies focus on social and environmental concerns as much as they do on profits. The TBL posits that instead of one bottom line, there should be three: profit, people, and the planet. A TBL seeks to gauge a corporation’s level of commitment to corporate social responsibility and its impact on the environment over time. [2]
Contents
1. History origins
2. Definition
3. Influence
4. Criticism
5. References
1. History/Origins
The term was coined by John Elkington in the early 90s. It has since become a widely used business term. He is acknowledged to be world authority on corporate responsibility and sustainable development and the author or co-author of 17 books. Elkington worked with TEST (Transport & Environment Studies as a Senior Associate, 1974-78), co-founded Environmental Data Services (ENDS) Ltd in 1978 and John Elkington Associates in 1983. He co-founded consultancy SustainAbility with Julia Hailes in 1987 serving on the board until 2014. In 2008, he co-founded Volans, where he is Executive Chairman.
2. Definition
As Elkington explains, “the triple bottom line is a sustainability framework that examines a company’s social, environment, and economic impact.” “The original idea was (…) encouraging businesses to track and manage economic (not just financial), social, and environmental value added—or destroyed.” This brief explanation makes it clear what the 3Ps stand for: social, environmental and economic impact. In some more detail, they entail the following:
People: the positive and negative impact an organization has on its most important stakeholders. These include employees, families, customers, suppliers, communities, and any other person influencing or being affected by the organization.
Planet: the positive and negative impact an organization has on its natural environment. This includes reducing its carbon footprint, usage of natural resources, toxic materials and so on, but also the active removal of waste, reforestation and restoration of natural harm done.
Profit: the positive and negative impact an organization has on the local, national and international economy. This includes creating employment, generating innovation, paying taxes, wealth creation and any other economic impact an organization has.
In the interpretation of these three, there is clearly most confusion about the third: profit. Mostly this is interpreted in the traditional sense, meaning the financial profit a company makes. But this interpretation is too limited and wrong for two reasons. First, it focuses on the financial aspect only. As the quotes above clearly illustrate, though, economic impact is a much wider idea than just financial impact. Second, it focuses on profit for the organization only. The original focus, though was on societal impact—and thus societal profit.
This widespread interpretation of the 3BL suggests that organizations are doing well if they generate large profits and limit their harm to people and the planet. This ignores the very fact that one of the most important impacts of an organization is its economic impact. Organizations, for example, add much value to society by creating employment, by generating innovation—and by paying taxes. That is what the third P of profit really stands for.
3. Influence
The 3BL has inspired many accounting and reporting frameworks including Social Return on Investment (SROI), ESG (Environmental, Social and Governance framework) and the Trucost approach. [1]
A review of management and sustainability articles showed that social and legal pressure for companies to adopt a responsible behaviour leads them to conduct their operations on behalf of triple bottom line goals. Behavioural differences between various countries caused institutions to create mechanisms that can press and change private standards through regulation and enforcement. [4]
4. Criticism
Elkington himself has recently expressed misgivings about the term, saying that the 3BL has been reduced to an accounting and reporting tool, used primarily for marketing purposes.
Elkington has argued 3BL was intended to provoke deeper thinking about the future of capitalism. Its goal was “system change—pushing toward the transformation of capitalism. It was never supposed to be just an accounting system. It was originally intended as a genetic code, a triple helix of change for tomorrow’s capitalism, with a focus was on breakthrough change, disruption, asymmetric growth (with unsustainable sectors actively sidelined), and the scaling of next-generation market solutions.”
5. References
[1] What The 3Ps Of The Triple Bottom Line Really Mean https://www.forbes.com/sites/samanthasharf/2020/06/08/how-to-reopen-the-housing-market/#6b3f929d9d67
[2] https://www.investopedia.com/terms/t/triple-bottom-line.asp
[3] https://sustainability.com/who-we-are/our-people/john-elkington/