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Triple Bottom Line of Sustainability EXPLAINED

Sustainability may often be interpreted as just environmental sustainability, however, it is much more than that. The triple bottom line of sustainability is the fundamental framework to understand sustainable development! But, what is the triple bottom line (TBL) in sustainability?

3 Ps Of SUSTAINABILITY: Three Princ...
3 Ps Of SUSTAINABILITY: Three Principles of Sustainable Development

What is the triple bottom line of sustainability?

The “triple bottom line” (TBL) is a term that captures sustainability’s three central pillars: environmental protection, social justice, and economic development. The triple bottom line is also important because is a framework to measure sustainability.

The triple bottom line of sustainability was first mentioned in the Brundtland report in 1987. Sustainable development is built on top of the triple bottom line because it can be achieved only when environmental protection, social equity, and economic profitability coexist without one area taking over any of the others.

The term triple bottom line is used to express the concept that to achieve sustainable development, businesses should in fact have 3 balance sheets: economic, environmental, and social.

As you can see, the financial balance sheet is only one of the 3 bottom lines that should be considered to have a truly sustainable business.

According to this definition, the 3 balance sheets of sustainable development are seen as interacting with each other at the same level. While sustainable development resides at the intersection of the 3.

The triple bottom line of sustainability explained
Sustainable development is at the intersection of the triple bottom line of sustainability

More recently, the triple bottom line of sustainable development was also outlined by the United Nations Millennium Declaration and as of today, this represents the most popular model to evaluate and understand sustainable development.

A more sophisticated interpretation is recognizing that the three components of the triple bottom line are not all at the same level, but there is a hierarchy. The economy is contained in the society, and the society is contained inside the environment.

The relationship between the 3 bottom lines of sustainability
Diagram showing the relationship between the 3 bottom lines of sustainability

The triple bottom line is also known as the 3 pillars of sustainability, the 3 Ps, or 3 E’s of sustainability. Moreover, there is also a different version of this model that is based on 4 pillars, where more importance is given to human factors.

Luckily, nowadays we can find many examples of sustainable development and how to achieve it.

The Environmental bottom line

Environmental bottom line of sustainability

The environmental dimension of sustainability is crucially important. After all, we have to make sure that we’re leaving the planet in a better state than we found it. That means measuring our environmental performance and making sure that we’re having a positive impact.

There are many different measures of environmental performance. These include things like greenhouse gas emissions, water use, energy use, waste generation, and land use.

We can calculate these measures at the scale of a single company, a sector, or the entire economy. For example, the environmental impact of a company can be calculated by measuring the carbon emissions released by the company, or by measuring the water used by the company. The environmental impact of a sector of the economy can be calculated in a similar way.

The environmental dimension in business

The idea behind this is that companies should also be accountable for their environmental impact and not just for their profits. This led to de development of the idea of an environmental balance sheet for businesses.

The environmental bottom line refers to the various corporate efforts, regulations, laws, and other tools used to manage environmental issues such as land, freshwater, oceans, forests, air, natural resources, and wildlife.

The economic dimension line involves direct management of the environment with things like planting and preserving oxygen-producing trees and taking action on the human consumption side.

The field of environmental management encompasses the use of environmental science and conservation biology to plan and implement solutions that will help protect our natural resources.

This may include developing policies and regulations, managing land and water resources, and working to reduce emissions and other environmental pollutants. By working to promote a sustainable future, environmental managers help protect our planet and its inhabitants for generations to come.

This process takes also into account the resilience of the ecosystems and their capacity to absorb disturbances caused by human activities.

The other approach is to manage the demand side of resources coming from human activities. This involves things such as:

  • Energy consumption: incentivizing the migration towards renewable sources and improving efficiency.
  • Waste management: moving away from a linear model (where the materials end up in a landfill) and promoting a circular path, where recycling is used as much as possible to harness its benefits.
  • Food: promoting more healthy and sustainable diets, such as the Mediterranean or Japanese diets, that make less use of animal products.
  • Freshwater: efficiency is improved by upgrading infrastructure and using new green technologies, especially in agriculture. Managing also the demand side, by educating the public on the use of this precious and limited resource.
  • Reducing CO2 emissions: by making extensive use of renewable sources, improving efficiency, and upgrading to new technologies.
  • Population: statistics demonstrate that most of the world’s population growth is coming from the poorest areas of the planet. While the population of the richest nations remains mostly stagnant or in slight decline. Promoting equality and better living conditions for the poor is not only ethical, but it can also contribute to reducing the global growth of the population.
  • Cities: proper planning of the urban spaces and infrastructure can help to achieve more sustainable lifestyles.

Those are just some environmental sustainability examples and facts. Luckily, with the growing environmental awareness, we can find more and more of those examples in our lives, helping to reduce our ecological footprint.

The Social bottom line

social bottom line of sustainability

The social bottom line encompasses initiatives, public policies, planning, and regulations that support social issues such as fighting poverty, social justice, peace, promoting diversity, quality of living, access to healthcare, education, community development, cultural sustainability, heritage, and some aspects of religion.

The social dimension of sustainability is the least understood compared to the economic and ecological dimensions. However, it is clear that the social factor influences all human activities, and is therefore strongly linked to the economic and ecological dimensions of sustainability and sustainable development.

More in detail, the main aspects of this type of sustainability are:

  • Peace, security, and human rights are very important components of social sustainability, this is because wars, crime, and unethical practices are not only wasting valuable resources in destructive activities but are also ultimately bad for the environment. Just think about all the pollutants dispersed into the environment during wars or from factories using unethical practices.
  • Access to healthcare is a central point of the social principle. Many health-related issues are interconnected with the environment and economic aspects in general. For example, in agriculture, green improvements are also helping to improve health-related conditions. Finally, the World Health Organization is going as far as considering sustainability impossible to achieve without taking care also of health-related issues.
  • Poverty and social justice: poverty and lack of social justice are also not allowing societies to make long-term plans, ultimately reducing human well-being while also hurting the environment.
  • Influence of religion and culture: cultural sustainability deals with beliefs, religion, and heritage conservation. Cultural aspects are without a doubt one of the drivers that can help to enable sustainable development. In this respect, recent years saw some important contributions on the religious side that helped to attract more attention to the topic: with both the Dalai Lama and Pope Francis calling for more responsibility in fighting ecological degradation and preserving the ecosystems.

Those are just some social sustainability examples and how they can impact human society and quality of life.

The social dimension in business

There are many different ways to improve social performance. One way is to create policies and programs that help reduce inequality. For example, a company could create a policy that gives all employees the same number of paid sick days. This would help reduce inequality by making sure that all employees have the same opportunity to take time off when they’re sick.

Another way to improve social performance is to create policies and programs that improve health and well-being. For example, a company could create a policy that provides free or discounted gym memberships for all employees. This would help improve health and well-being by making it easier for employees to get exercise.

A third way to improve social performance is to create policies and programs that promote inclusion. For example, a company could create a policy that gives all employees the same number of paid vacation days. This would help promote inclusion by making sure that all employees have the same opportunity to take time off.

The social dimension of sustainability is about more than just measuring social performance: it’s also about taking action to improve it. This means creating policies and programs that help reduce inequality, improve health and well-being, and promote inclusion.

The Economic bottom line

economic bottom line

The economic dimension of sustainability is about measuring the economic performance of a firm or society in order to ensure long-term viability. In other words, it is the standard financial accounting.

The most common measure of economic performance is gross domestic product (GDP). GDP is a measure of the total market value of all goods and services produced in a country during a year. GDP is a single number, and is the most commonly used measure of economic performance.

However, GDP is not the only measure of economic performance. Other measures of economic performance include profit, earnings per share, market share, sales, and market capitalization.

By looking at a variety of economic indicators, we can get a more holistic picture of a firm or society’s economic performance. This, in turn, allows us to make more informed decisions about how to ensure long-term economic sustainability.

The economic dimension in business

This means that the bottom line of sustainability from an economic standpoint is the classic financial balance sheet. This is essential for the business’s existence because a business needs to be economically viable to be sustainable. However, a sustainable business should view profitability as just one component of the company’s strategy.

A conscious business leader aiming at sustainability should encourage a more balanced culture, where also social and environmental factors are taken into consideration together with profitability and economic sustainability.

Keeping in mind the limits of the planet’s resources is key, especially considering that the current economic model is still based on “infinite” exponential growth.

The challenge of achieving long-term economic sustainability lies in balancing environmental protection with resource extraction and consumption. If we can find ways to use resources more efficiently and reduce waste, we can leave a healthy planet for future generations.

The capitalist system based on the free market is an incredible tool to improper the standards of living of western nations, however, this doesn’t take into account the limits of our planet: or better, it doesn’t until it will be too late.

For example, a factory that is using non-renewable resources or even an open pit mining operation is penalized because of this, and the damage made is somehow passed on to the collectivity, as a result, the price of their final product will not be influenced by their unsustainable practices. The business doesn’t have a direct economic incentive in adopting more sustainable practices.

One way to address this problem is to use government regulations to incorporate the damage made to the environment into the price of products and services. This can be done through a system of tax and incentives: the government can impose a tax on unsustainable practices, such as emissions or excessive waste dispersed into the environment, while it can give a subsidy to more virtuous businesses.

The concept of decoupling economic growth from environmental degradation is being studied as a way to reduce pressure on biodiversity and ecological systems. While this is achievable in some cases, it is difficult to achieve at a global level without a long-term view of economic activity and the use of available technology.

In recent years, thanks also to the increased environmental awareness of the public, sustainable business practices started to gain more traction. This generates new opportunities for businesses and corporates that are interested in embracing a sustainable business model.

Nowadays many businesses are trying to improve the perception of their brand by incorporating sustainability into their business plan. This is leading to new and more environmentally conscious leadership, that, by improving the efficiency of different processes, is often able to improve sustainability without necessarily increasing the cost of the final product.

What is the circular economy?

Circular Economy VS Linear Economy
Circular Economy VS Linear Economy

The circular economy is a new model of production and consumption that aims at improving sustainability by promoting: sharing, repairing, refurbishing, reusing, and finally recycling as much as possible of each product.

The circular economy is based on the principle of maximizing the use of manufactured products through sharing and leasing instead of ownership. This approach turns products into services, which can be used only when needed. Doing so can help save resources and reduce waste.

Another important aspect of the circular economy is the design process. Products should be designed to be long-lasting, easy to fix, and recycled when their lifecycle comes to an end. For this reason, having a circular economy also implies having a circular supply chain.

What’s the difference between the circular and the linear economy? The circular economy concept is opposite to the one of the linear economy. In a linear economy, all the resources are pulled from the environment to produce goods that have a relatively low average use and are ultimately destined for landfills.

The objective of a circular economy is to create a closed-loop system, where most resources are reused through recycling and manufactured products have an extended lifespan through remanufacturing and refurbishment. In a circular economy, there will be a residual waste, but it will be minimal compared to a linear economy.

Criticism of the circular economy concept

Recent years saw the rise of several critiques of the circular economy model, let’s have a quick overview of the more interesting ones:

  • Some criticize that the circular economy is still privileging continuous economic growth and just trying to improve the sustainability of the current linear model without really addressing the main issue.
  • Corvellec, and Hervé (2019) are focusing on the unavoidability of waste, which should somehow be considered an inevitable byproduct of life. While in the circular economy, waste is considered a sign of failure.
  • Geyer and Zink (2017) are questioning the central assumption of the circular economy. Arguing that reusing and recycling may not be preventing the production of new goods due to economic reasons that are not considered in the circular economic model.
  • Perhaps the most interesting critique comes from Korhonen, Jouni; Honkasalo, Antero; Seppälä, Jyri (2018) who argue that the circular economy model is violating the second law of thermodynamics. According to this fundamental law of physics, all spontaneous processes tend to equilibrium and lead to an increase in entropy. In other words: when trying to implement the circular economy in the real world, it will not be viable to recycle or reuse all the materials. Recycling all the materials would ultimately require systems that will use more energy than what those recovered resources will be worth. As a consequence, we will still have parts of the economy following the linear model.

While the circular economy concept is far from being perfect or the solution to all of our ecological concerns, we still have to recognize that we have no excuse to not pursue more efficiency in how we use and produce things.

In this regard, the circular business model is helping to give us a framework to focus our attention on optimizing product design and also to reduce the impact on the environment.

Why is the triple bottom line of sustainability important?

triple bottom line

The term sustainability is commonly used in conjunction with initiatives targeting environmental preservation. However, it originally refers to 3 different areas known as the triple bottom line of sustainability: environmental, social, and economic.

The importance of the triple bottom line of sustainability: the 3 balance sheets are useful to better understand sustainability and how to have a more eco-friendly lifestyle, in fact, they are used as a reference to create other models such as the 6 Rs of sustainability.

The triple bottom line of sustainability is important because it offers a framework that can be used to evaluate the sustainability of an organization, business, product, or service.

Respecting the triple bottom line approach can in the long run reduce the operational costs of businesses.

Finally, this model is also used to define the goals of green technology, leading the way toward a sustainable future.

Sustainable development goals and the triple bottom line

SDG and the Triple bottom line of sustainability
SDG aggregated according to the triple bottom line of sustainability

The triple bottom line of sustainability is important and relevant because the UN Sustainable Development Goals (SDG) are based on them. In fact, the SDG goals can also be categorized according to the three bottom lines.

Here are the sustainable development goals aggregated according to the triple bottom line of sustainability:

  • ENVIRONMENTAL:
    • SDG 12: Responsible consumption and production
    • SDG 13: Climate action
    • SDG 14: Life below water
    • SDG 15: Life on land
  • SOCIAL:
    • SGD 1: No poverty
    • SDG 2: Zero hunger
    • SDG 3: Good health and well-being
    • SDG 4: Quality education
    • SDG 5: Gender equality
    • SDG 6: Clean water and sanitation
    • SDG 10: Reduced inequalities
    • SDG 11: Sustainable cities and communities
    • SDG 16: Peace, justice, and strong institutions
  • ECONOMIC:
    • SDG 7: Affordable and clean energy
    • SDG 8: Decent work and economic growth
    • SDG 9: Industry innovation and infrastructure
    • SDG 17: Partnerships for the goals

Certifications based on the triple bottom line of sustainability

The triple bottom line of sustainability has been used as a guide to define several common standards and certifications. These include Fairtrade, the Rainforest AllianceGLOBALG.A.P., and UTZ Certified, spanning sectors such as agriculture, fisheries, forest management, and mining operations.

Those certifications are playing an important role not only in measuring objectively the adherence to sustainable business practices, but also in communicating to the consumer which items are sustainably manufactured or produced.

In recent years the public has become more and more conscious about the importance of sustainable development, with damages to the reputation of companies that are keeping a short-sighted approach focusing purely on profit without consideration for the environment.

This led to an ever-increasing number of businesses and corporates committing to reach ambitious sustainability goals in the coming years. Those goals span from zero-emissions commitments to fight climate change to the pursuit of ethical manufacturing, inclusivity, and more.

The triple bottom line of sustainability and ESG

ESG stands for Environmental, Social, and Governance and is a relatively new standard used by a growing number of institutional investors to evaluate companies and countries in their sustainability efforts.

Only when enough data has been collected on those 3 areas they may be included in the list of stocks and bonds to be considered for investment.

The triple bottom line of sustainability is essential for ESG because it’s the foundation of the framework used to derive ESG metrics for investments. While traditional models were considering only the economic performance of a company, the ESG evaluation involves all three bottom lines of sustainability: environmental, social, and economic.

This means that a company is not only evaluated by its balance sheet, but it will instead undergo a broader assessment regarding its long-term sustainability according to the 3 bottom lines.

This includes things such as gender diversity, employment equality, how the company is dealing with its carbon emissions, the use of renewable energy, product safety concerns, leadership sustainability commitments, and much more.

As you can imagine, ESG is also very relevant to green technology startups and companies that would like to obtain funds from institutional investors.

Conclusions

What is the triple bottom line of sustainability? The triple bottom line of sustainability includes: environmental protection, social equity, and economic profitability.

The triple bottom line is important because it helps to better understand sustainability and it is also used as a model for standards and certifications to evaluate the sustainability of organizations, countries, products, and services.

For example, the triple bottom line of sustainability is used for:

  • ESG when evaluating investments
  • Fairtrade certifications
  • Rainforest Alliance standards
  • The 6 Rs of sustainability framework to have a more eco-friendly lifestyle

The triple bottom line model can be used to evaluate the long-term sustainability of anything. It is important to check if the three bottom lines are in balance or if one of them is too dominant. Because to achieve sustainability, all three principles must be satisfied.

You probably really enjoyed learning about sustainable development and its triple bottom line! I’m sure that this knowledge will be useful for you in your life and help you be more eco-friendly.