Triple Bottom Line

Introduction

Nowadays the society and stakeholders specially are demanding more results from the companies, not only related with financial aspects, but social and environmental aspects, as well.

These requirements make a change about the way strategic management is being done, in order to include the triple bottom line.

The triple bottom line is an accounting framework that incorporates three dimensions of performance: social, environmental and financial. These dimensions are called the three P´s: People, Planet and Profits.

What is the challenge?

In the past, each company had to show good financial results in order to be considered successful, no matter if that company used to not take care about the environment or, if it was affecting the society.

According with the new world requirements, every single company has to have good results in the triple bottom line: financial, social and environmental.

It is no longer permitted for a company having only good financial results; it has to show good results related with the social and environmental aspects, as well.

Each company in the world must reveal what their commitments, effort and results related with the financial aspect (affect mainly to the shareholders), social and environmental (affect mainly to the stakeholders) are.

The financial aspect is the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It therefore differs from traditional accounting definitions of profit. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the real economic benefit enjoyed by the host society. It is the real economic impact the organization has on its economic environment. This is often confused to be limited to the internal profit made by a company or organization. Therefore, an original triple bottom line approach cannot be interpreted as simply traditional corporate accounting profit plus social and environmental impacts unless the "profits" of other entities are included as a social benefit.

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