« Back to Home Page

OpEd: Why “People, Planet, Profit” Must Die

3p Contributor | Wednesday October 6th, 2010 | 21 Comments

The Triple Bottom LineBy Dave Stauffer

The so-called “triple bottom line” has become sufficiently widespread that misconceptions about it must be corrected, and the way we talk about it must reflect a consensus about what it is. These things must happen because current discussions of the triple bottom line may be doing more harm than good.

Before I get to how this is happening, a quick review: A company is said to be targeting the triple bottom line (I shorten it to TBL) when it addresses the environmental, social, and financial consequences of its actions. This three-pronged concern is popularly expressed as “people, planet, profit.” The TBL is tied very closely to – and for some people is indistinguishable from – sustainable business operations.

The greatest flaw in the formulation of the TBL as “people, planet, profit” is its implicit proposition that profit is somehow distinct from people and planet. That isn’t just wrong, it’s harmfully wrong, because it perpetuates a misconception that is held by business leaders (as one might expect) and also by environmental and social activists and commentators (as one should not expect – but is very real and, in fact, rampant).

The misconception is two-fold:

  • that profit does not flow from a company’s attention to environmental (planet) and social (people) concerns and
  • that a company will lessen its profits when it pays attention to planet or people.

As an example, I’ll quote from an article titled “Getting Up to Speed on Triple Bottom Line Reporting,” by freelance writer Debbie Van Der Hyde (with apologies for picking on her and the person she quotes, as I encounter many instances every month that misstate what the TBL is and does). Debbie writes:

  • “[Laura] Musikanski [executive director of Sustainable Seattle] indicated … ‘In the industrial era, we used the language of profit. In this new era of sustainability, we need a common language for what we’ve done so far and what we want to do.’”
  • “Looking ahead at what is to come with triple bottom line reporting, Musikanski said: ‘I’m truly hopeful since I see companies setting — and meeting — goals beyond profitability.’”
    I say: Wrong on both counts. The language of sustainability is “the language of profit.” And companies that set and meet environmental and social goals aren’t going “beyond profitability,” they are going to enhance profitability.

I could illustrate this assertion with dozens of examples that show how a company’s attention to environmental or social responsibility contributes to enhanced profitability, but I’ll restrict myself for the moment to the always inspiring example of Jackie Robinson, who, with the concurrence of then-Dodgers general manager Branch Rickey, broke the racial barrier in Major League Baseball in 1947. As recounted by Wall Street Journal columnist William McGurn in his August 24, 2010, commentary, “What Baseball Can Teach Business”:

“My grandfather never accepted any effort to recognize him as a champion of civil rights, because he believed that you don’t accept awards for doing what’s right,” says Branch Rickey III. … “His partnership with Jackie was perhaps the most daring in American sports history, but he knew, too, that it was a good business move, and he never ran away from that justification.”

Branch Rickey’s attention to a social concern – that is, the exclusion of African-American athletes from big league baseball – brought increased profitability not just to the Brooklyn Dodgers of 1947, but to all of organized North American baseball ever since – every team, every year. So please don’t make the mistake of thinking that corporate social (or environmental) responsibility is practiced at the expense of corporate profitability; it is instead a real, and increasingly essential, contributor to corporate profitability.

I’ll further state my case for the death of “people, plant, profit” in future posts.


▼▼▼      21 Comments     ▼▼▼

Categorized: Managing Business|

Newsletter Signup
  • http://www.cose.org/blog Tim Kovach

    The title of the article certainly caught my attention, and I came prepared to defend the triple bottom line, but your post makes an excellent argument.

    I would agree that too many businesses, including those who have adopted sustainability, seem to think that people and planet are on one side of the see-saw and profit/performance rest on the other side. Yet, as you point out, there is not an inherent give and take among the triple bottom line; instead, they are inherently tied together to promote bottom and top line performance.

    Working at a small business support organization, I often have a difficult time making the business case for sustainability and energy efficiency to small business owners. They see that there may be a decent upfront investment, especially in energy efficiency. However, the benefits that a business can reap from making these investments can be astonishing. Whether it is creating a new market for your business, improving employee engagement, strengthening customer and supplier relationships, cutting costs, or improving productivity and output, sustainability can have a tremendously positive impact on the bottom line.

    It seems for too long that a standard business truism has been that businesses are responsible to improve the bottom line (and to the shareholders for public companies), so investing in CSR, sustainability, greater workplace safety measures, etc. is an inappropriate move. But as the BP oil spill proved, taking the time to make these efforts beforehand can save you many hundredfold in the long run.

    Sustainability is not just a fad; it is becoming a business imperative. Those who sit on the sidelines will suffer, while those who get into the game now have the potential to enjoy a tremendous advantage. Making this argument, especially to small businesses, can be difficult, but it is something that we need to do and do a better job of.

    - Tim Kovach
    Product Coordinator, Energy at COSE
    http://www.cose.org/blog
    http://www.twitter.com/COSEenergy

  • http://www.eq-cap.com Roland Van der Meer

    While the title is brazen, the concept of the piece is spot on. Many organizations and NGOs are in the camp of “businesses must sacrifice profit for the betterment of society or the environment.”
    At Equilibrium Capital we say this in a much more proactive light. The reason our portfolio of companies are making superior returns is because they are focused on the key issues and impact measures that drive sustainability of the sector. If you are doing it right, you will generate more profit. Maybe not in the short term but definitely over the medium and long term.

    • http://yellowstonebusiness.org/blog/?author=3 Dave Stauffer

      Roland – Yes, I was intentionally provocative in my title, and I generally agree with the benefits showing more in the mid- to long term than right away.

  • http://nickpalmer.blogspot.com Nick Palmer

    Until the people and planet bit of the TBL is monetised – given a value that can be added or subtracted – on the accountant’s bottom line these problems will continue.
    Monetise the other two and the free market will start to solve all the problems very rapidly without onerous legislation or bureaucracy.

    • http://nickpalmer.blogspot.com Nick Palmer

      Oh Mr Staufer – in case it wasn’t obvious, I’m broadly supportive of your keen insight into the way the triple bottom line seems to be misperceived – just pointing out that a bottom line is what comes from adding and subtracting and a monetary value has to be put on all three elements. When this is done, companies that shine in the people/planet area will naturally be more profitable in real terms than those who just try to maximise the conventional profitability of their company.

    • http://yellowstonebusiness.org/blog/?author=3 Dave Stauffer

      Nick – It is being monetized, it’s just not always easy to find. But read about the Sierra Business Council (CA) Regional Wealth Index, which does a fantastic job of attributing quantitative value to the people & plnet measures. Also hard fact that should impress any accountant: the substantially lower employee turnover in companies known for sustainability; e.g., Patagonia, Seventh Generation, Interface Inc.

    • http://yellowstonebusiness.org/blog/?author=3 Dave Stauffer

      Nick – It is being monetized, it’s just not always easy to find. But read about the Sierra Business Council (CA) Regional Wealth Index, which does a fantastic job of attributing quantitative value to the people & plnet measures. Also hard fact that should impress any accountant: the substantially lower employee turnover in companies known for sustainability; e.g., Patagonia, Seventh Generation, Interface Inc.

  • http://www.britesprite.co.uk Chris Milton

    Tentatively disagree, but await further expansion.

    You cannot disentangle profit from business. However measuring everything by profit is not the way forward.

    This is not because there’s anything intrinsically wrong with profit, but there is in assuming growth alone will bring sustainability, and profit it (by definition) reliant on growth.

    I’m not defending TBL … but I’d want to see the emergent sustainable business model go forwards, not backwards.

    • http://yellowstonebusiness.org/blog/?author=3 Dave Stauffer

      Chris – I’d agree that growth alone won’t bring sustainability. However, for a well run company, sustainability alone WILL bring growth.

  • carly smolak

    In my two years at Presidio Graduate School’s MBA program, we almost exclusively used the phrase “integrated bottom line,” I believe it was at Hunter Lovin’s urging. This article speaks to this integration of the three legs of business performance. While some newbies to the field of sustainable business may in fact believe that profit sits opposed to social and environmental stewardship, I would argue that the vast majority of folks within the sustainable business community would not hold that view. That’s the whole point of sustainable business- that what’s good for people and planet is good for business (and the bottom line).

    So when most of “our” people can agree that the bottom line is integrated, I think it is less important to blur the lines between these three facets to kill the concept of the Triple Bottom Line, and more important to learn how various forms of capital function, flow, and interact with each other. For example, many environmental and social investments have very different payback periods than do traditional capital investments. Businesses that want to make strategic and sustainable decisions must understand how these three facets are different, and how they must invest in order to survive (i.e. not run out of cash), while also promoting the long-term prosperity of the company. After all, you can’t send a happy employee with a flower to the bank in lieu of a rent check; the three forms of capital are just not the same thing. I wouldn’t say they are separate but equal, but how about distinct yet interrelated and equal? Eh, doesn’t roll off the tongue, but I think I’ve made my point.

    • http://yellowstonebusiness.org/blog/?author=3 Dave Stauffer

      Carly – What may roll more easily off the tongue is Jed Emerson’s concept of “blended value” (http://www.blendedvalue.org/) — which is possibly quite close to what you call integrated value.

  • Bill Bellamy

    After applying TBL to hundreds of business cases, it can be said that TBL is effective and does include enhanced profitability based on environment and social criteria and measures. That is the basis of a properly applied TBL analysis. Scenario planning and sensitivity of alternative futures can be tested through a TBL analysis using profit as a criteria as impacted by social and environmental issues, it works. We do not need a new buzz word and approach; rather, a rigorous application of TBL for planning and measurement with a firm understanding of business practices.

    • http://www.SLDI.org Terry Mock

      Don’t shoot TBL…

      I agree that “it can be said that TBL is effective and does include enhanced profitability based on environment and social criteria and measures. That is the basis of a properly applied TBL analysis.”

      Furthermore, I’ll add another reason to keep the sacred geometrical blueprint for triple-bottom-line analysis – the equilateral triangle is the most basic and stable two-dimensional form in the universe and provides the most stable platform to support any sustainable decision making model.

      Given the fact that the world is just now learning how to ride this “sustainability tool”, let’s not start taking off the training wheels!

      In a ground-breaking effort to overcome our global problems, Sustainable Land Development International (SLDI) has released the world’s first comprehensive sustainable land development best practices system. The SLDI Best Practices System helps to structure a triple-bottom-line (people, planet and profit) decision model – The SLDI Code™
      http://www.sldi.org/images/Research/sldi%20in%20focus%20-%20world%5C%27s%20first%20sldbp%20system%20introduced.pdf

    • http://yellowstonebusiness.org/blog/?author=3 Dave Stauffer

      Bill – Application of the TBL in scenario planning is intriguing and potentially incredibly useful. If BP were ever to have employed scenario planning to even half the extent as their competitor Shell Oil, the disaster in the Gulf would quite possibly never have happened.

  • Al Gea

    the ‘picture’ which you use and is widely used to represent TBL is in fact a Venn diagram displaying that the three principles are not distinct but ALL related. Therefore your case that the theory of TBL treats the three separately is fundamentally wrong.

    • Nick Aster

      Actually, I added the picture

  • Vincent Siciliano

    TBL is a concept to be embraced and used wisely. And the most effective way is to integrate the three as one of the posts above discusses. However, the marketplace does not monetize the value of environmental and social concerns and so it is not completely clear that the short run impact of integrating people, profit, and planet will be at least as profitable as focusing on short-term profits only. I will argue that in the long term a TBL company should be at least as profitable as the average company (in the same industry).

    Perhaps a more important point is the fact that the Wall Street Journal recently ran a major piece titled “the case against social responsibility” and inherently argued against TBL as being “inefficient and ineffective for the shareholder”. The most important way to effectively combat this kind of thinking is to argue that TBL companies will be more economically viable and sustainable in the long run. Let’s focus our energies on promoting TBL!

  • http://www.riversides.org Kevin Mercer

    The concept of TBL brings to mind the old chinese saying, “what profit is there in it”? TBL’s challenge is to define profit per se.
    On another tack, profitable companies that achieve those profits by expensing environmental or social costs on either the public or natural sector will, yes it is sad, be more financially profitable.
    Inevitably one can argue that TBL or integrated profitability is certainly achievable but not if the playing field is not leveled. Hence, what profit is there in it translates into, if you can get away with it, then do it. If not, then you have no choice.
    Libertarian commentators who believe we an achieve this state without “government or bureaucracy” are, of course, delusional. Hard rules are the best route to good triple bottom line, ask any major corporation.
    A great challenge to the accepted nomenclature.

    • http://yellowstonebusiness.org/blog/?author=3 Dave Stauffer

      Kevin – You’re absolutely right that “the playing field is not leveled.” I address that issue in my upcoming column in Planning Commissioers Journal with the title “Getting Our Arms Around ‘Externalities.’”

  • http://businessethicsblog.com Chris MacDonald

    I’m sympathetic to the thrust of your argument. But to say X and Y aren’t entirely separate is not the same as saying they shouldn’t be tracked and reported separately. All things are connected, but we may lose something if we aren’t willing to attend to them separately.

    But the real problem with the triple bottom line is that it implicitly (and sometimes explicitly) claims to be about far more than (as you say) “addressing” the 3 areas. Addressing all 3 is great, but that’s very, very different from aggregating and summing up in a way that produces anything like a “bottom line.”

    Chris macDonald
    p.s. for my academic critique of the Triple Bottom Line, see:
    http://businessethics.ca/3bl/