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Sustainability has been an often mentioned goal of businesses, nonprofits and governments in the past decade, yet measuring the degree to which an organization is being sustainable or pursuing sustainable growth can be difficult.
John Elkington strove to measure sustainability during the mid-1990s by encompassing a new framework to measure performance in corporate America.1 This accounting framework, called the triple bottom line (TBL), went beyond the traditional measures of profits, return on investment, and shareholder value to include environmental and social dimensions. By focusing on comprehensive investment resultsthat is, with respect to performance along the interrelated dimensions of profits, people and the planettriple bottom line reporting can be an important tool to support sustainability goals.
Interest in triple bottom line accounting has been growing across for-profit, nonprofit and government sectors. Many businesses and nonprofit organizations have adopted the TBL sustainability framework to evaluate their performance, and a similar approach has gained currency with governments at the federal, state and local levels.
This article reviews the TBL concept, explains how it can be useful for businesses, policy-makers and economic development practitioners and highlights some current examples of putting the TBL into practice.
The Triple Bottom Line Defined
The TBL is an accounting framework that incorporates three dimensions of performance: social, environmental and financial. This differs from traditional reporting frameworks as it includes ecological (or environmental) and social measures that can be difficult to assign appropriate means of measurement. The TBL dimensions are also commonly called the three Ps: people, planet and profits. We will refer to these as the 3Ps.
Well before Elkington introduced the sustainability concept as "triple bottom line," environmentalists wrestled with measures of, and frameworks for, sustainability. Academic disciplines organized around sustainability have multiplied over the last 30 years. People inside and outside academia who have studied and practiced sustainability would agree with the general definition of Andrew Savitz for TBL. The TBL "captures the essence of sustainability by measuring the impact of an organization's activities on the world ... including both its profitability and shareholder values and its social, human and environmental capital."2
The trick isn't defining TBL. The trick is measuring it.
Calculating the TBL
The 3Ps do not have a common unit of measure. Profits are measured in dollars. What...