What is tripple bottom line (TBL)? Is your business working towards sustainable business solutions?

Have you thought about whether Triple Bottom Line (TBL) may impact you as a consumer or retail investor or proprietor? Well in the short term, my answer would be "maybe" but in the long run, it will indeed impact all of us in one or another way.

 

Triple Bottom Line framework (courtesy: Harvard Business School Online).

Do you think sustainability in terms of financial profits is the only thing you mind? Then there is a big disruptor that is coming our way which is going to have a huge impact on how we as a consumer or retail investors or business owners may have to seriously think through it when taking our long-term steps. If you closely observe trends are already in that direction as all the big five or big tech (Apple, Microsoft, Alphabet (Google), Amazon, Meta) whatever you call them have aligned their business principles in the TBL framework.

So, what is Triple Bottom Line (TBL)? As per the definition from Investopedia, "In economics, the triple bottom line maintains that companies should commit to focusing as much on social and environmental concerns as they do on financial profits. TBL theory 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".

Now the question is when do the other businesses follow? If you think this will only impact the people who are running the business (say proprietors), well then you might be wrong! Because this will entirely shift the way how we consume and approach it. Of course, some of the lucrative industries in terms of financial profits may be hard hit by the full implementation of the underlying framework, but the strategic transformation, in the long run, is the only way to fully transit to this framework. Be it a consumer or retail investor it will knock on each one's door. The obvious question will be how it will impact a consumer? Well, the buying habit might slightly or entirely need to be changed in the long term. For instance, the prices of clothing brands might increase, which means the people involved in the process are paid more in terms of wages and less impact on the environment during the production process. A similar situation may arise for the energy sector too. Countries with high total energy consumption (click here and look into the 6th column to know the total percentage of renewable energy production) still rely on a significant portion of their electricity production through non-renewable energy sources. Transition to renewable sources (solar, wind, hydro, offshore, etc.,) may come at huge capital expenditure (CAPEX) for building the infrastructure, and in order to reach the breakeven, it might take years. In the case of retail investors, they may have to bet on the companies that comply with this new norm and can adapt to the change by balancing all the key stakeholders. In my opinion, for the short term, it will definitely impact the business (financial) profit margin to a significant extent but when considering its positive impact on people and the planet in the long run it will trade-off the short term compromise we make.

 

In our industry for instance (maritime), the design of greener ships is being promoted by the International Maritime Organization (IMO), research, industry partners and we are already working in the direction for implementation. The shipping industry contributes close to 2.5% of the global emissions which is expected to drop in the next decade or so.

The transition and implementation of the triple bottom line by the big players (in the US, Europe, and Asia) are inspiring to watch and many others to follow soon. They are becoming a role model to the next generation of entrepreneurs and businesses to follow and adapt to the new norm. As we are in the very nascent stage the magnitude at which key stakeholders (people and the planet) will be benefitted may not be visualized but slowly and gradually once the framework becomes much more mature we will witness the drastic change with its outcome on them.

Further read: click  reference 1  reference 2  reference 3

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