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Entrepreneurs come from all walks of life, with a diverse spectrum of ambitions, dreams and aspirations. One thing they all share in common is the desire to build a profitable company. Yet, does mere profit by itself go far enough? Or could one’s company do more?
Some companies strive to uphold the ideals of people, planet and profit (sometimes described as “people, planet and prosperity”). It’s a model of business management that places value on social and environmental responsibility as well as the company’s bottom line. The three Ps—or the triple bottom line—might seem like a relatively new concept. In fact, it’s been implemented by responsible entrepreneurs and executives since the mid-1990s.
During the mid-1990s, several theories arose regarding good business management practices and the ethical heartbeats of corporations. In 1995, Nobel Peace Prize winner and economist Muhammad Yunus laid the foundation for the concept of conscious capitalism. As the founder of a bank that made microloans for impoverished entrepreneurs in Bangladesh, Yunus called his bank a “socially conscious capitalist enterprise.”*
Conscious capitalism took off from there. It has become an increasingly influential movement that posits that businesses thrive when they have a greater purpose. This movement is still rooted firmly in capitalistic principles. However, it calls on corporations to consider the social and environmental ramifications of decision-making, as well as its economic results.
The concept of the triple bottom line—or people, planet and profit—is quite similar. These phrases were coined by John Elkington in 1994 and 1995, respectively.** Elkington had been trying to describe his ideas in a way that would resonate with corporate executives and entrepreneurs. He chose the phrase “triple bottom line” in order to put environmental and social responsibility on an even footing with economic impact.
Back in the 1990s, Elkington predicted that corporations would become much more influential in shaping the modern world than governmental entities and nongovernmental organizations (NGOs). He also knew that consumers would play a significant role in pressuring businesses to make more ethical decisions with regards to social morality and environmental sustainability. Elkington described his triple bottom line as a win-win-win scenario for businesses to underscore the societal good that could be derived from ethical business practices.**
When you think of the word “stakeholder” as it relates to a company, what comes to mind? Chances are, you thought about the company’s shareholders or perhaps its key decision-makers. This is the traditional model of business management—yet the concept of people, planet and profit goes far beyond it.
In the triple bottom line concept, the “people” refers to all possible stakeholders. This includes the company’s employees and shareholders, as well as its customers, affected communities and people at every stage of the supply line. It even includes future generations that may feel the impact of the company’s doings. The people, planet and profit theory holds that a business must ensure that all people affected by it will benefit in some way.
For the company’s employees, this might mean paying adequate compensation, ensuring safe working conditions and even encouraging employees to understand the value of their work. It is also essential that the company establish fair and equitable policies, which should include anti-discriminatory hiring practices that promote diversity at all levels of the company. Companies can also become agents of positive change in their communities, such as by advancing the cause of human rights and working to end hunger or homelessness.
The various activities of a corporation—from building new facilities to utilizing its supply chain—have monumental effects on the environment. Elkington proposed that a company’s profitability was supported by its commitment to sustainable environmental practices and policies. Indeed, eco-conscious consumers have been putting increased pressure on companies to adapt to greener business models.
Some companies have committed to net-zero emissions. This means they engage in environmentally positive activities designed to remove as much carbon dioxide as their environmentally negative activities contribute. Other companies go a step further by embracing a regenerative impact (such as through a commitment to reforestation).
Of course, limiting carbon dioxide emissions is only one aspect of environmental sustainability. A company can also demonstrate its commitment to people, planet and profit by reducing waste, using post-consumer recycled materials and even partnering with suppliers that have established eco-conscious policies.
The third leg of the triple bottom line is the one that generates the most amount of confusion. It’s often interpreted to mean the financial profit of the company itself, yet this interpretation is too limited. Rather, it was originally intended to encompass the overall positive or negative impacts of a company on the local, national and global economies.
For example, a company has a negative economic impact if it uses child labor or if it involves unsafe working conditions. In contrast, a company has a positive economic impact if it contributes good jobs to the local economy or encourages tourism to the area. It is also important that a corporation pay taxes in a responsible manner. This last point is of greater significance than it might appear. After all, a company that dodges its fair share of taxes also avoids its fair contributions to societal programs. These programs may include nutrition assistance for schoolchildren, firefighting departments and literacy initiatives—all of which are vital to the greater good of society.
Of course, corporations must also remain profitable or else they will go out of business. Yet, these profits should not come at the expense of the company’s social, environmental or economic obligations. Like a three-legged stool, each component—people, planet and profit—is equally important and necessary.
The broad benefits of the triple bottom line for all stakeholders are clear. Not only do stakeholders, society as a whole and the environment benefit from ethical and sustainable practices, but the company also benefits as well. After all, consumers are more likely to purchase from companies with a positive reputation. This raises the question: How can companies prove to consumers that they are ethical and socially responsible?
One solution is to become certified as a B corporation. An independent, nonprofit entity—the B Lab—evaluates companies for their negative and positive impacts on stakeholders, communities and the environment. If a company meets the strict criteria, it can amend its corporate charter and become a certified B corporation.
Certified B corporations are clearly identifiable to consumers as being for-profit entities that are committed to being a force for good. This is important because it’s easy for a company to merely claim that it follows eco-friendly practices, even if this isn’t necessarily the case. However, only certified B corporations have been independently assessed and verified to be eco-friendly and socially responsible.
Ethical decision-making and servant leadership are woven directly into the curriculum of the business management degree programs at Grand Canyon University. Choose from a range of master’s level programs, including the Master of Science in Leadership (MSL) degree, Master of Business Administration with an Emphasis in Health Systems Management program or the Master of Business Administration with an Emphasis in Strategic Human Resource Management degree, along with many other business management programs. Begin working to enhance your career qualifications today by clicking on Request Info at the top of your screen.
Retrieved from:
*Conscious Capitalism, Why Consciousness Is the Key to Unlocking Capitalism’s Greatest Potential in May 2021
**John Elkington, Archives, Enter the Triple Bottom Line in May 2021
