In 1994, John Elkington developed Triple Bottom Line as an accounting basis. Elkington is an entrepreneur and author. Triple Bottom Line (TBL) aims at incorporating sustainable accounting in business inclusive of social, environmental, and economic aspects. John Elkington is known as one of the founders of the global sustainability movement, he is an experienced CSR advisor in the business world.

John has addressed over 1,000 conferences around the world. He was a faculty member of the World Economic Forum from 2002-2008. He has served on over 70 company boards. He has won several awards and is the author and co-author of 20 books. John’s book titled Cannibals with Forks in 1997 popularised his ‘Triple Bottom Line’ concept triple bottom-line consists of People, Planet, Profit and has laid the foundations for sustainable business strategy.

In 2008, The Evening Standard which is a daily newspaper in London declared John among the ‘1000 Most Influential People’ in London, he is described as “true green business guru”, and as “an evangelist for corporate social responsibility” long before it was a fashionable concept in business world.

The triple bottom line (TBL) framework prepares an organization in realizing its responsibilities towards society and ecology. It is all about accountability for the overall effect of the company’s business practices and contribution towards non-profitable aspects. Triple bottom line theory expands conventional business success include its contributions to social well-being, environmental health, and a fair economy.

TBL theory focuses on the 3Ps that makes firms socially responsible:

People

Organizations are accountable for the well-being of the society and its people. Their responsibility pertains to people and behaving and conducting business ethically and with sensitivity towards social, cultural, economic, and environmental issues. Besides maximizing shareholder value, businesses should operate in a way that benefits society. People include employees working in the organization and the society at large.

Profits

It is every company’s responsibility to pay its lenders, operational creditors, and employees. Profit is capital that companies can use for maintaining the workplace buy machinery and equipment, upgrading infrastructure, buying expensive items, or investing in new products, services or employees. In a capitalist economy, a firm’s success most heavily depends on its financial performance, or the profit it generates for shareholders. Strategic planning initiatives and key business decisions are generally carefully designed to maximize profits while reducing costs and mitigating risk. It’s important to make the distinction between a firm’s shareholders and stakeholders. Stakeholders consists the entire society.

Planet

It is concerned with the geographical location, i.e., the nation, area, city, or state in which the company is located. Companies have to make sure that the neighbourhood and the location is clean. They must ensure that their operations don’t affect the environment adversely. Organizations must learn to reduce, reuse, and recycle waste. We as consumers must cut down on what we keep throwing away, we must volunteer for clean-ups in our community, educate children about importance of sustainability of our planet; conserve trees, plant trees, conserve jungles, conserve water, reduce dependence on electricity etc. Corporate social responsibility is a part of every organization’s core business strategy as well as the foundation upon which its core values and culture are based. Organizations don’t exist in vacuum; they are committed to having a positive impact on society and respecting and preserving the environment.

Why Triple Bottom Line is important?

Prof. Michel Porter – strategic management guru feels why should companies turn to NGOs and governments to solve society’s major problems? It is time for business organizations to address societal needs and challenges through creating shared values, in which a company prepares a business model addressing a social cause which will augment their profits. Because when business solves an external problem, it makes a profit and in return the action lets that solution grow. The shared value concept enhances corporate policies and practices add to the competitiveness of a company while simultaneously advancing social and economic conditions in the communities in which the company sells and operates.

For example, IDE Technologies, which is considered a leader in desalination technologies, turns salt water into fresh water. The Israeli company supplies 70% of the tiny Middle Eastern country’s potable water. Its largest local plant, located just south of Tel Aviv, produces 165 million gallons of freshwater daily. Though privately held, IDE also builds and operates some of the biggest desalination plants in about 40 other countries, including Mexico, Chile and China.

When organizations make profit on the basis of shared value, they enable society to advance and companies to grow faster. When corporates include societal issues into their strategies and operations major transformations take place. Some organizations which adopt a triple bottom line approach seem principled in a world that emphasizes profit over purpose. Innovative companies, however, have shown time and again that it is possible to do well by earning great profits.  Many firms have reaped financial benefits by committing to sustainable business practices.

For example, Nike Inc. decided to weave shoes more efficiently by reducing the raw material and labour time needed to make each shoe. That has kept more than 3.5 million pounds of waste from reaching landfills since 2012. But the good news doesn’t stop with the environmental impact. The company is spending less on transportation, materials and waste disposal…this is highly appreciable.

Tech giants have spent billions of dollars on solar and wind power, cutting greenhouse-gas emissions and energy expenditures at the same time. Alphabet Inc.’s Google, Amazon and Facebook Inc. are now some of the largest buyers of green power in America. The fact is that it’s not just easy being green — it also can be profitable. Google, Facebook and Amazon are among the largest energy consumers in the United States, and a lot of that power is now emission-free. Each company committed to getting 100% of their power for their data centres from renewable resources such as wind and solar.

Challenges faced by TBL

The biggest challenge TBL faces if of greenwashing which is a spin of corporate social responsibility in declaring itself to promoting environmentally friendly policies whereas in reality, the company does not live up to the commitment. Companies keep making unsubstantiated or misleading claim about the environmental benefits of its products, services, technology and strategic practices. It’s in fact an eye wash. Greenwashing is an unsupported claim to deceive consumers into believing that a company’s products are environmentally friendly or have a greater positive environmental impact than they actually do.

Way back in 2019, the controversy about McDonald’s introduction to paper straw which turned out to be non-recyclable is a classic case of greenwash. Aside from the questionable practice of cutting down trees to make disposable straws is a classic example of how a corporate giant can pretend to be ethical while cheating on its consumers. The so-called paper straws were made out of plastic creating plastic pollution. Another mocking greenwashing move is to slap a green label on something to make it appear more sustainable or healthy, as Coca-Cola did with Coca-Cola Life with 6.6% sugar was far from a healthy drink. Consumers were taken for a ride – you would probably get less Life if you drank a lot of it.

To survive the completion and to expand organizations need to restructure people, structure, culture, knowledge, policies, legalities, processes, technologies, product designs, marketing practices, pricing etc. A CEO may see change in terms of organizational structure and strategy, a manager in operations may see change in terms of processes, a manager in technology may see change in terms of systems & tools, a manager in HR may see in terms of training and development or recruitment of new staff, clerical staff may find it difficult to change the paper work format, peons and helpers may find it absurd to see each one stressed in the organization or find new bosses with new thinking.  In some cases a change is so complex that no one person has a true end-to-end assessment of it. The McKinsey 7-S model is based on the theory that, for an organization to perform well, to change from time to time, it need to look at the 7 Ss:  Strategy, Structure, Systems, Shared Values, Skills, Style and Staff.  These seven elements need to be aligned and reciprocally reinforced. The model helps in realigning and identifying problems that need to be worked on to improve performance of the organization. While some models of organizational effectiveness have been outdated, one that has persevered its continuity is the McKinsey 7-S Model framework. It was developed in the early 1980s by Tom Peters and Robert Waterman, two consultants working at the McKinsey & Company consulting firm, the basic premise of the model is that there are seven internal aspects of an organization that need to be aligned if it is to be successful.

Whatever the type of change may be: restructuring, new processes, organizational merger, new systems, change of leadership, new market, recruitment so on – the model can be used to understand how the organizational elements are interconnected. It helps to ensure the wider impact of changes made in one area and how it affects other areas.

McKinsey 7-S Model elements

Strategy

It is a scientific plan devised to maintain and build competitive advantage over the competition. The task involves gaining appropriate budgets and demonstrating, delivering value and ROI from budgets, who is to take charge, who would assist, time frame, what end results expected etc. It helps in annual planning approach. Business strategy is generally created at the upper levels of an organization. Grand corporate strategies can be broken down into objectives and tactics to ensure that the strategy is relevant all the way down the organizational hierarchy. Organizational structure is put into place relatively early in the life of a business, but it can be changed over time as the company evolves. The organizational structure matters in making strategies.

Structure

It clarifies the way the organization is structured and who reports to whom and span of control each person enjoys. The modification of organizational structure is made when it is very essential.  A company’s organizational structure must support its strategy. Employees at all levels of the company must be empowered to effectively complete the tasks necessary to achieve organizational objectives, and company structure can aid or hinder employees in their roles. Especially when reporting relations are not clear, and good employees are made to work under incompetent people, organizational goals and objectives become hazy. Structure can also dictate the means by which strategies are formed. Bureaucratic companies tend to generate a majority of strategic ideas at the top levels of management. Companies with flatter structures, on the other hand, often involve a range of employees in strategy sessions.

Systems

The daily activities and procedures that staff members engage in to get the job done. For example, the HR team is one component, the finance and accounts is a component, the service delivery staff another component. The gate keepers another one, so on. Standard Operating Procedures (SOP) help in running the system smoothly. And, making them easier yet scientifically designed helps a lot.  Whether documentation is important or not – remember it is the first set of deliverables within an organization process. Considering them unimportant is a lackluster attitude.

Shared Values

These are the organization’s stated values and rules of behavior. It is how the members represent the organization both in terms of their behavior and the shared values. Their interpersonal behaviors and their behaviors with outsiders speak volumes. This is expressed in mission, vision, philosophies and values of the organization. It serves as a guide for all of the company’s decision-making. Shareholders, leaders and employees and customers are generally the target of the mission. It projects the future, of what the organizations hopes to become.

Why shared value is placed in the middle of the model? The reason is shared values emphasizes that these values are central to the development of all the other critical elements. The company’s structure, strategy, systems, style, staff and skills all stem from why the organization was originally created, and what it stands for. The original vision of the company was formed from the values of the creators. As the values change, so do all the other elements.

Style

It represents the style of leadership adopted. The style implies a leader’s style of providing direction, implementing plans, and motivating people. There are many different leadership styles proposed by various authors. Organizations flourish with good leadership and they disappear because of leadership. The culture and goals of an organization determine which leadership style fits the firm best. Some companies offer several leadership styles within the organization, dependent upon the necessary tasks to complete and departmental needs. Includes both the way in which key managers behave in achieving the organization’s goals and the cultural style of the organization as a whole.

Staff

It represents the employees and their general capabilities. The success of any organization depends on the employee’s learning spirit. The organizations that continually seek to expand their capacity to create. In today’s highly competitive labor market, the hiring talent is not a joke, organizations have realized that capacities of workers matter a lot. The breakdown of staff in terms of their background, age and sex and characteristics such as IT, finance, marketing needs scientific thinking. Depending on the competitiveness of staff, organizations decide use of contractors and consultants. Many organizations depend on outsourcing. Staff recruitment and retention, and virtual working makes the difference and compels organizations to think about staff development and training.

Skills

The actual skills and competencies of the employees working for the company. It’s critically important that companies develop strategies to manage their people through the crisis if they are to survive and prosper in the long term. Companies need workers who can stay organized and focus on the projects at hand. However, company managers must also organize the work of their employees. Organizational skills in the workplace can include general organizing, planning, and time management, scheduling, coordinating resources and meeting deadlines. Distinctive capabilities of key staff can be interpreted as specific skill-sets of team members.

The above seven elements are divided into Hard and Soft elements:

Hard Elements: are tangible elements. They are Strategy, Structure and Systems.

Soft Elements: are intangible elements. They are Shared Values, Skills, Staff and Style.

One important point to note is that, in the first version of this model which was published in 1982, “systems” was classified as “soft” element. Since 1982, many processes in very many organizations have been meticulously documented or automated, making them relatively easy to analyze and change. They are therefore shown above as “hard”.