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.

Black Swan Events

The black swan events theory is an analogy that describes an event that comes as a surprise, the event is unimaginable with major effects and it disrupts the economy of nation/world also it harms the lives of people. Black Swan events create a chaos.  In the business world the term was propagated by Nassim Nicholas Taleb, a finance professor, writer, and former Wall Street trader. Talab described the 2007-08 subprime mortgage crisis – the collapse of housing market in US when the housing bubble burst because many borrowers were unable to pay back their loans. The dramatic increase in foreclosures caused many financial institutions to collapse. Many required a bailout from the government.

Another black swan event took place In March 2013 in Cyprus. The banks and its customers experienced an acute crisis because of the terms of an agreement to receive financial assistance from the European Union and the International Monetary Fund. The original proposal, which included a bank deposit levy on Cypriot bank account holders, was rejected by the country’s parliament because of chaotic situations raised.

Few more black swan effects were 2011 Tōhoku earthquake and tsunami in Japan in which according to the Japan Reconstruction Agency, nearly 400,000 buildings were destroyed or irreparably damaged and another 750,000 were partially destroyed across the country in March 2011. Nearly 16,000 people were killed and 2,500 are still listed as missing.

More recently the dire effects of Covid-19 when economies of most nations in world suddenly stopped. the pandemic continues to present daunting challenges for governments and international organizations. The economic impacts threaten to undo decades of recent progress in poverty reduction, child nutrition and gender equality. But Covid 19 has worsened efforts to support refugees, migrants, and other vulnerable communities. 

Black swan events cannot be rationalized; their occurrence devastates nations and economic rebuilding takes time and efforts. By definition, governments, organizations and society cannot fully prepare for Black Swan events. Since they are random and unexpected, they are almost impossible to anticipate, and thus to prepare for.

Green Swan Events

A green swan refers to an unforeseen environmental catastrophe attributed to climate change. It is a large-scale event connected with global warming and the impacts of pollution that could trigger a systematic financial crisis worldwide with negative implications. Green swans are risks created by human behaviour that includes pumping pollutants into the environment, destroying natural ecosystems such as forests and water catchment areas, and destabilizing climates. John Elkington, the man who originated the Triple Bottom Line, and has authored 20 books, and founder of sustainability consultancy named Volans, introduced the term Green Swan in his book “Green Swans: The Coming Boom in Regenerative Capitalism”.  

According to his book, Elkington adds, Green Swans are “solutions that take us exponentially toward breakthrough” or “systemic solutions to global challenges, solutions that tap into positive exponentials.” They deliver “exponential progress in the form of economic, social, and environmental wealth creation.” Elkington also adds, “Too often, Black Swans take you exponentially where you don’t want to go, whereas Green Swans take you exponentially where you do want to go.”

The melting of the glaciers, a phenomenon that has intensified in the 20th century, is leaving our planet iceless.  The fast melting of glaciers is affecting Antarctica and Greenland which are affecting the ocean currents, as massive amounts of very cold glacial-melt water entering warmer ocean waters is slowing ocean currents. And as ice on land melts, sea levels will continue to rise. Top geologists say that many countries near the sea will vanish in another 20-30 years.

Carbon dioxide concentrations are rising regularly because of the fossil fuels that people are burning for energy. Fossil fuels like coal and oil contain carbon that plants pulled out of the atmosphere through photosynthesis over many millions of years; we are returning that carbon to the atmosphere in just a few hundred years.

A good example of a Green Swan, according to Elkington, is the adoption of electric vehicles. It started out very slow, out of sight for most people. But gradually, and largely propelled by Elon Musk, it has accelerated step by step. It has now reached the exponential part of the curve, the point of no return, where it is rapidly embraced at increasing speed, disrupting the entire car industry on the path toward creating environmental, social, and economic wealth.

Dependence on solar energy is another example of Green Swan effect. Solar energy can help to reduce the cost of electricity, contribute to a resilient electrical grid, create jobs and spur economic growth, generate back-up power for night-time and outages when paired with storage, and operate at similar efficiency on both small and large scales.

Similarly, rain water harvesting reduces soil erosion, stormwater runoff, flooding, and pollution of surface water with fertilizers, pesticides, metals and other sediments. It is an excellent source of water for landscape irrigation with no chemicals, dissolved salts and free from all minerals.

White Swan Event

A white swan event is highly anticipated depending on available information and accurate forecasting. It is sure to occur. Its impact is easy to quantify. Human errors are usually considered the cause of such events.

Nasim Taleb uses the White Swan theory to explain events of dramatic proportions that had been predicted. A classic example he gives is of COVID-19. The pandemic had been predicted by many people before, including by Bill Gates in TED talk in 2015. The Governments of different nations in the world chose to ignore the warnings until too late.

Stocks markets are an excellent example of white swan event. They are also volatile and unpredictable because of the continuous flow of news, announcements, international data points, etc.

The crypto currency market is another example of a white swan event. Since its creation over a decade ago, it has experienced tremendous growth. While there are always periods of bear market conditions, the crypto market behaves like a pendulum that swings upwards and downwards. In the crypto market there are scalability difficulties, which means they may not be able to process enormous quantities of transactions at once. Due to the extraordinary volatility of most cryptocurrencies, investors don’t trust even in the most popular ones like Bitcoin. The volatility of the value of a particular cryptocurrency makes it difficult for investors to forecast their continued profitability in the future.

Conclusion

Black, Green and White events are radical in nature, they are a part of our life. In true sense the world has become VUCA. The acronym of VUCA stands for Volatility, Uncertainty, Complexity and Ambiguity. The world is experiencing a crazy spin of events because too many uncertainties have plagued it. These days you don’t see linear organisations, they hardly exist. Most organizations exist by adapting complexities and by behaving resilient.  We see new trends and practices in society which are seemingly evolving very fast. The world of business demands flexibility and adaptiveness. Traditional and outdated approaches do not work. Black, Green and White Swan events will occur constantly and we will have to face them powerfully.