Q 644. What is Triple Bottom Line (TBL)? What changes will an organization have to do to re-align its business excellence objectives to TBL? Provide examples to substantiate your answer.

 

Note for website visitors -

• This platform hosts two weekly questions, one on Tuesday and the other on Friday. 
• All previous questions can be found here: https://www.benchmarksixsigma.com/forum/lean-six-sigma-business-excellence-questions/. 
• To participate in the current question, please visit the forum homepage at https://www.benchmarksixsigma.com/forum/.
• The question will be open until Tuesday or Friday at 5 PM Indian Standard Time, depending on the launch day. 
• Responses will not be visible until they are reviewed, and only non-plagiarised answers with less than 5-10% plagiarism will be approved. 
• If you are unsure about plagiarism, please check your answer using a plagiarism checker tool such as https://smallseotools.com/plagiarism-checker/ before submitting. 
• All correct answers shall be published, and the top-rated answer will be displayed first. The author will receive an honorable mention in our Business Excellence dictionary at https://www.benchmarksixsigma.com/forum/business-excellence-dictionary-glossary/ along with the related term.

• Some people seem to be using AI platforms to find forum answers. This is a risky approach as AI responses are error prone as our questions are application-oriented (they are never straightforward). Have a look at this funny example - https://www.benchmarksixsigma.com/forum/topic/39458-using-ai-to-respond-to-forum-questions/

• We also use an AI content detector at https://crossplag.com/ai-content-detector/. Only answers with less than 15-20% AI-generated content will be approved.

Triple bottom line (TBL) referred to as 3P's -People, Planet and Profit. 
It is a framework used by companies to have a positive impact on the work but still improving financial performance. The company must not only be financially successful for the people and planet to thrive. Companies have to analyze its social responsibility and determine any negative social impacts to influence positive change in the community.

 

Here are the few examples of changes have to realign its business excellence:

 

•  Recycling waste materials - Preserving the environment reducing its carbon footprint and emission of toxic materials. another   example includes reforestation and restoration. 
•  Paying fair wages and providing employee benefits - This reduces cost on recruiting new employees. 
• Sourcing raw materials locally - helping local people to make profits by creating jobs.
• Paying the correct taxes on time.
• Reducing amount of energy consumption - Converting gas consumption machine to electric

 

Triple bottom line strategies may result to long term profitability. Becoming socially responsible has a positive impact to the community's success. This can result to employee's loyalty and commitment.

Triple Bottom Line (TBL) : It is a business concept which emphasizes that companies should be committed to focus as much on social and environmental concerns also as they do on profitability of the organization. The TBL consists of three critical dimensions and they are profit, people & the planet. Companies should work simultaneously on these three bottom lines and also can use these three elements to conceptualize their environmental and social responsibility along with making profit.

Re-aligning business excellence objectives to TBL with examples: The Tripple Bottom Line framework includes integrating social, environmental and economic impacts that might affect the business, instead of using profit and financial terms only as the company driving force. To implement TBL theory through business excellence initiative, need to take the framework of People, Planet, Profit and examine each one to identify actions to achieve goals of all these dimensions.

• First is 'Profit', where the company must ensure the earnings or incomes are in ethical, fair manners. Business excellence drivers need to develop strategies or financial operating plan carefully to maximize profits while reducing costs and mitigating risk. Like it is company's responsibility to pay its lenders, stakeholders and employees what is due to them and to have a sense of responsibility for obligations like fair share of local, state govt. or income taxes on a timely basis.
• Next is 'People', here company to determine how it manages its employees and how its operations affect people. People includes all employees, vendors and customers as well. At times company prioritize investors, but TBL guides to shift the focus to all individuals who are involved in the business operation. It's all about ensuring well-being of society and its people. For ex. doing CSR activities like promoting education and skill development, promoting healthcare etc.
• 'Planet', In this dimension business excellence objectives must include implementing a lower-cost option or a more environment-friendly alternative for all the business needs. All actions should be making a positive impact on the planet, for examples redesigning its distribution channels or logistics to reduce its energy usage, which will result saving a certain amount of greenhouse gas emissions. Also, organization may take goals like more Recyling and pollution reduction initiatives.

So, the TBL is about a company's contribution to society, environment, and the economy. An organization that focuses on bettering its surroundings including its people, has a long way to go. At the same time sustainable business gains loyal customers, which is critical in the competitive business world.

 

Over the years, business leaders have realized that only focusing on the company's bottom line is not a sustainable strategy for the future. 

 

Given the challenges that the world faces today in terms of poverty, inequality, global climate change etc. , companies have realized the need to address the world's pressing issues while driving the organizations' financial success.

This need has helped develop a strategy popularly referred to as the Triple bottom Line (TBL).

TBL focuses on social, environmental and financial impact that a company makes on the outside world. The 3 key pillars of the TBL strategy are Profit, People & Planet.

 

From a 'People' standpoint, it is expected that a company will not only focus on its shareholders but also on the wellbeing of its employees, communities within which the company operates, customers etc.

The impact that a company makes on the natural environment in terms of carbon footprint, greenhouse gas emissions etc. should be measured from a 'Planet' standpoint. Finally 'Profit' will be the conventional measure of a company's financial performance.

 

Given the above, from a 'Business Excellence' objectives realignment standpoint, it becomes necessary for an organization to widen the scope of its Business excellence objectives so that it covers all the 3 key pillars of TBL approach. 

 

While the traditional business excellence (BE) objective for 'Profit' focusses on elimination of waste, reduction of variation, process reengineering etc. to deliver value & reduce costs, it becomes necessary that from a 'People' standpoint, the company makes changes such that its BE objective becomes one to create metrics that measure the true impact that a organization has made on all its stakeholders including shareholders, staff, communities etc. These metrics will then help the organization to realign/fine tune its People strategy & make a stronger impact. 

 

Likewise, from a 'Planet' standpoint, the company needs to broaden the scope of its BE objective so that it is able to first measure & analyze the impact it is making on the environment and then put measures in place that will help it meet its commitment from an environment impact perspective.

 

Thanks.

 

Regards,

Lalit

 

 

   

 

In a typical organisation, the strategic goals are primarily towards Financials (profit improvement) and Employees (people improvement). Triple Bottom Line suggests incorporating a third strategic goal - Environment. By incorporating this change, companies can focus on our planet's sustainability as well, as this is an important initiative for the betterment of the planet.

 

The 3 P's of Triple Bottom Line:

• Profit - Focus on company's financial performance, stakeholder profit, RoI etc.
• People - Focus on employee benefits, wellbeing, CSR activities, etc.
• Planet - Focus on reducing carbon footprint, impacting climate change, etc.

 

How to embrace this change?

It's not easy to implement Triple Bottom Line, especially since companies are not well equipped with making changes that impact the last P - Planet. Some of the steps organisations can take towards this goal are:

1. Embrace change management - It is vital to arrive at an open mindset to deploy and manage change management in the company, especially something as large as reducing carbon foot print.
2. Small changes equal larger change - Start implementing changes at grass root level. By conducing workshops and awareness sessions to people at the ground level, will create the most impact since they typically constitute 60-65% of the workforce.
3. Assign goals - Start assigning goals such as zero carbon foot print, pollution emission levels, etc. Start with higher goals and break them down in to sub-goals such as number of trucks used for transportation, reams of paper used for printing etc.

 

Companies that have embraced Triple Bottom Line:

1. Apple Inc. - Apple has publicity stated their 2030 goal is to be completely carbon neutral. They have taken steps in this direction by shipping out smaller packaging, introducing watch straps with 100% recyclable material, not shipping chargers with phones, etc.
2. DHL - To reduce pollution, DHL has started implementing bicycle delivery mechanism, as opposed to cars and trucks. Their target is to reduce CO2 emissions by 150 metric tonnes a year
3. Novo Nordisk - This Denmark based Pharma company started implementing Triple Bottom Line before anyone else, in the year 2004. They commit towards the three P's as mentioned before.

 

 

Need for Positive Change is the base for Triple Bottom Line (TBL). Organizations focusing on Social and Environmental impact along with their financial profits is the key concept of TBL.
New age Business Leaders are inclined to sustainable strategies which address the world's most pressing issues along with organizational success.

 

3 Components of TBL are 3Ps - Profit, People, Planet

 

Profit - It is a combination of increasing profits, reduction of costs and mitigating risks which can boost shareholders.

People - For any organization, there is a difference between shareholders and stakeholders. It's the organization's responsibility to bring a positive change in stakeholders (customers, employees and communities) that are directly/indirectly dependent on the organization

Planet - Industrial revolution has generated a large amount of CO2 emissions which negatively impacted the lively hood of many living creatures, soil and water present on the earth and resulted in global warming. Reducing Carbon footprints and making the planet green should be the responsibility of every organization.

Amazon as a organization is proud to contribute to all 3Ps

Every employee contributes to reduction of operation cost while mitigating the risks to increase profits.

Every employee can be a volunteer and contributes to CSR (Corporate Social Responsibility) activities and provide the needed support of communities around us.

Every package or item is designed to deliver the products is produced from recycled material and is environment friendly.

On Mon, Feb 19, 2024 at 9:39 PM Arpit Ahluwalia <[email protected]> wrote:

From last two decade and more, almost every good business aimed to focus on the triple bottom line (TBL) using People, Profits and Planet, an accounting framework coined by John Elkington to ensure that businesses are socially responsible. But it was easier said than done as business owners also needed to ensure continuity and profitability during the highs and lows of volatile markets. So sustainability remained a buzzword for many and kept going on the back-burner.

Meanwhile, consumers were seeking “greener” solutions by the day due to greater environmental awareness globally and regulators were seeking transparency in environmental and social reporting saying that they need more credible data. Everyone wanted value with balance.

To top it all, skeptics said that sustainability results are intangible - but as a LSS professional - i can vouch and with confidence say - it is tangible and it can be implemented using any of these methodologies - Six Sigma, Lean or Lean Six Sigma. 

The outcome? The business becomes more efficient and cost-effective and processes become seamless. As a natural fallout, it soon becomes a matter of pride for the owner, employees and customers to embrace the sustainability route as an intrinsic part of their life.

FUTURE IS NOW : GREEN and CLEAN

But first, let us take a closer look at how business excellence using Six Sigma, which focuses on reducing variation and errors in any business process. It uses the structured approach of DMAIC (Define, Measure, Analyze, Improve and Control), which provides measurable and tangible results in terms of project governance, measurement systems, risk assessment and process designs. 

Next comes key tool with business excellence is  Lean, which eliminates any activity that does not add value to the end user of the product or service needs. It is a systematic yet fast-tracked approach to the entire workflow that optimize resources and eliminates non-value added tasks.

Let us be very clear that there are no ONE SIZE FIT’s ALL - kind of solutions here - Every business is different but it can be done. 

Hence, alignment of business excellence  using the hybrid methodology of Lean Six Sigma, which goes hand in hand with ensuring sustainable businesses and reduce waste is the need of the hour.

In summary - the perfect alignment of the business excellence teams can help companies leverage its well-established performance improvement methodology to jump-start new sustainability programs. Or substantially boost existing ones. 

Thus, organization's can marry the critical goals of being good corporates and citizens while improving their bottom line.

They can implement processes, which will go a long way through gradual changes in daily business operations. Which in a nutshell involves a mindset pivot towards doing the greater good.

Triple Bottom Line

It is a business strategy focusing more on measuring social and environmental impact than measuring financial growth for generating profits.

TBL can be split into 3 Ps.

Profit – The profits generated by the organizations to their stakeholders.

People – organization Impacting society in a positive mode.

Planet – organization impacting the environment.

How to Measure the Triple Bottom Line

Businesses may have to come up with innovative ways to evaluate their triple bottom line. While conventional accounting principles offer clear instructions on how a company should document its accounting revenue, there may be little or no framework in place for measuring its triple bottom line. This is especially true since there may be no mandatory external reporting requirement.

Measuring Profit

A company usually reports its company-wide net income as part of its triple bottom line. Among the three components of the triple bottom line, profit is the easiest to report because it already has strong guidance. In addition to profit, a company may also report or highlight other financial metrics such as gross margin by geographical region to demonstrate consistent or equitable pricing across different demographic groups. Historical federal income tax payments can also be reported to demonstrate the company's effective tax rate. Finally, a company may report any historical information or lack of late payments or penalties as a demonstration of its financial responsibility.

Measuring People

The "people" aspect of the triple bottom line is also known as social measures or social metrics. It includes both financial and non-financial measurements that can be determined by generally accepted accounting principles (GAAP), other reporting rules, or internal data sources.

To measure the people component, some examples include the average employee payroll, which can indicate if employees are receiving livable wages that exceed local pay expectations. Average employee benefits per employee can show the full benefit package per worker, and the average number of vacation hours earned and used per employee can demonstrate whether workers have been able to take time off.

In addition to this, employment demographics, such as the proportion of employees in different age, race, sexual orientation, or religious groups, can be measured. However, it is worth noting that some of this information is sensitive and must be provided voluntarily by employees. In the case of vendor demographics, businesses can identify themselves as small, LGBTQ-owned, veteran-owned, or minority-owned.

Measuring the number of product returns across different geographical regions can help ensure that customer satisfaction remains high among all demographics..

Measuring Planet

One of the most challenging aspects of the triple bottom line is measuring its impact on the planet. A company needs to measure its existing impact on the environment as well as its "eco-friendly" impact, which may require considerable expertise or effort. However, there are some common environmental measurements that companies can use to assess their impact, such as:

 

- Reductions in greenhouse gas emissions based on the difference between former processes and forecasted changes in new processes.

- Amount of waste generated in pounds, including the amount of recycled product over a period of time.

- Amount of energy consumption, adjusted for seasonality.

- Amount of fossil fuel consumption (adjusted for per-employee or per-sales lead if the company is growing).

- Proportion of raw materials sourced ethically.

Advantages

·       Encourages employee retention and decreases attrition.

·       Creates favorable working conditions.

·       Results in increased long-term profitability.

Disadvantages

It will be difficult to measure certain social and environmental aspects.

Profitability, which is quantifiable and is easy to measure but the social and environmental factors can be hard to quantify.

Balancing competing priorities, such as maximizing financial returns while also doing what is best for society, can also be challenging.

 

Enjoyed reading all the answers. The best answer has been provided by Vishal. Well done!

Answer from Arpit is also a must read.