Triple Bottom Line

A common framework for sustainability in organizations is the triple bottom line, where economic (profit), environment (planet), and social responsibility (people) measures are addressed as sort of a balanced scorecard.  Measuring more then financial performance is an important step in the right direction, but success of an individual organization or even an entire sector of the economy as measured by the triple bottom line does not necessarily lead to a broader interpretation of sustainability; rather, the result of reducing the unsustainable aspects of products and services can potentially, and inadvertently, result in negative affects to larger social, economic, and environmental systems.  (Also read Triple Bottom Line Examined.)

“Sustainability is the possibility that humans and other life will flourish on Earth forever. Reducing unsustainability, although critical, will not create sustainability.”

-John Ehrenfeld

Compression and Compression Thinking

Compression Thinking is not at odds with the triple bottom line. Instead, the triple bottom line becomes three nested circles, starting with the environment, followed by effectively delivering value and improving quality of life to people, and as a result generating profit.  Profit becomes a design parameter, much like durability and usability design parameters.  Compression Thinking is not about answers; rather, it’s about asking deeper and more strategic questions, such as “What business are we really in?”  For example, are automakers in the business of making vehicles or in the transportation business?

Compression is improving quality of life while greatly reducing resources and eliminating all toxins.  Products and services are first considered in terms of physical processes, including life-cycle and mass energy balance.  This more explicit focus on resource reduction and the focus on physical processes is one of the reasons for introducing the term compression instead of using sustainability.

In addition, compression addresses organizational changes that will help them accomplish a necessary business model transformation; resulting in an organization that is more disciplined and flexible as they work toward a common mission and goals–a Vigorous Learning Organization.

Triple Bottom Line Examined

Let’s look at a hypothetical example of success according to the triple bottom line*.

Consider a sustainability goal of the auto industry: Increasing the miles per gallon (mpg) of vehicles.  If the entire industry increased mpg by 300% it would be an important, even critical environmental success.  As countries such as India and China begin to purchase more vehicles, automakers’ revenue will greatly increase–a financial success.  Increased demand for vehicles could result in increased production capacity throughout the world, resulting in more jobs.  This, combined with more people having the freedom to own and travel in a personal vehicle can be considered a social success.

So, where is the problem?  As population increases and individuals in developing countries continue to purchase vehicles, the total number of vehicles in use could easily increase by 300%.  Now, the increased mpg is offset by the total number of vehicles using resources.  In addition, producing more vehicles requires use of mined materials that are limited in supply and require more and more energy to unearth as the supply is depleted.

Combine this example with the fact that many organizations using the triple bottom line do not transform their business model and are, therefore, often motivated first by financial gain, then customers, then the environment–sometimes with environmental concerns stemming from regulations, not concern for ecological systems.  The result can be temporarily or permanently abandoning social and environmental goals in order to meet financial goals.

 

*Adam Werbach introduces an important fourth category, culture, in his book Strategy for Sustainability: A Business Manifesto.