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The value of a triple bottom line
How shifting your focus beyond profit could help your business thrive.
3 minute read
Coined back in the 1990s, the idea of the triple bottom line, where businesses focus on profit, planet, and people, isn’t exactly a new one.
Consumers are becoming increasingly empowered with knowledge about who they’re buying from and what those businesses stand for. They’re aware of environmental and social issues – access to clean water and global warming, to name a few. Investors are focused on these themes as well, so the triple bottom line is more relevant than ever for your business.
BNZ’s Head of Tech Industry, Tim Wixon, shares his thoughts on the value of the triple bottom line framework as one useful way to think about your customer value proposition, and what it could mean in terms of an evolving focus for your business.
Triple bottom line broken down
1. Profit (or economic measures)
Profit, whether it be operating or net profit, has been and will continue to be a key metric of a business’s success.
Traditionally, a business’s success was largely thought of in terms of only the profit portion of the triple bottom line. And many businesses continue to report their performance to stakeholders only in the form of financial statements based on accounting principles that have broadly remained unchanged since first being codified in the 1970s*.
“Essentially, profit is an accounting term, often used as a proxy for cash flow generated by a business, and cash flow is needed by every business to survive,” says Tim. “However, we are increasingly focused on non-standard measures of profitability, and other non-financial lead indicators to future cash flows and longer-term value of businesses.”
2. Planet (or environmental measures)
Planet refers to initiatives a business is taking to positively contribute to or protect our environment.
Tim explains that there continues to be a shift in global awareness, “We’re seeing an increasing number of businesses designed around sustainability and environmental imperatives. The next generation of consumers are much more environmentally conscious, and they have the ability to access information about a business’s environmental responsibility and sustainability initiatives.”
3. People (or social measures)
A business is only as good as its people, and how it treats its people and its stakeholders. Not only do we see businesses thrive when they value and look after their employees – but also when they have strong relationships with their customer base, suppliers, and the wider community.
Trust tends to grow or decline based on how you treat everyone that touches your business or is impacted by what you do. “Trust is a really important theme, and one key reason consumers will buy or engage with a particular business,” explains Tim.
A triple bottom line can build trust
Although profit is the most traditional measure of a business’s success and remains key, we are seeing an increasing number of businesses that are thriving due to having a customer value proposition with an underlying focus on the sustainability of our planet and making a positive contribution to society.
“People care about why you do what you do, and how you go about it,” says Tim. “Businesses that have a value proposition and culture with people and/or the planet at its core, will often see that translate into higher long-term value in the financial and non-financial sense, and improved longer term profitability.”
Tim explains that if you’re looking to build trust with your customer base, genuinely looking past profit and instead toward planet and people is a great way to start.
The first steps to adopting a triple bottom line
If your business is taking its first steps toward adopting a triple bottom line, Tim’s advice is to really consider the values of your organisation, your stakeholders, and particularly your customers.
“Have a strong value proposition and the people who share your values will want to engage with you,” says Tim. “Economic benefits often seem to follow, as well as your ability to actually positively impact people and planet.”
Tim explains that the triple bottom line as a framework is a useful starting point to begin thinking about the longer-term value of your business. It might even put into perspective what success could mean for you and your business.
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This material is for general information purposes only and does not constitute, and is not intended as, personalised financial advice or as a replacement for legal advice. BNZ strongly recommends you seek advice specific to your personal financial or legal situation from a qualified adviser. Neither BNZ nor any person involved in the material accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.