There are very definable expenses common to most small-business owners. Labor costs, facility lease or depreciation costs, materials, and energy costs are some of the major expenses that you may need to monitor closely. Show Labor Costs Some may argue that labor costs are difficult to affect in a tight labor market due to competitive pressures. Many business owners would tell you that in today's marketplace, eliminating human resources is a short-sighted strategy, and not sustainable. As such, reducing labor costs can be challenging in today's business landscape. Facility Costs Facility costs are also difficult to affect due to long-term lease contracts and the increasing price of real estate. Many companies view this type of cost as a period fixed cost. Materials and Energy Costs Supply chain experts can certainly execute strategies that can extract vendor cost reductions that can improve your bottom line. In terms of energy costs, companies have historically assumed that these costs were similar to a tax and cannot be materially reduced. The reality is that many companies have already discovered that managing, controlling and reducing their energy costs is an effective way to improve the bottom line. How Smart Meters Can Help Energy Manage Costs ComEd is installing smart meters throughout Chicago and northern Illinois. By the end of 2018, all homes and businesses will enjoy the benefits that smart meter-enabled technology provides. A smart meter requires no action from you. ComEd will install a smart meter in the same location of the existing meter at your building or business. Once you have a smart meter installed, you can access more of your energy-usage data online – no need to wait for your monthly energy bill. With this information, you can monitor your energy use and make changes that can save you energy and money. You can also enroll in free, online energy-management tools and programs. Developing an Energy Plan In today's world, you cannot afford to fly-blind when it comes to business energy costs. The introduction of the smart meter provides you access to the data and tools you need to minimize what could be one of your major business expenditures on an on-going basis. If you're interested in developing an energy plan or if you already have an energy plan in place, ENERGY STAR® offers a free action workbook to make the most of energy management for small businesses. Want to learn more about how smart meter-enabled tools and programs can help your small business save? Contact ComEd at 866-368-8326 or visit ComEd.com/BizSmartMeter. The triple bottom line (TBL) is a sustainability-focused accounting framework that includes social, environmental and financial factors as bottom-line categories. Businesses, nonprofit organizations and government entities use the TBL to evaluate not only their financial performance, but the overall economic value they create and their social and environmental impact. Rather than only focusing on the standard financial bottom line, the TBL adds broader economic, social and environmental concerns to help measure how an organization affects its employees, the surrounding community and the environment as a whole. This is typically measured using the three P's: people, planet and profit. The idea behind the TBL is to gauge an organization's commitment to business sustainability and corporate social responsibility. Large organizations in particular tend to have a big effect on communities and the environment, so expanding their typical bottom-line considerations can help improve people's lives and the planet's well-being. TBL results can also be factored into environmental, social and governance (ESG) initiatives that focus on the adoption of sustainable and ethical business practices. The three P'sThe term triple bottom line was coined in 1994 by John Elkington, a British author and business consultant who focuses on sustainability issues. He articulated the three P's as the TBL's measurement components the following year. Although there's no single established way to measure them, the following common methods are typically used.
Why is the triple bottom line important?The triple bottom line is an important part of sustainability efforts in many organizations. It's a management concept that was designed to prompt business leaders to look beyond standard measurements of profit and loss and to think more deeply about how their company operates. For example, the TBL encourages executives to consider everyone who is affected by the organization. As a result, it can help drive business transformation within companies. The TBL could also help mitigate some of the effects of climate change, especially when it's used by large businesses that consume substantial amounts of energy and other resources and often contribute heavily to air and water pollution. Through its environmental aspects, the framework points toward a more sustainable future on climate, at least to the degree that it drives changes in organizations. From a high-level business perspective, the TBL framework provides the following opportunities for organizations:
Business benefits of the triple bottom lineOrganizations that use the triple bottom line can also gain tangible business benefits, such as the following:
Challenges and criticism of the triple bottom lineHowever, the triple bottom line also comes with its share of criticism. This includes the following:
Elkington himself has criticized the way the TBL is used by many companies. In an article he wrote for Harvard Business Review in 2018, he said the framework "wasn't designed to be just an accounting tool." Far beyond that, it was intended to drive changes in capitalism as a whole. But, he added, the TBL "has been captured and diluted by accountants and reporting consultants." He also said there was too much focus on the financial performance of organizations instead of on their broader economic value. Real-world triple bottom line examplesOil company Shell was one of the first organizations to adopt the triple bottom line concept. It initially applied the elements of the framework in a company report published in 1998 that posed this question on its cover: "Profits and Principles -- does there have to be a choice?" Shell went on to create a TBL-influenced sustainability plan and has continued to release a report on its efforts annually. Some examples of other organizations that use the triple bottom line framework include the following:
Future of the triple bottom lineThe TBL framework is well aligned with the increased emphasis on ESG, sustainability and corporate social responsibility in organizations, a trend that has been driven partly by the expansion of ESG investing practices. That alignment could lead to wider use of the TBL in the future, as more organizations look for ways to measure and document their ESG and sustainability efforts. Continued growth in the number of benefit corporations and Certified B Corporations should also drive further adoption of the framework because they both use its principles as a defining element. B Corporations, or B Corps for short, are certified by B Lab, a nonprofit organization that measures the social and environmental performance of companies based on an impact assessment they fill out online. To get the certification, businesses are also legally required to consider the impact of business decisions on all of their stakeholders, not just shareholders. B Lab states that more than 6,500 companies have been certified as B Corps worldwide. Ben & Jerry's, Better World Books and Patagonia are three examples. While B Corp is a voluntary designation, a benefit corporation is a legal business structure with corporate governance requirements that commit companies to consider all stakeholders and provide some type of public benefit as part of their operations. Benefit corporations can be registered in more than 30 U.S. states, as well as the District of Columbia and Puerto Rico. A company can also be both a benefit corporation and a B Corp -- for example, Patagonia is registered as a California benefit corporation. New rules and regulations could also push more companies to use the TBL. For example, the European Union's Corporate Sustainability Reporting Directive, which went into force in January 2023, will require approximately 50,000 companies to report annually on their business risks and opportunities related to social and environmental issues and the effects their operations have on people and the environment. Meanwhile, the U.S. Securities and Exchange Commission has proposed a rule that would require publicly traded companies to report on their climate-related risks and greenhouse gas emissions. However, there's a backlash against ESG initiatives among some politicians, primarily Republicans, at both the federal and state levels in the U.S. For example, Congress in March 2023 approved a Republican-driven resolution to block a federal rule that allows retirement fund managers to consider ESG factors in investment decisions, although President Biden vetoed the measure. It remains to be seen whether anti-ESG legislation could negatively affect such initiatives and use of the TBL. |