What Is Triple Bottom Line Reporting?

Triple bottom line reporting makes companies accountable for economic, social and environmental effects of doing business. This is a popular form of accounting for nonprofit companies and government organizations to show a commitment to corporate social responsibilities. For these companies, social and ecological performance is just as important as financial performance.

Facts

The idea of triple bottom line reporting was first used by John Elkington in 1994. He wrote a book on this topic in 1998, "Cannibals with Forks: the Triple Bottom Line of 21st Century Business." Triple bottom line reporting has gained momentum in all industries and sectors, not just nonprofit and government organizations.

Function

Triple bottom line reporting requires a company to be responsible to shareholders and to all stakeholders of a company. Stakeholders are made up of all shareholders, employees, customers, suppliers and anyone else who is affected by the actions of the business. Triple bottom line reporting demands that a company be accountable for every aspect of business.

Benefits

The social aspect of triple bottom line reporting focuses on fair treatment of a company's human capital. Besides providing a safe workplace and fair wages for employees, being socially responsible also entails performing beneficial and responsible business practices in the surrounding community. Triple bottom line reporting requires a company to engage in sustainable environmental activities. Companies should exert an effort to help the environment, or at least reduce the harm they inflict on the environment as much as possible. A company that uses triple bottom line reporting manages the consumption of energy, reduces waste, recycles, and avoids producing harmful items such as chemicals or weapons.

Significance

Appearing socially and environmentally responsible to customers helps businesses increase profits. It's often the case to see a company in the headlines for accounting scandals, unfair wages, unsafe workplaces, discrimination and much more; these reports hurt a company's reputation and goodwill, resulting in lost revenue. Also, focusing on more things just profits can help a company open market potential that was unattainable before. Companies may also lose market share to other competing businesses that are utilizing triple bottom line reporting because they appear more socially responsible to consumers.

Misconceptions

Triple bottom line reporting isn't just traditional accounting, with environmental and social impact factored in. The economic section of this accounting approach is focused on the economic impact of the company and is not limited to the revenues and expenses of a business.