As we look to the future, we are faced with staggering economic, environmental, and humanitarian unknowns. This uncertainty grows from a history of planetary economic expansion, which built the prosperity of the modern day, but leaves us with depleted resources, damaged ecosystems, and vulnerable populations.
With profit as the most important aspect of commerce, the only recognized value is monetary. In the pursuit of maximum profit, the invaluable well-being of humanity and the environment is set aside (Elkington 1998, 2013). To increase monetary gain the current global economy only sees the value of a forest when it has been clear-cut and processed into fuel, boards, or paper. The clean water, air, and soil the forest contributed to the bioregion are not considered. The biodiversity of plants, animals, and insects is not taken into account. The stability of the local climate and groundwater retention is not included in the cost analysis (Alhaddi 2015). The loss of an ecosystem is not recognized as severing the regional community from the land they live on. These costs are not considered, justifying the assumption that the forest is only valuable when processed into firewood, two-by-fours, or your morning coffee cup.
But what type of world are we creating when this is how we conduct business?
It is easy to see how the current bottom line’s boundaries are not inclusive of all costs. To realize the actual cost of any commercial activities, the scope must be expanded. To account for social and environmental costs, sustainable business design presents an innovative approach: the triple bottom line (Figure 1).
Originally developed by business writer John Elkington in 1994, the theory gives a name to sustainable commercial system design. This evolved business approach includes people and the planet alongside profit, creating a bottom line with three equally important domains. The forest’s intrinsic value and the regulatory services it provides are considered before it is cut down (Elkington 1998, Wayne & MacDonald 2015). The way we make decisions about resource harvest and use changes because we see the true value of the environment around us. While the approach requires more initial research and calculations of the value of ecosystems and their inhabitants, the long-term benefit is a thriving planet. With access to a resilient environment and economy, civilization has the capacity to reach unprecedented future prosperity.
In 2017, the United Nations released 17 sustainable development goals which caused investors to put pressure on companies to incorporate principles, like the triple bottom line, into their business models. This challenges the financial industry to reevaluate how companies are valued. Instead of success being purely profit-driven, the people and planet initiatives that a business has in place are considered in overall company valuation. A challenge that we, as systems thinkers, must undertake is to develop a model to understand how valuation may change given desired strategic initiatives to increase social and environmental responsibility. Investing in people and the planet will lead to increased efficiency and cost savings, but computing this value is more complex than simply calculating net profit. By modeling, we can perform trade studies to understand the overall impact an initiative in people or the planet will have on the value and success of the company (Figure 2).
Though the idea of the triple bottom line was developed almost 30 years ago, many mainstream corporations have yet to fully incorporate it into their business design. Some companies are challenging this norm and demonstrating how commerce can benefit people and the planet alongside profit:
Founded by Yvon Chouinard to supply him and his friends with affordable and consciously designed climbing gear, Patagonia has been a leader in business design with people and planet in mind. From sourcing sustainable materials to giving 1% of all revenue back to the planet each year, the company has never let profit outweigh the negative impacts of business. To further this, Chouinard recently announced the environment would be the only shareholder for the company going forward. With the potential to change the way businesses perceive success, the shift in stakeholders paves the path to a new type of commercial impact:
“It’s been a half-century since we began our experiment in responsible business. If we have any hope of a thriving planet 50 years from now, it demands all of us doing all we can with the resources we have. Instead of extracting value from nature and transforming it into wealth, we are using the wealth Patagonia creates to protect the source. I am dead serious about saving this planet.” (Patagonia, 2022)
Evolving our Systems
How do we evolve our systems to incorporate a triple bottom line? The main shift is to include the impact of the system on people and the planet (both regionally and globally) alongside profit:
- Include clean air, pure water, thriving community, biodiversity, and ecosystem health in the goals for a system design or business initiative.
- Expand the parameters of cost analysis to include polluted air and water, community deprivation, biodiversity loss, and ecosystem degradation.
- Explore the possibility of creating positive impacts on communities and the environment through the system’s design (using native plants in landscaping, sourcing materials from local regenerative farmers, or releasing “waste” water cleaner than when it was collected).
When developing a business plan and the subsequent system design, including the social and environmental costs results in more conscious commercial flows. With enhanced complexity, systems begin to represent the real-world dynamics between commerce and the environment (Elkington 2013, Alhaddi 2015). By including economic impacts once left in the shadows of business, decisions can be made to ensure the resiliency of the environment, the economy, and the people relying on both to sustain their lives.
Alhaddi, H., (2015). Triple Bottom Line and Sustainability: A Literature Review. Redfame Publishing. 1(2). doi:10.11114/bms.v1i2.752
Elkington, J. (1998). Accounting for the Triple Bottom Line. Measuring Business Excellence. ISSN: 1368-3047
Elkington, J. (2013). Enter the triple bottom line. In The triple bottom line: Does it all add up? (pp. 1-16). Routledge
Patagonia. (2022, September 14). Patagonia's Next Chapter: Earth is Now Our Only Shareholder [Press Release]. https://www.patagoniaworks.com/press/2022/9/14/patagonias-next-chapter-earth-is-now-our-only-shareholder
Wayne, N., MacDonald, C., (2015). Getting to the Bottom of “Triple Bottom Line.” Business Ethics Quarterly 14(2), 243-262. DOI: https://doi.org/10.5840/beq200414211