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64-417: In traditional business accounting and common usage, the " bottom line " refers to either the "profit" or "loss", which is usually recorded at the very bottom line on a statement of revenue and expenses. Over the last 50 years, environmentalists and social justice advocates have struggled to bring a broader definition of bottom line into public consciousness by introducing full cost accounting . For example, if

128-400: A merchandising company, subtracted costs may be the cost of goods sold , sales discounts, and sales returns and allowances. For a product company, advertising , manufacturing , & design and development costs are included. Net income can also be calculated by adding a company's operating income to non-operating income and then subtracting off taxes. The net profit margin percentage

192-409: A "consolidated social statement" and a "consolidated environmental statement". While many people agree with the importance of good social conditions and preservation of the environment, there are also many who disagree with the triple bottom line as the way to enhance these conditions. The following are the reasons why: In short, the criticisms can be summarised as: In response to these limitations,

256-399: A 1990–2008 study of worldwide national newspapers. An example of an organization seeking a triple bottom line would be a social enterprise run as a non-profit, but earning income by offering opportunities for handicapped people who have been labelled "unemployable", to earn a living by recycling . The organization earns a profit, which is invested back into the community. The social benefit

320-412: A business to pollute the air, "the simple right to clean air is abolished". Under his conception of capitalism, profit necessarily subjugates the environment, and properly accounting for the social costs of production requires some form of socialist planning . Any attempt to adequately protect the environment within such a capitalist framework is doomed to fail, so the argument goes, because society simply

384-814: A call for legislation change to allow and encourage a focus on social and environmental impact, with BCorp a legal form for a company focused on "stakeholders, not just shareholders". In Western Australia , the triple bottom line was adopted as a part of the State Sustainability Strategy, and accepted by the Government of Western Australia but its status was increasingly marginalised by subsequent premiers Alan Carpenter and Colin Barnett . Bottom line In business and accounting , net income (also total comprehensive income , net earnings , net profit , bottom line , sales profit , or credit sales )

448-645: A capital increasing mechanism, like worker power, create marketable products that are sold for money and waste. In the concept of sustainable capitalism, it appears to be necessary to shift to a more circular economy where the end product would be reinvested not only to the capitalist business or financial institution but into the basis for raw materials, and people who support this business. This type of circular economy would require more responsibility on corporate governance to reduce externalities. China has made advances in this area, increasing renewable energy industries, with an estimate that fossil fuels will no longer be

512-478: A cleanup, such stark honesty opens not just an economic but political door to some kind of negotiation — presumably to reduce that ratio in time to something seen as more equitable. As it is, people in developed nations can be said to benefit 15 times more from ecological devastation than in developing nations, in pure financial terms. According to the IPCC , they are thus obliged to pay 15 times more per life to avoid

576-401: A community or its labour force. A TBL business also typically seeks to "give back" by contributing to the strength and growth of its community with such things as health care and education. Quantifying this bottom line is relatively new, problematic and often subjective. The Global Reporting Initiative (GRI) has developed guidelines to enable corporations and NGOs alike to comparably report on

640-462: A continuation, but a replenishing of resources. Sustainability is often thought of to be related to environmentalism, and sustainable capitalism applies sustainable principles to economic governance and social aspects of capitalism as well. The importance of sustainable capitalism has been more recently recognized, but the concept is not new. Changes to the current economic model would have heavy social environmental and economic implications and require

704-406: A corporation shows a monetary profit, but their asbestos mine causes thousands of deaths from asbestosis , and their copper mine pollutes a river, and the government ends up spending taxpayer money on health care and river clean-up, how can we capture a fuller societal cost benefit analysis ? The triple bottom line adds two more "bottom lines": social and environmental (ecological) concerns. With

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768-648: A fuller understanding of what "social capital" is, how it functions in a real community (that being the City of London ), and how losses of it tend to require both financial capital and significant political and social attention from volunteers and professionals to help resolve. The data they rely on is extensive, building on decades of statistics of the Greater London Council since World War II . Similar studies have been undertaken in North America . Studies of

832-451: A global monetary reform by which they could be systematically and globally reduced in some uniform way. The argument is that the Earth 's carrying capacity is at risk, and that in order to avoid catastrophic breakdown of climate or ecosystems , there is need for comprehensive reform of global financial institutions similar in scale to what was undertaken at Bretton Woods in 1944. With

896-496: A healthy sales stream, which needs a high focus on customer service, coupled with the adoption of a strategy to develop new customers to replace those that die away, and planet can be divided into a multitude of subdivisions, although reduce, reuse and recycle is a succinct way of steering through this division. The initial understanding is now supplanted by thinking beyond TBL: added to the TBL concept of economics, ethics and environment

960-449: A long-term influence on the value which it measures. This concept follows recent trends that see forms of sustainable business as the preferred method for development, because of the way that these types of businesses offer a positive influence to their environment. Many of these stem from business-led corporate responsibility coalitions which aim to mitigate ESG impacts through mobilization of resources. These business are not limited to

1024-571: A loss of each such life to climate change — the Kyoto Protocol seeks to implement exactly this formula, and is therefore sometimes cited as a first step towards getting nations to accept formal liability for damage inflicted on ecosystems shared globally. Advocacy for triple bottom line reforms is common in Green Parties . Some of the measures undertaken in the European Union towards

1088-459: A net income calculation: Net Income = Gross Profit − Operating Expenses − Other Business Expenses − Taxes − Interest on Debt + Other Income {\displaystyle {\text{Net Income}}={\text{Gross Profit}}-{\text{Operating Expenses}}-{\text{Other Business Expenses}}-{\text{Taxes}}-{\text{Interest on Debt}}+{\text{Other Income}}} Net profit

1152-511: A question asked by the Polish poet Stanisław Lec , "Is it progress if a cannibal uses a fork?" as the opening line of his foreword. Elkington suggests that it can be, particularly in the case of " sustainable capitalism ", wherein competing corporate entities seek to maintain their relative position by addressing people and planet issues as well as profit maximisation . A Triple Bottom Line Investing group advocating and publicizing these principles

1216-447: A radical change of the system are not likely to succeed as they go against what capitalism was designed to achieve. Capitalism and sustainability are mutually exclusive ideas given the current model. Critics such as Neil E. Harrison argue that the government would likely be resistant to sustainable changes for the current capitalist model. Since the capitalist government was built upon capitalist ideals and business interests, he argues,

1280-405: A safe and legal manner. " Cradle to grave " is uppermost in the thoughts of TBL manufacturing businesses, which typically conduct a life cycle assessment of products to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user. Currently, the cost of disposing of non-degradable or toxic products

1344-401: Is a measure of the fundamental profitability of the venture. "It is the revenues of the activity less the costs of the activity. The main complication is . . . when needs to be allocated" across ventures. "Almost by definition, overheads are costs that cannot be directly tied to any specific" project, product, or division. "The classic example would be the cost of headquarters staff." "Although it

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1408-553: Is a related ratio. This figure is calculated by dividing net profit by revenue or turnover, and it represents profitability, as a percentage. Net profit: To calculate net profit for a venture (such as a company, division, or project), subtract all costs, including a fair share of total corporate overheads, from the gross revenues or turnover. Net Profit = Sales Revenue − Total Costs {\displaystyle {\text{Net Profit}}={\text{Sales Revenue}}-{\text{Total Costs}}} A detailed example of

1472-483: Is aimed at lowering or removing greenhouse gas emissions to reduce radiative forcing of the atmosphere and the intensity of future climate change. Economist John Ikerd claims that environmental degradation happens under modern capitalism because the economy is divorced from ethics. According to him, classical economists like Adam Smith had always intended for market economics to be tempered by property owners' moralities, and neoclassical economists put undue faith in

1536-424: Is an entity's income minus cost of goods sold , expenses, depreciation and amortization , interest , and taxes for an accounting period . It is computed as the residual of all revenues and gains less all expenses and losses for the period, and has also been defined as the net increase in shareholders' equity that results from a company's operations. It is different from gross income , which only deducts

1600-468: Is at the core of the business of banks in the Global Alliance for Banking on Values , for example. The Detroit -based Avalon International Breads interprets the triple bottom line as consisting of "Earth", "Community", and "Employees". The triple bottom line consists of social equity, economic, and environmental factors. The phrase, "people, planet, and profit" to describe the triple bottom line and

1664-593: Is born financially and environmentally by future generations, the governments, and residents near the disposal site and elsewhere. In TBL thinking, an enterprise which produces and markets a product which will create a waste problem should not be given a free ride by society. It would be more equitable for the business which manufactures and sells a problematic product to bear part of the cost of its ultimate disposal. Ecologically destructive practices, such as overfishing or other endangering depletions of resources are avoided by TBL companies. Often environmental sustainability

1728-596: Is not structured to be willing to sacrifice private profits for public endeavors on this scale. The Capital Institute describes the concept of sustainable capitalism as an oxymoron . They argue that modern capitalism is not designed for cooperation and much of the proposed measures in the manifesto are insufficient. Regeneration, cooperation, and well-being are aspects of sustainability that do not coincide with what capitalism has evolved to be. Efforts may be made to reform current capitalistic practices, but mass movements focusing on environmental concerns that do not create

1792-561: Is one framework for reporting this material impact. This is distinct from the more limited changes required to deal only with ecological issues. The triple bottom line has also been extended to encompass four pillars, known as the quadruple bottom line (QBL). The fourth pillar denotes a future-oriented approach (future generations, intergenerational equity , etc.). It is a long-term outlook that sets sustainable development and sustainability concerns apart from previous social, environmental, and economic considerations. The challenges of putting

1856-512: Is the adoption and development of sustainable practices that protect natural resources, instead of spending it as capital. Ledewitz claims that in traditional capitalism, natural capital ", meaning natural resources, will continue to decline and will limit monetary capital success, lifting the value of natural resources and replacing the definition of prosperity. He proposes that sustainable capitalism would institute policies and regulations to protect natural resources in addition to investing back into

1920-604: Is the idea of thinking of the environment as a mantel that the other pillars hold up, and add to Economics and Ethics, the notions of Energy, and Health or the 4 E's. The following business-based arguments support the concept of TBL: Government fiscal policies usually claim to be concerned with identifying social and natural deficits on a less formal basis. However, such choices may be guided more by ideology than by economics . The primary benefit of embedding one approach to measurement of these deficits would be first to direct monetary policy to reduce them, and eventually achieve

1984-414: Is the meaningful employment of disadvantaged citizens, and the reduction in the society's welfare or disability costs. The environmental benefit comes from the recycling accomplished. In the private sector , a commitment to corporate social responsibility (CSR) implies an obligation to public reporting about the business's substantial impact for the better of the environment and people. Triple bottom line

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2048-408: Is the more profitable course for a business in the long run. Arguments that it costs more to be environmentally sound are often specious when the course of the business is analyzed over a period of time. Generally, sustainability reporting metrics are better quantified and standardized for environmental issues than for social ones. A number of respected reporting institutes and registries exist including

2112-519: Is theoretically possible to calculate profits for any sub-(venture), such as a product or region, often the calculations are rendered suspect by the need to allocate overhead costs." Because overhead costs generally do not come in neat packages, their allocation across ventures is not an exact science. Net profit on a P & L (profit and loss) account: Another equation to calculate net income: Net sales (revenue) - Cost of goods sold = Gross profit - SG&A expenses (combined costs of operating

2176-608: The Euro currency integration standardize the reporting of ecological and social losses in such a way as to seem to endorse in principle the notion of unified accounts, or unit of account , for these deficits. To address financial bottom line profitability concerns, some argue that focusing on the TBL will indeed increase profit for the shareholders in the long run. In practice, John Mackey , CEO of Whole Foods , uses Whole Foods' Community Giving Days as an example. On days when Whole Foods donates 5% of their sales to charity, this action benefits

2240-435: The value of Earth have tried to determine what might constitute an ecological or natural life deficit. The Kyoto Protocol relies on some measures of this sort, and actually relies on some value of life calculations that, among other things, are explicit about the ratio of the price of a human life between developed and developing nations (about 15 to 1). While the motive of this number was to simply assign responsibility for

2304-404: The "profits" of other entities are included as a social benefit. Following the initial publication of the triple bottom line concept, students and practitioners have sought greater detail in how the pillars can be evaluated. The people concept, for example, can be viewed into three dimensions – organisational needs, individual needs, and community issues. Equally, profit is a function of both

2368-476: The Global Reporting Initiative, CERES, Institute for Sustainability and others. The ecological bottom line is akin to the concept of eco-capitalism . The profit or economic bottom line deals with the economic value created by the organization after deducting the cost of all inputs, including the cost of the capital tied up. It therefore differs from traditional accounting definitions of profit. In

2432-673: The TBL into practice relate to the measurement of social and ecological categories. Despite this, the TBL framework enables organizations to take a longer-term perspective and thus evaluate the future consequences of decisions. Sustainable development was defined by the Brundtland Commission of the United Nations in 1987. Triple bottom line (TBL) accounting expands the traditional reporting framework to take into account social and environmental performance in addition to financial performance. In 1981, Freer Spreckley first articulated

2496-501: The ability of markets to automatically adjust to physical and moral imperatives. Ikerd concludes that a system of environmental regulations founded on a popular, ethical consensus is necessary and sufficient to prevent excessive climate change . Sustainable capitalism is also viewed as a non-transcendent, regulated commodity to humanity due to the ever-increasing demands of environmental regulation. Geoffrey Strickland emphasizes that current discussions on economic development are led by

2560-420: The community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well-being of corporate, labour and other stakeholder interests are interdependent. An enterprise dedicated to the triple bottom line seeks to provide benefit to many constituencies and not to exploit or endanger any group of them. The "up streaming" of a portion of profit from

2624-498: The community, creates goodwill with customers, and energizes employees, which may lead to increased, sustainable profitability in the long-run. Furthermore, planning a sustainability strategy with the triple bottom line in mind could save companies a lot of money if a disaster were to strike. For example, when BP spilled "two hundred million gallons of oil in the Gulf of Mexico ", it cost the company "billions". This company focused mostly on

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2688-487: The company) - Research and development (R&D) = Earnings before interest, taxes, depreciation and amortization (EBITDA) - Depreciation and amortization = Earnings before interest and taxes (EBIT) - Interest expense (cost of borrowing money) = Earnings before taxes (EBT) - Tax expense = Net income (EAT) Sustainable capitalism Sustainable capitalism is a conceptual form of capitalism based on sustainable practices that seek to preserve humanity and

2752-651: The concept of the "Triple Depreciation Line" (also called "CARE - Comprehensive Accounting in Respect of Ecology - model") has been proposed A focus on people, planet and profit has led to legislation changes around the world, often through social enterprise or social investment or through the introduction of a new legal form, the Community Interest Company . In the United States, the BCorp movement has been part of

2816-511: The cost of goods sold from revenue. For households and individuals, net income refers to the (gross) income minus taxes and other deductions (e.g. mandatory pension contributions). Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings . As profit and earnings are used synonymously for income (also depending on UK and US usage), net earnings and net profit are commonly found as synonyms for net income. Often,

2880-433: The economy is most easily associated with capitalism. Sustainable capitalism, as a policy outline, is an attempt to address and tackle the use of admittedly insufficient tools used today to measure the economic growth and the real value of countries, such as GDP or GO . Criticism of this form of growth measurement is centered on the fact that GDP fails to account for labor conditions and other environmental factors which have

2944-513: The efforts of individuals, as well as compliance of local, state and federal governments. Controversy surrounds the concept as it requires an increase in sustainable practices and a marked decrease in current consumptive behaviors. This is a concept of capitalism described in Al Gore and David Blood ’s manifesto for generation investment management to describe a long-term political, economic and social structure which would mitigate current threats to

3008-562: The emergence of an externally consistent green economics and agreement on definitions of potentially contentious terms such as full-cost accounting , natural capital and social capital , the prospect of formal metrics for ecological and social loss or risk has grown less remote since the 1990s. In the United Kingdom in particular, the London Health Observatory has undertaken a formal programme to address social deficits via

3072-430: The environment in attempt to reverse the degradation. Social aspects of sustainable capitalism involve a positive reception toward climate change. Author Mohan Munasinghe explains that two specific ways that humans can respond to climate change are through adaptation and mitigation. First, adaptation is aimed at reducing the vulnerability of human and natural systems in the face of climate change stresses, while mitigation

3136-541: The expenses of an endeavor. In practice this can get very complex in large organizations. The bookkeeper or accountant must itemise and allocate revenues and expenses properly to the specific working scope and context in which the term is applied. Net income is usually calculated per annum, for each fiscal year . The items deducted will typically include tax expense , financing expense ( interest expense ), and minority interest. Likewise, preferred stock dividends will be subtracted too, though they are not an expense. For

3200-543: The financial and economic costs of this disaster, instead of the company’s environmental bottom line, furthering damage to the company and its reputation. Timothy Slater and Tanya Hall identified General Electric (GE), Unilever , Procter and Gamble , 3M and a private company, Cascade Engineering, as examples of businesses using TBL. GE referred to TBL benefits associated with their electron beam emitting technology investment in 2008. Danish company Novo Nordisk 's consolidated financial statements for 2019 were supplemented by

3264-408: The firm. Examples of stakeholders include employees, customers, suppliers, local residents, government agencies, and creditors. According to the stakeholder theory , the business entity should be used as a vehicle for coordinating stakeholder interests, instead of maximizing shareholder (owner) profit. A growing number of financial institutions incorporate a triple bottom line approach in their work. It

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3328-467: The goal of sustainability , was coined by John Elkington in 1994 while at SustainAbility, and was later used as the title of the Anglo-Dutch oil company Shell's first sustainability report in 1997. As a result, one country in which the 3P concept took deep root was The Netherlands. The people, social equity, or human capital bottom line pertains to fair and beneficial business practices toward labour and

3392-540: The main source of energy by 2030; these steps toward change were forced in part by high pollution and population. In their manifesto, Gore and Blood propose key economic measures to change from the current form of capitalism:. The first five items are most related to economic changes, while the last five are actions more related to social aspects. Of these ten, only two are directly related to environmental aspects, and none explicitly suggest environmental policy changes. As explained by Bruce Ledewitz, sustainable capitalism

3456-430: The marketing of finished goods back to the original producer of raw materials, for example, a farmer in fair trade agricultural practice, is a common feature. In concrete terms, a TBL business would not use child labour and monitor all contracted companies for child labour exploitation, would pay fair salaries to its workers, would maintain a safe work environment and tolerable working hours, and would not otherwise exploit

3520-470: The notion that human reproduction is a commodity that must be regulated and improved to encourage market efficiency, which is a phenomenon that counteracts the growth of capitalism. According to the Marxist understanding of capitalism as production for profit, it is impossible to prioritize environmental sustainability without abolishing capitalism. Ernest Mandel claims that when profit maximization requires

3584-559: The original concept, within a sustainability framework, the "profit" aspect needs to be seen as the real economic benefit enjoyed by the host society. It is the real economic impact the organization has on its economic environment. This is often confused to be limited to the internal profit made by a company or organization (which nevertheless remains an essential starting point for the computation). Therefore, an original TBL approach cannot be interpreted as simply traditional corporate accounting profit plus social and environmental impacts unless

3648-416: The planet and society. According to their manifesto, sustainable capitalism would integrate the environmental, social and governance ( ESG ) aspects into risk assessment in attempt to limit externalities. Most of the ideas they list are related to economic changes, and social aspects, but strikingly few are explicitly related to any environmental policy change. Economic aspects are clearest, perhaps because

3712-401: The planet, while reducing externalities and bearing a resemblance of capitalist economic policy . A capitalistic economy must expand to survive and find new markets to support this expansion. Capitalist systems are often destructive to the environment as well as certain individuals without access to proper representation. However, sustainability provides quite the opposite; it implies not only

3776-616: The ratification of the United Nations and ICLEI TBL standard for urban and community accounting in early 2007, this became the dominant approach to public sector full cost accounting. Similar UN standards apply to natural capital and human capital measurement to assist in measurements required by TBL, e.g. the EcoBudget standard for reporting ecological footprint . Use of the TBL is fairly widespread in South African media , as found in

3840-526: The social impact of a business. The planet, environmental bottom line, or natural capital bottom line refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and minimize environmental impact. A TBL endeavour reduces its ecological footprint by, among other things, carefully managing its consumption of energy and non-renewables and reducing manufacturing waste as well as rendering waste less toxic before disposing of it in

3904-414: The term income is substituted for net income, yet this is not preferred due to the possible ambiguity. Net income is informally called the bottom line because it is typically found on the last line of a company's income statement (a related term is top line , meaning revenue , which forms the first line of the account statement). In simplistic terms, net profit is the money left over after paying all

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3968-478: The traditional non-profits we associate with corporate responsibility, but also can be independent, non-profit, for-profit, led by a board of directors or core-funded. The wide spectrum of business types shows the gradual turn towards socially and environmentally responsible corporate governance . Sustainable capitalism challenges the common model of the capitalist economy by its linear frame. Raw materials , either natural resources or intellect, when combined with

4032-515: The triple bottom line framework in a publication called Social Audit - A Management Tool for Co-operative Working . In this work, he argued that enterprises should measure and report on financial performance, social wealth creation, and environmental responsibility. The phrase "triple bottom line" was articulated more fully by John Elkington in his 1997 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business , where he adopted

4096-413: Was founded in 1998 by Robert J. Rubinstein . For reporting their efforts companies may demonstrate their commitment to corporate social responsibility (CSR) through the following: The concept of TBL demands that a company's responsibility lies with stakeholders rather than shareholders . In this case, "stakeholders" refers to anyone who is influenced, either directly or indirectly, by the actions of

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