Benefits and challenges of the Triple Bottom Line
Sustainability is a need of the hour for ensuring social aspects while doing business, but what exactly is the Triple Bottom Line? The Triple Bottom Line is a business model that has social, environmental, and financial objectives. In this blog, we will discuss the challenges and benefits of the Triple Bottom Line for non-banking finance companies.
As the market expands, the phenomenon grows that social and environmental aspects influence the market in complex ways just as much as the monetary aspect does. The triple bottom line concept is a business approach that emphasizes social and environmental factors as much as profit. It has been associated with several corporations and national banking and financial institutions.
3Ps of Triple Bottom Line: Triple Bottom Line focuses on three factors, referred to as the three Ps:
Profit: It reflects the financial aspect and is the most important factor a company can use to evaluate its financial performance. It is easily quantifiable.
People: This shows the social responsibility of the company towards its employees, its commitment to people, and the active measures it has taken for the benefit of people.
Planet: This is about the company’s environmental impact. Its choices between cheaper or environmentally friendly options.
Benefits of Triple Bottom Line
Here are several benefits offered by Triple Bottom Line to NBFCs companies:
- The triple bottom line has led companies and brands to think about unique and sustainable ways to save the world from catastrophic consequences, rather than just focusing on profits. It has increased accountability and transparency in the work of companies. , including non-bank financial companies. There has been a heavy emphasis on reduced energy consumption while increasing productivity.
- The triple bottom line talks about the three P’s (profit, people, planet) for holistic development. Non-bank financial institutions have set a goal of achieving overall development, not just making profits through lending. They have shifted their focus to those areas that have higher development needs than others, such as small businesses, women-led businesses, agriculture, religious institutions, farming, and schools.
- The revamped policies have also led to higher employee retention due to a healthier work environment. Witnessing a massive brand transformation with a solid reputation, the company is attracting more and more customers, alongside investors seeking a positive impact on the planet.
- NBFCs are also talking about introducing various environmental policies that will encourage the promotion of green products. They have also been working on clean energy loans under the Triple Bottom Line mandate, which will help make them more environmentally friendly. One such example of this can be agricultural loans to benefit the environment by giving farmers access to easy credit that can also increase their profitability.
CHALLENGES
Here are some of the challenges of Triple Bottom Line:
- The biggest challenge for the Triple Bottom Line is that there is no common basis for measuring the three factors (profits, people, planet). Profits can be measured in monetary value, but it is difficult to measure environmental losses in monetary value. Companies are doing their part by implementing measures for a better planet and making commitments to their consumers, but even then there is no sure way to quantify these measures, which has limited the progress of the initiative.
- There is a trend among companies, including non-bank financial companies, that have taken active steps to adopt the triple bottom line framework, but the sustainability costs of some measures have increased as they have been implemented, which has then negatively impacted consumers and burned holes in their pockets.
- Companies always face the problem of balancing whether they want to make profits or work for the common good, which makes it difficult to apply this P3 policy in practice. There have already been several failed Non-Banking Financial companies that started with the intention of holistic development but failed due to lack of funding.
Conclusion
There have been several debates and discussions about the triple bottom lines which have turned into actions, some positive, others not so much. But it has stirred positive conversations among different industries, scholars, and organizations and has left a positive mark on Non-Banking Financial companies. There are enormous paths on how NBFCs can utilize this concept to offer greater benefits aligning with it.
