It’s an important question to answer and often reveals how an organization measures its success. The reason I inquire is because someone recently asked me if I could identify Sage customers (specifically nonprofit or government organizations) who measure their triple bottom line. And, while I am confident we have customers who report outcome measures that reflect the concepts of the triple bottom line, I am not sure how widespread adoption of the framework is in our community.
The “triple bottom line” also known as TBL or 3BL began as an accounting framework to capture the full cost of doing business and as a guide for companies to report on the sustainability of their business practices.
The triple bottom line measures a company’s performance in terms of three bottom lines: profit, people and the planet.
- A single bottom line measures “profit” the fiscal or economic performance of an organization, profit and loss at the end of the year.
- A second bottom line measures “people” the social impact of an organization, how well does the organization treat people within the organization, throughout their supply chain and in the communities they touch.
- A third bottom line measures “planet” the environmental responsibility of an organization or their ecological impact locally and globally.
Because “you get what you measure”, organizations that establish and report on the triple bottom line are in turn more socially and environmentally responsible or sustainable.
Is Triple Bottom Line for Business Only? 3BL can be adjusted to fit any organization. Nonprofits and government entities can use 3BL by establishing outcome measures that report their economic, social and environmental performance.
Nonprofits can report “profit” as revenue generated or funds raised. “People” as number of constituents served. Environment as resources recycled or even the amount of green energy purchased each year. How 3BL is implemented really depends on the organization. There is an excellent article here on the Indiana Business Review that explains the concept of triple bottom line in more detail and provides examples of measures your organization can use.
Does your organization measure the triple bottom line? Let us know by commenting below.
Patricia Tynan
Social Media and Community
Sage Nonprofit
Patricia,
Love that our brief exchange resulted in a blog post and I really hope others contribute to this discussion.
What I find interesting about the nonprofit world is that so many organizations misunderstand the nature of what it means to be a nonprofit. Being nonprofit is a tax classification, not a business model.
In other words, being nonprofit doesn’t mean NOT generating a profit, but HOW that profit is used to create or enhance social or community benefit.
Therefore, being a nonprofit does not exempt an organization from having sound and solid business practices.
Perhaps being nonprofit provides even greater motivation for adopting sound business practices.
Let me contrast — for-profit organizations really get bottom-line thinking – their success is measured by how much profit they generate at the bottom-line of their business (after all revenues are booked and expenses are covered). They see the bottom-line as a direct measure of their success.
Nonprofit organizations, especially those deploying solutions like Sage, are interested in generating healthy financial outcomes. However, for these nonprofits, having a healthy bottom-line isn’t about making their shareholders happy, it’s about being more responsive to their stakeholders.
If a nonprofit doesn’t generate profit, it is forced to cut back or cancel programs. If this situation endures long enough, it’s forced to close its doors and discontinue services altogether.
No money, no mission.
Using sound financial practices and introducing efficiencies to an organization through the incorporation of tools like Sage and informed decisions based on sound data made possible by those tools, results in more money flowing to the bottom-line. More money to the bottom-line means more money for the mission and more good for the community.
More money, more mission!
The third bottom-line is then about doing mission in a sustainable way that protects and preserves the environment and the planet for those that will follow us in the future.
More money, more mission, more good for all! Now that’s what I call a healthy triple bottom-line and a WIN-WIN-WIN for all involved.
Thanks for getting this discussion rolling. Looking forward to hearing how your clients are better ALL of their bottom-lines.
Kevin Monroe
X Factor Consulting
http://www.xfactorllc.com
Very good topic & thoughts so far. Gives me an opportunity to mention something I’ve thought for a long time. Non-pofit & not-for-profit are mis-nomers. In my opinion, a better name for this group of businesses/organizations is non-owned entities (NOE). Sole proprietorships, partnerships, & corporations are the three traditional business entities one learns about at the beginning of Accounting 101. Those descriptions identify who the owners are: the people who benefit from the profits of the business.
NOE have no owners; by implication, the profits go back into the organization to benefit the mission. That’s why net worth is called Net Assets, not Owner’s Equity as in for-profits (& for-profit may be another mis-nomer or incomplete description).
NOE also avoids the implication that these organizations can’t have an excess of revenue over expenses. Indeed, if they don’t, they’re history–no money, no mission as Kevin Monroe aptly stated.
@Ray, I’m on the same page with you that very few things in life are known by what they are not. When I introduce myself I don’t say, “hello, I’m not David, or not Ray” or “I’m not a dog or a cat”, as a matter of fact, it sounds silly when someone tries that approach, except, of course, at the social sector collaboration where most folks say, “I’m from a NON-profit” and we’re so adjusted to it that we all smile and nod our heads.
The subliminal effect of the message that being non-profit equals having no money and even worse, can’t or shouldn’t operate at a profit is deadly to the sector.
So I’m in complete agreement that the sector needs a new name, but I’m a little concerned that the Non-Owned Entity moniker still focuses on what the sector is not, rather than what it is. A colleague and friend, Hildy Gottlieb, advocates for Community Benefit Organizations as it better describes what the sector does, not what it doesn’t do.
At any rate, hoping we can change the mentality and mindset that money and margin are good, desirable, and even honorable aspirations…as long we sowing the margin and money back into the community to multiply the good works being done there.
Cheers!
I really like the term Community Betterment Organizations. This really describes what these organizations strive to do, whether they’re human service, membership, arts, animal welfare, environment/conservation, etc. This term also removes the negative of “non”-profit & “not”-for-profit.
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