Triple Bottom Line: measuring social and environmental KPIs

By Geoff Taylor | October 21, 2020

The main KPI to measure the success of a company has always been profit. The bottom line. The shareholder value so to speak. Profit has often been the only measure and the only goal. And while we all understand that companies must be financially sustainable, there are also other factors that contribute to a company’s overall health, performance and footprint. Profit is no longer the only measure that counts.

Triple Bottom Line: beyond ‘just’ profitability

The so-called triple bottom line (TBL or 3BL) is gaining more and more ground as a measure of a company’s true performance. The TBL covers three parts: social, environmental and financial results. It enables companies to evaluate their performance in a broader perspective than financial results alone. It includes, for example, their footprint in the supply chain. After all, what does a large financial profit mean if generating it has caused havoc in the supply chain with, for example, pollution, deforestation and human rights infringements such as forced labour or child labour?

Besides the TBL, the quadruple bottom line (QBL) may also be used, which is an extended version of the TBL. The QBL also takes the effects for future generations into account whereas the TBL only takes the current impact into account.

Challenges in triple bottom line accounting

triple-bottom-line-1.pngThe biggest challenges when evaluating the TBL or QBL are measuring the social and environmental impacts. For most companies, these impacts are mainly concentrated in their supply chain. In some cases more than 80% of the impact lies beyond their tier 1 suppliers, therefore beyond their direct control. This poses a number of challenges, including, for example, how to find out which suppliers your tier 1 suppliers use, or the suppliers of their suppliers.

This daunting task may put companies off even attempting to map out their supply chain, but luckily we are seeing more and more companies recognizing their responsibility and working on improving their entire supply chain. The traditional one up, one down view of the supply chain is being replaced by full visibility from source to final product. Questions such as: “Where did the ingredients come from and under which circumstances have they been produced?” can only be answered by using supply chain mapping, traceability and by collecting data at all relevant stakeholders in the supply chain.

Starting to collect supply chain data

Yet it doesn’t have to be daunting. Companies can start off relatively easily by using a combination of Excel and email to ask their tier 1 suppliers for more information about themselves, and their respective suppliers. In this way a company can start to gather information about tier 1 and tier 2. Excel is useful because it lets you easily structure the questions you want to ask to your tier 1 suppliers. You can use the same technique to dig deeper in the chain and approach your suppliers in deeper tiers as you uncover them. Gradually you can build up a clearer picture of where ingredients and materials come from, and of which parties are involved in your supply chain.

Moving beyond Excel

Using a combination of Excel and email is a great way to get started with mapping out your supply chain. Soon, however, you’ll probably find that it’s not without its limitations. As you dig deeper into your supply chain, it can get hard to manage all the emails you’ve been sending, and even harder to pull all of the responses in your Excel sheets together into one big picture.

Analytics_Screenshot_Sustainability_Dashboard.jpgThat’s where specialized Supply Chain Collaboration software, like ChainPoint, lends a much more helpful hand. ChainPoint makes it a snap to build web-based questionnaires for your suppliers, and to invite your tier 1 onboard so they can provide answers. All your suppliers’ answers are stored in ChainPoint’s central, secure supply chain repository.

Now you can easily make conclusions from a central set of data instead of ploughing through countless Excel sheets. And when it comes to digging deeper in your chain, you can ask your tier 1 suppliers to onboard their own suppliers as well, making it really easy for you to push questionnaires further down your supply chain. Rinse, repeat, and use the power of ChainPoint to let underlying tiers invite each other onboard and build out your supply chain mapping. Suddenly, building out your supply chain map is not so daunting at all, because you don’t have to do it alone.

When data has been collected and stored in ChainPoint’s central repository, it can be analyzed, sliced and diced to form truly new perspectives. For example, you can use ChainPoint’s analytics to identify supply weaknesses well beyond your tier 1 suppliers. If 2020 has taught us anything, it’s that identifying supply hotspots – areas where supplies are very heavily dependent on a single player or region – is critical. Resilience, agility, continuity, and above all, insight, are all key here.

2020 was an awakening for many supply chains

The COVID-19 pandemic has already exposed the vulnerabilities of many organizations, especially those who have a high dependence on China or other highly impacted regions, to fulfil their need for raw materials or finished products. According to Accenture, 94% of Fortune 1000 companies are seeing supply chain disruptions from COVID-19. Apple, for example, had to delay the launch of their new iPhone series due to a shortage in raw materials and a lack of redundancy in their supply chain. Other examples of impacted sectors are the fashion, automotive, discrete manufacturing and bicycle industries.

Back to the Triple Bottom Line

You really can’t get deeper insight into your supply chain until you invest in getting it mapped out. But once you do this, a world opens up of being able to understand so much more about what’s going on in your supply chain. And that brings us back to the Triple Bottom Line, since understanding the wider impact of the things you produce can only become apparent when you have insight into your chain.

Let us show you the way

As we’ve pointed out in this blog, mapping out your supply chain doesn’t have to be as daunting as it seems, and getting insight into your chain can bring so many benefits, including reporting on your Triple Bottom Line. Let ChainPoint show you how to get started by booking a free demo today with one of our supply chain experts.Request a demo

 

This article was originally published on August 21, 2018 but has been revised for completeness and additional insights.

Posted in analytics, data capture, triple bottom line, TBL, QBL, reporting

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