From the Single bottom-line to the Triple bottom-line
As our understanding of an increasingly complex world deepens, long-held assumptions about the role of business in relation to society and the environment are being questioned and challenged. The economic model that hinges on short-term profit, never-ending economic growth, GDP as a proxy for well-being, and views people and the Earth as inputs for maximizing single bottom-line profits is now being recognized as one that is outmoded and unsustainable.
A shift is taking place in which a new economic model that more closely mimics those of natural systems is emerging. This model is based on the recognition that the economy is a system that is nested within larger, inter-related societal and Earth systems. What affects one affects the others. It is this recognition that forms the basis for the triple bottom-line model of people, planet, profit.
A New Ethos for a New Time
The old dualistic either/or divide between “for profit/non-profit” is being replaced by a widening continuum of newly emerging organizational forms. These forms are based on a new ethos in which environmental sustainability and social justice values are at at the heart of their profitable mission-driven business models and strategies.
This ethos is informing the decisions of a growing number of individual and institutional investors who are targeting capital where it can make a positive impact as well as earn a reasonable return. And an increasing number of business partners and consumers are basing their purchasing decisions on a company’s environmental and social responsibility records.
Boards of Directors as Servant Leaders
Succeeding in this new business model calls for a new type of leadership at the Board of Director level. Neither traditional shareholder-primacy for-profit Boards, nor the donor-oriented volunteer non-profit Boards meet the new corporate governance requirements of the triple bottom-line company in a rapidly evolving market.
This new Board leadership must not only have the right mix of expertise, its members must also demonstrate wisdom, personal character, foresight and a commitment to serving the interests of a variety of stakeholders. This unique and rare combination of traits is especially important given the rise of shareholder activism and the growing influence of social media. An effective Board of Directors can make a critical difference in any organization’s evolution, resilience and long-term success.