Triple Bottom Line

Definition

The Triple Bottom Line graph of the indexing operating performance method makes the contributions of Profit, People and Planet, the three central elements of the Triple Bottom Line concept, also known as PPP or 3BL, comparable.

Instead of using currency values, the indexed approach uses Operating Ranks of the key performance indicators. This makes the underlying metrics universally comparable so that they can be cumulated and consolidated for multi-level, multi-segement organisations.

Description

The Triple Bottom Line graphic shows the median as a solid line and the first and third quartile boundaries, i.e. the 25th and 75th percentile, as blue shaded areas, as shown in the graphic below. The illustration follows the principle presented in the Operating Contribution tool: The transfer of the Operating Rank to the Triple Bottom Line graphic is accomplished by subtracting fifty percentile ranks from the Operating Rank. This means that only that part of the Operating Rank remains, which is above the median in case of positive Operating Ranks and below the median in case of negative Operating Ranks. The graph thus develops from the middle, the 50th percentile rank, upwards and downwards, by plus and minus fifty percentile ranks respectively.

The axes can be labeled on a scale from 0% to 100% analogous to the Operating Contribution, where 50% is the market center. Alternatively, the intuitively easier to understand display from 0% to 200% can be used, whereby in this variant, stretched by a factor of two, the market center is assigned the value 100%. This is readily converted into an intuitive compensation philosophy: 100% performance = 100% compensation. Because of these two conversion possibilities, which in the end are only a matter of taste, the use of a scale labeling with numbers was omitted in the graphic. Instead, the performance and the associated compensation recommendations are labeled. Thus the following philosophy applies: Market performance = target bonus.

The graph starts at the median for the first metric. If the rank of this metric is below the median, as shown here as an example for TSR, then the bar goes down by the difference below the median. The end of the first bar forms the starting point of the second bar, here the profit. In this example, the profit rank is above the median. For this reason, the difference above the median is counted upwards. These steps are repeated for all key figures. It should be noted that the above-median and below-median rank contributions are to be divided by the number of metrics, because the more metrics, the less each metric contributes. This division secures the rank scale from 0 to the 100th percentile or, in an alternative scaling approch, from 0% to 200%.

On reaching the last metric, it is advisable to display the total achievement as a further orange bar starting at 0% and ending at the level of the last metric. In this way, the overall performance of the company with regard to all aspects of performance is summarized in a metric bar that takes into account all metrics in the three aspects: Profit, People and Planet.

Application

The Tripple Bottom Line analysis allows different key figures to be viewed simultaneously in their position and distribution, similar to the Operating Contribution and the Operating Radar. This performance reporting approach is used for ESG (environment social governance) factors among other applications.

The Analysis of the Tripple Bottom Line is conducted by the Financial Research company Obermatt AG (about). Request the Tripple Bottom Line, sustainability or ESG position of your company from Obermatt AG (contact).

If you are writing a dissertation or master thesis on this topic, Obermatt AG (career) can sponsor you.