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The Triple Bottom Line through ESG: The Planet and the Environment.




As we continue to navigate the complexities of our world, it has become increasingly clear that human activities have a significant impact on the environment. This degradation of the environment has led to a renewed focus on sustainable practices and a plethora of sustainability concepts. Two of these are the Triple Bottom Line (TBL) and Environmental, Social, and Governance (ESG). These concepts have influenced how businesses function because they acknowledge the value of producing profits while considering their impact on people and the environment. Profit, people, and the planet (thus the three Ps) are interconnected components from which the TBL analyses sustainability performance, with the planet part focused on the environmental side of sustainable business operations. On the other hand, investors and stakeholders use the environmental component of the ESG framework, which is closely related to the planet aspect, to evaluate a company's sustainability performance.


In the series of articles to come, we will dive deeper into the relationship, and differences between the Planet and Environment in the TBL and ESG frameworks, and explore why they are important to businesses.


The Relationship


The relationship between the planet and the environment is critical in the Triple Bottom Line (TBL) and the Environmental, Social, and Governance (ESG) frameworks. In the TBL framework, the planet, as a critical component, represents the natural resources that businesses rely on for their operations. It emphasises the need for sustainable business practices to consider the long-term impact on the environment. The TBL framework encourages businesses to consider their impact on the environment and find ways to minimise their negative impact while promoting positive environmental outcomes.

Similarly, in the ESG framework, the environment is one of the three pillars, along with social and governance factors, which investors and stakeholders use to assess a company's sustainability performance. The ESG framework encourages businesses to focus on sustainability practices that promote environmental responsibility, such as reducing carbon emissions, water consumption, and waste generation.


Both TBL and ESG frameworks highlight the importance of businesses' impact on the planet and environment and emphasise the need for businesses to operate sustainably to preserve natural resources for future generations.


The Difference


In the context of sustainable business practices, the term "planet" is often used to refer to the natural environment as a whole, including the earth's ecosystems and resources. The concept of the "planet" in the triple bottom line (TBL) framework emphasizes the need for businesses to consider the long-term impacts of their operations on the natural world and to operate within the limits of the planet's resources. This brings us to what are the Earth’s planetary boundaries.


Planetary boundaries are the points at which the Earth's systems are at risk of abrupt and permanent environmental change. The idea, which was first put up in 2009 by a team of scientists led by Johan Rockström, identifies nine crucial facets of the Earth system that must be preserved to keep the planet stable and conducive to the development of human civilization1. These include, among others, freshwater use, biodiversity loss, climate change, and changes in land use. The planetary boundaries framework is used to manage and comprehend how human activity affects the environment and to direct sustainable development initiatives.


The Nine Planetary Boundaries (Rockström et al., 2009)


On the other hand, the term "environment" in the ESG (Environmental, Social, and Governance) framework is more focused on specific environmental issues that are relevant to a company's operations and stakeholders. This can include issues such as carbon emissions, water use, waste management, and pollution.

While both the planet and the environment are important considerations for businesses, the TBL framework takes a more holistic view of sustainability and recognizes the interconnectedness of economic, social, and environmental issues. The ESG framework, on the other hand, provides a more focused set of metrics for evaluating a company's environmental performance and is often used by investors and other stakeholders to assess the company's risk and potential for long-term success.


Value Addition for Companies


By incorporating both the "E" and "P" factors into sustainability practices, businesses can ensure they are taking a more comprehensive approach to protecting the environment. The planet and environment in TBL and ESG are important to businesses for several reasons. Firstly, the natural resources and ecosystems that businesses rely on are finite, and their depletion or degradation can have significant consequences on a company's operations and profitability. Secondly, environmental issues such as climate change, pollution, and resource depletion can also have broader societal and economic impacts, affecting the communities and markets in which businesses operate. Thirdly, there is an increasing demand from investors, consumers, and other stakeholders for companies to demonstrate their commitment to environmental sustainability, and failure to do so can lead to reputational damage and financial risks. By incorporating the planet and environment into their sustainability strategies and reporting, businesses can better manage risks, reduce costs, and enhance their long-term viability and resilience.


Most importantly, businesses need to take sustainability seriously and think about how their actions will affect society and the environment. When it comes to giving people a thorough grasp of sustainability and assisting businesses in measuring their impact, the Triple Bottom Line and ESG frameworks have proven crucial. Important elements that concentrate on a company's environmental impact are "Planet" in TBL and "Environment" in ESG. While these two concepts are similar, they also differ significantly in ways that businesses need to be mindful of how to make sure they are accomplishing their sustainability objectives. In the end, incorporating sustainability practices into business operations is now required, not a choice. Businesses that embrace sustainability have a greater chance of long-term success and of positively influencing society.



References

Rockström, J. et al. (2009) Planetary Boundaries: Exploring the Safe Operating Space for Humanity, Planetary boundaries - Stockholm Resilience Centre. Available at: https://www.stockholmresilience.org/research/planetary-boundaries.html (Accessed: 17 May 2023).





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