The IEDC EDj Economic Development Journal 734 15th Street, NW Suite 900 • Washington, DC 20005 Volume 14 / Number 3 / Summer 2015 When Three Equals One By Janet Hammer, PhD TRIPLE BOTTOM LINE ECONOMIC DEVELOPMENT Economic development succeeds at the interface of people, place, and prosperity. Sometimes referred to as the triple bottom line, this concept recognizes the interconnections between economic, environmental, and social factors and provides an important framework for engaging in economic development. This article introduces the concept of triple bottom line economic development, discusses its centrality to the profession, and provides examples of what it might look like in practice. Advertisement when three equals one By Janet Hammer, PhD he “triple bottom line” re- Janet Hammer led the fers to the economic, envi- The triple bottom line concept is central to development of the US ronmental, and social val- economic development. Most communities have Economic Development t Administration’s Triple ue of an investment. The term visions and goals that include economic prosperity, Bottom Line Tool (tbltool. was coined by business con- environmental quality, healthy people and livabil- org). She is a Senior sultant John Elkington to de- Fellow at Portland State ity. Not only should economic development be scribe important investment University and founder of conducted in ways that take us toward rather than The Collaboratory – value that accrues outside a a consultancy that helps firm’s financial bottom line. away from those goals, it turns out that those very organizations achieve, The concept is increasingly salient in factors are important for fostering assess, and communicate triple bottom line impact the worlds of business, investment, economic development. of development development, and governance and (janet@gocollaboratory. org). is sometimes referred to as “people, sion framework to consider sustainability impacts. planet, profit” or sustainability. In this article, we In real estate, developments may look to LEED, Acknowledgments introduce the triple bottom line concept and its EcoDistricts, or other standards to improve and The author thanks the communities that shared communicate environmental or triple bottom line relevance to economic development, and ex- their case stories as well performance. Cities may use the STAR Communi- plore what it might look like in practice. as colleagues that con- ty Rating System to identify areas for improvement tributed to development and document achievement. of the TBL Tool and THE TRIPLE BOTTOM LINE CONCEPT Motivations for addressing triple bottom line cases including Traditionally, if a cost or benefit did not appear performance vary depending upon context. In Julia Babcock, as a financial transaction it did not appear on the some settings the driver might be demands for Ira Goldstein, books and, thus, was not accounted for. Over time, better accountability and transparency, stronger Briana Meier, however, there has been a growing realization that Maggie McCullough, investment performance, or alignment with orga- important investment value may not appear in the Kelly Moosbrugger, and nizational and stakeholder goals. In others, it may financial bottom line yet should be accounted for. Gary Pivo. be an interest in brand or reputation management, These extra-financial returns may be economic, The research that cost savings, competitive advantage, innovation social, or environmental and are referred to as the informed this article was opportunity, or risk minimization. Whatever the funded by US Economic triple bottom line or TBL. driver, the concept has arrived. Conversations that Development Adminis- This realization has prompted organizations in centered on “is this important” have given way to tration Technical Award public, private, and non-profit settings to seek ways “how can we best address this?” For example, in Number 99-07-13871. to consider triple bottom line performance of in- the corporate world, the number of S&P 500 In- This article is the sole vestments (see Sidebar One). For example, busi- dex companies publishing corporate sustainability responsibility of the author and does not nesses may report on environment, society, and reports grew from under 20 percent in 2011 to 75 imply endorsement by governance using the Global Reporting Initiative percent in 2014. framework or may become a certified B corpora- these individuals or their organizations. tion. Infrastructure investments may use the Envi- TRIPLE BOTTOM LINE ECONOMIC DEVELOPMENT Economic development succeeds at the interface of people, place, and prosperity. Sometimes referred to as the tri- ple bottom line, this concept recognizes the interconnections between economic, environmental, and social factors and provides an important framework for engaging in economic development. This article introduces the concept of triple bottom line economic development, discusses its centrality to the profession, and provides examples of what it might look like in practice. Economic Development Journal / Summer 2015 / Volume 14 / Number 3 5 THE TRIPLE BOTTOM LINE CONCEPT AND • Place is where development happens, even in the ECONOMIC DEVELOPMENT context of an interconnected world. Placemaking The triple bottom line concept is central to economic helps attract and retain workers and visitors, and development. Most communities have visions and goals stewardship of place maintains the resource base that include economic prosperity, environmental quality, upon which life and economies depend. healthy people and livability. Not only should economic • Prosperity contributes to well-being and quality of development be conducted in ways that take us toward life. New accounting metrics provide a more com- rather than away from those goals, it turns out that those plete picture of investment value so that business very factors are important for fostering economic devel- and community ledgers balance in the short term opment. That is, economic development succeeds at the and the long term. interface of people, place, and prosperity: Together, these 3Ps – the triple bottom line of people, • People are at the heart of economic and community place, and prosperity – are both the ingredients and out- development. People provide the talent and labor comes to successful economic development. that enables economies to thrive, and they are the Let’s consider the following thought experiment to see main reason we engage in economic development some of the concepts in play. Imagine there are two sce- and cultivate prosperity. narios for a mixed-use development project: SIDEBAR ONE APPLYING TBL TOOLS TO ED As the triple bottom line and sustainability have grown in importance, a profusion of tools and terms have been created to bring the concept to life. They have been developed for a range of scales or foci including business, built environment, infrastructure, and investment. The following highlights some of the most important of these terms and tools and then discusses their relevance to economic developers. Business and Investment – Corporate social Built Environment and Municipal Sustain- • Second, economic developers can encour- responsibility (CSR) is a term that refers to how ability – There are a number of tools that age or incentivize applicants for funding a business conducts itself, particularly with re- provide information about the TBL or sustain- or approval to participate in reporting or spect to environment, society, and governance ability performance in the built environment. certification programs. This helps raise the issues (ESG) or sustainability. An increasing Major programs that focus on the building, bar and shift practice toward stronger TBL number of companies issue CSR reports to neighborhood or district level include LEED, performance. communicate how they are addressing ESG or Green Globes, Living Building Challenge, and • Third, economic developers can encourage sustainability factors. For example: EcoDistricts. Sustainable Sites considers the officials to prioritize purchases from triple • The Global Reporting Initiative (GRI) is an landscape context for building and Envision bottom line businesses and to consider international organization that has devel- considers infrastructure. The STAR Community whether the organization’s investments oped standards for CSR reporting. GRI does Rating System provides a framework and certifi- are in funds or community development not certify reports, companies, or perfor- cation for local jurisdictions to document and financial institutions with strong reporting or mance; GRI helps organizations know what improve social, economic, and environmental certification. performance. to report. Together, these strategies support busi- • The Sustainability Accounting Standards Relevance and Application – Economic nesses that are striving to achieve positive social Board (SASB) is developing standards for development professionals can make use of and environmental impact along with finan- the disclosure of material sustainability these standards and certifications in a number cial returns and stimulate demand for other information for more than 80 industries in of ways. businesses to do so. Economic developers can 10 sectors for mandatory SEC filings such as • First, economic developers can help busi- also work with their community to employ the Form 10-K and 20-F. As with GRI, SASB nesses learn about and adopt reporting sustainability indicators such as STAR Commu- provides guidance