The Triple Bottom Line: People, Profits & Planet

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1 The Triple Bottom Line: People, Profits & Planet Joe Walsh, Green Clean Maine Thursday, Nov. 6 th 10:00 11:00 AM Convention Center Room W307 Traditional View: Not Inherently Bad/Evil Traditional view of business = What s the bottom line? Profit rules all: More profitable = More successful Business decisions made around the singular question: what will maximize our profits (long term and short-term) This is not inherently BAD. We all want to make money! In fact, good money! Support family, have a nice house, go on extended vacations. Triple-Bottom-Line enriches the traditional view of business to ultimately make it more sustainable, durable, self-propagating. Triple-Bottom-Line Philosophy: What Is It? Exciting concept that highlights the transformative power of the free market system! Businesses are free to act with far fewer political constraints (we don t have to get re-elected) Businesses can move quickly to respond to rapidly-changing needs (no need for legislative action) Government is inherently less efficient than business we have to compete every day, which keeps us leaner, more agile Despite destruction, pollution and depletion of resources, no other system in the history of civilization has been more effective at creating wealth and improving overall quality of life However, resources are exhaustible. Traditional model doesn t take into account externalities. o What effects do my business activities have on the people who interact with my business (clients, vendors, employees)? On the environment around me (air, water, soil)? What if we take into account the effect our business has on the natural and human resources we use? Triple Bottom Line: If we view benefits to the people inside and outside our company, and the natural resources (air, water, soil) as equally important goals alongside profit, we ultimately realize more success

2 o o o Andrew W. Savitz, author and consultant for Price Waterhouse refers to this as The art of doing business in an interdependent world Ultimately, businesses that recognize that People, Planet and Profits are interconnected will be more successful Operate in the sustainability Sweet Spot: In the middle of graphic below How does Triple Bottom Line Apply to a Cleaning Company? Triple Bottom Line looks at the stakeholder concept. We ask: Who and What has a stake in how we do business, and ultimately how successful we are? These are our stakeholders. Set goals around how your business will contribute to the margins in the Environment and Social Progress just like you do for Profit. Who are the stakeholders in a typical residential cleaning business? What might we say are the interests of these various stakeholders in a residential cleaning business? What goals can you set? Clients: Am I getting a good service at a fair price? Will this service improve the health of my family or have an adverse impact? Will this service be convenient and hassle-free to use? Are my cleaning needs being met? Employees: Am I making enough money to meet at least basic needs? What are the opportunities available to me working for this company? Is my work environment positive? Supportive? Enjoyable? Does this job have a positive impact on my quality of life? How does this job compare to other jobs for which I am qualified in terms of compensation, opportunity and work environment?

3 Suppliers/Vendors: Am I being paid in a timely manner? Am I being treated well during business transactions? Can I trust this business? Will this business be a quality, long-term client? Do I enjoy doing business with this customer? Community: Is this business a good neighbor? Does this business contribute positively to the community in which it operates? Contributions are not just donations. Donations are philanthropy, but what other contributions? Good jobs? Creating wealth? Volunteer time? Environment: What is the net impact of business activities on the external environment? Known as externalities. What is the cost in terms of environmental impact of our business activities? Carbon emitted into the air? Particulate pollution? Pollutants deposited in water stream? Amount of natural resources used (water)? Amount of waste created in the course of business activities? Owner(s)/Shareholders: Am I getting a good return on my investment? Owner: is all this work worth it? Am I meeting my financial and lifestyle goals? Is the company sufficiently profitable? Profits are just a part of a much larger picture all interconnected Successful companies who subscribe to this model would argue that when you look at everything together, and consider all of your stakeholders in your goal-setting and business planning, your bottom line will ultimately be stronger and more enduring. Examples directly from my 30-Employee company: Consider: Clients stay with you when their needs are being met. This includes their health (using safe products), but they also need to feel valued and cared for. Cleaning business example: We have a saying: Because it s the right thing to do! We use this when asking ourselves why we provide the best service we can imagine. Client retention goal: 97% monthly. Currently at 97.1%. Top-ranked cleaning company in market. Employees who are compensated at a living wage and feel valued at work (you re considering their well-being in business decisions) stay longer and call out less. Lower absentee and turnover rates=more profits. It also creates a competitive edge for you in the employer marketplace and helps to attract a higher caliber employee, who will help maintain your premium image. Cleaning business example: We have a stated commitment to pay a minimum wage of $10.00/hr. post-training. Restructured our entire company so that wages would be held steady while necessary profitability adjustments were made. Average hourly field staff wage held steady at $12.68/hr. while payroll costs dropped dramatically and target profitability was met. Absentee rate: less than 2.5%.

4 A Community will support a good neighbor. Generosity engenders goodwill. You get to support causes you care about. People recognize that you are doing it (as long as you tell them!). Cleaning Business example: We have a goal to donate 1% of gross revenue to environmental and educational non-profits each year. We directly get new clients from the community activities in which this commitment gets us involved. Silent auction donations are my favorite: 1) Supports a cause you or your customers care about. 2) Gets you into client s homes to demonstrate your service. 3) You get a new client, who feels great about your service because you started the relationship with an act of generosity. Getting into a home is SO IMPORTANT in our business. People may balk at the price of a professional service, until they have EXPERIENCED what that service can do. Suddenly that $300/month doesn t seem so bad anymore! Environment: Considering your environmental impact will ultimately save you money. Consider this example, when we added an electric vehicle to our fleet in an effort to meet our carbon pollution reduction goals: Average operating cost /yr, leased vehicles, 10k miles: Conventional Compact Wagon, 2 yrs old Electric Vehicle, 2 yrs old Payments: $2,388 $2,988 Maintenance/Repair: $ 136 (3 visits) $ 50 (1 visit) Fuel (electricity): $1,400 $ 438 Insurance: $ 1,058 $ 1,164 Taxes: $ 383 $ 652 Operating Cost Total: $5,365 $5,292 Even with the relatively high cost of electricity in our state (Maine-13 cents/kwh), the electric vehicle was cheaper overall during the year (long-term maintenance will be lower as well, so we re projecting larger savings as the vehicles age). Great! But consider this: Electric vehicles get attention, and good PR! # of clients gained directly attributable to this particular vehicle: None 1=$3,500/yr revenue

5 Net: $5,365 $1, Consider how meeting this goal not only saved on the bottom line, it opened new doors for my business and establishes us as a leader in the community. We ve since received a grant of $6,500 toward the lease/purchase of another electric vehicle made eligible by our demonstrated commitment to reducing carbon emissions. Consider now how these pieces interconnect and feed into each other. Eventually a synergy takes over and things build on each other. (synergy examples: Lower absentee rates=more staffing consistency=happier clients who stay with us and refer friends; positive work environment=employees refer qualified new employees AND spread the work in the community=community goodwill=more people ready to do business with us) Ultimately, the bottom line is bolstered. This stuff really does take on a life of its own! Q&A Yes, it s hard to get used to triple bottom line No, it hasn t always gone smoothly Yes, we are trending in the right direction Examples of people outside of our industry using this with great success (you may be surprised!) Further Reading: The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success - and How You Can Too. Andrew W. Savitz The Ecology of Commerce: A Declaration of Sustainability. Paul Hawken.