Definition of a Double Bottom Line

by Lesley Barker; Updated September 26, 2017

It is common to hear a business person speak about the "bottom line" as an excuse for saying "no" to a possibility. The "bottom line" is about money or the return on investment: how much something will cost compared to how much it will generate. Sometimes the "bottom line" is used to explain why a company makes a choice that may seem to ignore social benefits or virtues. Closing a school because of budget shortfalls may be based on the "bottom line," even though it forces the students to travel outside of their neighborhood and attend schools in more crowded classrooms, for example. The "double bottom line" (2BL) considers both financial and social consequences before arriving at a business decision.

History

The term "double bottom line" grew from a concept that Jed Emerson developed at Harvard Business School. A senior fellow with both the William and Flora Hewlett Foundation and the David and Lucille Packard Foundation in 2007, Emerson coined the terms "blended value proposition" and "blended return on investments." "Blended" includes more than financial considerations, such as social and environmental returns on an investment. His work has led to an investment trend called "socially responsible investment," or holding a "double bottom line."

Social Entrepreneurship

Social entrepreneurs use a double bottom line. They look for venture capital from socially responsible investment funds to start innovative businesses that also accomplish positive social change. Occasionally this happens through a strategic partnership between a for-profit company and a not-for-profit organization. The Roberts Enterprise Development Fund is one organization that tracks and encourages this kind of collaboration.

Cause Marketing

Another approach to considering a double bottom line is cause marketing. When you purchase a can of Campbell's soup that has the pink breast cancer logo on the label, you have encountered an example of cause marketing. A few cents from the proceeds of the sale of the soup is committed to go to fund work to beat breast cancer. It helps the cause while also creating a positive impression about Campbell's as a company that cares.

Microenterprise

Micro-enterprises are new very small businesses that need only a few individuals to operate. They have become a popular, suggested solution to transition individuals, families and even communities who are transitioning out of a severe systemic generational poverty. Since a new micro-enterprise can be opened for relatively small amounts of money (technically, under $35,000 as of 2009) and because the stories of the people who want to start one are often compelling, organizations like Kiva have been able to connect investor-loaners with prospective micro-enterprise business people. The loans are treated as real investments in real businesses. They are arranged with repayment obligations and schedules. This is a socially conscious approach to making money, taking the double bottom line very seriously.

Philanthropy

Philanthropy has always looked for a double bottom line. Grant-makers fund nonprofit service organizations to produce innovative solutions to serious social problems. The double bottom line considerations come when the proposal to receive a grant is scrutinized. Not only do the funding organizations want to be sure that the project is likely to succeed at what it plans, they evaluate the track record and fiscal capacity of the nonprofit organization to make sure that it will be able to manage the grant after it has been awarded. There is even a new trend in philanthropy called "venture philanthropy" that takes the double bottom line thinking seriously, while entertaining significant risk.

Potential

The double bottom line may not go far enough. It looks at the return on investment from both a financial and a social perspective. However, now there is an expanded, more complex bottom line approach that takes three factors into account. When financial, social and environmental considerations are taken together before making a business or philanthropic decision, the double bottom line becomes a triple bottom line.

About the Author

Lesley Barker, director of the Bolduc House Museum, authored the books "St. Louis Gateway Rail—The 1970s," published by Arcadia, and the "Eye Can Too! Read" series of vision-related e-books. Her articles have appeared in print and online since the 1980s. Barker holds a Bachelor of Arts in sociology from Washington University and a Master of Arts in Teaching from Webster University.