People, planet, profit; E, S, G
◈ 9 cardsThe triple bottom line as a lens; the three ESG pillars with example topics and a KPI each; net-zero versus zero emissions; Scope 1, 2 and 3 at vocabulary level.
The triple bottom line
A conventional income statement has one bottom line: profit. The triple bottom line (TBL) asks a company to account for three — people (its social impact), planet (its environmental impact) and profit (its economic result). It is a lens for thinking about performance, not a reporting standard: no standard-setter issues “TBL statements”, and the midterm distractor is to treat it as one. The reporting standards come in lesson 6.3.
The three ESG pillars
Investors and lenders organise the same idea as ESG — three pillars of non-financial performance that affect a company’s risk and value:
- Environmental (E) — emissions, energy, water, waste, biodiversity, climate risk.
- Social (S) — employee health and safety, diversity, labour practices in the supply chain, community relations, product safety, data privacy.
- Governance (G) — board independence and structure, executive pay, shareholder rights, ethics and anti-corruption. This pillar is module 5’s content under a different heading.
Worked example — Tamarack’s ESG summary
Tamarack Outfitters’ first ESG summary, one KPI per pillar:
| Pillar | Topic | KPI | Where in this course |
|---|---|---|---|
| E | delivery-fleet emissions; packaging waste | tonnes CO₂e from the fleet (Scope 1); % of packaging recyclable | scorecard environmental perspective (M11) |
| S | warehouse safety; supplier labour audits | lost-time injury rate per 200,000 hours; % of suppliers audited | — |
| G | board independence; audit committee | % of directors independent | Module 5 |
The skill the midterm tests is classification: handed twelve topics, put each under E, S or G. Water use is E; a supplier’s factory safety is S even though it is environmental-sounding; executive pay is G; data privacy is S; a board that is not majority-independent is G.
Net-zero and the three scopes
Two vocabulary items appear in every ESG discussion.
Net-zero means a company’s greenhouse-gas emissions, less the emissions it removes or offsets, equal zero. It is not the same as zero emissions: a net-zero company may still emit, provided it removes or pays for the removal of an equal amount. A carbon-neutral claim usually means the same thing. The trap is reading net-zero as “emits nothing”.
Emissions are counted in three scopes, a classification from the GHG Protocol that IFRS S2 adopts:
- Scope 1 — direct emissions from sources the company owns or controls: Tamarack’s delivery vans, the gas furnace in its warehouse.
- Scope 2 — indirect emissions from the electricity, heat or steam the company buys: the power its stores draw from the grid.
- Scope 3 — all other indirect emissions in the value chain: the manufacture of the tents it sells, customers driving to its stores, employee commuting, the disposal of its products. Scope 3 is usually the largest and always the hardest to measure, which is why the reporting standards give it transition relief (lesson 6.8).
A simple check: Scope 1 is your smokestack, Scope 2 is the utility’s smokestack on your behalf, Scope 3 is everyone else’s smokestack because of you.