What’s Really New? Public-Sector Cost-Benefit Analysis and the Triple Bottom Line

What’s Really New? Public-Sector Cost-Benefit Analysis and the Triple Bottom Line

Increasingly, agencies are interested in understanding the benefits of their investments in terms of the "triple bottom line" or (TBL).  TBL is often presented as a new and important type of analysis in transportation and economics.  It is important for planners, economists, and others involved in transportation decisions to understand what this means, and how it relates to the current state of the practice in transportation economics.

The “triple bottom line” originates from private-sector models of corporate social responsibility in the European Community (EU) and elsewhere.  The global emphasis on sustainable business practices led to requirements from the EU, and from Non-Governmental Organizations (NGO’s) increasingly demanding that private firms track not only their own profitability, but account for societal values (including effects of their investments on society, the environment and the economy).  For private firms, this has represented significantly new and additional accounting which many had not done before.  For example, before TBL, a firm might have made an investment decision in a third-world country using a cost-benefit analysis where only the benefits accruing to the firm were counted, but not to society at large.  As TBL has become more widely used in the business world, it has been of interest to public sector planners and economists as well.

However, unlike private firms embracing TBL as a new methodology in recent decades, most public agencies have long already understood cost-benefit analysis as explicitly addressing societal costs and benefits.  Cost-benefit analysis in the transportation planning sector has generally never been thought of as an analysis merely of the private costs and benefits to the public agency – but has always been understood to incorporate the costs and benefits to all of society, implicitly already including social, environmental and economic factors.  For example, the TIGER program, while not explicitly requiring “TBL” analysis, makes it clear that to qualify for federal funding, the benefits included in a cost-benefit ratio address an array of performance areas, which include all of the areas on the “Triple Bottom Line” (and more).

Therefore, for public agencies already conducting cost-benefit analysis using widely accepted methods and tools like TREDIS-BC, REMI, the FAF Benefit-Cost tool, HERS-ST and others, the essential elements of triple-bottom line accounting are usually already included in the analysis.  TBL simply then involves using the results of these tools to compare the types of benefits they show.

Other tools (such as SROI and PRISM) present results in reports that are organized around TBL categories of social, environmental and economic outcomes.   It is important to understand that tools that simply use the expression “Triple Bottom Line” to describe their findings, are not actually applying any new or different analysis than tools that do not.  Nor are the outcomes of the analysis meaningfully different simply because they are presented in the TBL structure.  For public-sector planning (where cost-benefit analysis has long been understood to look at broad societal benefits), TBL is primarily a reporting protocol and not a new or different type of methodology for agencies.  With that said, when reviewing the results of cost-benefit or multi-criteria tools of any kind – it makes sense to look at the types of benefits presented within the context of TIGER and MAP-21 requirements to ensure the analysis is always complete.

For further information about cost-benefit analysis, the triple bottom line or the use of economic methods and tools for TIGER, MAP-21 and other policies, please contact Chandler Duncan cduncan@edrgroup.com.