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Managerial accounting, is different from financial accounting, is aims to generate both financial and non-financial information that to help internal users to do a relative decisions within a company. As the social needs of sustainable development, a growing number of corporate decision makers realized that the company could not blindly pursue its business profits, but also need to seek sustainable development. By definition, sustainability means the pursuit of endeavors, which prolongs the use of, reduces or eliminates resources being consumed in performing transactions to achieve an individual or organizational objective (Sivabalan, Sawyers, Jackson, & Jenkins, 2013, p. 221). The triple bottom line reporting system as a core value of sustainability considers three dimensions of performance that are economical, social and environmental, which differs from traditional reporting framework. BHP Billiton Limited has been selected in order to illustrate these triple performances. BHP is a mining company aims to create long-term shareholder values and a good reputation to the society. BHP started their business from silver mining, and now they are the world’s largest producer of mineral, including coal, iron, oil, and etc. The purpose of this essay is to analyze how BHP Billiton Limited applies the triple bottom line performances, and some comments on their relevance for both present and future decision-making.
Social performance of triple bottom line is a series of action taken by an organization that the outcomes can benefit society or the operation and capacity of corporation. The social outcomes can be by training employment, safety and health of workers, supporting entrepreneurships, donating to the community and etc. As one of the most profitable companies in Australia even to the world, BHP Billiton limited has made positive contributions to their home country, and other country where they operate. In order to get more skilled personnel and reduce unemployment rate, BHP Billiton Limited has spend around 25% on education and training program out of total expenditure US$245.8 million, which is the most expenditure investment program to the community. Furthermore, one of the biggest concerns to mining workers should be the potential safety and health risk. For solving this problem, during 2011 and 2012, BHP Billiton Limited has introduced and applied a new science and technology to reduce the mining operator’s exposure, so that it can ensure workers’ safety and reduce the health problems. In addition, BHP Billiton Limited also support local a regional entrepreneurships in order to develop their host countries economics. By doing this, there were over 830 work opportunities were made available and a$12.3 million worth of work packages awarded locally during 2013 (“our shared values”, 2013). Moreover that, BHP Billiton Limited also encouraged their employees make a valuable donations to their local communities. In 2013, there were more than 5,700 employees donates US$7.5 million to the societies. The company itself also expended US$1 million, US$29 million, US$9 million, and US$9 million donate to Red Cross Australia, Colombia Resilience Project, assist Mozambique farmer, and support Australian partnership respectively. As the BHP Billiton Limited has made great number of valuable benefits and contribution to the society in variety of social fields. Therefore, my comment to BHP is they should persist enterprises’ sustainable development, helping and donating more needy people and society.
Environmental performance of triple bottom line generally represents the amount of natural resources a ¬rm uses in its operations and capacities and reflect the potential influences by products its activities create to the environment and the corporations’ operations. The outcomes of environment performances can be using and management of energy, management of pollution, recycling and land rehabilitation. BHP Billiton Limited as a global organization is seeking to minimize the negative impact to environment and try to contribute environmental benefits to community. As the climate change, mining industry need to bear such an enormous public opinion from both government and communities. In order to reduce the social pressures and build a good brand image, BHP Billiton Limited has contribute a lot of benefits to the environmental performance. First of all, excessive energy and natural resources consumptions is still one of a people's concerns, although the demand for those necessary energy is increasing. One innovative project had been implemented by BHP Billiton Limited in order to reduce the unnecessary energy consumption and improve the productivity in 2013. In the previous five years, however, the index of total energy use in 2013 is the highest, which has reached 325 petajoules based on the BHP Billiton sustainability report 2013. In addition, BHP has done a lot of efforts on the land rehabilitation. Mining industry is one of the industries that can impact the land damage. Significantly, it requires more consideration that how BHP Billiton to manage the land use and rehabilitate the damage land. BHP Billiton Limited has formed "Five rivers Conservation Project" with an environmental non-government organization to deliver the objective goals. One case study of BHP shows that they have rehabilitated 220 hectares successfully during 2011 and 2012. This successful action not only reduced exposed damage land, but also improved the visual amenity of the land. Moreover, BHP also made a great effort in recycling. For example, they have developed a plan that includes lots of considerations about the water reuse and recycling within the operations. As a result, 25% of industrial water is close to drinking water quality and 45% of industrial water can be use for other purposes after filtering and processing. On the other hand, BHP in reducing greenhouse gas emissions has done a lot of works, but did not reach a significant result in 2013 due to the increases operations. Compare the index of greenhouse gas emissions between 2012 and 2013, it has increased around 7 millions of tones CO2-e. From above, we can easily see that BHP has made a lot of efforts to the environmental performance of triple bottom line. However, some of the performances they did do not have a significant achievement, such as reducing greenhouses gas emissions and saving energy. Therefore, I suggest that BHP Billiton Limited can try to work closely with local government; as a result, government can provide some tangible benefits to the company. On the other hand, BHP also needs to strengthen the maintenance of the exit equipment and apply some new technologies to minimize the environmental pollution and reduce greenhouse gas emissions.
Economic performance of triple bottom-line is the traditional profit and return on capital performance (Birt, Chalmers, Byrne, Brooks, & Oliver, 2012, P.44). It refers to economic value created by the entity in a specific period of time that enable both external users and internal user to make an economical decision based on those financial performances. The outcomes of financial performances can be the turnover ratio of an entity, ROA (Return On Asset), Cash Flow Ratio, and the profit of entity. The table below shows that some of annual indexes in financial report during 2012 and 2013within BHP Billiton Limited.
As the largest diversified and extended mining company, they have several financial methods to examine their financial performance. Firstly, profit performance is used to monitor their operations' capability. To define the term of profit, it refers to the gross profit less all the other expenses in operations. Based on the financial annual report of BHP Billiton Limited, the profit of entity had decreased 23% compare to 2012's profit. At the meanwhile, they have analyzed several factors and trends that affected their operation results, such as the exchange rate, changes of products' demand and supply, increase of operating cost, and other capital expenditures. In addition, underlying Earnings before interest and taxation (EBIT) also was used to measure and assess the financial performance of their business. The underlying EBIT is earnings before net finance cost, taxation and any exceptional items ("BHP Billiton Annual Report", 2013), which can be used to enhance the comparability from different periods, and the operations can be clarified clearly. Based no the index they provide, underlying EBIT has declined by US$6.1 billion or 22% comparing between 2012 and 2013. They have explored that the lower price reduced the Underlying EBIT by US$8.9 billion in 2013, among reduction of the iron ore's price became a major contributor to the decline. Additionally, cash flow ratio is used to examine company's operation and capabilities as well. Cash flow ratio also can be called liquidity ratio, which indicates how the money in and out through the entity's operation. According to the index they provide, the liquidity ratio in 2013 is 27%. Comparing the index in 2012, it declined by 11%, which means BHP Billiton Limited in 2012 has a better position to meet their obligations. Furthermore, from corporation's asset turnover ratio, we also can get some ideas about the entity's efficiency. Thirteen percent of asset turnover decreased from 2012 to 2013, which the index is 49% and 62% respectively. It is still in a relatively stable and efficient state, although there were a little bit declines over the two years. Therefore my comment to BHP's economic performance is they already have an established and developed financial system to run their sustainable business. Based on the thorough and detailed index they provide, both external users and internal users can directly make effective decisions.
By giving the concept of managerial accounting and definition of triple bottom line, people can easily get some idea that how BHP Billiton Limited run their sustainable business.
Social, environmental, economical performances within the triple bottom line of BHP Billiton Limited have been given in this essay in order to analyze the company’s sustainability. My personal comments have been given for each performance. The social performances have been explored, which BHP Billiton has done a good job on contributing their community. Through the description of environmental performance of BHP, we have known that the entity has made such a great effort to minimize the negative impact to environment. However, the achievement is not significant in 2013, therefore, I suggest that the company need to seek multiple methods to minimize the pollution to the society. Finally, based on the BHP’s financial annual report, they already have a completed financial system. The detailed and through financial information and index can help users to make correct decisions.
Sivabalan,P., Sawyers,R.B., Jackson,S., & Jenkins,G. (2013). Accounting for sustainability - social and environmental reporting and management accounting. InACCT managerial(p.221). South Melbourne, Vic: Cengage Learning.
Our shared values. (2013). Retrieved from http://www.bhpbilliton.com/home/aboutus/sustainability/reports/Documents/2013/BHPBillitonSustainabilityReport2013_Interactive.pdf
Birt,J., Chalmers,K., Byrne,S., Brooks,A., & Oliver,J. (2012). Accounting: Business reporting for decision making (4thed.). Milton, Qld: John Wiley and Sons Australia
BHP Billiton Annual Report. (2013). Retrieved from http://www.bhpbilliton.com/home/investors/reports/Documents/2013/BHPBillitonAnnualReport2013.pdf
• Share data
• Building human and enterprise capacity – making a positive contribution to society http://www.bhpbilliton.com/home/aboutus/sustainability/Pages/Sustainability-in-action.aspx
• Helping communities generate livelihoods http://www.bhpbilliton.com/home/aboutus/sustainability/reports/Documents/2012/HelpingCommunitiesGenerateLivelihoods.pdf
• Training staff
• Improving energy and greenhouse management
• Improvement in the land rehabilitation http://www.bhpbilliton.com/home/aboutus/sustainability/reports/Documents/2012/ManagingLandForRehabilitation.pdf
Measuring Organizational Performance: Beyond the Triple Bottom Line