Triple Bottom Line Concept and Its Benefits for Businesses
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Published: Tue, 05 Dec 2017
The concept of Triple Bottom line is just a popular concept that has been applied in the understanding of social duties among companies that are looking forward for the incorporation of non monetary values in their businesses. Its notion has become of much fashion in management, investing and management over the last few years. It has been explained that the ultimate success of corporations ought to be measured not just by the use of traditional financial bottom line, but need also to be measured by on the ethical and environmental factors. In fact most individuals have accepted that, organizations have a lot of responsibilities to their stakeholders to have responsible behaviors. In addition, it is also true that, it is not possible for firms in the long run to be successful if they disregard key stakeholders’ interests. Its apparent novelty lines in the contention of its supporters that the overall attainment of duties to the society, clients, employees as well as suppliers should be either calculated or audited and even report presented just like financial performance of public firms have been for over a century now, (Bowen, 1953).
As a matter of fact, TBL can not be taken as if it is an award, certification or even an accreditation that can be earned, but it is a continuous process that just helps companies to keep on ensuring that they are working towards greener business, as well as the demonstrating to the local community that, they are not just working towards enriching themselves, but also to the common good. Its major aim is to ensure sustainable development strategy.
The origin of triple Bottom Line dates back in 1990s, when the management thought accountability started using the phrase in its work. In 1997, the phrase got currency with “1997 publication of British edition of John Elkington’s Cannibals with Forks: The Triple Bottom Line of 21st Century Business” (Elkington, 1998). As a matter of fact, there were very few literatures on it, and many individuals thought that, Elkington coined the idea. However, after its publication, it has spread just like bush wire. It has been embraced and promoted by different organizations like the Global Reporting initiative and accountability by applying its concept in corporate world. Not being taken as a surprise, most firms accounting firms have incorporated the concept in an approval way when offering services that help companies that want to audit or even measure their additional bottom lines. In the same way, there have been sizable portion of industrial investment that have been devoted their energy din the processes of screening firms on the foundation of their environmental as well as ethical/social undertakings. As a matter of fact, most of them use 3BL language.
Not only companies, but different governments, government departments as well as political parties have also been well represented in the increasing documentation of those proposing the fact. The Triple Bottom line was originally inspired by Patrick Urbanist, who came up with similar ideas at the start of 20th century. These concepts depends much “on the triad of “folk, work, and place,” which encouraged the use of a multifaceted approach to policy and economic analysis” (Robertson, 1992). At the later stage, in a similar function, the aspect was adopted by both environmental and business theorists. In particular, the most renown theorists was Elkington, with his intention of coming up with an approach to social/ethical responsibility that was far much practical for business managers and leaders. This is based on the fact that, it does not regard or even water down the social/ethical as well as environmental values of much more ethical business. There have been a number of different approaches have been trying to come up with a very better metrics, that are far much helpful in the calculation of a triple bottom line since that time. Some of such approaches have been considered legislation in some parts of the world, for instance, Oregon and Minnesota States in the United State. Other nations or countries include Australia.
Essentially, the aspects of TBL were just an attempt of introducing a paradigm of accounting to the social environmental domains. Originally, the concept was just introduced as a tool of corporate tool of business. As an effect, individuals wonder if during its introduction, the notion was that the phrase would be picked and applied universally as it is now. To some extent, the phrase is not as new as such, this is based on the fact that, the concept just applies accounting knowledge to what was formally called corporate social responsibility.
Sometimes back, lots of companies used to scorn the notion of Triple Bottom Line reporting systems; currently, there are those who have taken its task fully. Its effects have been experienced in the positive flow on their suppliers. Since chains of supply are also accountable to the company’s performances, they are also scrutinized well in the Triple Bottom Line audits. The best examples in U.S are some big box stores which are greening up their actions, and as an effect, demanding their suppliers to use less packaging.
Elements of Triple Bottom Line Concept
The elements of Triple Bottom Line include profit also called Economic value, people (Social values) and the planet (Ecological value.) this is according to the description provided by Sustainability influence by 200th century Urbanist Patrick, in his notion of folk work as well as place.
Ecological values (planet)
One of the elements that make up Triple Bottom Line concept is ecological values. In its sense, it refers to environmental practices that are sustainable. The Triple Bottom Line company struggles itself to ensure that it has benefited the natural order as much as it could, or at least to the level that it will not harm and curtail environmental effects. A Triple Bottom Line endeavor ensures that it has reduced its ecological footprint by considering other factors. This is usually done through; careful management of its energy consumption as well as the non-renewable. This usually goes hand in hand with the reduction of waste manufacture, along with rendering waste products less toxic before disposing them din a safe and legal manner. The phrase “Cradle to grave” is uppermost in the thoughts of TBL manufacturing businesses which typically conduct a life cycle assessment of products to determine what the true environmental cost is from the growth and harvesting of raw materials to manufacture to distribution to eventual disposal by the end user.” Accompany that considers A triple bottom line, does not in any way produce harmful products, or even destructive products for instance, weapons, chemicals that are toxic or even batteries that contain heavy metals that can be termed as dangerous” (Giddens, 1995).
In the current times, the expenses involved during dumping of non-degradable products or even toxic waste products, is very high. As a result, are borne financially by different stakeholders like for instance, Governments and environmentally by those individual who reside near the dumping site and also elsewhere. According to the thinking of A triple bottom line, an industry which engages itself in the production as well as marketing a product which will at one point create a waste problem, should never at any cost be provided with an easy ride by the society as a whole, even the government should never provide any incentive on it. It will be considered more equitable for all businesses that involves themselves and sales products which might be taken as problematic, or might cause some troubles in future, , need to bear part of the expenses of its ultimate disposal.
Practices which can be considered as being ecologically, for instance, overfishing activities or any other activity that in one way or the other tries to endanger the depletion of some resources are all avoided by A triple bottom line company. In most cases, environmental sustainability is a more profitable course for investors in the long run. However, arguments stated that it is much expensive “to be environmentally sound are often specious when the course of the business is analyzed over a period of time. Generally, sustainability reporting metrics are better quantified and standardized for environmental issues than for social ones” (Porter 1998). There are a number of respected reporting institutions as well as registries, are under existence, for instance, the Global Reporting initiative, institute for sustainability, CERES, as well as the institute for sustainability, among others.
The reality so far is that, practice or companies that that create a lot of economic wealth, but do not at any cost prevent the deletion of natural resource, eventually can be considered as sustainable triple bottom line. This is based on the fact that, at one single time, the product or organization, will at one time lacks natural resources to continue its operation. In addition, it has been proved that, operations that do not factor at any level environmental costs of production sends false signals to customers and government. If in any case a business entails in the externalization of business environment, in most cases consumers tent to believe that, the cost of producing such a product is much lower than reality, due to lower prices for instance, demand tents to be higher. Tipple bottom line Sustainability, looks forward in addressing such like issues.
Profit (economic value)
This can be termed as the economic value that is usually created by any organization after the deduction of all expenses of any input, even after the exclusion of tied up capital. As an effect, it differs much from the traditional accounting definitions of what the profit is. Originally within sustainability framework, the concept of profit is supposed to be seen as being the real benefits that the host community enjoys. It is presumed to being the economic impacts that an organization might have on its economic environ. This in most cases is confused with the “limited to the internal profit made by a company or organization (which nevertheless remains an essential starting point for the computation)” (Matt, 2010). As an effect, the original Triple Bottom Line approach can not in any way be interpreted as being traditional corporate accounting profits on top of social and environmental effects, except when the profits of other entities have been included as social gains.
Just as any other element of Triple Bottom Line, the point of profit includes net profits or losses. All business practices that leads to the creation of both environmental social advantages, but ends up losing money, is considered as not being sustainable in any way. This was not based on the fact that, at one point the business might lack its operations funding. As a result, the Triple Bottom Line does not have any intention of excluding “profit incentive from operations. It exists to balance the profit incentive with the costs of production decisions that are often externalized:” (Matt, 2010) both environment and social bills. Those proposing sustainability Triple Bottom Line initiative, explain that operations that in one way or the other, but only create costs similarly not suitable are unsustainable as well.
People, (social value)
This refers to the and fair and beneficial business operations towards labor and the community and region under which the firm carries its activities. A Triple Bottom Line firm aims at benefiting many constituencies; by ensuring that it does not endanger any group neither destroys it. Part of the profits gained from finished product marketing back to the original raw materials producer. As a matter of fact, Triple Bottom Line business never uses child labor and will always monitor contracted firms for the exploitation of child labor. Such firms will also pay better salaries as well as maintaining safe working conditions, along with tolerable working hours. They also look forward to giving back to the community, by contributing to its growth with things like health care and schools. The quantification of such bottom line is new, subjective and often problematic, Fine (1991).
Theories and Opinions
According to Michael Porter, economy is just a social construct. This is based on the reason that, it is as an effect of policies, institutions as well as interactions that makes up the society. Secondly, the meaning of economy and what it is, originates from narratives made by society members. In this manner, the economic bottom line is not separable from social issues, including societal issues. According to Michael Porter, both economic and social issues can’t be separated at a cost; this is based on the fact that it is far much difficult to for anyone to reject the fact that, the relationship between economy and society are different. It has been found by economists that, economic processes that increases competitiveness, and better financial bottom line, results to long-term social trade off. It is true that, “through the erratic nature of innovation, improved forms of production are developed but their
Adoption is hindered by the lack of supporting services and infrastructure once abundant but no longer Available.” (Porter 1998)
On the same note, economic efficiency might result to other forms of social stresses. This is especially when advantages of higher efficiency is not distributed equally. At this very point at any time, for instance, many producers of vegetables across U.S may be arguing that, the current chain of supply arrangements gives rise to non-producers in the chain of supply for instance, processors and retailers capturing and never passing on the interests of the efficiency that is gained by producers. At this point for instance, this in most cases occurs when economic notions those results to social equity are in facing head on each other.
On the other hand, constructivist school sociologists like Grove-White (1997), and Fine (1991), have brought the point that; natural environment by itself is already a human construct. Cultural groups have led to the construction landscapes as their own reflections. Any form of change in environment has been associated with social along with cultural symbols. According to Finer, the definition of a group has been renegotiated to refer to the conception and definition of what the environment is.
Constructivists have therefore give TBL different meanings, for instance, the existence of environmental factor will not exist unless socially constructed. As a matter of fact, the environment can be given collective meaning depending on the collective social affiliations that are attributed to them. This is because, in one way or the other, the environment can be considered as being inseparable from the sociology. Though such like statements are philosophically challenging, but they make sense when individuals start translating personal perceptions into shared point of views. For example, to different individuals, a river might be a source of water, to another person, source of beauty while to the rest might view it as recreation source.
Secondly, environmental issues in most cases reflect social interaction. This is based on the fact that, scholar have even stated that the environment by itself is constructed by socio-culture. It has been argued by White-Grove that problems as a result of environment are just physical phenomena. “environmental problems and issues which society recognizes at any one moment are shaped and determined by processes of human judgment and social negotiation, even in their very definitions” (White-Grove 2011). This view has been has been supported by other researchers like Woodhill’s who has concluded that
In the recent past, there have been calls for the addition of fourth bottom line on the Triple Bottom Line, that will be based on culture however, individuals have argued that, this will just increase “a fourth leg to a concept that is in many ways flawed, it does provide a lead to defining some pragmatic ways of dealing with the flaws” (Spiller & Lake 2003). This call has attracted a lot of attention to the effects that accumulated stresses that are currently measured by TBL.
Globalization has played a major part in the TBL concept development; however, the paradox that has come with globalization is that, it has resulted to greater global integration of both “national and regional economies and cultures, it accentuates, rather than minimizes, the significance of the local context for innovative activities” (Acs et al 1996). At first such like contradiction was referred to as ‘glocalization’. This paradox has a very strong suggestion of regionalism, and calls for collective practices at local levels trying with a lot of effort to challenge the point of globalization, but on the other hand, it tries accommodating it to enhance competitive advantage. This kind of advantages is in most cases just a very complex mix of issues which under Triple Bottom Line framework.
In addition, the issue of glocalization tends to explain the way forward. First and foremost, it tries to integrate factors that underlay the TBL, other than accumulating credits along with deficits that make up bottom lines that tent to have greater meaning to those individuals who tent to live the events other reporting them, (Bowen, 1953).
Application, Impact and Discussion
The company might experience increased income and market share. This suggests that, managers believe that, their organizations have the ability of benefiting a lot from the Triple Bottom Line efforts. Market share impact also indicates that the management believes that, both customers and stakeholders have responded positively to the action. As a fact, managers will be seeing economic value; cause, it can help in cost saving along with incomes from new markets and innovation opportunities.
There is also increased employee retention after Triple Bottom Line (TBL) implementation. Having stronger sustainability is helpful in the retention as well as recruitment of better talents. Research has shown that, employees kin U.s prefer getting lower salaries but work with responsible institutions. Managers look at increased societal support as being an advantage to TBL. This sis based on the fact that, the local society influences firm’s operation license. When firms engage in societal activities, like addressing community problems and engaging in social impacts, it is presented as a good citizen corporate and partners. As an effect, managers view this as a chance of opening dialogue door and positive stakeholders. The TBL implementation also assists in the avoidance of legal issues, and angering special interest teams while encouraging good publicity.
Managers look at increased societal support as another positive impact of TBL. Companies that provide support to society, impact their environment beyond the firm’s boundaries. Activities like development of education and health system, leads to a reduced risk. This means that, when organizations implement TBL, they become safer enterprises, hence, to them, funds procurement is much easier.
As an effect, an organization might use such positive impacts for the creation of a framework that rewards practices and decisions made by its management for the support of sustainability along with TBL. In general, TBL leads to the “hiring of top talent, higher retention of top talent, increased employee productivity, reduced manufacturing expenses, reduced expenses at commercial sites, increased revenues and market share, reduced risk, and easier financing” (Willard, 2002). As shown in figure 1 bellow.
Figure 1 organizational advantage to TBL from: ttp://www.ccl.org/leadership/pdf/research/tripleBottomLine.pdf
Division of labor is one of the characteristic of rich societies, and a major reason that leads to massive accumulation of wealth. This then leads to the point that organizations’ contributions are majorly to the welfare of the community din all areas when managers are focusing on what they can do best, for the benefit of all. Sat the time, business is satisfying the society, TBL is then thought to be very harmful, as it diverts business attention far from its main goals and values. For instance, just like charitable organization like Red Cross are not expected to handle environmental issues. As an effect, mangers have to know that they are not required to concentrate on concerns outside company’s main objective, given that the enterprise is not doing any harm to the environment or people.
The concern for social and environmental issues is hardly found in poor communities, it is only a concern for richer societies. As an effect, application of TBL acts as an “example of choices available to the citizens of a society made wealthy by businesses attending to business” (Willard, 2002). As an effect, the creative attention to only business makes the business to contribute effectively to the betterment of all society angles, like social, environmental as well as economic.
Though socially responsible managers will say that is harmful to the society, however, TBL pressurizes libertarian managers to a mechanism that might or might not be the best option. It is not ethical to force businesses to undertake duties that are outside there core area of concentration. This is so particularly in areas that the firm does not harm either the environment or people in any way.
In the implementation TBL, most managers face the difficulty of achieving global agreement on simultaneous policy that might render such like measures found in TBL at the best advisory, hence unenforceable. For instance, individuals might not be willing to face depression or recession with the aim of replenishing lost ecosystem.
One of the major shortcomings of TBL framework application is capability of being applicable in monetary-based economic system. Since there has been never and still there will be no single way in monetary terminologies that can be used to measure society and environment as there is with profits. TBL does not allow mangers to get the sum of all three bottom lines. Due to this, it is far much difficult for managers to recognize the benefits of TBL implementation in the firm.
Mangers implementing TBL have been criticized by the TBL left wingers on the fact that, this method is just an “attempt by otherwise exploitative corporations to avoid legislation and taxation and generate a fictitious people-friendly & eco-friendly image for PR purposes” (Giddens, 1995).
Application of Triple Bottom Line Concepts in Management
It is being applied as an accounting and reporting tool as promoted by Elkington. This application has gained rapid adoption especially among global organizations that are looking for ways to enhance their image a good global citizen. For instance, Shell was amongst the first firm in the United States. Many organizations have ended up hiring the Consultancy Organization Sustainability by Elkington, in developing tools that assists in their accounting for their progress against TBL (Shell International, 1998). The process of developing TBL into a framework unto which firms can make a presentation of their performance accounts, has ended up promoting flurries of studies, money and consultancy firms. The goodness is that, all of them are on the way of improving the tools and processes involved. As a matter of fact, the global Reporting Initiative has been established with the objective of providing central concentration for such like activities, and also setting some international standards for reporting sustainability. This application of TBL reporting has gained its application in various public sectors as well as smaller entrepreneurs.
The concept of TBL has introduced the factor of measurement in the management of organization as urged by Elkington. He explained that “what you can’t measure, you are likely to find hard to manage” (Elkington, 1998). It happened that, he was a fervent believer that, it is very much possible to use Triple Bottom Line in the process of measuring progress. However, Elkington acknowledges two0n major challenges. The first challenge is that, the process of accounting for social dimension, there is a problem. This does not concern how measure social attributes. He continued that, amongst the challenges of Triple Bottom Line agenda, he notes that, “when we include the social and ethical dimensions of sustainability, the range of sustainability-related
Issues and impacts grow dramatically” (Elkington, 2004). He ends up concluding that, the second challenge faced by TBL model is the development of an approach that measure progress din a way that is very much integrated across the Triple Bottom Line.
However, lots of those carrying out social studies have criticized Elkington ideas that TBL has been applied in some sort of decision algorithm mechanisms. Such researchers have argued that, the decisions that revolve around sustainability and natural resource management need to concentrate on issues that can count, other than being based on things that can be counted (Vanclay, 2003). There are other researchers who have noted some difficulties in the adoption of framework that leads to decision making systems that incorporates social dimension. “In attempting to develop social indicators we encounter immediately the problem that the communities whose health in which we are interested do not resemble the sorts of stable and self-regulating systems we find in nature” (Lockie & Jennings, 2003)
Such like criticism and other reservations were all raised at a workshop that was discussing and debating the Use of Triple Bottom Line concept as a means of incorporating social dimension into other policies along with processes of decision making for Australia. On of the major conclusion that this workshop came up with was that, developing Triple Bottom Line indicators is just one of the operation in a broader process. On the other hand, the subject of identifying indicators is a very important output. This is based on the fact that, it will help organizations make reflections on their overall strategic goals, as the process proceeds well beyond that first step. The process of reporting TBL results to engagements with stakeholders in the creation of new circuits of knowledge exchange, as well as communication. The ongoing monitoring as well as reporting of TBL indicates that “it has the capability of developing a new phase of organizational reflection” (Elkington, 2004). Apart from that, it also leads to the exchange that regards to the quality of measures under use and the performance target that have been put in place.
As a planning and reporting tool, the manner in which TBL has been used, is just seen as being a mare approximation of complex aspects for instance, sustainability. This has been taken to be much true in the case of its uptake by organizations. For any company to count for ‘global’ aspects, for instance sustainability would need a detailed as well as complex analysis of the company’s interaction with ecological systems, societies, habitats, resources as well as habitats. In the light of all other firms’ past as well as present effects don the similar systems. In its place, it can be used during categorizing different matters that can be connected to sustainability pursuit, with an objective that, the organization has the power of monitoring the effects of its activities concerning these issues.
Appropriate Strategies and Recommendations
The TBL needs a much focused commitment through long term strategic thinking, alignment, planning as well as implementation. When firms propose a certain corporate sustainability, the difficulty encountered depends on the process of incorporating TBL principles onto operations of an organization. There are two aspects which organizations have to consider ensuring successful integration of TBL along with company strategy is that; sustainability needs a lot of innovation. The second point is that, sustainability strategies have to be customized. Studies have found that, the organization size has no effect on whether it wants to incorporate TBL.
Consistent with major recommendations of 2003 workshop on social dimension of TBL in rural Australia, I advocate greater concentration on the process of TBL reporting as a way of encouraging the ability of addressing sustainability change. As a matter of fact, there should be a set of criteria which ought to be used in the evaluation of TBL with the major aim of improving TBL outcomes.
Organizations need to implement an iterative learning cycle. This will ensure that organizations planning are but on collaborative change reflections that will be seen after an operation by the company in the past. At the core of these operations, should be the opportunity that allows stakeholders engagement in company operations, on both external and internal, (Elkington, 2004).
Another recommendation is that, when considering how different activities can result to sustainable future community, I recommend that, TBL reporting need to be promoted by companies. This is based on increasing degree of experience and resources to enable organizations’ handle TBL reporting dealings. Provided with some of the inherent constraints with organizational-based TBL reporting, it is much clear that organizations need to take TBL as an adaptive long-term adaptive management. This should not be seen as a quick fix, but it needs the development of means of monitoring how organizations, activities are contributing to particular TBL sustainability and the reflection on performance evaluation that ensures that all targets are concentrated upon most significant issues not just those that are most expedient, and that its efforts are addressing these effectively.
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