Introduction To John Elkington Commerce Essay

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The term triple bottom line was coined by John Elkington, a sustainability guru, in the mid 1990's. He suggested that business organizations need to move from the traditional measurement of their success which looked only at the financial performance bottom line (expressed in the form of profits, shareholder value or the return on investment) into a modern perspective that also looks at the organization's broader economy, the society and the environment in which it operates. This is more so since in conducting business, organizations use more than only the financial resources (such as sales revenues and investment capital). They also use environmental resources (energy, water and raw materials) and also social resources (community employee's talents/skills and their time). Any business that wishes to be sustainable therefore should be able to perform the tasks of measuring, documenting and reporting positive return on investment on all the three bottom lines (social/ethical, environmental and economical) as well as the benefits that the same three dimensions give the business's stakeholder.

The essence of sustainability is captured by the concepts of Triple Bottom Line as it measures the impact of activities carried out by the organization on the world. Therefore a positive Triple Bottom Line indicates growth in the organization's value, which includes both its shareholder value and profitability abs its human, social and environmental capital. The Triple Bottom Line provides a scorecard with which organizations can use to measure in words and numbers the extent to which they are or are not creating and adding value for both the society and their shareholders. It highlights the non-financial and non-market areas of corporate responsibility and performance: economic, social and environmental.


Environmental indicators

In environmental indicators, organizations that are advanced in terms of environmental reporting and management consider both non-financial and financial information, the impact on the environment and the implications of the same. This measuring tool is then applied internally to the company and also externally to its community.

Most of the organizations that report on environmental impact usually concentrate on indicators that are internal. These are in essence measures, both non-financial and financial, of the processes of production and their efficiency with regard to environmental resources. This information is used to inform primarily the organization's internal management in charge of operations. This indicator is commonly used as a measuring tool for water/energy use (per consumer, employee, and product), spills (sewages, oils), fines, penalties and prosecutions.

External environmental indicators are usually reported by the resource sector but have recently received numerous use industry sectors. These indicators include reports on production and transportation emissions (greenhouse gases, nitrogen, sulphur oxides and substances that deplete the ozone layer), land clearing and rehabilitation, general and hazardous waste and all environmental incidences that have the potential or have adverse impact on the environment. These measuring tools are usually directed to the organization's external stakeholders with the aim of addressing principles that advocate for the communities right to know.

Social indicators

In its social dimension, the triple bottom line approach captures the impacts that activities carried out by an organization has on the society, including, customers, employees, community, business partners and supply chain. Social indicators allow the organization to perform a social audit. This allows the organization to account for its performance against its corporate social responsibility objectives and then do a report on that performance. The organization is therefore able to measure its principles of accountability: compliance, transparency and responsiveness. Quantitative indicators that measure inputs and outputs are the ones currently used in the social dimension. However some innovative measures have emerges which measure the impacts and outcomes.

Social indicators are however still in their formative years, with very few companies measuring the issues indicated in a frequent and consistent manner. Therefore organizations tend to give limited quantitative measures on the outcomes and output of corporate social responsibility activities. The social measures are usually focused internally on issues such as employee retention, employee safety as well as levels of job satisfaction. Although his area is not new to company reporting usually annual, modern practices include the examination of the social impact by the organization on its wider and local community. Still, only a few organizations clarify on the social issues that they seek to influence. This allows the indicators to only be evaluated based on the feedback obtained from the program recipients and the readers.

In the workplace the quality of management indicator measure; the employee retention rates, jobs offered-jobs accepted ratio, evidence of alignment between employees orientation and the organizational vision, evidence highlighting the involvement of employees in management decision making process, job satisfaction levels. The health and safety indicator measures

Economic indicators

Few organizations report on their financial economic performance beyond their annual financial reports. The main focus of economic indicators that they do report is on the number of human capital, taxes paid, turnover and the general wealth that the organization has generated.

2. Current trends and movements the Triple Bottom Line approach

There is continued growth in the number of organizations that have adopted triple bottom line approach as a mode of reporting. Recent surveys by KPMG indicate that 45% of the top250 highly ranked companies now publish separately a corporate report that detail the social/environmental performance in addition to the traditional annual financial report.

The triple bottom line focuses organizations on not only the economic value they add but also the social and economic value that they add as well as destroy. In its most basic form it is used as a framework for reporting and measuring corporate performance against social, environmental and economic parameters.

Economic performance encompasses issues that are traditionally contained in the organization's financial reports released annually. It also includes issues such as investment in research and development and human capital, benefits and wages paid, market capitalization to book value ratio and the location and value of goods and services that are outsourced.

Environmental performance includes issues such as: materials and resource usage, amount and origin of the energy consumed, effluents and management of waste, emissions, management of habitats and land usage.

Social performance focuses on the interaction between the organizations and the community that hosts it. The issues addressed include: health and safety, employee relations, wages to cost of living ratio, indigenous rights, non-discrimination, customer satisfaction and impact of involving the community in the organization's activities.

Therefore triple bottom line contributes to the enhancement of an organization's short term and long term value through offering a strategic idea in how to successfully manage its social, environmental and economic impact and performance so as to reduce risks and create greater opportunities. The organization derives value and its wider influence also creates benefits for the community. These three activity spheres are measurable and then their contribution to the value of both the organization and the community communicated to internal and external stakeholders.

Triple bottom line is not a search a new bottom line metric but rather offers an approach to performance and performance assessment that highlights the interdependence and importance of social, environmental and economic performance.. it is however important t note that the corporate performance dimensions do not always fall neatly into these three divisions as we have seen companies adopt a fourth category of corporate ethics and governance. Triple bottom line is therefore a concept that offers the framework that allows organizations to manage measure and report publicly on matters pertaining multi-dimensional corporate performance.

3. Relevance of triple bottom line to the property industry

In the property industry, the utility of the space enclosed has been the fundamental performance measure in property constructed assets. Traditionally, these assets have been evaluated on the ability of the occupants to pay for the provided space (an expression on profitability/ financial return on investment). However, triple bottom line approaches used currently take note of long term considerations with particular emphasis on sustainable optimal utility of property.

The impact on the world in future arising from sustainable issues concerning the property industry has generated considerable debate. Sustainability is currently being considered more than the construction, design and material choice for use in the construction. This is more so by financial stakeholders concerned in the whole construction lifecycle that includes the long-term operation and management of buildings and front-end financiers. Efficient use of environmental resources is seen as a contribution to the overall success of the property industry.

According to the triple bottom line approach a sustainable property us seen as one that encompasses buildings that are planned, designed, constructed, operated and managed to reduce the impact of the property developed on the environment. It also has top be viable economically and also enhance potentially the occupants' and the community's social amenities. They therefore have low economic, social and environmental impacts while at the same time enhance the welfare, health and quality of life of the people who work and live in them.

The triple bottom line indicators advocate for the property industry to adopt green building which makes reduces the overall impact on the environment and also minimizes waste and pollution as well as the efficient use of resources. They in turn require less financing to maintain and also short term and operating costs. The ventilation is enhanced allowing for better quality of the indoor air that promotes the occupants health as well as improving the satisfaction of the workers. They are therefore able to show greater commitment to sustainability, facilitate greater workforce productivity, give owner a competitive edge in today's sensitive market and of more significance, have an effect on the organization's profit. Financial rewards are accumulated in terms of the federal governments' tax incentives and also cash rewards form utility organizations.

The triple bottom line approach allows the property industry to develop a framework that is integrated to the industries objective which allows it to achieve sustainability. This is because it focuses not only on the current generations in the community but also in future generations. The indicators developed allow players in the industry to measure their sustainability performance so as to be able to better comprehend their weaknesses and strengths which in the long run will enable the organizations to improve performance in future.

Improved accountability, transparency and performance management derived from the selection of suitable and relevant indicators helps the industry players to measure and facilitates better dialogue between the stakeholders and the property industry

4. Application of triple bottom line to the current market conditions

There are several ways in which the triple bottom line approach can be used to measure and report on an organization's performance. In current market conditions the implementation of the triple bottom approach is an iterative process through different stages that are described below.

Organizations that apply the triple bottom line approach in their integrated operations and planning display accountability and transparency. This enables them to achieve economic prosperity, social well-being and environmental quality. In practice, many organizations indicate that there is usually no right way in which they can identify measure and report the non-financial aspects of their business outcomes or inputs.

Application of performance measurement and reporting in the currently diverse market in Australian is captured in five broad categories of triple bottom line approach.

The wait and see approach is adopted by companies that are at present satisfied with their current approach to accountability and communication, such as Woolworths Fosters. The market condition indicates that change is not a priority in the business and is therefore not being contemplated.

The second application is applied by companies that make a commitment to be transparent and open to their stakeholders. These organizations observe "the community right to know" principle and endorse the concept of greater accountability for their performance to the community. To be able adhere to this commitment they gather and package the organization's internal information for the external community. This information creates insight on how the standards the company wishes to meet, how well it has performed according to those standards and activity's description. Wesfarmers and Orica, leaders in environmental reporting, are in this area. Although they continue to