The Triple Bottom Line (TBL or 3BL or People, Planet, Profit) captures an expanded spectrum of values and criteria for measuring organizational (and societal) performance in economic, environmental and social sectors. The triple bottom line accounting means expanding the traditional reporting framework to take into account environmental and social performance - in addition to financial performance. The notion of Triple Bottom Line accounting has become increasingly important in management, consulting, investing, and NGO circles over the last few years. The phrase was coined by John Elkington in 1994. It was later expanded and articulated in his 1998 book “Cannibals with Forks: the Triple Bottom Line of 21st Century Business”.
The concept of TBL demands that a company is responsible to 'stakeholders' rather than shareholders. In this case, 'stakeholders' refers to anyone who is influenced, either directly or indirectly, by the actions of the firm. According to the stakeholder theory, the business entity should be used as a vehicle for coordinating stakeholder interests, instead of maximising shareholder(owner) profit. "People, Planet and Profit" are used to succinctly describe the triple bottom lines and the goal of sustainability.
The idea behind the 3BL paradigm is that a corporation’s ultimate success or health can and should be measured not just by the traditional financial bottom line, but also by its social/ethical and environmental performance. Of course, it has long been accepted by most people in and out of the corporate world that firms have a variety of obligations to stakeholders to behave responsibly. It is also almost a truism that firms cannot be successful in the long run if they consistently disregard the interests of key stakeholders. The apparent novelty of 3BL lies in its supporters’ contention that the overall fulfillment of obligations to communities, employees, customers, and suppliers (to name but four stakeholders) should be measured, calculated, audited and reported - just as the financial performance of public companies has been for more than a century. This is an exciting promise. One of the more enduring clichés of modern management is that “if you can’t measure it, you can’t manage it”. If we believe that ethical business practices and social responsibility are important functions of corporate governance and management, then we should attempt to develop tools that make more transparent to managers, shareholders and other stakeholders just how well a firm is doing in this regard.
The People:
People (Human Capital) pertains to fair and beneficial business practices toward labor and the community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well being of corporate, labor and other stakeholder interests are interdependent. A triple bottom line enterprise seeks to benefit many constituencies, not exploit or endanger any group of them. The "upstreaming" of a portion of profit from the marketing of finished goods back to the original producer of raw materials, i.e., a farmer in fair trade agricultural practice, is a not unusual feature. In concrete terms, a TBL business would not knowingly use child labor, would pay fair salaries to its workers, would maintain a safe work environment and tolerable working hours, and would not otherwise exploit a community or its labor force. A TBL business also typically seeks to "give back" by contributing to the strength and growth of its community with such things as health care and education. Quantifying this bottom line is relatively new, problematic and often subjective. The Global Reporting Initiative (GRI) has developed guidelines to enable corporations to comparably report on the social impact of a business.
The Planet:
Planet (Natural Capital) refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtail environmental impact. A TBL endeavor reduces its ecological footprint by, among other things, carefully managing its consumption of energy and non-renewables and reducing manufacturing waste as well as rendering waste less toxic before disposing of it in a safe and legal manner. In TBL thinking, an enterprise which produces and markets a product which will create a waste problem should not be given a free ride by society. It would be more equitable for the business which manufactures and sells a problematic product to bear part of the cost of its ultimate disposal. Ecologically destructive practices, such as overfishing or other endangering depletions of resources are avoided by TBL companies. Often environmental sustainablity is the more profitable course for a business in the long run. Arguments that it costs more 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. A number of respected reporting institutes and registries exist including the Global Reporting Initiave, CERES, Institute 4 Sustainability and others.
The Profit:
Profit is the bottom line shared by all commerce, conscientious or not. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the economic benefit enjoyed by the host society. It is the lasting economic impact the organisation has on its economic environment. This is often confused to be limited to the internal profit made by a company or organisation. Therefore, a TBL approach can be interpreted as traditional corporate accounting plus social and environmental impact.
The concept of TBL demands that a company is responsible to 'stakeholders' rather than shareholders. In this case, 'stakeholders' refers to anyone who is influenced, either directly or indirectly, by the actions of the firm. According to the stakeholder theory, the business entity should be used as a vehicle for coordinating stakeholder interests, instead of maximising shareholder(owner) profit. "People, Planet and Profit" are used to succinctly describe the triple bottom lines and the goal of sustainability.
The idea behind the 3BL paradigm is that a corporation’s ultimate success or health can and should be measured not just by the traditional financial bottom line, but also by its social/ethical and environmental performance. Of course, it has long been accepted by most people in and out of the corporate world that firms have a variety of obligations to stakeholders to behave responsibly. It is also almost a truism that firms cannot be successful in the long run if they consistently disregard the interests of key stakeholders. The apparent novelty of 3BL lies in its supporters’ contention that the overall fulfillment of obligations to communities, employees, customers, and suppliers (to name but four stakeholders) should be measured, calculated, audited and reported - just as the financial performance of public companies has been for more than a century. This is an exciting promise. One of the more enduring clichés of modern management is that “if you can’t measure it, you can’t manage it”. If we believe that ethical business practices and social responsibility are important functions of corporate governance and management, then we should attempt to develop tools that make more transparent to managers, shareholders and other stakeholders just how well a firm is doing in this regard.
The People:
People (Human Capital) pertains to fair and beneficial business practices toward labor and the community and region in which a corporation conducts its business. A TBL company conceives a reciprocal social structure in which the well being of corporate, labor and other stakeholder interests are interdependent. A triple bottom line enterprise seeks to benefit many constituencies, not exploit or endanger any group of them. The "upstreaming" of a portion of profit from the marketing of finished goods back to the original producer of raw materials, i.e., a farmer in fair trade agricultural practice, is a not unusual feature. In concrete terms, a TBL business would not knowingly use child labor, would pay fair salaries to its workers, would maintain a safe work environment and tolerable working hours, and would not otherwise exploit a community or its labor force. A TBL business also typically seeks to "give back" by contributing to the strength and growth of its community with such things as health care and education. Quantifying this bottom line is relatively new, problematic and often subjective. The Global Reporting Initiative (GRI) has developed guidelines to enable corporations to comparably report on the social impact of a business.
The Planet:
Planet (Natural Capital) refers to sustainable environmental practices. A TBL company endeavors to benefit the natural order as much as possible or at the least do no harm and curtail environmental impact. A TBL endeavor reduces its ecological footprint by, among other things, carefully managing its consumption of energy and non-renewables and reducing manufacturing waste as well as rendering waste less toxic before disposing of it in a safe and legal manner. In TBL thinking, an enterprise which produces and markets a product which will create a waste problem should not be given a free ride by society. It would be more equitable for the business which manufactures and sells a problematic product to bear part of the cost of its ultimate disposal. Ecologically destructive practices, such as overfishing or other endangering depletions of resources are avoided by TBL companies. Often environmental sustainablity is the more profitable course for a business in the long run. Arguments that it costs more 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. A number of respected reporting institutes and registries exist including the Global Reporting Initiave, CERES, Institute 4 Sustainability and others.
The Profit:
Profit is the bottom line shared by all commerce, conscientious or not. In the original concept, within a sustainability framework, the "profit" aspect needs to be seen as the economic benefit enjoyed by the host society. It is the lasting economic impact the organisation has on its economic environment. This is often confused to be limited to the internal profit made by a company or organisation. Therefore, a TBL approach can be interpreted as traditional corporate accounting plus social and environmental impact.
1 comment:
You write very well.
Post a Comment