Triple Bottom Line Reporting
Abstract
The increasing demand of stakeholders for broader information regarding the operations and financial position of business organizations has triggered several business entities to incorporate data about organization sustainability. The acknowledgement that there are predetermined resources that organizations need to utilize today and in the future operations have necessitated the need for integration of further reporting by organizations on matters on sustainability elements. This paper will explore the model of triple bottom line reporting and its application in evaluating the level of corporate sustainability as well as its significance. The concept of triple line reporting is significant in ensuring that corporate sustainability trepidations are handled and the organization incorporates all the outcomes associated.
Introduction
The current society has shifted its focus towards environmental concerns, and therefore, business organizations are encouraged to envision the world around them to impact the society. One of the significant thinking that is being proliferated currently is the idea of how organizations need to address their values of reporting aimed at reducing the chances that their activities will be harmful to the available global resources currently and in future. This cognizant progress as well as the alterations of strategies and procedures is what entails sustainable development. The modern corporate environment and culture is steadfastly inclining towards the need for transparency and accountability in terms of public reporting and communication. This calls for a high level of revelation of the nature and level of corporate undertakings and engagements in addressing matters of social economic and environmental dimensions ((Jackson, Boswell and Davis 55). In other words, the public demand information about the levels of sustainability that different organizations perform or take into consideration. To evaluate the levels of this sustainability, it is significant that a given standard of reporting is adopted. Therefore, triple line reporting entails one of the modes used in reporting sustainability.
The definition of triple bottom reporting has not been established and is not definite. However, several definitions have been accepted. Triple bottom line reporting refers to a form of corporate communication that engrosses stakeholders and holds onto the organizations’ accepted policy regarding the management of social, economic, and environmental magnitudes through a clear established channel that provide information on the magnitudes (Jackson, Boswell and Davis 55). The social and economic components as well as the environmental magnitudes in organizations form the sustainability development. Triple bottom line, therefore, simply refers to the formal publication of social, economic, and environmental information or a given corporation in a way that it is incorporated to reflect the activities and outcomes of the organization’s performance grounded on the three magnitudes.
The development of the word sustainability perspective can be seen in a number of organizations across the globe, which have incorporated to report on their outcomes that are not only financially inclined but also on sustainability operations. Global large corporations, for instance, Weyerhaeuser Company, The Boeing Company, Sony Corporation, Toyota, and PricewaterhouseCoopers among others have also come together and created a World Business Council of Sustainable Development (WBCSD). The entity is aimed at establishing a channel to a world that incorporates significant transformations in governance, economic frameworks, business, and human behavior. According to the WBCSD, these transformations are necessary and achievable, and they provide wonderful opportunities for organizations that turn sustainability into strategy (WBCSD 17). Several nations have seen implementation of sustainability reporting in organizations and government entities, for instance, Australia, Britain, Japan, France, South Africa, and the United States among others.
Sustainable Development
Sustainable development entails aspects of integrating the forward thinking approach by organizations in stepping world sustainability. All organizations that have sustainability missions in their operations not only need to put in words but also actions to progress in their paths. Organizations are encouraged to seek both internal and external counsel on working mechanisms that will allow them make use of resources that will in the end not deplete or exploit them. The elements in enhancing and reconstruction of sustainability in an organization include the need for wellbeing as well as opportunity for innovation. Organizations must incorporate changes in their objectives to reflect sustainability, which might not be suitable in the short run, but in the long run, they turn out to be strong foundation for business thrive. For an organization to mirror sustainability missions, it is essential for all the concerned parties, particularly organization leaders, to understand what sustainability engrosses. The organization’s leaders must shift all the focus put on financial and profitable outcomes to the needs of the world around the organization. Once this concept is shared and understood, it will be possible for the organization to look at the community and determine what environmental needs they are voicing that need to be addressed. Therefore, this approach needs to be incorporated, and is measured by triple line reporting.
Triple line reporting is applied in organizations to enlarge the shareholders’ knowledge about an organization. Triple line reporting goes beyond the customary financial viewpoint or entity reporting by recognizing and revealing the organization’s impact on the world around it (Mitchell, Curtis and Davidson 270). The concept of triple bottom line reporting entails three main factors: people, plane, and profit. Accordingly, it is significant for organizations to integrate economic, environmental, and social concerned efforts in evaluation of an organization and during the decision making process. This reporting, therefore, creates guidelines through which an organization must operate in the process of effecting the mechanisms.
Sustainability is a word that has been in use for decades. For instance, in the late 1990s, the famous John Elkington devised the term triple bottom line as a way of evaluating sustainability. The most evident elements used in performance evaluation are economic, environmental, and social elements (Sustainability reporting guidelines 2). By the fact that triple bottom line entails further reporting, organizations will have no option but to incorporate additional information on their reporting to evaluate sustainability. The information will also need to be re-evaluated often to ensure that the expectations underlined in the reports are attained. In case a given constriction is detected and is affecting the targeted outcomes, the organization needs to come up with procedures in addressing the constraints without affecting them further.
Major Elements in Triple Bottom Line Reporting Concept
The main elements entailed in the TBL reporting are economic value, people who constitute the social value, and the plane that encompasses the ecological values.
Ecological Value (Planet)
Ecological value is one of the three components that make up triple bottom line concept. The ecological value are the environmental practices that are sustainable by an organization. A triple bottom line organization will strive to benefit the natural resources in all its capacity or ensure that it does not harm the environment through its activities. As Such, triple bottom line strives to ensure that organizations have cut down ecological foot prints in consideration of other factors. This process is achieved through cautious management of an organization’s energy consumption and the non-renewable waste products. An organization ensures that there is a cut down of waste products, and disposes off all the waste and toxic byproducts in a safe and permissible way. With regard to triple bottom line reporting and the economic value, a “cradle to grave” is an important concept. This concept entails the thought of TBL manufacturing business that undertakes a life cycle evaluation of products to ascertain the true environmental cost that is entailed from the growth as well as reaping of raw materials in the manufacturing process and eventual distribution to the targeted user and disposal. Several organizations’ products pose a great danger to the environment.
In the modern society, the expenses that are incurred in duping or exposing the non-degradable product are becoming costlier because of their toxic nature. Consequently, they have harmful effects and may attract negative criticism by government bodies and area residences towards the manufacturing organizations. According to the ripple bottom line perspective, it is evident that an organization that involves itself in the processes of production, marketing, and distribution will also have a by-product, which will cause a waste problem. Therefore, organizations need to come up with incentives to handle it effectively. As a result, it is considered rational that organizations be art of the end products management that might be harmful to the by society in the future being part of the expenses of the products eventual disposal. These are the main concepts that ecological value is created in TBL.
Economic Value (Profit)
Profit value can also be referred to as the economic value an organization attains after deduction of all its expenditure. This is different from the customary definitions of profit. Formerly, within the sustainability context, the concept of profit is supposed to entail the real benefits that a society enjoys. It is the economic impacts that an organization have on the host community, an aspect that is often confused with the organization’s internal profits. In the same way as other elements of triple bottom line concept, the concept of profit also entails net profits and losses. Business organizations that take part in environmental and social advantages but end up losing money are considered sustainable. This is because an organization must benefit all the stakeholders including the business entity, and the concept does not advocate for the eradication of economic profit making by organizations. The economic value is intended to balance an organization’s profits as well as the external effects both environmentally and socially.
Social Value (People)
Social value entails the fair and beneficial organizational activities towards labor to the society under which a giver corporation operates its activities. Through triple bottom line, the communities around are granted organization safety and security regarding the organizations activities is maintained and preserved. Aspects of child labor are also significant components initiatives that are addressed under this concept. Other aspects that fall under this component are rational salaries and packages to employees, safe working conditions, as well as tolerable working hours. The organizations are also engrossed in giving back to the community through services, such as health care and education.
Factors Motivating the General Trend towards Adoption of TBL Reporting
Several factors trigger organizations towards the incorporation of triple bottom line reporting currently. For instance, obligatory requirements, the need to be unswerving with high level public eye and vigilance, and the increase in the stakeholder’s requirements to attain high outcomes among many others. Therefore, the concept of bottom-line reporting has become trendy in many organizations in the management of their operations. The underlying factor of triple bottom line reporting is aimed at ensuring organizations do not only report on the traditional financial development but also on matters of social, morals, and ecological performance. In the current organizational settings, it is evident in the corporate world that organizations are required by the stakeholders to carry out their tasks and responsibilities responsibly. Organizations cannot attain their goals and objectives if they go against the interest and wishes of their stakeholders. One of the unique features of triple bottom line reporting is the satisfaction of organizations’ supporters through the attainment of the responsibilities in society, employees, customers, and suppliers are calculated and appraised, and information is given to the stakeholders in a similar manner the financial reports are done.
Significance Triple Bottom Line Reporting
The main function of triple bottom line reporting is to ensure that corporations are socially responsible to its shareholders as well as the stakeholders in the organizations. Shareholders are the majority of the people who are part of the organizations. They include employees, customers, suppliers, goods, and services providers. It is, therefore, mandatory for organizations to be liable to all these categories of people. The social aspects of triple line reporting concentrate on the rational treatment of organizational human resources. Furthermore, the provision of a healthy environment for employees to carry out their tasks and responsibilities, a good package, and undertaking responsible and effective business practices to the society that surrounds a community are beneficial to the organizations and the stakeholders. Triple bottom line reporting also entails ecological activities and undertakings in conserving the environments or controlling any harm being caused to the people around like pollution. All these efforts are beneficial to all the concerned parties and ensure a cohesive coexistence between the parties involved.
When an organization takes part in the social and environmental activities for its customers and other stakeholders, there is a possibility of maximization of the process of profit making. Currently, it is common to see organizations in main stream reporting on bad issues, such as financial scams, employees’ mistreatments, as well as unfavorable working conditions prejudice. The reports have negative impacts on the organizations in question in addition to their good will, hence, resulting in many losses in terms of revenues. On the other hand, organizations that tend to focus on issues that go beyond financial profitability are able to penetrate potential markets that were unable before. An organization that has incorporated triple bottom line reporting also stands a good chance in the face of competition in the market. Triple bottom line reporting, thus, assists an organization to reach the untapped markets. In this way, the financial muscles of the organizations are strengthened, which were previously missed in their efforts that were only profitable minded.
Moreover, triple financial reporting is a significant procedure in the aid of non-governmental organizations that are present in the society to propagate their missions. The clean shit reports will motivate missions, such as fundraisings, getting clients and donors, as well as generating networks and opportunities with other related entities through the good work of sustainability that is evident. This empowerment is significant in assisting the NGOs in the provision of their roles, for instance, the populations that need help.
Triple bottom line reporting also helps in making organizations to be familiarized with similar business schemes. Currently, there are various business entities that are sprouting, especially in the social entrepreneurship sector. These organizations need to prepare themselves to achieve financially, socially, and economically as a way of remaining relevant in the market. If they do not do so, they are doomed to fail. In this process, the entities through TBL reporting will be in position to know what is required of them at every stage of their development. For instance, trade ethical firms are required to have ethical and sustainable practices in their performances. Any entity that is intending to be part of this firms must design the strategies of their businesses to become triple bottom line reports.
There are two main reasons organizations provide triple bottom line reporting. The first one is to meet the investor demands and the second is for the actions to be known and recognized publically. For instance, Shell and Nike have undertaken triple bottom lie reporting in the past as a way of restoring their reputation. This was to counter the initial negative publicity the organization had faced, especially regarding their ecological and social decisions (Jackson, Boswell and Davis 57).
The triple bottom line reporting is also significant in ensuring organizations get a positive reputation from the media and other public watchdog entities. Currently, there are several watchdog groups besides the media that are continually engaging in public scrutiny. Through triple bottom line reporting, organizations are able to exonerate themselves for any such possible bad image action. This aspect will lead to a good reputation and commendation from the media and other watchdog groups, for instance, environmental conservation efforts that will act as success factors in the competitive markets. Organizations ignoring such policies are bound to face negative criticisms and reputations.
Through triple bottom line reporting, organizations are also in position to have financial gains. New investors will be triggered about the success of organizations financially, socially, and ecologically. In a similar way, through triple bottom line reporting, an organization is in a good position to attract new employees and enhance employee retention, thus, enhancing the financial performance besides the sustainability undertakings. Organizations that incorporate TBL reporting allow transparency in their activities, especially with regard to environmental and social undertakings. They are able to meet eligible standards in being part of the social funds that will in the end benefit their own stock performance as a result of the societal engagements. The idea of triple bottom line reporting has enormous benefits to organizations.
Furthermore, the TBL concept is a pact between an organization and the society. TBL reporting is a symbol that an organization is relaying information about the pact on the elements of sustainability. Therefore, TBL reporting entails presenting what organizations are doing well besides the areas that need to be amended. This report demonstrates the motive towards enhancing openness that enhances the good relationship between shareholders and the organization. In this way, an organization will focus on its progression, and it will not waste time in trying to mitigate and address conflicts brought about by the shareholders.
Triple bottom line reporting is a concept of demonstrating that an organization is taking into account accountability to higher levels. According to Jackson, Boswell, and Davis (58), triple bottom line reporting is a measure in which an organization upholds and raises its expectations and enhances the global clout. This way, an organization is able to receive positive reputation with seriousness about its activities and undertakings in the society other than being profit minded.
Triple bottom-line reporting is significant in increasing knowledge about the organization. Through the process of reporting, the stakeholders, that is, employees and external stakeholders, are able to understand the organization and build a closer relationship with each other. This enhances participation in learning about the environment that is essential in helping the organization to implement its sustainability strategies. Therefore, the process of budding a sustainable environment can also lead to other discoveries on how an organization can be helpful to the society in protecting the natural environment, which is facing a great challenge in the modern days.
Qualities of a TBL Report
Various standards are put in place to ensure that TBL reports attain a quality level, and they are not just publicized for the sake of it. A reliable TBL report must be accurate and it should relay information that is correct regarding the undertakings and performance of an organization. Furthermore, the report must have effective meaning in the sense that information entailed must contain high levels of relevance to internal and external stakeholders and the organization’s process of decision making. The TBL report should also be open, giving full information disclosure, and the content must not have hidden meaning as openness is core. Moreover, the report should be practical to remain relevant and marinate concepts that are aimed at the future practices. The reports should also maintain a high level of distinctness, in that it can be confirmed in an external setting.
Limitations of TBL Reporting
Several arguments have been put forth currently, which are aimed at disputing the concept of triple bottom line reporting. However, it is significant to note that whenever there is a measure or procedure, there must always be resistance attached. This is because of the concept of fear of the unknown or ethnocentrism in which any people and organizations are affected. The view about TBL reporting in some organizations is the idea that it will not bring about relevant changes, while other organizations are focusing on the aspect that nothing will remain the same. Many organizations tend to be uncomfortable with the TBL reporting as they feel that they will lose their control position. Several other arguments have pointed out at the time that they will be needed, thus, having a mixture of expectations and risks that maybe engrossed from the execution of the TLB reporting concept.
One of the concerns about TBL reporting by organizations is the idea that there might be a possibility that the organizations’ actions might not support their intentions in the sustainability activities. Organizations can go ahead and declare their intention to take up the new responsibilities of being part of the social and economic development partners but they might not be practical. According to Jackson, Boswell and Davis (57), organizations might pretend with the intent but what remains to be seen are the mere pieces of papers or plaques on the organizational wall. In several instances, organizations have permitted proper reporting to be prejudiced by corporate supremacy, therefore, making it difficult for some to abide by the requirements of TBL reporting.
Furthermore, it is mandatory that for an effective triple bottom line reporting to do away with the corporate environment and be reconstructed. Many organizations tend to be resistant to this approach. Keeping in mind the customary financial requirements that aid reporting, many organizations have established their policies frameworks around these regulations. Altering the structures that organizations have established over time requires taking risks and getting out of the comfort zones that many organizations might not be willing. Therefore, in the implementation of TBL reporting, one thing is definite, the need for extensive transformations of organizations operations, which is an aspect that any are not willing to take up.
Moreover, TBL reporting affect the general timeline targets and operations of most organizations. For instance, if organizations are to incorporate TBL reporting process and concepts, more time is required. This will possibly have a negative impact on the bottom line of the organizations, thereby enhancing the complexity of their operations. Besides all these efforts that are time consuming, the implementation of the new concepts is also costly, considering the resources and manpower needed to train and prepare the employees for the new tasks and responsibilities outlined in the TBL reporting. Therefore, more work in an organization add more pressure on labor resources. At the end, it causes multiple glitches not only for the employees but also for organization productivity giving rise to unstable state.
The process of implementing TBL reporting can also make organizations be victims of the process. As an organization attempt to meet the objectives of sustainability, the opponents may take the opportunity to focus on the ethical predicaments discovered in the course of the process. This might lead to indictments by the detractors that might lead to a future poor perception of the organization while taking steps to make a move in extenuating these loopholes. Critics are classically slow to offer any praises but they are always hasty in disparaging. Therefore, with this impending repercussion, organizations might be tentative in the enactment of sustainability concepts through TBL reporting, and therefore, turnout to be reticent in the transformation process towards TBL reporting.
Incorporating TBL
Business organizations are the dominant controllers of what appears in the TBL reports. However, it should be emphasized that a substantial amount of authority from the stakeholders, both internal and external, is significant in the content. Therefore, in coming up with the report content, the sustainability committee should consider much of the information from internal and external stakeholders in determining the topics to appear in the TBL reports. The report should also reflect the mission and vision statements of the organizations. Furthermore, the statements should provide an outline for the organizations’ objectives in the long run. All information that is significant by the stakeholders must be entailed in the reports and organizations are discouraged from withholding any information that might have negative outcomes on the organization. After the reporting principles have been established, data based on the principles should be continuously relayed to make the report dependable and maintain its consistency.
One of the main objectives of sustainability for any business organization is to reduce or eradicate any costs associated with poor quality. Therefore, estimating or measuring the cost of poor quality is a significant part of TLB reporting. To evade the cases of self-predisposition in this process, organizations are encouraged to have assessments done by an appointed committee. For instance, this can be effectively achieved by having a section of the management board to supervise the sustainability committee. After the reports have been settled on, there should a review undertaken by persons that were not part of the information gathering process. The information needs to be verified for accuracy purposes and the data should be organized into the TLB report. All information that is not relevant in the report should be excluded to avoid jargon. TLB reporting should be straight to the point and well understood by all the stakeholders internally and externally.
Conclusion
The concept of triple bottom-line reporting is drastically being adopted by several organizations and it has become a competing tool in addressing ecological and social needs. However, the standards to which organizations are operating on need to be raised to meet the high requirements. One of the evolutionary sustaining processes today is to ensure that resources are retained for the future generations and making use of them effectively to support the current needs. The standards of operating these concepts must be changing often due to the transforming nature of technology that is being discovered every time. The three main elements of TBL reporting are people, planet, and profit. Adoption of TBL reporting, thus, makes an organization aware that it has to fulfill certain requirements developed by the stakeholders. Therefore, this will make the organization to focus on the impacts it has on the society. Despite several challenges accrued from implementing TBL report, there are also positive outcomes that an organization enjoys when implementing the concept. Consequently, TBL reporting is significant to an organization. Triple Bottom Line Reporting is essential for all organizations, it reflects their commitment not only to their financial gains, but also in ensuring that the community needs are well taken care of. These are long term initiatives that are crucial to the society.
Works Cited
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https://www.csu.edu.au/__data/assets/pdf_file/0011/748370/Mitchell_Michael_270.pdf
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