Triple Bottom Line - Essay Example

Triple Bottom Line Table of Contents Introduction 3 Discussion 4 People or vibrant societies 5 Profit or resilient profitability 5 Planet or strong environment 6 Recommendations 11 Conclusion 13 References 14 Introduction In the era of globalization and technological advancement, the challenges of sustainability are getting thresholds of prominence to the external stakeholders, customers and long-term approaches of companies. Researchers reveal that the executive of sustainability in organization can help to secure lasting competitiveness and benefit business to develop competitive lead. There is a rapid upsurge of increased demand of energy, land, food, additional resources and water. Furthermore, these demands are fuelled by upsurge of economic growth, rapid urbanization, population growth and middle class escalation. According to John Elkington, the best framework to measure performance and maintain sustainability in organization is the triple bottom line. The triple bottom line is defined as the accounting framework and structure which consist of three parts such as financial, ecological and social. Several businesses has implemented triple bottom line framework within the organization to evaluate and estimate its performance. John Elkington coined the triple bottle line which takes in to account the environmental and social performance of organization. Three measures of triple bottom line introduced by Elkington include people, planet and profit. In case of people, it includes favourable and reasonable business performs. According to the theory of triple bottom line, planet can be measured by the lessening of environmental effect and usage of sustainable environmental performs. The profit of organization can be measured by evaluation of economic value which is formed by the business. Elkington argued that it is vital for organization to change their focal point on finance to the environmental, economic and social impact of the company. The prime purpose of the project is to provide detailed analysis about the concept of the triple bottom line. Furthermore, the paper also discussed about the complications of measuring environmental and social influences towards a business. Discussion In 1994, John Elkington coined the triple bottom line. The argument of Elkington is that every organization should be prepared to measure three bottom lines such as profit, planet and people. The triple bottom line is defined as the implementation of actions and policies to measure the environmental, social and financial effect on organization (Adrian, 2000, p.18). Moreover, this framework helps to regulate the feasibility of organization for being sustainable. There is no secret that the environment of business and world is altering. Therefore, it is vital for today’s economy to maintain sustainability in the organization to gain competitive advantage. According to World Commission on the development and Environment, the sustainable improvement is well-defined as the development action and practices that meet the requirements of the people (Augen, 2008, p.92). The four main objectives are required to be balanced to maintain sustainability. The fortification of environment, watchful use of natural resources, upsurge the levels of economic growth and social development are the four main objectives that are needed to be addressed to maintain true sustainability of the organization. The concept of triple bottom line is vital to maintain sustainability (Armstrong, 2002, p.12). This framework reveals that the success of any business is no longer determined by monetary gain. Additionally, the framework states that the success of business is also defined by the impact of execution of activities and practices of organization on societies (Collins and Shemko, 2009, p.83). According to Philip Watts and Charles Holliday, the performance of any sustainable business is outshined on client value creation and financial assets. Moreover, it embraces the success of stakeholder and community (Blythe, 2012, p.34). The demand of triple bottom line is that it is crucial for company to focus on stakeholders. The triple bottom line comprises consideration of healthy environment, vibrant communities and strong profitability. Furthermore, profit, planet and people are needed to be addressed by organization (Fyall and Garrod, 2005, p.8). People or vibrant societies It is responsibility of every organization to define the process of working to the wide communities and employees. The execution of triple bottom line by company can help to understand the effect of execution of practices and performs to its wider stakeholders, workers and corporation (Hall, 2007, p.42). Moreover, it benefits company to understand the nature of work and best possible way of evaluation of working process within the organization. The triple bottom line companies contribute to the growth and strength of community by effective education and healthcare (Dibb, 2012, p.39). The Global Reporting Initiative produced one of the most predominant principles for sustainability recording in the world. Several guidelines are developed by the Global Reporting Initiative to provide opportunity to the NGOs and other corporations to comparable report on the community influence (Farrell and Hartline, 2010, p.15). Profit or resilient profitability It is vital for every business to make money. The company with triple bottom line must identify that sustainability is dependent upon the rate of social and environmental work. There are certain Settings that are needed to be considered by company which includes worker displacement, other issues and costs of pollution (Jeannet, 2005, p.6). The other entities of profits should be included on the social assistances to interpret the approach of triple bottom line as old-style corporate accounting turnover (Hill, 2009, p.27). Planet or strong environment Every good business is required to commit towards maintenance of environmental practices. Furthermore, this commitment of the company can create sustainability within the organization. The maintenance of environmental safety, conservation of energy and reduction of waste can help organization to reduce environmental footprints and save money (Kotler and Armstrong, 2011, p.21). The uppermost thought for triple bottom line business is cradle to grave. Furthermore, this thoughts is typically is conducting assessment of life cycle of products and services (Mccalley, 2002, p.37). This can enable organization to determine the overall environmental cost from the collecting and growth of raw materials. The company with the triple bottom line approach does not produce any damaging and harmful products like toxic batteries, chemicals and weapons. The prime purpose for the execution of TBL approach is to maintain sustainability in the environment (Lamb, 2010, p.72). The execution of effective triple bottom line can benefit organization to expand existing business and open new market. Profit, people and planet provides tangible profits to the organization in the form of employee engagement and employee retention. The activation of effective corporate social responsibility program can translate the level of program in to higher levels of employee engagement. According to several researchers, the upsurge of rate of employee engagement can create effective culture within the organization (Marquardt, 2013, p.97). Additionally, the triple bottom line can help to drive improvements within the organization. This framework can be used to help managers to focus on their responsibilities and can enhance the efficiency of work. Some of the organization uses the triple bottom line to prove the way of treating people outside and within the corporation (Lencioni, 2012, p.88). Furthermore, it can help to lessen the negative influence on environment. Hence, it is crucial for organization to implement effective strategy and introduce triple bottom line to manage and monitor the progress of business financially and environmentally. The concept of the triple bottom line supports certain business basis arguments such as adaptation to introduce on new business segment and accomplishment untapped market prospective. Ethical trade and fair trade are examples of the execution of effective strategy for reaching in to new market (NG, 2014, p.22). Ethical trade and fair trade organizations are required to execute sustainable and ethical performs from all service benefactors and sellers. The business model of these ethical and fair trade companies must introduce new strategies which follow the triple bottom line (Midler, 2010, p.182). Another business centred argument is reaching the market potential for the benefit of organization. Companies with triple bottom line framework can find monetarily cost-effective niches. This can act as a driving factor for business to enhance the sustainability of organization. For example, the addition of geo-tourism and ecotourism in tourism market as act as driving factor (Pride, 2013, p.48). The Dominican Republic is situated on the island of Hispaniola is the example of addition of ecotourism in the existing rich tourism market. The development of profitable methods can assist and benefit current NGOS (Pitt, 2012, p.46). Moreover, this can assist to enhance the mission of NGOs such as creation of networking prospects, reaching clients and fundraising. The triple bottom line companies can provide services and products with can benefit unwarranted environment and populations. The evolution of emergent strategy can be developed by the process of strategy growth may be embedded in culture and routines of organization. It is vital for organization to facilitate and encourage the way of doing things and accepting challenges for execution of assumptions to cope with the complex and progressively dynamic environments (Pride and Ferrell, 2014, p.64). The imposition of tactics and vision of tactical leaders by external stakeholders can leader to the execution of intended strategy. During the time of 1950s, the growth of domestic market of Honda Company is originated. Moreover, this growth leads to the accomplishment of the Japanese constructors. The primary philosophy of the Honda Company is to use highly automated techniques and capital intensive strategies to enhance the productivity of number of model production. The basic objective of the Japanese manufacturers is to develop high model volumes that are carefully addressed (Ruder, 2008, p.103). The executive of triple bottom line approach by Honda Company is to identify the pros and cons of the introduction of change management in the organization. In terms of intended strategy, the process of strategy improvement resulted by planning systems (Johnson, Whittington and Scholes, 2011a, pp.418-421). Likewise, these systems are accepted out by dispassionately and accurately. On external basis, many researchers believe that environmental factors are pivotal for the success of organization. On the other hand, internal approach is based on strategic cultures, capabilities and resources of organization. Additionally, this specific strategic approach of organization can help to drive approach (Smith, 2005, p.16). It is important for organization to focus on environmental opportunities to gain competitive advantage over other competitors. There are several factors that are needed to be undertaken by organization. Relationships are another key aspect of the business which is viewed as the ability to assimilate accomplishments and knowledge of one organization to other organizations. Relationships can be external and internal. External relationships include networks, virtually, alliances and outsourcing. Honda has initiated several programs which are based on corporate social responsibilities. The Battle of the Bands, All-Star Challenge, Professional Development Centre (Shavinina, 2003, p.4), Brain Tumour Foundation and Eagle Rock School are some of the programs that are initiated by the company to focus on the triple bottom line. Furthermore, Coastal Foundation, Honda Foundations and United Way are other programs of the company. The company strives on introduction of variety of quality and products that created huge positive impact on society. The impact of company on global assisting communities and manufacturing operations is crucial for the development. Low-emission products, development of fuel-efficient products and minimization of the environmental impact are some of the positive approach of the company (Worthington, 2012, p.128). The company developed fruitful approach for upholding the responsibilities and principles of company are development of human rights, effective working conditions, environment stewardship, community involvement, commitment principles, diversity and business ethics. Therefore, it can be notified that Honda Company has implanted effective strategies and program for development of triple bottom line approach within the organization. Ryanair is one of the major European airlines which are based on low-cost corporate model. The company focused on market segment which is based on providing low priced tickets. There are some external factors which can act as difficulty for Ryanair Airline Company. Competitors of the company can come up with identical strategy to achieve their objectives. This provides opportunity to implement low-cost strategy in their business model. The execution of differentiation of method can be diminished by cost reductions (Sorensen, 2009, p.61). The company may focus on outsourcing of IT systems for introduction of cost efficiency. This process of application of cost reductions strategy can reduce the ability of implementation of competitive benefit through IT. The dominant strategy of the company on implementation of low-cost strategy is vital for the development. The firm can maintain competitive advantage in the market by obtaining rare and valuable resources. Likewise, the company has the capability to implement these valuable resources to drive customers to buy their products and enjoy services (Johnson, Whittington and Scholes, 2011b, p.209). Every successful organization has important capabilities and resources to complete in the market. Ryanair has combined these factors of having crucial capabilities and resources to execute appropriate strategic planning. Some of the tangible resources of the company include agreement with airports and improvement of even fleet of Boeing aircraft. These are the internal factors that helped the company to continue its improvement and expansion in the airline industry (Thorne, 2007, p.84). The value integration is defined as the forward or regressive integration in to contiguous undertakings. The outsourcing results when any company decides to buy formerly manufactured in-house products or services. Some of the common examples of outsourcing activities are IT services, component manufacture, training and payroll. There are also some environmental issues for outsourcing. The lack of understanding about any particular IT organization is the foremost environmental and labour issues of IT outsourcing. It is pivotal for organization to understand the execution of economic, social and environmental pillars. The process of identifying sustainable suppliers by businesses to purchase products and services is regarded as not a straightforward task (Norton, 2012, p.71). The process of sustainable sourcing judgment involves data information, practices and industry knowledge. The philanthropic program initiated by organization is to consider on external environment situation and settings (Johnson, Whittington and Scholes, 2011c, p.99). The execution of mergers and acquisitions is regarded as the effective method of restructuring stationary industries and organizations. Internationalization is viewed as the complex model. The implementation of internationalization should be carefully diagnosed of the direction and strength of trends. Additionally, these trends are diagnosed in accordance with the market situation. The cost, competitive, government and market are four pivotal drivers of international strategies. Small firms like GNI are using internationalizing at their early stages of development process (Johnson, Whittington and Scholes, 2011d, p.204). The relationship of internationalization to the financial performance is uncertain. Recommendations According to CEO of Unilever, the execution of sustainable living plan by Unilever is based on doubling the sales of the company and reducing the social and environmental influence. This plan is initiated to measure the satisfaction of stakeholders and specify the required strategies to be implemented to reduce greenhouse emissions and overall water consumptions. The value of sustainability is analyzed by organization to focus on the triple bottom line. Furthermore, the organization should focus on new paradigm to identify the challenges and hurdles to overcome the drawbacks by shaping up innovative business background. There are four international strategies that company can focus to nullify the difficulties of calculation and assessing the environmental and social contribution. Four aspects include competitive advantage, synergy, resource allocation and scope of procedures. The pressure from employees, competitors and governments is increasing for any organization. Companies are facing pressure to address the issues of social, governance and environment, moreover, these issues ranges from supply chain of company, human rights and obesity. But over the period of time, the execution of effective corporate social responsibility is vital for any organization to fulfil their goals and objectives. The application of CSR can benefit organization address the issues and gather data which can justify maintaining sustainability (Wilson, 2010, p.18). There are many companies which have made huge progress for implementation of tracking operational metrics to notify the impact of finance to the business operation. There are certain values for execution of environmental, social and governance programs like risk management, returns on capital growth and management quality. The application of this process can benefit organization to nullify the difficulty of understanding the issues of understanding the contributions of environment and social. In growth sector, new product, innovation, reputation and new customers are some of the vital components. In case of management quality, long-term strategic, adaptability and leadership development are components to overcome the issue. In case of returns on capital, reputation, workforce efficiency and operational efficiency is vital for better workforce skills, and enhancing the morale of employee. According to Alnoor Ebrahim, the measuring of environmental and societal change and contribution to the organization can be done by delivering basic services and other environmental contributions of business. Alnoor Ebrahim believes that it is vital for managers to figure out complete benefits of using triple bottom line framework to the organization. The triple bottom line is determined as the good practice to report the environmental, social and economic indicators. In today’s globalized world, it is fundamental for business to present information on the performance of environmental and social. By the year 2004, the Commission invited the corporate social responsibility forum on EMS to improve principles and strategies for declaration, reporting and measurement. The performance of any company must be measured by TBL approach to constructing capital of environmental, social and economic. ITC Limited in a conglomerate based on India constructed exclusive business model. This model is based on triple bottom line approach. Furthermore, this approach can benefit organization to ensure maintaining competitiveness and sustainability (Olson, 2010, p.77). Environmental footprints can be calculated by ecological, carbon and materials footprint analyses. This analysis can help to find the ratio of material consumption and type of consumption by population and measure emission of indirect and direct greenhouse gas. Conclusion This can be concluded that triple bottom line framework is the effective method to measure the social, environmental and economic performance of an organization. In case of adaptation to the new business segment, many organizations have the opportunity to progress at the time of social entrepreneurialism. Furthermore, this execution of opportunities can create hope for business to reach expanded market segment. This expanded market sector is regarded as the new segment. This process of reaching in to the new market segments can help organization to be ecologically sustainable, socially beneficial and financially profitable. According to CEO of Cascade Engineering, Fred Keller, the triple bottom line is executed in the organization to focus on planet and people. The commitment of the Cascade Engineering to introduce strategy and program that commits to the triple bottom line and emphasis on sustainability. This can be notified that effective execution of TBL is vital for business to excel the practice of providing benefits to society and business community. As a part of helping community, company can be benefitted by response loop between the precise corporate culture and right employees. Organization contributes environmentally and socially effectively by undertaking several activities and programs. Environmental activities are based on raising public awareness and realizing the importance of environment towards development of society. Consequently, the application of triple bottom line approach is vital to measure the performance of organization socially, environmentally and economically. References Adrian, T., 2000. Managing Change. New Jersey: Pearson. Armstrong, G., 2002. Global Marketing Management. New Jersey: Pearson. Augen, J., 2008. The Volatility Edge in Options Trading. New Jersey: John Wiley & Sons. Blythe, J., 2012. Strategic Marketing. London: Kogan page. 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