Triple Bottom Line
Essay by mohamed jafer rassool • May 18, 2017 • Case Study • 3,129 Words (13 Pages) • 1,522 Views
NORTH WEST UNIVERSITY. GRADUATE SCHOOL OF BUSINESS AND GOVERNMENT LEADERSHIP. MAFIKENG CAMPUS. |
BLCG 511 – CORPORATE GOVERNANCE PROF DEON de KLERK |
INDIVIDUAL ASSIGNMENT |
Mohamed Jafer Rassool - 28366158 21/04/2017 |
INDEX
1. BACKGROUND 3
1.1. INTRODUCTION 3
1.2. HISTORY 3
2. THE THREE P’S 4
2.1. THREE P’S AND ETHCICAL THEORY 4
2.2. THREE P’S AND CORPORATE CITIZENSHIP 5
2.3. THREE P’S AND SUSTAINABILITY 5
3. HOW DOES THE TBL WORK? 6
3.1. CALCULATING THE TBL 6
3.2. WHAT MEASURES GO INTO THE INDEX? 6
3.2.1. Economic Measures 7
3.2.2. Environmental Measures 7
3.2.3. Social Measures 7
4. THE SIGNIFICANCE OF TBL IN THE KING III REPORT 7
5. EXAMPLE OF IMPLEMENTATION OF THE TRIPLE BOTTOM LINE IN SOUTH AFRICA 8
6. CONCLUSION 9
7. REFERENCES 11
BACKGROUND
INTRODUCTION
During the Mid 1990’s, John Elkington strove to measure sustainability by encompassing a new framework to measure performance in the corporate world. This framework was called the “Triple Bottom Line (TBL)”.
The Triple Bottom Line is an accounting framework that integrates three elements of performance, which are: social, environmental and financial. The TBL requires corporations to focus not just on the economic value they add (as per traditional reporting frameworks), but also on the environmental and social value that they may be adding or destroying. The TBL elements are also commonly called the three P’s namely, People, Planet and Profit.
HISTORY
The expression "the triple bottom line" was initially authored in 1994 by John Elkington, the organizer of a British consultancy called Sustainability. His contention was that organizations ought to get ready three diverse bottom lines. One is the customary measure of corporate profit—"the bottom line" of the profit and loss account. The second is the bottom line of an organization's "people account"— a measure in some shape or type of how socially responsible an association has been all through its operations. The third is the bottom line of the organization's "planet account”—a measure of how environmentally responsible it has been. The triple bottom line (TBL) in this way comprises of three Ps: profit, people and planet. It intends to quantify the financial, social and environmental performance of the company over a timeframe. Only an organization that delivers a TBL is assessing the full cost required in doing business.
Elkington (2004, p.3) describes the triple bottom line as “an inevitable expansion of environmental agenda” that “focuses corporations not just economic value that they add, but also on environmental & social value they add or destroy”. Dutta (2011) pointed out the necessity of considering the three parameter People, Planet and Profit (3Ps). According to him TBLR reflects a more comprehensive mechanism that integrates the traditional financial information along with non-financial information, which can help firm in enhance economic value addition, besides putting it on a firm financial footing. At its narrowest, the term “Triple Bottom Line’ is used as a frame work for measuring & reporting corporate performance against economic, social and environmental parameters’ (Elkington J. ,1980, The Ecology of Tomorrow’s World).All the believers advocate it as forecasted and a sustainability initiatives. They argue that triple bottom line undoubtedly makes a firm environmentally responsible but in reality the firm doesn’t have to do anything with environment. Elkington (1997) “An approach of measurement of sustainability is triple bottom line”. Adam et al (2004) said “both the timing and terming of introducing the triple bottom line have been perfect”.
THE THREE P’S
The triple bottom line (the three Ps and the three pillars) puts into solid terms what we definitely know: there's something else entirely to business than simply profiting. You could even say that there's something else entirely to making money than making money, at minimum the conventional way.
The Three pillars further explained.
Profit is self-evident. It's the number 1 rule of every businessman. Be that as it may, TBL considers profit to be just one part of a business plan. Profit is considered in terms of total value, with all input costs deducted, including tied-up capital. Further, profit for this situation is viewed as what financially benefits society at large.
Planet is the pillar concerned with ecologically sustainability business practices, accomplished by expanding benefits while limiting burdens. This can run from electronics recycling to strategies for success that shun the utilization of hazardous chemicals or ruinous practices.
People respects labour, the community and the locale in which a company operates. Organizations that compose the triple bottom line into their strategies for success look to build benefits for all stakeholders without misusing or imperilling any.
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