The core objective of any organization is to maximize its shareholders’ return, which drives the firm to adopt various strategies to make financial profits. Traditionally, the profit-making capacity of a firm is often considered as the sole index for its performance, but often fails to count for its sustainability. It has been often found that a company making decent profits may not always be sustainable for the long term. Thus, measuring sustainable growth by only measuring the financial performance can be quite challenging.
In order to address this issue, John Elkington, during the mid 1900s have developed the triple bottom line framework. The triple bottle line is an accounting framework which goes beyond just measuring the financial performance through profits and return on investments, to include the social and environmental dimensions. For a business management student, the triple bottom line framework can be quite crucial for their college essay.In this article, we have covered an in-depth explanation of the triple bottom line framework, and discussed about its implications for an organization. By the time you are through with this article, you will be able to apply this framework in your own professional essay writing or any related case study.
The triple bottom line an accounting framework which incorporates three key dimensions of organization performance, such as financial, social and environmental. As opposed to the traditional measures of performance, which only accounted for the financial gains, the triple bottom line framework encompasses all three dimensions. This model is more comprehensive in assessing how an organization is performing in a holistic way. It measures the impact of the operational activities of an organization on the world, including the shareholder values, the social development and the environment.Thus, in this context it can be stated that the triple bottom framework allows an organization to take care of its corporate social responsibility, alongside of its financial responsibilities. Now that we have identified three dimensions of the triple bottom line, let us now look at how we can measure them.
As mentioned earlier, the triple bottom line framework measures a firm’s performance based on three key dimensions: financial, social and environmental. But measuring each one of them can be quite challenging, as there is no common unit that can measure a firm’s performance on all three dimensions. Moreover, the social and environmental performance can be very difficult to quantify, like the financial performance, as there are no universally accepted indices or tools.The financial performance of a firm is measured in terms of currency units, as it is quantifiable in nature. But for the social and environmental performance, it is quite difficult to assign any unit as they cannot be quantified. This may seem to be an apparent issue for the firms, but it also allows firms to adapt the framework to their own business model, projects, policies and various external factors. Let us now look at each of the individual dimensions so that you can implement them in any organization of your choice for your college paper.
Economic: The economic dimension deals with the cashflow of the organization. As a business organization it is driven by its objective of making money, which is extremely important for its survival in the competitive environment. Moreover, the economic growth of the firm also ensures shareholders’ return, thereby attracting even more investors. The economic performance of a firm is assessed by considering the income, operating costs, business diversification, taxes, R&D expenses, etc. The economic performance is considered to be high, when a firm has able to secure steady sources of revenue which surpasses its expenditure, at an accelerated pace. It should be noted that making profit itself is not enough for a firm to survive, as it also needs to ensure that it is able to grow its business ventures, in its pursuit to earn more profits. In simple words, the financial performance of the company is assessed by its financial growth and its ability to maximize shareholder’s returns, which itself is a reflection of its profit-making capacity.
Social: The social dimension refers to the impact of the organization on the community in which it operates in. It includes the employees, the customers, and the society itself. It should be noted that the business operations of an organization can have a significant effect on the society around it. Therefore, this dimension measures the positive or negative impact of the company on a social context. In order to achieve better social performance, a firm can offer industry standard remuneration to the employees, offer better work environment, employment benefits, participate in social welfares, contribute in social charitable funds or take some initiative to solve certain social issues which is closely related to the business operation of the firm. Creating positive social impact can some major benefits for the firm. First of all, it can help win the support of the local government, which can, at times, help in organizational growth and expansion in the market. Moreover, it can also create a positive brand image for the local customers, leading to higher brand preferences.
Environmental: The environmental dimension refers to the impact of the organization on the environment and the ecosystem. Firms are often dependent on the availability of natural resources, such as fossil fuels, metals, minerals, trees, etc. Therefore, it is the responsibility of the firm to adopt necessary strategies which can reduce the negative impact on the environment. This may include recycling of products in order to reduce extraction of natural resources and adopt more efficient operational processes that require lesser resources. Moreover, environmental impact can also come from waste disposal by the manufacturing plants. In order to perform better in the environmental dimension, an organization should be able to leave positive impact on the planet. Taking initiatives like planting more trees, using renewable energy or adopting green supply chain can have positive impact on the environment.
By this time you should have had a good understanding of the triple bottom line framework, and should be able to prepare your own essay on it without asking for essay help. All you need to remember is that the triple bottom line measures the performance of an organization based on three key dimensions, which are financial, social and environmental. This as a result gives a holistic overview of the company’s performance. Moreover, it also allows the firm to bring positive impact for all of its stakeholders including its investors, customers, employees, society and the environment.
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