Complete Insight into the Futuristic Accounting Framework: Triple Bottom Line

Global Assignment help Australia

31 Oct 2022 1028 13 minutes

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One thing that is pretty obvious for creating a sustainable business strategy is the need for change. A company in its lifetime adapts several policies according to the requirement. Being a student studying Business Administration or Management, you would have to learn which strategy is best in which situation. In the past few years, several companies have started using the triple-bottom-line accounting framework to positively influence society, the environment, or both, while simultaneously generating profits for shareholders as they have understood the changing situations and the focus shifting from only earning profits to managing resources and people.

In this write-up, you will understand in detail what is the triple bottom line and its importance with examples.

What is Triple Bottom Line?

The first light on this concept was shed by Feer Sperckley in the book “Social Audit- A management tool for co-operative working” in 1981. In this book, he mentioned the concept of measuring and reporting social wealth and environmental responsibility in addition to the financial record. After this, in 1987 John Elkington explained the concept in his book “Cannibals with Forks: the Triple Bottom Line of 21st Century Business”.  

Both of these books led to the creation of an investigating group in 1998 for Triple Bottom Line Reporting and publicizing the concept. 

As explained above, the TBL idea stipulates that an organisation is accountable to its stakeholders rather than to shareholders. In this context, "stakeholders" refers to anybody who is impacted by the firm's decisions, either directly or indirectly. Employees, clients, suppliers, locals, governmental entities, and creditors are a few examples of stakeholders. The stakeholder theory states that rather than maximising shareholder (owner) profit, the corporate entity should be used as a means to satisfy stakeholder interests. Thus, now the triple bottom line strategy is being used by more and more financial firms. 

To properly use this strategy in future, here is a description of everything related to the framework. 

3 P’s of Triple Bottom Line 

The TBL is a framework for accounting related to social, environmental, and financial aspects of performance measurement. These three things are divided into a pattern called 3P’s of Triple Bottom Line:

People

The people category includes all stakeholders, including consumers, employees, members of the supply chain, communities in which an enterprise operates, future generations, etc. This aspect of the triple bottom line is connected to corporate social responsibility (CSR). According to the definition of CSR, companies have to satisfy their stakeholders. And stakeholders can hold them accountable for their deeds. 

Among the programmes that a company might consider as part of its CSR objectives are:

  • Promoting human rights
  • Eradicating poverty and hunger
  • Nurture diversity, equity, and inclusion
  • Assistance in gender equity
  • Guaranteeing a healthy and safe workplace.

Planet

The reporting of environmental impacts is the best advantage gained from triple-bottom-line reporting. A corporation frequently has to choose between a less expensive and a greener alternative. A business may also select a less desirable option; for instance, environment friendly transportation will probably be slower than air travel.

It is frequently far simpler to evaluate the effects of the alternatives a company has chosen rather than describe the beneficial adjustments the company has made to the environment. Imagine a business redesigning its distribution systems to consume less energy; this action would be credited with reducing glasshouse gas emissions by a specified amount. It is an example of how a business can care for the environment. 

Prosperity

Everything one does is a creation of the planet and people. The prime goal of a business organisation was to earn a profit before the triple bottom-line framework. After this, one has understood that profit is not only about how much money a business makes. A company must make sure that it can generate revenue honestly and ethically. It involves seeking out business partners and suppliers with whom it has charitable alignments. It also outlines the process by which a business creates its strategy or financial operating plan.

Some people believe that the triple bottom line may also state that profit refers not just to firms but also to the profit of people who surround the company. It includes the neighbourhood where the business is located. Companies can do it by:

  • Ensuring that the business pays its fair share of all applicable local, state, and federal income taxes on time
  • Ensuring that the firm supports local businesses and promotes economic prosperity in the area.
  • Pledging to contribute financially to the community through collaborations, projects, or corporate sponsorships.

Measures of TBL Framework 

Depending upon the 3ps of triple bottom line reporting, here is a list of variables related to every measure that you can check out for better understanding:

Economic Measures 

It might consider issues related to earnings or spending, taxation, the economic environment, employment, and business diversity. Examples in detail include:

  • Personal earnings
  • The price of underemployment
  • Sizes of businesses
  • Sector-specific employment distribution
  • Percentage of businesses in each category
  • Sectors that contribute to the gross domestic product's revenue
  • Land usage and land cover changes 

Environmental Measures 

Organizations could better determine the effects a project or policy would have on the area if long-term trends were known for each of the environmental variables. The examples of triple bottom line in this measure include:

  • Concentration of sulphur dioxide
  • Nitrogen oxide concentration
  • Prioritising certain pollutants
  • Surplus nutrients
  • Usage of electricity
  • Usage of fossil fuels
  • Management of solid waste
  • Manage hazardous garbage
  • Land usage and land cover changes 

Social Measures

A sample of possible variables is provided below in the examples:

  • Rate of unemployment
  • Rate of women in the labour force
  • Median income for a family
  • Relative destitution
  • Percent of people who have a postsecondary diploma or degree
  • Adjusted for healthy life expectancy

How does Triple Bottom Line Promote Sustainability?

The concept of the triple bottom line helps the company to get connected with its actions and recognise the impact on the entire world. As talked about the environmental, social, and economic factors, TBL captures the essence of all three into one. Thus, when a business focuses on all, it has a lot more impact on the people than using the traditional method of focusing on financial profits. There are many companies throughout world that now understand the relationship between sustainability and triple bottom line and have started implementing it to perform better.  

Examples of TBL 

Many companies have started using the principles in their working structure. The examples of triple bottom line being used by them are mentioned below:

Better World Books 

This company deals in selling the used books. With it’s profit, they donate some of the parts to literacy funds and libraries. They have raised more than $28 million through this and also created job opportunities.

DHL 

This shipping company has updated its delivery trucks with hybrid, fuel-efficient, or alternative energy-capable models. Through its GoGreen initiative, logistical processes are well-organised, and trucks are directed to travel the lowest distance. It sends couriers on bicycles in various European nations and generates 62% of its electricity from renewable sources, which helps them cut the carbon dioxide emissions by 152 metric tonnes annually.For maintaining a good reputation as a good neighbour, it also engages in a number of other activities, such as supporting U.N. disaster management initiatives, assisting airports in their preparation for natural disasters, and cooperating with international companies to advance the younger generation educational opportunities. 

Starbucks 

By giving customers a getaway to a setting far apart from the rush of daily life, Starbucks took a cheap commodity and reinvented the coffee business. It is also a great example of triple bottom line. Starbucks connects with consumers who value an experience while drinking their coffee and also looks out for its employees, society, and the environment by contributing to projects that promote health, education, and social welfare. However, the cultivators of the crop receive the maximum benefit. They pay coffee farmers a premium amount so they may continue using old-fashioned growing practices that protect tropical forests. Starbucks changed the way of purchasing coffee in 2001 with the assistance of Conservation International. The business made a choice to give farmers who adhere to a set of social, environmental, economic, and quality standards huge prices. 

Why it is necessary for Business and Management Students? 

As you have seen in the examples, most of the named companies have started using the triple bottom line in their accounting framework. Being the one studying business or management, it is important topic that you need to know if you want to become a good manager. As the most trending topic, it can be a part of your assignments or research.  

For writing a well-studied assignment, it is necessary for you to study this topic in detail. When you are writing, there might be times when you need business assignment help or guidance in the one you are writing. Thus, it is good for you to check out samples that can help in forming a proper content on the topic.

Global Assignment Help Samples on TBL

As this concept has widely gained importance and recognition in the industry, we at Global Assignment Help Australia have covered it in the sample section of our website. It can help you to understand the specific companies and how they implement Triple Bottom Line Framework. With this, we also provide management assignment help on other topics..

Everything that one studies and understands about this framework, it is clear that it will be a lot more beneficial in future than it is today. Being the one who is the future of the industry, it is necessary for you to know how to use the triple-bottom-line accounting framework.

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