Triple Bottom Line (TBL) Reporting

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Executive Summary

The core principle of TBL reporting is based on the fact that an organization’s duties and responsibilities lie in its stakeholders and not the shareholders. This principle is focused on enhancing a high level of efficiency, cost effectiveness and accountability in the manner in which an organisation operates and remains open for public scrutiny. People who are influenced in any way by the activities of the company are the ones who should take the responsibility of ensuring its efficiency, effectiveness and overall success. Rather than to endlessly struggle in maximising the value of shareholders, it is crucial for a business entity to use the operations of the organization and thus synchronize the interests of the stakeholders.

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Introduction

The traditional way of reporting and enhancement of accountability has continued to be inadequate in the accounting sector. Measurement of the level of efficiency, cost effectiveness and the overall level of organisational success remain to be critical issues of concern in the modern business environment. Economic, political, social, ecological and technological issues play a pivotal role in determining the success level of an enterprise or society. Besides the traditional form of reporting, triple bottom line (TBL) reporting expands the scope of reporting by incorporating societal and environmental performance concerns in addition to financial performance (Willard, 1989).

A number of reporting mechanisms that are often in line with a company’s efforts towards corporate social responsibility include the use of policy programs, staffing resources, implementation of globally recognised reporting initiatives, being signatories to the existing voluntary standards and the adoption of top level involvement strategies that utilize the services of senior organizational managers. There are a number of benefits, limitations, aspects and concepts that relate to the application of the triple bottom line reporting (Scerri & James, 2010).

Aspects of TBL

By focusing on addressing the interests of major stakeholders and not the shareholders, TBL reporting helps in ensuring that a high sense of efficiency and cost effectiveness are enhanced in the manner in which both internal and external business operations are undertaken. Different factors do influence the manner in which the triple bottom line reporting works. The concepts are interlinked to people and natural capital which are commonly referred to as planet and profit. The concepts best describe the manner in which an organization enhances its earnings and sustainability of the daily processes. In the views of Banerjee (2007), these are core issues that help to enhance long-term business sustainability and competitiveness.

People

Fair and more beneficial business operations are the core aspects of TBL reporting strategies in most business enterprises. The core aim of this approach is to ensure that employees and other stakeholders are accorded due attention, fair payment options, better remuneration and that a sustainable business structure is formulated and effectively implemented (Willard, 1989). To enhance greater levels of productivity, an organisation must be focused on ensuring the wellbeing of employees, suppliers and any other interest groups.

Instead of endangering the employees, the TBL reporting mechanism endeavours to improve their mutual benefit and wellbeing. For instance, in a manufacturing company, it is advisable that top level organizational managers should never use child labour in an effort to increase the value of shareholders. This, according to Banerjee (2007), implies that the interests of the company, the shareholders and stakeholders must be kept very independent and yet interlinked in a manner that would ensure that the vision and mission of the organization remain intact. Additionally, the TBL reporting identifies means through which a business organization can be of benefit to the community in which it operates by use of corporate social responsibilities. Besides contributing to the strengths and minimising the weaknesses of the business, TBL encourages organizations to take initiatives such as improving the education and healthcare facilities of the concerned communities and other social aspects of the community.

Planet

With regards to the issue of planet, TBL reporting aims at fostering the existence of a sustainable and productive business environment. In an effort to adhere to the TBL reporting strategies, a business organization should ensure that it fully protects and benefits the existing natural order. It should also avoid causing any harm to the environment. As a result, the ecological impact is reduced by managing the level of energy consumption, wastage and reducing the level of toxic acids in waste products before disposing them in the environment. Stewart (2010) explains that practices such as charcoal burning, deforestation and overfishing are highly discouraged when TBL reporting is adopted in any given organization.

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Profit

With reference to TBL reporting, profit refers to the economic benefit and value developed by a given organization once the cost of inputs and capital has been reduced. Unlike the traditional definition of the term profit, TBL reporting refers to the economic impact that a given organization would have on its business environment inclusive of other business entities that are also integrated in form of social business entities (Savitz & Weber, 2007). Variables such as job growth, personal income and establishment churn, overall cost of underemployment and measurement of business revenue are some of the key economic measures that shape TBL reporting in the modern business environment (Willard, 1989).

Application of TBL reporting

Development of products, management of hazardous waste products and consumption of fossil fuel, excessive nutrients, and management of many other critical issues of concern are some of the core benefits of TBL reporting. The application of triple bottom line reporting is based on streamlining business operations and enhancing a high sense of efficiency and cost effectiveness. Undertaking such tasks helps to minimise business operational costs by eliminating all possible negative aspects of a business (Craig, 2009).

The now becoming popular concept of TBL reporting helps businesses to reach any possible market that may have been perceived to be unreacheable. This is more so due to the fact that money is no longer the only driving factor in business. TBL reporting helps to add geo-tourism or ecotourism to the rich hotel and tourism industries such as the ones found in developing countries (Kenway, Howe, & Maheepala, 2007; (Stewart, 2010). The other advantage is that management by use of the TBL reporting approach enhances the development of a mission statement, fundraising strategies and mechanisms of quickly and efficiently reaching out to both the existing and potential clients in the broader market scope. In some instances, this financial mechanism of reporting could also help to boost the financial outlook of small and medium scale enterprises. As a result, Stewart (2010) explains that it could become easy for organizations to formulate market strategies geared towards the development of products and cost effective services that would in turn address the needs and demands of the clients.

TBL reporting has the overall benefit of enhancing corporate social responsibility in the manner in which business organizations undertake their daily endeavours (Kenway, Howe, & Maheepala, 2007). By adhering to the triple bottom line reporting, organizations are compelled to implement stringent yet very transparent community centred ways that are geared towards ensuring that the common good of the society and all organizational stakeholders is catered for.

Triple bottom line reporting strategies have continued to be very appropriate in the application of most cost accounting strategies. This is more so in the corporate world in which competition has led to business organizations using unfair mechanisms in order to have competitive advantage in the market (Savitz & Weber, 2007). According to Craig (2009), application of triple bottom line reporting would in turn ensure that there is long term sustainability of the business enterprise. This is also proof that TBL reporting is an effective means of measuring the environmental and financial aspects of a business enterprise.

TBL reporting strengthens an organization’s association with its key stakeholders resulting in a stronger and long lasting business brand. It reduces business risks, increases level of innovation and creativity, improves access to the existing and potential investors, and creates a more reasonable basis of streamlining business operations. The chief financial manager of an organization is an important figure. He or she is charged with the responsibility of implementing the TBL reporting mechanism in the given organization (Moeller, 2007).

Limitations of TBL reporting

Though the social, environmental and political benefits of TBL enhanced by the use triple bottom line reporting are highly appreciated, several underlying criticisms do exist. The criticisms relate to the aspects of division of labour, reductive mechanisms, enhancement of effectiveness, nationalism, inertia, liberation of people and the cost implication of the use of this financial reporting strategy in business organizations. With reference to the reductive method, the business environment which is equally important for the success of business processes tends to be treated as a secondary need (Banerjee, 2007; Craig, 2009).

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On nationalism, there are countries that adopt strategies that only focus on according priority to their own citizens. Sadly, this is often not confined to a single sector of the state and it could as well lead to challenges associated to a country’s labour unions, business enterprises and the political class. According to Brown, Dillard and Marshall (2006), the fact that triple bottom line is a theoretical state of thinking and not necessarily the result of a given business process makes it to be ambiguous and unrealistic. Implementation of this model which is widely believed to be an inauthentic reporting process does not always spare an organization from internal corporate challenges related to poor management and misappropriation of resources (Stewart, 2010). Furthermore, when TBL reporting is employed, it becomes complicated for an organization to foster flexibility, intelligent operations, responsive and accountable conceptual frameworks.

Conclusion

According to the above analysis of the TBL reporting concept, it is apparent that economic issues have become more important and fundamental in the modern business environment. Management of finances has also become an issue of great concern. It is also evident that TBL reporting fosters constant thinking and adherence to the interrelationship between the society in which people live and the economy. Moreover, TBL reporting has continued to encourage effective public reporting, accountability in both the private and public sector and communication thus encouraging openness and disclosure of business performance so as to fully include the social, economic and environmental aspects.

References

Banerjee, S. B. (2007). Corporate Social Responsibility: The Good, the Bad and the Ugly.UK: Edward Elgar Publishers.

Brown, D., Dillard, J. & Marshall, R. S. (2006). Triple Bottom Line: A business metaphor for a social construct. USA: Portland State University.

Craig, S. (2009). Merrill Bonus Case Widens as Deal Struggles. Wall Street Journal vol, 35(3), 23-45.

Kenway, S., Howe, C., & Maheepala, S. (2007). Triple Bottom Line Reporting of Sustainable Water Utility Performance.USA: Amer Water Works Association.

Moeller, R. (2007). COSO Enterprise Risk Management: Understanding the New Integrated ERM Framework.USA: John Wiley Sons Inc.

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Savitz, A., & Weber, K. (2007). The Triple Bottom Line: How Today’s Best-Run Companies Are Achieving Economic, Social and Environmental Success – and How You Can.UK: University College London.

Scerri, A., & James, P. (2010). Communities of Citizens and “Indicators” of Sustainability’. Community Development Journal, vol. 45(2), 12-38.

Stewart, M. (2010). The Management Myth: Debunking Modern Business Philosophy.UK: Reprint. W. W. Norton Limited.

Willard, B. (1989). The Sustainability Advantage: Seven Business Case Benefits of a Triple Bottom Line, Conscientious Commerce.Canada: New Society Publishers.

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BusinessEssay. 2022. "Triple Bottom Line (TBL) Reporting." May 1, 2022. https://business-essay.com/triple-bottom-line-tbl-reporting/.

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