Chapter 4, Problem 1DQ

Summary Introduction

To discuss:

If it is reasonable to expect that managers can measure their social and environmental performance on the same level as they measure financial performance with a triple bottom line.

Concept Introduction:

While measuring an organization's social, environmental and financial performance is referred as the term triple bottom line. This is also called as three Ps: People, Planet and Profit.

Explanation of Solution

In terms of monetary measures like sales growth, revenue earned, return on assets, net profit etc. But it is not a straight forward task to measure social and environmental performance. It is not possible for the managers to measure exactly their environmental and social performance on the same level as of financial performance.

Impact of the organization on the community is referred to as social performance which includes employee welfare, adhering to government laws, customer treatment, and charitable contributions etc. On all kind of stakeholders associated with it is impacted by the organization. Impact on whom is to be measured; employees, their families, suppliers, people surrounding company's building. The families of employees would be affected if employees do not take proper care of its employees.

The amount of natural resources used like material, water, energy and land is referred to as environmental performance. By-products of production activities like air emissions, excessive nutrients, waste etc are also included in this.

It would be a good initiative to be counted, if the company has taken initiative to plant green trees, reducing energy consumption etc. But how to count it in terms of money saving, percentage saving or comparing to other companies in the industry is difficult.

So there is a long list of factors, out of them which priority factors need to be considered for performance measurement needs to be decided by the manager. It is important for the manager to measure all three performance of the organization so that the business remains sustainable in the long run because profits cannot be earned at the cost of society and natural environment. In terms of an index that helps in comparing performance between companies is one of the methods to calculate the Triple bottom line.