The Triple Bottom Line
The main motive of any organisation is to grow sustainably making profit at an increasing graph. But, the sustainable development is quite misunderstood among the firms. It is viewed in the light of finance alone which is in correct. A sustainable development covers many aspects of growth namely employees welfare, customers satisfaction, moral responsibility towards environment and finance too. The government of UK has to follow a ‘clean growth’ in business. This means that the organisations and firms has to provide the best services and products to their clients as well as understand the importance of environment. This asset covers natural resources like timber, water sources, land, air, living organism and other components of the ecosystems. This report explains the various models that could be implemented by the companies and organisations in order to achieve an overall development or we can say a sustained and supported development. The models discussed are- the Triple Bottom Line, The Five Capitals, Natural Capitalism, Cradle to Cradle, The Circular Economy and the Balanced Scorecard. The importance of each model is very explained, the aspects and the regions of perception covered by each model is discussed that can help UK government to understand the situation better, providing the necessary tools and ideology that can be implemented. Two models are then chosen (Circular Economy & the Balanced Scorecard) and they are discussed in relation to an automobile industry.
This theory reflects on the moral responsibility of the organisation towards both the stockholders as well as the stakeholders as shown in figure 1. It is basically categorised three matter of important points- the economic perspective, social perspective and the environmental perspective. Under economic perspective the management should develop those products along with its marketing that would increase the economic performance of the organisation. It must focus on the values such as ROCL, gearing ratio and the returns of the stakeholder (Edwards, 2018), (Elkington, 2018). The social perspective ensures the equity in the work between the rich west and the poor workers of the developing countries. Economic welfare of the employees along with the customer satisfaction and taking care of the local communities wher the industry is established has to be taken care of. Lastly, there is also the moral responsibility of every organisation towards the environment. Those products that degrade it should be discontinued and proper measures to decrease its negative ecological footprint should be followed (The Economist, 2009), (Richardson, 2018).
Figure 1 (Richardson, 2018)
This model links the economic, social and environment aspects in order to achieve sustainable development. There are five elements that are needed for an organisation to meet the demands of the present as well of the future as shown in figure 2. The first one is the natural capital. The organisation should work within a framework in such a way it doesn’t harms its environment. The natural resources such as fish, timber and fossil fuels should be exploited in such a way that it is not depleted and it is reserved for the future generation (Forum For The Future, 2018). The second one is the human capital. The organisation should ensure that it appoints only the knowledgeable and skilled employees (Schaefer, 2018). If the quality of workers is compromised then the wealth is largely affected. The third capital is the social, which states that the relationship between the management and the organisation is of prime importance. The trust a key factor that helps it to work efficiently (Glenn, 2017). Fourth capital is the manufactured capital. If the machines, tools, transportation and many more elements that play an important role in converting the raw materials into finished goods are not flexible and innovative then the performance is decreased. The last capital is the financial capital which is basically the currency. It the organisation is not making profit then it won’t develop in a sustainable manner, this would also result in the unequal distribution of wealth within workers.
The Five Capitals
Figure 2 (Forum For The Future, 2018)
Natural capitals includes all the resources provided by the nature to us. These resources are limited and takes time in order to replenish. If the industries care only about their economy and discards the social and environmental issues, a time will come when its economy would collapse. The economy lies under social capital, while the social comes above it and the environmental capital encapsulates both of them (Bohne, 2015), (Autodesk Sustainable Blogging Team, 2009). The principle of natural capital states that a proper balance has to be made between and rate of exploitation and replenishment. This way the profit would increase along with time and so would be the social relationship (Rocky Mountain Institute, n.d.), (Waldegrave, 2017).
Nature provides raw materials to the industries so that they can produce useful products out of it. These wastes can be either biodegradable or non-biodegradable. The biodegradable wastes return to earth although the time period may vary for different articles. But in the case of non- degradable nothing is returned except the waste (Murray, 2016). Cradle to Cradle makes sure that the non-degradable waste is used in producing other items as shown in figure 3. It doesn’t considers wastes as useless instead they are the valuable resources in the wrong place. This way the negative footprint is decreased while the positive is increased on the environment (McDonough, n.d.), (Patwary, 2016).
Figure 3 (McDonough, n.d.)
The linear economy approach that is being followed today creates a lot of waste. The process of take, make, use and dispose is not a sustainable approach and instead depletes the finite amount of resources. Circular economy emphasises upon zero waste generation by distributing the waste into biodegradable and non-biodegradable as shown in figure 4. The products are generated in such a manner that after their life is finished they give its maximum resources back to nature. Those products that fails to do so are cycled to produce another product. The means that the waste of today serves as raw materials for tomorrow. It is an approach in which the customers don’t own the goods, instead they own license and when it lifetime gets over, the organisation providing it cycles it (Korhonen, et al., 2018), (Domenech, 2014).
Figure 4 (World Economic Forum, n.d.)
This model focusses on the four perspectives of an organisation for a sustainable development. These are finance management, customer satisfaction, employee growth and learning and the improvement in the processes involved. The financial perspective can be achieved by viewing
Ratios as the key perspective indicators. In order to achieve maximum profit so that the organisation can complete its benchmark, it can reduce the price, provide rebates to its services. The next is the customer’s feedback that has to be taken into account. Focus should be imposed on increasing their numbers. The third is the employee’s growth. Investment has to be made on their learning so that it can result in wealth maximisation in future. Lastly the environment perspective by introducing better and least waste generation processes. This can be measured by the efficiency of the machines and waste productions. The balanced scorecard enables an organisation to grow in a sustainable manner (Jackson, 2018).
Natural Capitalism
The circular economy fully focusses on environment. It considers the resources as an important elements that helps an organisation to grow in a sustainable manner. The automobile industry uses many resources of the environment, mostly those are non- biodegradable and therefore circular economy comes into play that states that the automobiles should be produced in a manner that it produces least waste. This could be done by employing renewable energy sources to power up the vehicles because the main source of waste is in the form of pollution. The next step is to return the biodegradables back to nature so that it replenishes. Rubber is the main biodegradable source. Metals cannot be returned, instead they could serve as raw materials for producing other products such as doors, chassis and body again. This way although it is non-biodegradable, yet it is used again without producing waste unlike before. By the way rubber can also be used again by vulcanising it or in many countries the discarded rubber is being used as a raw material in the construction of roads. Considering automobiles as a licensed entity and not owned would reduce the cost and hence increase the economy. More and more people will buy new cars. This would eventually increase the wealth of the organisation in the long run. This approach takes the responsibility of environment as well as the organisation. It takes care of both the entities. The improvement in the quality of environment without sacrificing the profits of the organisations is achieved through the circular economy. The components that can be recycled, re-used or repaired reduces the stress on the natural resources. Circular economy choses nature as its role model which is a sustainable system. Ignoring the environment and overexploiting it lavishly can pose a serious threat to everyone. The resources are being taken as under-priced and in the worst case as invisible to economy. This can develop many risks associated with the firms. The uncontrolled discharges and emission can severely have a bad impact on the environment as well as on the business because of the protests, legal action and boycott from the people. It can damage the reputation of the company and hence its profit as well. It needs to be treated as their liabilities in order to benefit both the environment and themselves.
The balanced scorecard is undoubtedly one of the strongest models that can easily make any organisation to grow in a sustainable manner. The takes environment perspective into consideration in terms of waste generation and management. It emphasises upon the analysis
of the processes involved in the generation of goods. Automobile industry is a complex one, giving way to a lot of innovations. The robotic arms makes the processes easier. It operates on electricity and therefore is no waste generation from the production line at least. Moreover, other replacements could also be done. Automation is a powerful tool that can transform the whole industry into a simpler version because programming makes a device to do a task repeatedly without the interference if humans and hence the decrease in errors and hence the complexity associated with that. In order to reduce the waste generated, the organisation has to implement reusability of the wastes. This can serve as a raw material either for the same company or for some other. The Prime objective of the balanced scorecard is to maintain a balance between the various perspectives and not only caring about the finance. The environmental indicators such as the amount of greenhouse gases, quality of air, amount of suspended matter such as dust needs to be improved. One common indicator in the case of automobiles is the amount of E-wastes. This waste has to be checked from time to time because these are those metals that can never be returned to earth and therefore measures has to be taken that not only cycles them, but also minimise their. This can be implemented by adopting certain designs that minimise the amount of metal used. The use metal could be melted and re-casted either for the same firm or for other firms. The energy efficiency has to be checked from time to time so that automobiles deliver more output than it was giving previously. The environmental sustainability gives to rise to improved supply chain strategies. The business partners also improves their environmental perspectives and the impacts can be stopped to some extent. The risks involved with it are a few because this model is complete in its own way. Suppose, if any firm keeps a check on its pollution levels, discharge capacities and environmental indicators, it would require certain investments. This would affect the short term profits of any organisation but what is most important for a business is wealth enhancement. Innovation in the technology against the one used earlier that typically made the growth dirty has to be brought out and this requires both time and patience. The finance perspective can be achieved easily by increasing the sales of products and services, providing rebates, regards to the shareholders and many more but the customer satisfaction is achieved only when the locality is kept clean and this can only be done through environmental perspective of sustainable growth.
Cradle to Cradle
The circular economy emphasises upon the reusability of the products that have expired or we can say the ‘dead’ products are disassembled and redesigned into the same new product or changed to some other product. This approach not only released the pressure and stress on the natural resources and raw materials, but also influences the economy. The imports are naturally decreased because the automobiles industry do not require the components for their production. This reduces the cost of the vehicles and hence makes it available in an economical way to the consumers whereas the balanced scorecard approach emphasises upon many aspects or the perspectives such as finance, employees, process and environment too. Inclusion of the finance perspective helps an organisation to generate profit, although they are short term. For example, if the company is unable to reach a threshold sales target, it can increase it by introducing many rewards such as discounts, rebates, ROCL and many others. In order to accomplish a long term profit there has to be some more perspectives. The balanced scorecard include three more long term profit resulting in the increase in wealth in the long run and these are employees, customers and environment of course. The customer satisfaction plays an important role in providing sustainable development. If the customers are happy they will eventually use the same product again and again and this increase the market share. The employee’s growth in relation to learning, developing strategies to complete the same task in a short span of time and in a different way. The knowledge should be shared among other employees and this way the simple step leads to overall growth of the organisation. Moreover, the organisation should provide training to its employees in order to enhance the growth. The environmental aspect basically stresses on the environmental growth along with the sustainability of the organisation by improving the processes involved and replacing them with faster ways. The balanced scorecard model gives an edge over the circular economy due to increased add-ons as described above. The environmental part of both are more or less the same, the difference lies in the additional profit increments along with a sustainable development provided by the balanced scorecard approach in achieving a ‘clean growth’.
Conclusion
This report explains some of the business models that can be implemented so that not only the companies and the firms are benefitted, but also the environment. It can be easily understood that if the finance aspect is considered in order to generate profits then the firm could not attain sustainability and lose the race in the long run. Customers have to be made happy and satisfied. This could be done only when the companies take care of them, considers their remarks, feedbacks and suggestions in order to improve. The customers play an important role in creating a profit scenario. Another aspect are the employees that work in the firms. They have to be skilled in order to increase the productivity and hence the performance. The firms should encourage the sharing of knowledge because ultimately they are going to get benefitted by their work. An important (probably the biggest) challenge that our world is facing right now is the degradation of environment. The pollution has gone to such a level that if it is not controlled today it will deplete all the natural resources which serve as the raw materials for these firms which ultimately would result in their downfall.
The future works include the development of new market strategies that would be basically an improved version of previously devised methodologies. The models apply in every area of business and therefore needs to be formulated fast. The implementation of the models discussed in this report are one of the most common models that are capable of developing any firm sustainably. The future holds for only those firms who understand that if they want to survive and thrive in the best manner, they need to understand areas other than finance that even includes their moral responsibilities.
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