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True Value: Understanding the ‘true’ earnings of an Organisation
Home Business Management
By: Pravin Mehta Email Article
Word Count: 524 Digg it | Del.icio.us it | Google it | StumbleUpon it

  

The traditional bottom line approach of businesses has become passé and irrelevant. There is a growing sentiment amongst many to look beyond profits.This sentiment has led to the adoption of the triple bottom-line approach by many. The triple bottom-line approach equates the true value of an organisation upon three different parameters, namely:

• Social Value: The social bottom line of an organisation is defined as the economic value created for the society. It measures the positive ramifications of the business on its human capital. Healthy labour practices, corporate community development and workplace behaviour are some of the key metrics towards measuring the social value of an organisation. This approach seeks to align the corporate interests with the labour interests within the organisation.The social sustainability approach seeks to build and nurture sustainable relationships within the internal and external community.

• Environmental Value: There have been a multitude of cases where businesses and organisations have been at loggerheads with the environment regulatory bodies. For far too long, the corporate interests never seemed to align themselves with their environmental counterparts. Excessive wastes, gaseous emissions or land disturbance have been common occurrences. In the light of increased awareness about environmental sustainability, business worldwide have a very important role to play. Earning handsome profits at the cost of severe degradation of the environment will lead to an unpopular image in the eyes of many. Organisations need to acknowledge and adopt practices such as rainwater harvesting, use of renewable energy, optimal use of raw materials and minimising the use of fossil fuels. These practices will not only lead to long term sustainability of the environment, but also lead to the creation of long term value for the organisation.

• Financial Value: Economic sustainability calls for using financial resources in the best way possible which will help the business to continue to function for a long period of time. Business operate in order to generate profits and create wealth, but it must be done keeping in mind its neighbouring ecosystem and the overall welfare of the society. Profits earned and wealth created must be distributed not just in the hands of a chosen few but amongst the overall many. The triple bottom line approach seeks to question the idea of viewing businesses solely as financial entities. They must not restrict themselves solely to idea to garnering traditional profits but push their boundaries and create true value.

The true value of an organisation is the sum total of its financial, environmental and social value.It is not restricted to its financials alone, but to the value it brings to the community at large. An organisation which fares positively on all the three fronts is the one that creates true shareholder value. Only with a strong commitment and a collaborative spirit can the triple bottom line approach translate towards sustainable development. Strategic business decisions should no longer be taken in financial isolation, but instead be thoroughly assessed upon its overall impact on the society. Companies and governments need to come in unison to standardise this approach, helping communities live better.

The true value of an organisation is the sum total of its financial, environmental and social value.It is not restricted to its financials alone, but to the value it brings to the community at large.

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