Exam 11: Section 4: Is Sustainability Just a Buzzword

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Benefits of the TBL Approach 1. Improves transparency: In addition to financial statement reporting, the TBL allows an organization to voluntarily report its impact on society and the environment. This can improve accountability as the organization provides information on its nonfinancial activities and exposes itself to both public criticism and praise. 2. Allows flexibility: The TBL is also a framework any organization can use. Whether you are a corporation, the government, or a nonprofit organization, the framework is general enough for most organizations to easily adopt. An organization of any size or any industry can use the TBL method. It can also be used broadly to assess an organization's overall performance or be applied to an individual project, policy, or geographic area. On an annual basis, organizations can use the framework to assess performance, identify necessary changes, and assist in future decision making. 3. Aims to satisfy more stakeholders: The approach also recognizes the impact of the organization's actions on all its stakeholders. Stakeholders can include shareowners, employees, the community, and even the environment. As a result, this methodology uses a long-term perspective to improve the impact of an organization's activities on all the people and groups being affected by it. Limitations of the TBL Approach 1. No measurement standards: Unlike generally accepted accounting principles (GAAP) used in accounting, there are no widely accepted standards or rules for measuring, verifying, or auditing TBL data. The mixture of both quantitative and qualitative data means that there is no common unit of measure that can allow all three categories to be added together to arrive at a net figure. Each component-economic, social, and environmental-is unique. While the economic category can use a dollar-based measure, it can also use additional measures to track other indicators other than profits. For example, job growth and employee turnover are two variables. Similarly, the social and environmental categories have other unique indicators that cannot simply be added together. 2. Too subjective: Another limitation of this qualitative method is its subjectivity. The social category, for instance, is subjective and requires more personal judgment than the economic category. For example, what is a positive social action that a company can take to improve the well-being of its employees, the community, and other stakeholders? Is it a monetary donation to a charitable organization, or will a company allowing its employee's to volunteer their time to a worthy cause also suffice? What meets the needs of employees and the community may depend on a variety of factors: The region, the culture, the values, and the expectations of its stakeholders are just a few. 3. Lack of comparability: Since the TBL approach is not legally required, not all organizations voluntarily use this approach. For organizations that do use it, each organization has the flexibility to choose what data to collect, measure, and include for reporting purposes. For instance, companies can decide to exclude negative activities and only include positive ones. Cost and time constraints may also create obstacles for some organizations in tracking data. There are no consequences if there is missing data or a lack of information, and there is no legal requirement to have a third-party audit. Other factors such as the size of the organization or the type of industry can affect what indicators organizations decide to use. A construction company, for instance, may use a lot of environmental indicators to track waste and other environmental impacts, whereas a nonprofit health group may have more social indicators aimed at helping people.