International Strategic Management - Essay Example

International Strategic Management Introduction Sustainability is a common goal for businesses, governments and non-profit organisations in the modern organisational setting. In spite of this, measuring the degree to which an entity is being sustainable or seeking sustainable growth is quite difficult. In the 1990s John Elkington tried to measure sustainability by using a new model to gauge performance in corporate America. This accounting model, known as the triple bottom line (TBL) extended beyond the traditional metrics of stockholder value, return on investment (ROI) and profits to include social and environmental paradigms. In this paper, the writer examines the TBL concept, discusses its possible contribution to business and economic development and how it can be useful to policymakers. The writer will also provide some examples of how TBL can be applied to achieve the best results for companies and individuals. Discussion By concentrating on detailed investment results – about performance based on interrelated aspects of people, profits, and the planet – TBL reporting can be a vital instrument to support sustainability objectives. Interest in TBL accounting has been intensifying in for-profit, government and non-profit sectors. Many enterprises and non-profit firms have implemented the TBL sustainability model to analyse their results (Bachani and Vradelis, 2012:19). Interestingly, a similar approach has become popular with governments at the federal, state and local jurisdictions. TBL is an accounting model that comprises three aspects of performance: social, financial and environmental. This contradicts traditional reporting models because it comprises environmental and social constraints that can be difficult to allocate effective measurement techniques. The TBL aspects are also popularly known as the three Ps: profits, planet, and people. Years before Elkington conceived the sustainability concept now known as TBL, environmentalists grappled with models of, and measures of, sustainability. Academic fields based on sustainability have increased significantly in the last 30 years. People involved inside and outside academic disciplines who have investigated, and practiced sustainability would concur with Andrew Savitz’s general definition of TBL (Longoni, 2014:43). According to Savitz (2013:15), TBL encapsulates the basis of sustainability by gauging how an organisation’s activities affect the world, including its stockholder and profitability values and its human, environmental and social capital. According to scholars, the problem is not defining TBL; the problem is measuring it. The TBL is an extremely effective tool when used in the right way. It can make unsustainable organisations sustainable by allowing them to adopt long-term remedies to challenges. The 3 Ps lack one unit of measure; profits are measured in dollars. What is the measure for social capital? What of ecological or environmental health? Creating one unit of measurement is just part of the wider challenge. Some people propose the monetisation of all the TBL dimensions, including ecological damage or social welfare. While that would help in achieving a common unit of dollars, many people are opposed to the idea of assigning a dollar value on endangered species or ecosystems on purely philosophical grounds (Bachani and Vradelis, 2012:24). Others challenge the technique of determining the right price for endangered species or damaged wetlands (Numitor, 2011:26). Another remedy would involve calculating the TBL based on an index. This way, we can get rid of the unsuitable units issue and, provided there is a universally recognized accounting technique, supports comparisons between organisations. For example, it allows companies to compare results between organisations, development projects, cities or some other standards. The Indiana Business Research Centre’s Innovation Index is an example of an index that pits one country against its performance for different components. Despite this, there is still a degree of subjectivity even in the use of an index. For instance, how are the index dimensions measured? Would each P receive the same weighting? What of the sub-components found in each P? Do they receive same weighting? Is the people dimension more vital than the profits dimension? Who decides? Another alternative would avoid measuring sustainability based on an index or dollars (Savitz, 2013:41). If those using the TBL found it suitable every sustainability metric would be independent. For example, “acres of mangroves” would be a good measure. In addition, over time, progress would be measured based on the creation, destruction and status quo of mangroves. The disadvantage of this approach is the implementation of metrics that could be vital to measuring sustainability. The TBL user is likely to suffer from measurement fatigue. Having analysed the challenges associated with calculating TBL, I can focus attention on potential metrics for use in TBL computation. After that, I will explain how businesses and other organisations have implemented the TBL model. There is no universal way of calculating TBL; neither is there a universal benchmark for the measures that form the three TBL dimensions (Elkington, 1998:23). This can be interpreted as an advantage because it enables users to fit the general model to the requirements of different organisations, different geographic boundaries, or different policies or projects. A local government agency and a business can both measure environmental sustainability using the same standards. For example, the two entities can use a measure of minimising the amount of solid waste dumped in landfills. On the other hand, a local mass transit can gauge growth using passenger miles while a commercial bus company would measure growth using earnings per share (Bachani and Vradelis, 2012:27). The TBL can harbor all these differences. In addition, the TBL can either accommodate a broad scope or be project (case) specific. It can measure effects across large geographic expanses or a small geographic locus like a borough. A project-specific TBL would gauge the impacts of a specific case in a specific location, like a community constructing a hospital. The TBL also applies to infrastructure projects at national levels or energy policy at state levels (Bachani and Vradelis, 2012:28). The degree of entity, the geographic locus and the type of project will influence most of the decisions concerning what measures to use (Elkington, 1998:25). That considered subject matter experts, shareholders and the ability to gather the required data will ultimately determine the set of measures. Although there is a lot of literature on the suitable measures of sustainability at the national or state levels, data availability is what will ultimately facilitate TBL calculations. Economic Measures Economic measures should be variables dealing with the flow of money and the bottom line. It can include business climate conditions, income or expenditure, business diversity conditions, taxes, and employment (Elkington, 1998:29). Good examples include: revenue by industry contributing to GSP (gross state product); personal income; job growth; cost of underemployment; percentage of companies in each sector; sizes of establishment; employment distribution by industry; and business churn. Environmental Measures Environmental measures should represent indications of natural resources and show possible influences to its feasibility. It could include natural resources, air and water quality, land use/land cover, energy consumption, and toxic and solid waste (Elkington, 1998:31). Ideally, the existence of long-term patterns in each of the environmental measures would help companies determine the impacts a policy or project would have on a specific area. Some examples of environmental measures include: electricity consumption, sulphur dioxide concentration, change in land cover/land use, fuel consumption, prevalence of nitrogen oxides, toxic waste management, specific priority pollutants, solid waste management, and unrestrained nutrients. Social Measures Social measures represent social dimensions of a region or community and could comprise indicators of quality of life, access to social resources and equity, social capital, education, and health and wellbeing (Elkington, 1998:42). Some examples of social variables include: health-adjusted life expectancy, median household income, violent behaviour per capita, relative poverty, unemployment rate, mean commute time, female workers’ involvement rate, and number of people with post-secondary certificates or degrees. Data for many of the above measures are gathered at the national and state levels, but also exist at the local or community levels. Many are suitable for locals to use when designing TBLs. However, as the nature of the case and geographic scope shrink, the set of suitable indicators can change; sometimes dramatically. For local projects, the TBL indicators of progress are best identified locally (Willard, 2012:16). There are numerous identical methods of ensuring stakeholder involvement and contribution in the design of the TBL model. Some of these methods include: employing a “narrative style” to seek stakeholder involvement and thorough project evaluation, designing decision matrices to include public opinions in decision making and project planning, and using stakeholders to weigh and rate elements of a sustainability model based on community needs (Bachani and Vradelis, 2012:37). For instance, a community can assume a vital indicator of success for a business development program to be the number of sole-proprietorships formed over a three-year period. However, the organisation will ultimately be responsible for producing a fixed set of indicators suitable to the task at hand (Willard, 2012:18). The TBL’s application by businesses, governments and nonprofits is driven by the principles of social, economic and environmental sustainability. However, these entities differ in their approaches to measuring the three classes of outcomes. Supporters who have designed, and implemented sustainability evaluation models like the TBL faced numerous obstacles. Chief among them is how to design an index that is not only relevant, but also comprehensive, as well as how to select good data for the measures that form the index (Bachani and Vradelis, 2012:3). For example, the GPI (Genuine Progress Indicator) comprises 25 indicators that include social and environmental elements. Those indicators are transformed into monetary units and made into one, dollar-denominated variable. The state of Minnesota designed its progress measure consisting of 42 indicators that concentrated on the objectives of a prosperous economy and measured success in attaining these goals (Willard, 2012:21). There is a huge tome of literature on sustainability indicators and integrated evaluation that emerged out of the fields that gauge environmental impact. Interestingly, these are not limited by rigid economic theory for gauging developments in social welfare. Scholars in environmental policy state that the three classes – social, economic and environmental – should be integrated so as to get the whole outlook of the impacts that a policy, regulation or economic development initiative may have and to evaluate tradeoffs and policy alternatives (Willard, 2012:29). Business, government agencies, and non-profit organisations can all use the TBL. For businesses, the TBL and its fundamental sustainability value have become a force in the corporate world due to increasing anecdotal proof of increased longer-term profitability. For instance, minimising waste produced by packaging can also lower costs (Willard, 2012:36). Companies that have excelled at these approaches include Cascade Engineering, Proctor and Gamble, GE (General Electric) and 3M. Despite lacking an index-oriented TBL, it is obvious how they use the TBL concept to gauge sustainability (Willard, 2012:45). For example, Cascade Engineering, a private company that does not need to submit the comprehensive financial paperwork of public firms, has determined the following measures for its TBL scorecard: Economic – Taxes paid Social – Charitable donations, average hours of employee training, welfare, and retention. Environmental – Amount of waste, safety incident frequency, greenhouse gas emissions, water use, lost workday frequency, and use of industrial recycled and post-consumer material. Most non-profit organisations have implemented the TBL while some have collaborated with private companies to solve broad sustainability problems faced by mutual stakeholders. Companies acknowledge that partnering with nonprofits is good for business, especially those nonprofits with objectives of economic growth, environmental protection, and social wellbeing (Taylor, 2012:21). The Ford Foundation has sponsored researches that employed variations of the TBL to gauge the impacts of programs to generate wealth in many rural areas across the United States. RSF Social Finance is another example of a non-profit that uniquely concentrates on how its investments enhance all dimensions of the TBL. Although RSF prefers an original approach to the TBL concept, it is obvious how one can customise the TBL to suit almost any company (Willard, 2012:49). RSF’s approach includes: Economic (Food and Agriculture) – Seek new economic frameworks that support sustainable agriculture and food while spreading public awareness of the benefits of biodynamic and organic agriculture. Environmental (Environmental Stewardship) – Offer funding to projects and organisations committed to sustaining, preserving and rejuvenating the Earth’s ecosystems, particularly integrated culturally-relevant and systems-based approaches. Social (Education and the Arts) – Finance arts and education projects that have therapeutic and holistic value National, state and local governments are increasingly implementing the TBL as well as traditional sustainability models as performance-monitoring and decision-making instruments. For example, in the United States, Utah, Minnesota, Northeast Ohio region, Maryland, Vermont and the San Francisco Bay Area have carried out analyses based on the TBL or identical sustainability models (Savitz and Weber, 2013:34). Policymakers employ these sustainability models to determine which actions should or should not be taken to increase sustainability. Policymakers want to identify the cause and effect pattern between actions – policies or projects – whether the outcomes move society away from or toward sustainability. For example, Maryland employs a hybrid GPI-TBL model to compare projects (e.g. investing in green energy) against other policy alternatives or the independent variable of inaction (Savitz and Weber, 2013:36). Globally, the European Union employs integrated evaluation to determine the possible positive and negative implications of proposes policy initiatives, facilitating informed political actions to be taken on the recommendation and determine tradeoffs in attaining competing goals (Savitz and Weber, 2013:39). The EU frameworks have themselves been the target of criticism and have undergone multiple series of modifications (Elkington, 1998:35). The process of enhancing the frameworks shows both the EU’s dedication to integrated evaluation and the transparency of the whole process. The TBL concept can be applied regionally by communities to promote economic growth in a sustainable way. This demands more cooperation among governments, citizens of specific regions, nonprofits, and businesses. There are examples of US regions that have done this and demonstrated the multiple ways in which the TBL concept can be exploited to develop a region’s economic foundation in a sustainable way. Case Studies Cleveland, Ohio The mayor of Cleveland launched the Sustainable Cleveland 2019 (SC2019) Summit in 2009 to unite hundreds of people intent on implementing the principles of sustainability in the development of the city’s local economy (SAGE, 2012:49). The SC2019 is a ten-year project aimed at creating a sustainable and long-term economy in Cleveland by concentrating on a TBL-like model. Cleveland uses four vital dimensions for measuring sustainability: the built environment (urban and infrastructure growth trends); the social and personal environment; the business environment; and the natural environment (Savitz and Weber, 2013:46). Each vital area has six objectives. At this juncture, specific measurement pointers are yet to be fully developed, but the city intends to design a dashboard that could be integrated to develop an index for general project success. This dashboard will facilitate fast year-to-year evaluation in the SC2019 development. Grand Rapids, Michigan, and the Nearby Region The Grand Rapids region developed the first "Community Sustainability Partnership" in the United States. It also became the first region to design a framework to make it more sustainable. The Grand Rapids region uses 14 main measures associated with the region’s environmental factors and quality of life to identify growth achieved towards sustainability (Buys and Mengersen, 2014:28). Instead of creating an index, target objectives were created for all measures. More comprehensive information of the indicators used for each measure us available in its TBL report, but there are fleeting explanations of the measures used to gauge their TBL: Environmental Quality Transportation: public transportation infrastructure Waste: patterns in yard waste, refuse, and recycling Energy: natural gas and energy consumption as well as alternative energy usage Land Use and Natural Habitat: records of forest cover and land use Air Quality: hazardous release records and number of ozone action days in air pollution Built Environment: the quantity of LEED certified and approved projects Water: water use Economic Prosperity Unemployment: the unemployment rate Personal Income: the personal income per capita Knowledge Competitiveness: external report ranking American regions Redevelopment, Jobs and Reinvestment and Jobs: findings from Brownfield job creation, reinvestment, and redevelopment Social Capital and Equity Quality of Life: free lunches patterns, home ownership, lower prices, and poverty levels Safety and Security: violence and crime statistics Health and Wellness: blood lead levels patterns and infant mortality rates Community Capital: voter ethnicity, involvement and population, and 211 assistance calls Educational Achievement: degree achievement levels Conclusion Elkington’s Triple Bottom Line concept has revolutionised the way businesses, governments and nonprofits gauge the performance of policies, projects, and sustainability. Beyond the premise of gauging sustainability in three categories – people, planet and profits – the TBLs’ flexibility enables organisations to implement it in a way appropriate for their particular needs. There are obstacles to applying the TBL concept. These include gauging each of the three dimensions, computing a policy or project’s impact o sustainability and collecting suitable data (Savitz and Weber, 2013:49). Besides these bottlenecks, the TBL model allows companies to analyse the implications of their decisions from realistic and longer-term perspective. Organisations should learn to adopt and apply the TBL based on their needs. As evident in this paper, the concept is becoming increasingly adaptable and flexible, so organisations should take advantage of this. Research shows that companies that can identify their needs and then tailor the TBL to meet these specific needs post much better results compared to those that implement the concept in a blanket manner. References Bachani, J. & Vradelis, M. (2012) Strategy making in non-profit organisations a model and case studies, New York, Business Expert Press. Buys, L. & Mengersen, K. (2014) A triple bottom line planning tool for measuring sustainability a systems approach to sustainability using the Australian dairy industry as a case study, Oxford, Chartridge Books Oxford. Elkington, J. (1998) Cannibals with forks: the triple bottom line of 21st century business, Gabriola Island, BC, New Society. Longoni, A. (2014) Sustainable operations strategies: the impact of human resource management and organisational practices on the triple bottom line, Cham, Springer. Numitor, G. (2011) Global reporting initiative: ecological footprint, triple bottom line, corporate social responsibility, Beau Bassin, Flu Press. 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