An assessment by the management of a corporation’s performance in the three factors – economic, environmental and social, that make up the TBL report will result in an improvement in the financial position, if long-term shareholder value is increased as a result of the report being produced. In this case, the benefits that accrue from the assessment and production of a TBL report must exceed the costs of undertaking the report. It is likely to be the case that the costs of producing the report are relatively easy to measure but the financial benefits may be more difficult to measure and may take place over a longer time period. Some examples of the ways in which Kengai Co may benefit financially are explained below.
Focusing on and reporting the company’s environmental and social impact may build and enhance its reputation. Increasing reputation may increase the long-term revenue of Kengai Co. On the other hand, if Kengai Co does not follow (or even try to lead) its competitors in this area then the loss of reputation may damage its revenues stream and lower its corporate value.
Consideration and improvement of working standards and consulting employees as part of this process, when assessing social factors, may help in retaining and attracting high performing, high calibre employees. This will benefit Kengai Co in the long term because of increased employee motivation and performance. Employee involvement may also help reduce the costs related to the company’s risk management activity and thus have a direct cost reduction impact.
Improvement of due diligence procedures as part of the economic factor assessment may help limit direct legal costs and indirect costs incurred in maintaining stakeholder relationships. Communication with stakeholders and thus improving the quality of reporting may result in improvements in governance procedures. This in turn would lead to a reduction of the costs related to risk management.
Assessing and improving the environmental factor impact in the TBL report may result in Kengai Co making efforts to reduce its carbon footprint by placing less reliance on exports and developing local expertise in producing the inputs it needs. This may reduce the risk of supplier related problems and alleviate problems related to possible inventory shortfalls. It may also improve Kengai Co’s reputation, leading to long-term financial benefits.
Monitoring and reporting on the performance of employees and managers as part of the assessment of economic and social factors may help identify areas where work can be done more effectively and efficiently. It may help managers reconsider business processes and question areas where improvements can be made.
In all the above examples, the result of the assessment required in producing the TBL report and comparing the corporation’s progress in relation to its aim of becoming a sustainable organisation will create opportunities which senior managers can develop into financial benefits. The extent to which these opportunities are successfully developed depends on the quality of assessment and the organisation’s ability to enable change to happen. |
