PROFIT AND PRINCIPLES – FINDING A BALANCE WITH THE TRIPLE BOTTOM LINE
Abstract:Local Government Authorities (LGA's) throughout Australia have or are in the process of reforming their water operations. For many, this means operating on a more commercial basis, with a progressively greater emphasis on the financial performance of utility services. In many cases, these changes have led to a significant increase in the commercial performance of these businesses to the benefit of both the LGA and the broader community.
However, given the nature of the urban water industry and its central importance in maintaining living standards and addressing environmental issues, progressive managers are beginning to ask the question; “is the dollar the single or even best measure of “success” in the management of our water services?” Addressing this question is one of the issues at the forefront of development of the water industry.
Traditional information disclosures and measurements of performance for water utilities have been focussed on external financial reporting whereby prescriptive rules and regulations abound. However, when it comes to social and environmental disclosures, there is no universally accepted approach. Indeed, how do we measure “social” and “environmental” benefit in an objective manner?
Measuring the financial viability is comparatively easy. There are many well established tools and prescriptive rules for measuring the commercial “health” of a business's operations. This is undertaken by skilled financial practitioners.
So, if the financial issues are measured by the financial experts, why shouldn't the environmental issues be measured by the environmental experts and social issues developed by the community (through a reference group or Council)? The environmental and social accountability process can largely be driven by stakeholder identified target and performance. That is, experts in their field can set appropriate targets against which the business's performance can be measured.
This paper outlines how the application of Triple Bottom Line leads to the development of tools to measure the sustainable performance of a business and how they are able to enhance decision making processes and increase accountability to key stakeholders. The techniques used were benchmarked against similar strategies developed by multinationals such as Shell and BHP who recognise that the impact of their businesses go well beyond the commercial profitability of its projects and that the development of a sustainable business needs to take into account these broader issues.
Given the essential and monopolistic nature of the urban water industry, these tools may well provide a mechanism for both managing and reporting the performance of water businesses to ensure that they remain sustainable over the very long term.
Document Type: Research Article
Publication date: January 1, 2003
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