Introduction
This memo is a summary report prepared after assessing the performance of this company as instructed by the CEO. In this memo, a triple bottom line (TBL) accounting framework will be conducted to assess the company’s compliance with corporate social responsibility using key performance indicators listed in the KPI and Triple Bottom Line Balanced Scorecard. The revised key performance indicators provided by the CEO will be analyzed and compared with the results in the financial statements. The results in this memo will help the CEO and other internal staff members to understand if the company can achieve sustainable TBL-centred growth. The financial records that indicate compliance with TBL will first be sorted for further exploration. The records will then be compared with the organizational goals and KPIs to measure the organization’s level of compliance. To ensure accurate analysis, various attributes in the financial statements will be measured against various entities and percentages calculated. The memo will reveal that most TBL data financial statements support the key performance indicators in the KPI and triple bottom line scorecard. The results in the memo will also show how various strengths, weaknesses, opportunities, and threats affect the company’s financial performance.
Financial Element
Profits in the economic bottom line context are measured differently from traditional internal accounting of profits. In this framework, an organization cannot be said to have made a profit if the revenue and income earned cannot support other factors. To transition well to a low-income market, the company will have to set financial goals to aid the community it will be providing services for. The current financial statements give contracting results on the company’s position when it comes to giving third parties financial aid. There is a year-to-year growth in the revenue attribute of the financial statement of this organization. The sales revenue row shows that revenues increased from $ 130,000 000 in 2016 to $ 150,000 000 in 2017 before jumping to $ 174,090,000 in 2018. At the same time, the money given to charity donations rose from $ 400,000 in 2016 to $ 500,000 in 2018. Despite this being a relatively large amount to give in terms of donations, the amount was insignificant compared to the profits earned. While the profit margin increased by 33% from 2016 to 2018, the amount to charitable organizations lagged, rising by just 25%. Based on the organizational goal of increasing loyalty card membership in areas with predominantly low income, this trend has to change.
Corporate social responsibility and TBL suggest that for a for-profit to be achieved, the percentage of profits given to charity and the community’s well-being must be a certain percentage of the profits earned. In the financial year that ended on 31st December 2018, the company made a net income of 18,565,000, of which only 500,000 were given to support the people and the environment. This represents only 2% of the profits earned, indicating a low contribution to society’s financial wellness. The organization should consequently set up a key performance indicator goal of ensuring a certain percentage of net profits is given to charity. The revenues, profits, and contributions to charity financial records show that this organization is not committed to TBL economically. The sales revenue growth is not attributable to the company’s CSR and TBL efforts.
The ratio between salaries paid to promote sales against those that are paid for administrative work of 3 to 1 shows our commitment towards sales. This vast disparity in the distribution of expenses shows that we are committed to ensuring that the hiring procedures support Through Line (TTL) marketing. TTL marketing efforts try to integrate both Above the Line (ATL) marketing which is general, and Below the Line (BTL) marketing, known to be more specific (Nasution et al., 2022). Incorporating both marketing strategies has given organizations a competitive advantage (Khalid, 2018; Hamadamin & Atan, 2019). This data, therefore, shows commitment to the company’s financial well-being, which is the bottom line of TBL.
The company is not very active in collecting its accounts payable, and the amounts owed to different customers have been increasing since 2018. While this approach could cause a reduction in operating cash flows, it has a financial benefit to its customers. To achieve the TBL mandate, the company should seek to ensure that the financial well-being of its customers is considered. This could allow them to shop with credit and enjoy an extended loan repayment time. Advancing overdrafts to clients put the company at risk as it could result in financial difficulties. However, if the program is managed correctly, the company would enjoy increased revenues since customers would be willing to shop more. Therefore, the increase in accounts and other receivables indicates a good triple bottom line policy in the organization’s profitability.
Environment Element
All organizations have a corporate social responsibility to ensure that the environment in which they operate is safe. This is not easy as a company may be forced to choose either to conserve the environment or to lower its total operational costs. In the last financial year of 2018, the company has seen an increase in the cost of property, building, and equipment. Many factors could have contributed to this trend, one being the pursuit of environmentally safe equipment. The company ensured that its buildings were LEED certified, which resulted in increased costs. Likewise, financial data reveals that the company was forced to buy new equipment and expensive but planet-friendly equipment. The company had to deal with increased costs for purchasing non-current assets especially plant property and equipment, in the just-ended fiscal year. If this trend were to continue, the company would achieve zero emissions to the environment by 2025.
The company purchased expensive tools and equipment capable of recycling waste products. It is hoped that the focus on using reusable energy and recycled products will help the company reduce its expenditure by 5%. The saved money will be allocated to green projects such as purchasing solar panels, wind turbines, and green tools for use by the company or charity. The company has also allocated a budget to do away with equipment that leads to the degradation of natural resources. Fuel-powered machines are being replaced with wind and solar panels. The company is also focusing on being one of the first to use electronically powered cars. The company’s products must go through various audit procedures to ensure they are as safe as possible before being sold to consumers.
In the last fiscal year ended 31st December 2018, data from the consolidated balance sheet shows a sharp increase in financial assets. This is attributable to the fact that the company dedicated a large share of its income to ensuring that produced financial assets minimize waste emissions. It also changed its procurement procures of purchasing the most effective and cheap machinery in the last financial year. The strategic plan ensures compliance with TBL guidelines and that the goals are achieved according to the KPI bottom line scorecard guidelines.
The company has a strategic plan for reusing, recycling, and promoting sustainable energy use. For this mandate to be achieved, it has been forced to let go of some of its internal financial goals, like ensuring the reduction in the number of new non-current assets purchased. This will create a weakness since the company will have fewer finances to use in operational, financial, and investing activities. However, the strategy creates strength in capturing the growing market of consumers and investors who are only willing to buy from environmentally friendly organizations. Analysis of the statements shows that the company is using financial assets to support the environment rather than going for profitability. The high goodwill of the company of 8,000,000 shows the company has invested in environmentally friendly fields, and therefore it is less likely to fail.
People
The company aims to contribute to the community it operates extensively. It has set Specific, Measurable, Achievable, Realistic, and Timebound (SMART) goals. One of the company’s main goals is to give back to the community. It, therefore, targets to give a total of $50,000 as contributions by the end of the financial year 2021. The measurement criteria for this objective will be the amounts given out, which can be analyzed using its financial records for the 2016, 2017, and 2018 financial years.
The company is not reinvesting its retained profits in TBL initiatives as of 2018. Since 2016 the amounts of retained earnings have been increasing. There has been no significant increase in donations over the three years analyzed. The financial statement also shows that the company has not given back to society in terms of finances in any other method apart from donations. The percentage of contribution by the company to the people and charity remains a small fraction of less than 1% compared to the retained earnings. It is also only 2% when compared with the net profit. The company does not also give many people a chance to have ownership of the company. Financing most activities are done using debt and retained earnings leaving many, including its employees, lacking an opportunity to enjoy the financial benefits of its success.
People have a particular liking and trust towards the company, represented by high goodwill. It is noticeable that the company’s will is more than its intangible assets and long-term financial assets. Over the last three years, the goodwill has been constant, indicating a struggle in increasing perceived value. High goodwill is positively correlated with corporate social responsibility and adherence to the TBL framework. The high salaries that are advanced to administrative and operating salary expenses reveal that the organization is performing its cooperative social responsibility role of providing work for many people. This argument can be proved by the fact that selling employees receive huge compensations; thus, the huge salaries are attributable to a large workforce.
Conclusion
While environmental, financial, and social factors that affect an organization do not have a single unit of measure, one can predict how well an organization has implemented them by studying the financial statements. The companies’ levels of compliance with the 3Ps are high as financial records suggest that the organization strains to ensure corporate social responsibility. The company will need to continue being compliant with the TBL framework for the smooth and successful initiation of its loyalty cards membership program in poor neighborhood regions.
References
Hamadamin, H. H., & Atan, T. (2019). The impact of strategic human resource management practices on competitive advantage sustainability: The mediation of human capital development and employee commitment. Sustainability, 11(20), 5782. Web.
Khalid, L. I. (2018). Inside Aarong: marketing activities of an ethical brand. Web.
Nasution, I. M., Bintaro, B. K., Kesumawati, C. S., Zahruddin, M., & Nabila, E. A. (2022). Implementation technology for development of a brand communication in company PT. XYZ. Aptisi Trans. Technopreneursh, 4(1), 17-25.