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Why is there a Need for Triple Bottom-line Decision Makers?

Author – Anas Gahshan, Senior FM Manager, Kaizen AMS

Sustainability is one of the major strategic goals for the built environment in the UAE. This is one of the reasons that there have been an exponential surge in investments by the real estate sector and strata management firms in sustainable and clean energy projects to align their vision with the UAEs Energy Strategy 2050. The Energy Strategy targets an energy mix that combines renewable, nuclear, and clean energy sources to meet the UAE’s environmental goals of clean energy (44%), Gas (38%), clean coal (12%), and Nuclear (6%).

With rising awareness, property buyers & investors are prioritizing the sustainability efforts of the developers over the quality and prices of the project. In the last decade, sustainability has emerged as a key factor in the property buying decision. The research conducted by Epson reveals that 94% of millennials in the Middle East prioritize environmental and social issues and over 90% of employees in the UAE think that the use of green technologies can play a pivotal role in improving the air quality and will have a great social impact on the businesses. While designing their future plans, organizations are considering sustainability as their top priority. This is allowing them in addressing the emerging challenge of climate change and also in gaining a competitive edge.

Today, sustainability has become a viable decision-making tool for corporate leaders to evaluate the impact of their decisions over the entire life cycle of the product or practice. Sustainable practices are empowering the UAE’s corporate sector in striking the right balance between mother nature, the built environment, and profitability.

An Urge for Triple Bottom line

Triple Bottom Line (TBL) is an accounting framework which considers social, environmental, and financial results as bottom lines. Businesses of all types – Corporates, NPOs, and government entities – leverage the TBL framework to evaluate their financial performance and the impact of their operations on the environment and society.  Triple Bottom Line encourages real estate leaders to nurture the mindset of prioritizing sustainability in every single process, activity, decision, and strategy. TBL is based on the principle that any action that achieves benefits in one aspect cannot be initiated without measuring its impact on the other crucial aspects of the business.

3Ps of TBL

The Triple Bottom Line (TBL) concept functions on the principle of 3Ps – Profit, People, and Planet. The Profit aspect evaluates the performance of an organization based on its financial performance. It focuses on key aspects like – business decisions made, strategic planning, and the methods of cost reduction.

The second P – People measures an organization’s social impact and its commitment to people (i.e. its stakeholders, employees, and people involved in the supply chain, customers, the organization’s surrounding community, and future generations.) Some of the methods used by organizations today to measure the bottom line includes – advancing human rights; volunteering; donating to the poor or hungry; promoting diversity, race, and gender equity; and improving life expectancies.

The third P – Planet measures the environmental impact of an organization. In the last decade, like any other sector, the real estate sector has also been the contributor to rising air pollution which has adversely impacted the climate at staggering rates.

The bottom-line approach aims to encourage organizations to reduce their carbon footprints to protect nature and precious human lives. Some of the prevalent methods to measure the bottom line includes – curtailing carbon footprints by cutting down on energy consumption, reducing reliance on fossil fuels, ensuring effective waste management, streamlining shipment practices, and above all using ethically sourced materials.

The 3Ps of Triple Bottom Line (TBL) should be of paramount importance for every organization as it enables them in weighing the impact of each aspect on another. This will entitle organizations in deriving the maximum benefits from all three aspects and making informed decisions which are bearable, viable, and equitable.

Challenges in Sustainable Decision-making

 Lack of standard guidelines to accurately measure TBL

  • Lack of structured framework
  • Achieving a global standard is a time-consuming & costly affair

 Sustainable Decisions

Many organizations wonder how they can make sustainable decisions. Well, it is not as tough as it seems. The foundation of sustainable decisions starts with drafting a sustainable strategy which supports the organization’s mission, vision, and values. Sustainable decisions must align with the services offered, business operations, nature of the business, policies & procedures.

There are 5 phases of executing a sustainable strategy. These are as follows –

  • Analyze the goals of the sustainability strategy
  • Evaluate the feasibility of initiatives and plans
  • Outline a preliminary sustainability plan
  • Ensure that the plan accomplishes the sustainable goals of the firm
  • Nurture a culture and mindset towards sustainability which can be implemented in the existing organizational processes
  • Execute the plan post management’s approval

The Direct Impact of TBL on organization

Prioritizing People, Planet, and Profit as a core of the organization often leads to extraordinary business results. Organizations must place ESG goals at the top of their value proposition to maximize their impact on the Planet and People and drive unprecedented business results –

  • Create a checklist of feasible sustainable practices and ESG Governance
  • Reinforce supply chain management to protect against business interruption
  • Ameliorate customer relationship and satisfaction
  • Evaluate the impact of ESG goals on the people and the environment to strengthen brand reputation and customer relationship
  • Prioritize the people in every decision to drive employee loyalty, retention, and diversity and increase employee engagement
  • Align goals with ESG standards to reflect organizations’ vision, values, and strategy which connects with both internal or external stakeholder
  • Maximize the business performance by following all three aspects of ESG. This will have a profound impact on the financial performance among ethical business performance will have a higher rank than other organization performance.

To make wise and informed sustainability-driven decisions, organizations must understand the following basics –

There is no Yes/No approach to the right decision, when it comes to sustainability, it is not an option. Right decisions must consider the organization strategy, employees’ collaboration, and management’s objectives. These decisions must be backed by research and data. Before reaching a final conclusion, an organization must perform data collection, data analysis, the study of alternatives, and the impact of each decision on Triple bottom line aspects by considering the insights drawn from Life cycle analysis and their monetary & non – monetary values.

While businesses have historically been the greatest contributors to climate change, they also hold the keys to driving positive change. Many business leaders are now recognizing their responsibility to do so. This effort isn’t solely on the shoulders of the world’s largest corporations—virtually all businesses have opportunities to make changes that reduce their carbon footprint by considering TBL in their strategic decisions. Adjustments like using ethically sourced materials, cutting down on energy consumption, and streamlining shipping practices are steps in the right direction.

This article was penned by  Anas Gahshan, Senior FM Manager, Kaizen Asset Management Services. It is part of CMtoday’s Expert Talk series.