Integrating sustainable chain management with triple bottom line accounting

Abstract

Triple Bottom Line accounting is widely advanced as a way in which firms can realise broader societal objectives in addition to increasing shareholder value. In our analysis of the Australian economy, we integrate financial input–output tables that describe the interdependencies between economic sectors, with national social and environmental accounts to construct numerate ‘triple bottom line’ accounts for 135 discrete sectors. The accounts are portrayed against the numeraire of ‘one dollar of GDP’. Thus, for a sector of the economy, financial aspects of performance can be expressed for example as dollars of export earnings per dollar of GDP. Social aspects such as employment can be portrayed as minutes of employment generated per dollar. Greenhouse issues can be portrayed as kilograms of carbon dioxide emitted per dollar. Since these indicators of ‘triple bottom line’ performance are referenced against financial units and are consistent with the system of national accounts, they can be applied to financial accounts of a firm, a service or a product, and allow a robust triple bottom line account to be developed across a range of scales. The critical advantage of this approach is that it includes both the direct or immediate effects as well as the indirect or diffuse effects associated with a large and distant chain of supply paths. The incorporation of most indirect or upstream effects therefore expands the range of issues and effects within the analytical boundary, and also includes imports and exports. Both products and firms can then be assessed properly in sustainable chain management (SCM) terms. Thus, a firm that uses a key intermediate input that requires a large amount of water for example cannot hide the environmental implications since they are revealed in the analysis of the full production chain. This revelation can also underpin progress when firms acknowledge both the direct and indirect effects, and improve their selection of key inputs on a wider range of criteria, rather than on price alone. Our analysis is well developed at the economic sector level for Australia and is also being applied to number of government institutions, firms, and individual products. Before the full benefits of numerate triple bottom line accounting can be applied to the equity issues of globalisation, trade interdependencies between groups of typical countries will have to be analysed using these whole economy approaches. This will allow country-specific intensities to be applied to important items in the international production chain.