Triple Bottom Line Impact of Micro,
Small and Medium Enterprises

 

With the world moving towards sustainability, many organisations have adopted various measures to shift towards green practices. The Triple Bottom line is one such approach. Triple Bottom Line (TBL) is an accounting framework that measures the three dimensions of performance of an organisation: economic, social and environmental, combining the traditional matrix of finance with measurements of environmental impacts and social justice. It systematically ensures that companies look at their lifecycle impacts to reduce carbon emissions and ways to improve the impact of people involved, also ensuring efficiency of the workforce.

There is a crucial need for designing the TBL framework for both growing start-up enterprises and the existing enterprises, both in big corporations and the MSME space. MSMEs play a key role in increasing competitiveness and promoting rural and global value chain development, thereby achieving inclusive growth and poverty reduction. Large businesses and national economies are dependent on micro, small and medium enterprises. The MSME sector in India contributes significantly to India’s economic and social development. Therefore, specific indicators devised to track environmental and societal impact can help in minimising the negative effect of the firms on the people and the planet.

Many organisations have embedded sustainability into their system through utilising the reporting tool, Sustainable Reporting by GRI. However, apart from reporting, a proper TBL framework for MSMEs is not in place. Many big businesses perceive sustainability as an added expense and a distraction from their main targets. This fundamental misunderstanding acts as an impediment for a paradigm shift in the operation and management of the system. There is a need for the businesses to identify the overlap between profit and sustainability. The portrayal of a business as eco-friendly and sustainable has a positive reception by the public over its unsustainable competition. Companies like PepsiCo and H&M have reported increased sales by advertising their push towards sustainability.

In the MSME space, TBL framework is perceived to be resource and cost extensive and without the availability of subsidies and incentives, the long-term benefits of this framework will not be realised. The challenges with respect to the lack of availability of consistent data and a uniform framework for assessing the credit worthiness of diverse MSMEs poses a problem to financial institutions to lend money in order for the MSMEs to design their infrastructure around the Triple Bottom Line framework. The systematic shift in existing MSMEs can only realised through perception shift towards sustainability, capacity building of the current workforce and access to finance.

Isha Sen
isen@devalt.org

 

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