Why the triple bottom line matters in rural banking
Rural and community banks are Specialised Deposit Taking Institutions. They provide financial intermediation. Rural banks are also profit making organisations. The shareholders expect management to create wealth for them. In view of that, profit (bottom line) is usually used to measure their success.
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It is common to see some RCBS publicising their financial results in newspapers. The bottom line (profit) has become an important performance indicator to the extent that most RCBS bonus payment is dependent on that. In other words, the amount of bonus to be paid for employees is linked with the attainment of profit target.
It is worth mentioning that it is good for every serious business organisation to make profit in order to satisfy the financial needs of stakeholders such as shareholders and employees. Profit can also help organisations such as RCBS to invest for growth and expansion.
However, the question arises, is the bottom line (profit) the sole criterion to measure the success of organisations such as RCBS? This article will discuss the concept of the triple bottom line. This concept will help us to appreciate the fact that the conventional way of relying much on the bottom line (profit) to measure success is not enough. The article will also bring to the fore how RCBS can implement the triple bottom line.
What is triple bottom line?
The triple bottom line concept was coined by John Ellington in 1994. According to the concept, business or organisation success or performance should be measured in a broader perspective instead of relying solely on bottom line (profit). The concept highlights the fact that the success of an organisation can also be measured by its positive impact on society as a whole. The triple bottom line framework is made up of three parts and they are: social, environment (ecological) and financial.
In order words, the triple bottom line concept has three dimensions known as 3ps. The 3ps of the triple bottom line are: people, planet and profit.
The people dimension (social impact) is about the impact that organisation such as RCBs can have on people such as employees and residents in the catchment area. This means that RCBs should engage in corporate social responsibility to impact positively on the communities that they are operating. This will go a long way to improve the well-being and standard of living of people.
Board and management of RCBs should treat their employees very well. Human capital is vitally important and as such, employees should be provided with better conditions of service. It will not be advisable for RCBs to declare huge profit while their staff are underpaid and being denied of better condition of service.
According to the triple bottom line concept, the performance or success of an organisation could also be measured on the basis of its impact on the environment.
For example, it will not be a success story for a mining company to declare huge profit when it is polluting the environment which is resulting in serious diseases for the people in its neighbourhood.
Therefore, measuring the success of this mining company based solely on profit and overlooking the negative impact of the pollution on the health of people is a bad assessment.
Globally, our planet is under serious threat by pollution. We are currently experiencing the effect of environmental pollution in the form of global warming. In Ghana, we are grappling with poor sanitation. RCBs can impact positively on the environment by contributing to improving sanitation in their catchment area.
First, RCBs can embark on education campaign to educate people about the benefits of good sanitation practices and the serious consequences of bad sanitation practices.
Second, RCBs should collaborate with residents in their operational areas to organise periodic clean up exercise to reduce waste and ensure healthy environment.
It is a fact that these activities will affect the bottom line. However, boards of RCBs should recognise the fact that the success of their organisation is not dependent solely on declaring huge and impressive profit. RCBs cannot operate without healthy people in a healthy environment. The board and management of RCBs should also take cognizance of the fact that involvement in the aforementioned sanitation programmes can project good image and also build awareness through publicity by the media. The resultant effect will be attraction of new customers and deposit mobilisation.
The last dimension of the triple bottom line frame work is profit maximisation. As already mentioned, RCBs need profit in order to meet the financial commitments of various stakeholders such as shareholders, employees, communities, government, among others. As a going concern organisation, RCBs need profit to ensure sustainability. Therefore, it is not wrong for RCBs to focus on profitability. However, per the triple bottom line concept, the success or performance of RCBs should not be defined by monetary gain only but also by their positive impact on social economic development and the environment.
Conclusion
So far the article has revealed that profit is very important. However, there are other key performance indicators that can be used to assess performance of an organisation. RCBs should, therefore, impact positively on their communities and employees.
The author is the CEO of Proven Trusted Solutions, an employee training, development and marketing research firm.
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