Terms Beginning With 't'

Triple Bottom Line

  • February 02, 2021
  • Team Kalkine

Triple Bottom Line is an accounting approach that focuses on creating a sustainable method of execution for corporates. It is an economic concept that includes three aspects in its functioning: social, environmental, and financial.

This approach suggests that there should not be one but three bottom lines that a company adheres to. These three bottom lines include the people, planet, and profits or the 3Ps. All the aspects covered under the Triple Bottom Line approach are not included in traditional accounting methods as they cannot be measured as easily.

Corporates are expected to follow TBL methodology under their Corporate Social Responsibility. The purpose of adopting TBL is same for companies. However, how this approach is adopted differs across organisations. 

How did this approach come into existence?

The phrase Triple Bottom Line was coined in 1994 by British sustainability expert John Elkington. The idea was to move beyond the general method of accounting followed by companies that focuses majorly on revenues and profits.

The ideology states that companies should focus on three bottom lines.

  • The first bottom line being the traditional method of accounting which includes the profit and loss statement of a company.
  • The second bottom line being the “people’s account”, which states how socially responsible a company has been.
  • Finally, the third bottom line being the company’s planet account, which depicts whether the company has taken environmentally conscious decisions or not.

The idea was given birth to so that people take a long and deep look into capitalism and what its future entails. However, it is widely understood as a tool to manage accounts in areas beyond company revenues. It is also understood as an improvement over the traditional single bottom line bookkeeping method followed by companies.

Over time the concept has branched into more extensions like the Quadruple Bottom line, and it has been interpreted differently across organisations.

How does the Triple Bottom Line incorporate the 3Ps?

The sustainability approach focuses on the following aspects:

  1. People: Companies have an obligation towards all the stakeholders in the company. Therefore, a company must look after all individuals associated with it, including all its employees and customers. The TBL ideology recognises the interdependencies existing between various sets of people associated with the organisation.

Thus, organisations must foster a hospitable environment for all individuals that are linked with it. This can be achieved through favourable employee benefits and/or by ensuring customer satisfaction is achieved through regular feedbacks.

  1. Planet: This includes adopting environmentally conscious decisions during the manufacturing process as well as through further stages. These decisions may include not producing harmful products, reducing waste and harmful emissions, and adopting renewable energy sources.
  2. Profits: A company’s profit and loss statement is one of the most important aspects on which its operations are based. The TBL approach ensures that various aspects associated with the company do not suffer as the company tries to generate profits. Thus, measures that are ecological and profitable are preferred over traditional means of revenue creation.

What are the challenges associated with TBL method?

A major issue faced by companies in adopting the TBL approach is measuring the aspects it seeks to integrate into the bottom lines. Out of the three bottom lines, profits can easily be measured in terms of money; however, the rest cannot be readily measured. 

One method to overcome this can be to find out the monetary value of all the three bottom line aspects. For instance, attaching a standard monetary value to a single carbon footprint can help determine the cost caused by a company to the environment. Similarly, whether a company’s policies are employee friendly or not can be judged by the monetary value of the benefits provided to the employees.

Another method to achieve this can be through appropriate indexes that help companies measure how they impact the environment as well as the stakeholders. This is highly dependent on the framework followed by a company. Thus, in practice, this would lead to multiple variations across companies. There is no standard index that would fit universally.

How can organisations move towards the TBL framework?

The Triple Bottom Line approach can be adopted by companies, non-profits and even government organisations. Adopting the approach entails the initiation of a few small steps that would help ensure that are more sustainable and provide a wider coverage among individuals.

Even small initiatives like switching from incandescent bulbs to LED bulbs would be a good start in moving towards the TBL approach. This can be followed by slightly bigger projects that are aimed at using renewable sources of technology and producing goods that are environmentally friendly.

Next step would be to focus on employee policies. Employees must receive salaries promised to them on time. Providing health insurance to employees and other necessary benefits would give the workers a sense of security and would enable them to offer their best to the company.

Reusing inventory or unused parts in the following financial year is also another method of adopting a more sustainable approach. Thus, the TBL method allows companies to focus on much more than just monetary revenue. It has been crucial in the current times when a lot is dependent on an organisation’s reputation. Thus, all dimensions that enable a business to function must be treated respectfully, and the TBL approach is one such measure that helps organisations achieve the same.

What is Data Analytics?  Data Analytics involves a set of quantitative and qualitative approaches and processes that can be used to determine useful information for business decision-making. The process involves various patterns and techniques, including: extracting a raw database, and categorising it to identify and analyse the behaviour, relation and connection of the results.  The ultimate goal is to acquire valuable information in order to make decisions for businesses’ benefit and productivity.  In today's competitive times, most companies chalk out their business plan with the help of data analytics. With organisations becoming customer-service oriented, data analytics has become a critical tool to reach the target audience in an effective manner while understanding their requirements. Once data is collected, it is analysed and stored according to organisations’ requirements.  The data analysis process has multiple layers involved, and its diverse modules are not just used in businesses but also in science and social science fields. Rather than making decisions based on just available information, one can utilise data analytics in examining the data in standard ways and churning out the results from it.  It has been observed that companies generally make decisions based on past references and future outcomes. Data analytics appears advantageous in providing useful information towards this end.  Why do Businesses Need to Use Data Analytics?  Many data analytics’ tools and softwares are readily available these days. These systems use resources, such as machine learning algorithms and automation.   Data scientists and analysts are counted amongst the leading career options as well. These professionals use data analytics techniques while researching and presenting useful information for businesses to increase productivity and gain. The process helps companies understand their target audience and determine effective ways to cater to their needs. Data analytics can further be used to design strategies in marketing campaigns and promotions and also evaluate its results.  Data analytics is primarily used in business-to-consumer (B2C) processes to boost business performance and improve the bottom line. There are data collection firms which gather consumer information and provide it to the businesses so that the companies can effectively influence the market. The collected data is not only used to understand and impact consumer behaviour but also determine market economics and its practical implementation.  The data used in the process can be either be data collected in the past or newly updated data. There are various methods to manage consumer and market information. It may come directly from the customers or potential customers or can be purchased from the data collection vendors. The data primarily includes audience demographics, behavioural patterns and expense threshold.  How Can Data Analytics be Effectively Used in Business Processes? Data analytics is an ever-evolving technique. Earlier, the data was collected manually, but with the rise of internet and technology, data is now collected online with the help of search engines and social media platforms. Subsequently, the information is analysed through available software.  Here is a list of some key steps businesses can follow to leverage the benefits of data analytics: Set up crucial metrics: This step reduces the guesswork and provide data-based insights to the businesses. Before embarking on the data analytics process, it is vital to determine the goal for your business. Analysing customer data helps in understanding conversion rate, consumer spending ability, demographics etc. The results of the analysis can support the businesses while making decisions in launching an advertising or marketing campaign. Similarly, the unwanted data can be erased from the database so that the brands can focus on their right target audience. The relevant metrics will change the course of the company and push it in the right direction. Moreover, once your key metrics are set, even when the market conditions change in the future, you can adjust the metrics according to the requirement and achieve the results. Set a clear module: It is important to examine the data correctly by avoiding common mistakes. An ambiguous path can produce confusing insights while wasting time and energy of businesses.  Therefore, it is recommended to draw a clear goal in order to achieve actionable insights. The data, when collected from different sources, need to be merged accurately in the analytics model. Businesses can modulate their data analytics systems either manually or through automation. There are various data modelling practices available in the market. The best use of these techniques can simplify the process of modelling complex data.  Data visualisation: Once the relevant data is collected, and the modules are set to analysis, visualisation of that data will assist in understanding the information correctly. When the businesses have an acute knowledge of what their target audience wants, they can then focus on strategising advertisement and content, which matches the consumers' interest.  It is the critical step in the data analytics process to distinguish insights from information.  Not everyone is comfortable dealing with numbers. Hence, ensuring that key stakeholders understand essential points and information can be displayed in a visually appealing format seem crucial to capitalise on data effectively. Right tools to implement insights:Having access to data and insights can get overwhelming. However, the information is worthless if the businesses are unable to implement it successfully. While it is important to collect the data and set critical metrics and modules to analyse it, it is also imperative to translate the data into practical actions. The eventual goal is to improve sales or grow profits. It is ultimately in the marketers' hands to transform the gained insights into a successful implementation. The consumers' insights should be incorporated while establishing a marketing plan and at all decision-making steps. 

Dead Cat Bounce Dead Cat bounce is a colloquial phrase which is quite popular in the financial markets. The term was coined a long time ago and generally referred to the peculiar behaviour of the price. The phrase denotes a recovery in the asset’s price, often a sharp one after a prolonged downtrend. Sometimes it is also referred to a short but sharp fall, succeeded by an equally sharp recovery. How does a downtrend continue for a long time? Quite often, some securities in the financial markets depict a very long downtrend which may last from a few months to a few years depending on the severity of the fundamental headwinds. These prolonged downtrends are so strong that no support levels can withhold the downtrend and the prices keep on falling. Every support level gets taken out by excessive selling, which pushes the prices even lower. These lower prices force the long holders to liquidate their positions as no visible halt in the downtrend is noticed. This liquidation from existing buyers further fuels the selling, leading to the continuation of the downtrend. As the price keeps on falling, the buyers do not get enough confidence to buy and consequently keep getting overpowered by selling pressure continues the downtrend. So what is the ideology behind “Dead Cat Bounce”? In due course of a downtrend, the security tends to become oversold for the time being. Oversold is a technical term is used for security which seems to have fallen quite a bit in a specified period. In other words, a security that has been continually sold in a specified period tends to reach a level wherein the sellers are no more interested in selling at further lower rates. This is where the buyers’ step in and try to buy these stocks at low prices, leading to an increase in demand over the supply. This fresh buying tends to push the price up hence resulting in a short upside movement or, in technical parlance a “Bounce”. This point is where the downtrend witnesses a temporary upside momentum which is exactly quoted as a “Dead Cat Bounce”. The ideology is “Even a dead cat will bounce if fallen from a great height.” Likewise, a short bounce is quite expected after a prolonged downtrend which does not change the trend as a bounce does not mean the cat has become alive. Image Source ©Kalkine Group Does it signify a reversal from a downtrend? A Dead Cat bounce is an upside momentum, witnessed after a prolonged downward trend, generally near the oversold price region. But it is to be noted that this price bounce is merely a reaction of the downtrend which is often witnessed in the oversold areas. This does not change the entire trend, and more often than not, the trend continues in the primary direction after the bounce fizzles out.  Why is it difficult to trade a Dead Cat Bounce? Most of the time it is difficult to trade a move like a Dead Cat Bounce as the bounce is often very quick and short-lived. The overall trend remains negative, which is in contradictory to the short-term bounce. Also, few investors mistake it for the trend change, which often proves to be a mistake.  It generally becomes difficult to estimate some key support areas from where the bounce may occur as the downtrend is quite strong and lacks demand to support the price. However, there are some momentum indicators like RSI (Relative Strength Index), Stochastics oscillator etc. which may help to gauge oversold zones from where the bounce may occur. What are the reasons for a Dead Cat Bounce? There could be many reasons for a Dead Cat Bounce to occur on the charts as the sudden demand may come due to numerous reasons. Some of the reasons are Oversold Price As discussed, due to a prolonged downtrend and continued selling the price often comes to a level wherein the sellers are no more interested in selling at these lower prices and at the same time buyers often find a value proposition. This leads to a spike in demand, which ultimately results in a Dead Cat Bounce. Strong support area There are some levels of support on the price chart that are quite prominent. In other words, there are some regions of support which are quite strong and may remain relevant for years. These support levels are generally hard to break at the first attempt, which results in a bounce or a complete reversal.  How to profit from a Dead Cat Bounce There are two different strategies when it comes to trading these kinds of sharp and against the trend moves. They are contradictory to each other, but both are based on proven price behaviour. Short Selling the rally As the primary trend of the underlying is still downward, one thought arises to go short on the bounce. This strategy one to participate in the downtrend but with a much better price. If these rallies are met with a resistance level like a falling trendline, horizontal price resistance etc. then these areas are ideal to sell the bounce in a downtrend.  Buying into the rally Another opinion arises, why not to participate in the bounce? This strategy can also be fruitful provided the bounce should be stronger and last for a while, which is not always the case. This essentially calls for a very quick decision making while capitalising on the temporary bounce.  Bottomline A Dead Cat Bounce is a prolonged downtrend followed by a short-term bounce. These bounces generally don’t last long, and once they fade, the trend continues towards the south. However, sometimes a bounce may also act as a reversal, but for the added confirmation a trader should also look at other signals of a reversal like bullish divergence at the bottom or a double bottom chart pattern.

Earnings reflect after-tax income for a company and generally referred as the bottom line. Earnings are one of the main drivers of a company?s share as it, along with other measures, indicate the profitability of a company and its long-term sustainability.

Defining Macroeconomics Macroeconomics is a branch of Economics that evaluates the functioning of an economy as a whole. It studies the performance and behaviour of key economic indicators such as economy’s output of goods and service, exchange rates, the growth of output, the rate of unemployment and inflation, and balance of payments.  Macroeconomics emphasises on the policies and economic behaviour that influence consumption and investment, exchange rates, trade balance, money flow, fiscal and monetary policy, interest rates, national debt, and factors influencing wages and prices.  The scope of the subject goes beyond microeconomic topics like the behaviour of individuals, firms, markets, and households.  History of Macroeconomics Macroeconomics originated with John Maynard Keynes post the great depression when the classical economist failed to explain the great economic fallout. Classical economics mostly comprised theories that studied pricing, distribution, and supply & demand. In 1936, John Maynard Keynes published – The General Theory of Employment, Interest and Money – effectively changing the perception of how macroeconomic problems should be addressed. The theories of Keynes shifted to focus on aggregate demand from the aggregate supply.  Keynes said: ‘In the long run, we are all dead’. This statement was made to dismiss the notion that the economy would be in full employment in the long run. Later the theories developed by Keynes formed the basis for Keynesian economics, which gained popularity over other schools of thoughts including Neoclassical economics. Neoclassical economics emerged in the 1900s. It introduced imperfect competition models, which included marginal revenue curves, indifference curves. The theories in neoclassical economics argued about the efficient allocation of limited productive resource.  Neoclassical economists explain consumption, production, pricing of goods and services through supply and demand.  Some assumptions of this thought were an individual’s motive is to maximise utility as companies seek to maximise profits. Individuals make rational choices and act independently on perfect information.  Over the years, many new schools of thought in Macroeconomics have found footing in the economics world. These include monetarist theories, new classical economics, new Keynesian economics, and supply-side macroeconomics.  Difference between Macroeconomics and Microeconomics Major topics in Macroeconomics National income and output  The estimation of national income includes the value of goods and services produced by a country in a financial year domestically and internationally. National income essentially means the value of total output generated by an economy in a year.  National income can also be referred as national expenditure, national output or national dividend.  Financial systems Understanding financial systems is an important concept in macroeconomics. A financial market is a market for financial securities and commodities, including bonds, shares, precious metal, agriculture goods.  It is important for an economy to have markets where buyers and sellers can exchange goods. A financial market helps in the allocation of resources. Financial markets facilitate savings mobilisation, i.e. financial intermediaries channelise funds from savers to borrowers.  Investment remains on the agenda for policymakers to promote growth, and financial markets facilitate funds by allowing individuals to invest in bonds and stocks, which are issued by institutions seeking funds for investments.  Business cycles A Business cycle or an economic cycle refers to fluctuations in production, trade or economic activities. The upward and downward movement generally indicates the fluctuations in gross domestic product.  A business cycle has four different phases: expansion, peak, contraction, and trough. An expansion in an economy is when economic growth, employment, prices are rising. The peak is achieved when the economy is producing maximum output, inflation is visible, and employment levels are running high. After a peak, the economy enters into contraction, which leads to a fall in employment, depleting economic activity, and stabilisation in prices. At trough, the economy is at the bottom of the cycle, and the next phase of expansion starts after the trough.  Interest rates Macroeconomics also deals with interest rates in the economy. Interest rate policy of an economy is formulated and maintained by the central bank. A central bank manages the money supply in the economy.  The intervention by the central bank to propel economic growth is called monetary policy. The monetary policy of an economy seeks to maintain employment and inflation in the economy. The motive of the monetary policy is to achieve full employment and maintain stable prices. 

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