Created Theory: Ethical Bottom Line

Introduction

The Ethical Bottom Line Theory is developed on the bases of the case study and CSR theories and the traditional concept of accounting system.

In traditional business accounting and common usage, the "bottom line” refers to either the “profit” or “loss”, which is usually recorded at the very bottom line on a statement of revenue and expenses.

The Triple Bottom Line was coined by Elkington (1994) to introduce the full cost accounting method. For example if a corporation shows a profit but their production pollutes the river, and the government ends up spending taxpayers’ money for rehabilitation programs. So the Triple Bottom Line was coined to address the issue. The triple bottom line incorporates the notion of sustainability into business decisions. The TBL is an accounting framework with three dimensions: social, environmental (or ecological) and financial. The TBL dimensions are also commonly called the three Ps: people, planet and profit and are referred to as the "three pillars of sustainability". Interest in triple bottom line accounting has been growing in both for-profit, nonprofit and government sectors. Many organizations have adopted the TBL framework to evaluate their performance in a broader context (Elkington, 1994)

Ethical Bottom Line theory condenses the Triple Bottom Line of Elkington (1994) framework and integrates the Stakeholder Theory.

Brief Description of the Theory

The theory condenses the Triple Bottom Line of Elkington (1994) framework and integrates the Stakeholder Theory. The theory supports the Sustainable Development Goals. Corporations are going to measure its financial performance on the basis of the integrated CSR approach – profit (economic), social, and environment. The theory assumes that a corporation is said to be profitable when it does not only profit by itself but rather promotes livelihood to the community where it corporate operates, and protects, preserve, conserve the natural resources. The theory further assumes ethically profitable corporations support the achievement of the Sustainable Development Goals and involve stakeholders in corporate decisions.

Criticisms of the Theory

The theory could not be applied mainstream to all businesses across all industries especially so that small businesses even medium or large ones do not have CSR as part of their business practices

Measuring variables in the theory * Profit * Sustainable Development Goals * Stakeholders * Financial performance * Livelihood * Natural resources * CSR approach
Implications of the Theory to Practicing managers

Some managers find the theory hard to integrate in the business practices and norms for some have difficulty maintaining their ethical standards. At the same, stakeholders which are affected by the managers moral or immoral actions are in the same way affected managers by moral or immoral actions of stakeholders.