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ACCA Applied Knowledge · Business and Technology · Governance in business organisations

Arden Co, a clothing retailer, adopts a policy of reporting on profit, its impact on people and its impact on the planet. Later, a manager says that the company can ignore a supplier's poor labour conditions because the supplier is a separate legal entity and the retailer's reported profit is unaffected. Which statement is the most accurate assessment?

The manager is wrong. A triple bottom line policy covers the company's social impact, including conditions in its supply chain, so poor supplier labour practices fall within the people dimension even though the supplier is legally separate and profit is currently unaffected.

  1. AThe manager's view is inconsistent with the triple bottom line policy, since social impact in the supply chain forms part of the people dimensionCorrect
  2. BThe manager's view is correct, because the triple bottom line covers only the company's own employees and premises
  3. CThe manager's view is correct, because social impact is outside the reporting boundary if profit is unaffected

Explanation

The triple bottom line (profit, people, planet) covers the social impact of operations including supply chains, so labour conditions at a key supplier are relevant to the people dimension. Legal separateness and unchanged profit do not remove this, and there is also reputational risk.

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