Short term profit could harm long term sustainability if for example critical expenditure on training is shelved for the sake of increasing the bottom line. The consequence of this would be a weakened capacity of employees to deliver on the mandate of the organisation.
The implicit assumptions here seem to be that the two are discrete and that one is better than the other. But surely the two are more often than not inter-dependent? Short term actions generally have long term consequences, long term sustainability depends on survivability day to day to day. The two have to co-exist.
And don't forget the "constructive destruction" of markets and its disincentive to truly long-term thinking. How many commercial enterprises or even FTSE100 PLCs survive more than a generation or two? How many SMEs outlive their founders? How many current business opportunities even existed thirty years ago? Outside semi-state sectors like armaments, companies like Cadbury's were always the exception to the rule.
I'm not saying long-term stewardship isn't important, but in some ways defining the question is even harder than finding the answer.
as per the requirement of international accounting standard the going concern principle apply to the question .
the principle said that business should go and sustain for long time and the people. or any setup start business with keeping in mind that the business will grow and sustain for long time
The "going concern" concept expects that an entity will be assumed to be continuing its operations unless it says otherwise. But that's not the same as being sustainable long-term. That market concept of "constructive destruction" I referred to earlier means that entities are constantly forming and re-forming to move in and out of markets, merge or take-over competitors and allies, and hive-off subsidiaries into new enterprises. Although capital itself and interest-groups like investors and employees have long-term interests, each of those elements is likely to change materially over any time period longer than a decade or so.
I'm not arguing against a long-term view; just think it's important to recognise that this isn't a simple choice between long-term OR short-term.
I think this would be about Ethics.
Sustainability should be the long - term goal, but since an organisation does have a responsibility towards their shareholders, they also need to provide some amount of profit. They may make losses, doesn't mean that they should have losses in the short term every year.
Also, in the long-term they need to make their shareholders and customers happy, means the org. has to provide a sustainable product to both.
The managers should not jeopardize the long-term objectives to achieve the short-term profit. Or the short-term profit to sustainability.
Just read the comments made by my other colleagues.
I too think that longterm sustainability should come before short term profits. As accountants and business operators in foreign countries it should be a small price to pay to sacrifice what is very little profit now. In order that in the longterm all stakeholders (that it shareholders, communities, employees and other affected parties) should benefit from a company/organization operating correctly in the business environment.
Especially in poorer countries where the business can be substantially richer than the government and there is a great deal of poverty. Social prgrammes should be developed to assist in countereacting the short term drawbacks of profit motivation.
Shareholders are not the only ones that business owe responsibility to. Remember the "Stakeholder" Cocept.
Both must coexist...
How can you focus on Long-term at the expense of short term profits? Surely if the profits are not sufficient in the short-term, this will potentially result in loss of investors or cashflow issues. Possibly making the firm a good target for acquisition. Under these circumstances business will be not sustainable in the long-term.
Yes the business are responsible to other stakeholders, but surely not at the expense of the business itself. There has to be balancing act where neither short-term profit nor long term investment is maximised, however both are maintained at an acceptable levels
Okay I accept that there maybe a case for co existence.
However I would argue that it would be necessary for the company to scarifice profits in the short term. But eventually be able to recoup in the longer term. By operating more sustainably it would be possible to attract potential investors who are looking to invest in a business that has a good record of sustainability.
Additionally in order to countereact the drawback of losing profits in the short term. Managers could investigate tax brakes and/or regional grants that might be available for business wishing to operate more sustainably. This may help in ofsetting the loss of short term profits.
What do you think!
I'm with Mr. Rutter on this one, seems to me that you wouldn't run into the middle of a battlefield to pick up £10 just as you wouldn't try to go to the end of a rainbow for a mythical pot of gold...
Not that I'm the most experienced in these things, but how often in reality can you actually clearly distinguish the two? Life and decision making doesn't seem to be as coldly rational as that...
Isn't profitability part of sustainability?
I think we shouldn't forget that in today's bussines environment shareholders are put second, ofcourse they should expect a return at end but not at the expense of long term, see this is the problem that i have observed here in Africa where everybody wants to come and do business and as soon as they realise thier huge profits at the end of it all then they pack their bags and move somewhere else. the whole idea of long term is to ensure that all stakeholders involved in business atleast gain something in return (the community in which the entity is conducting it's business is also entitled to something and it's only going to gain something during the on-going operation of the business)
Short term profit could potential ill effect long term sustainability. Management considers the long – term development of the business rather than focusing solely on short – terms results.