Sustainability Balanced Scorecard

Professor Doug Cerf

Donald Bren Graduate School of Environmental
Science and Management
Environmental Accounting &Financial
Management (ESM 284)
Spring 2007
 Internal Management tool to
operationalize sustainability goals
from the company’s strategic plan
 Sustainability Balanced Scorecard

• Introduction to Balanced Scorecard

– See Introduction to Balanced Scorecard.ppt
• Presentation based on
– The Sustainability Balanced Scorecard –
Linking Sustainability Management to Business
Strategy” Figge, Hahn, Schaltegger and
Wagner, Center for Sustainability Management
University of Lüneburg, Germany
Printed on recycled paper-actually
better, not printed at all
 Overview
• Overall goal is to implement sustainability issues
in the company’s strategic plan through the
balanced scorecard system
• Balanced Scorecard is a promising starting-point
to incorporate environmental and social aspects
into the main management system of a firm.
• Sustainability management with Balanced
Scorecard helps to overcome the shortcomings of
conventional approaches to environmental and
social management systems by integrating the
three pillars of sustainability into a single and
overarching strategic management tool.
Printed on recycled paper-actually
better, not printed at all
 Link environmental and social management
systems to economic management systems

• Many companies have implemented specific

environmental or social management systems during the
last decade.
• These systems have, however, rarely been integrated with
the general management system of a firm.
• As a consequence environmental and social management is
often not linked to the economic success of the firm
• Consequently, the economic contribution of environment
and social management therefore remains unclear.
• This lack of integration is a major obstacle.

Printed on recycled paper-actually

better, not printed at all
 The correlation between environmental,
social success and economic success

• the literature is mainly based on empirical studies

that refer to the correlation but not to the causality
between environmental and social measures and
the economic success of firms
• To date there is a small amount of literature on the
relation between environmental and social
measures and the achievement of long-term
economic goals

Printed on recycled paper-actually

better, not printed at all
Suitability of balanced scorecard as a tool for
sustainability management

• Management should first identify and realize

opportunities for simultaneous improvements in
all three dimensions of sustainability (social,
ecological and economic goals) in order to achieve
strong corporate contributions to sustainability
• SBSC offers the possibility to integrate the
management of environmental and social aspects
into mainstream business activities

Printed on recycled paper-actually

better, not printed at all
 Integrating Sustainability into BSC

• Integrating the three pillars of sustainability into general

business management (ie:BSC) offers three major
advantages
– Sustainability management that is economically sound
will be practiced in successful and unsuccessful
economic periods
– Sustainability management that also contributes to
economic objectives helps to disseminate the idea of
sustainable development in business, as it serves as an
appropriate role model for other businesses.
– a business improves performance with regard to all the
three dimensions of sustainability simultaneously

Printed on recycled paper-actually

better, not printed at all
 Methods of integration

• Three possibilities to integrate environmental and

social aspects in the BSC
– Environmental and social aspects integrated in the
existing four standard perspectives.
– An additional perspective added to take environmental
and social aspects into account
– A specific environmental and/or social scorecard is
formulated
• Preferred in the listed order
• A combination of these approaches is appropriate
Printed on recycled paper-actually
better, not printed at all
 Integration into the four balanced scorecard
perspectives

• Similar to adding any other strategic aspect that is

relevant to a particular perspective
• Through a top down approach
– Environmental and social aspects are integrated
through respective strategic core elements or
performance drivers
– lagging and leading indicators as well as targets and
measures are formulated
• particularly appropriate for environmental and
social aspects that are already integrated in the
market system. Printed on recycled paper-actually
better, not printed at all
 Example

• a firm that aims at an environmental

customer segment
– the core measure ‘market share’ in the customer
perspective would have an environmentally
oriented dimension
– the leading indicator ‘product features’ would
have an environmental dimension
• Environmentally friendly packaging

Printed on recycled paper-actually

better, not printed at all
 Addition of non market perspective

• Environmental and social aspects are not fully integrated

in the market exchange processes
– Example: externalities—non market portion of C02 pollution
• Consequently a non market perspective needs to be added
to incorporate these strategic aspects
• In order to justify introduction of an additional non-market
perspective, environmental and social aspects from outside
the market system must explicitly represent strategic core
aspects of the firm
• Should only be used if the aspects can not be represented
within the standard four perspectives
Printed on recycled paper-actually
better, not printed at all
 A specific environmental and/or
social scorecard is formulated
• Predominantly used to coordinate, organize and
further differentiate the environmental and social
aspects
• Should not be developed parallel to the
conventional scorecard
• In order to integrate sustainability management
into mainstream business management
– Must be added in conjunction with one of the other two
integration alternatives
– This is not an independent alternative for integration, it
is an extensionPrinted on recycled paper-actually
better, not printed at all
 The process of formulating an SBSC has to
meet the following……

• must lead to integration of

environmental and social management
into business management
• the SBSC is business unit specific
• environmental and social aspects of a
business unit must be integrated
according to their strategic relevance
Printed on recycled paper-actually
better, not printed at all
The process of formulating an
SBSC

Printed on recycled paper-actually

better, not printed at all
Printed on recycled paper-actually
better, not printed at all