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 companys strategic plan

Sustainability Balanced Scorecard

Introduction to Balanced Scorecard
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Presentation based on
The Sustainability Balanced Scorecard Linking Sustainability Management to Business Strategy Figge, Hahn, Schaltegger and Wagner, Center for Sustainability Management University of Lneburg, Germany
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Overview
Overall goal is to implement sustainability issues in the companys 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.
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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.
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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
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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
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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
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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

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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
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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
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Addition of non market perspective

Environmental and social aspects are not fully integrated in the market exchange processes
Example: externalitiesnon 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
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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
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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
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The process of formulating an SBSC

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