Environ Monit Assess (2010) 170:599–607
DOI 10.1007/s10661-009-1260-7
Environmental performance evaluation and strategy
management using balanced scorecard
Yu-Lung Hsu · Chun-Chu Liu
Received: 2 October 2009 / Accepted: 3 December 2009 / Published online: 18 December 2009
© Springer Science + Business Media B.V. 2009
Abstract Recently, environmental protection and
regulations such as WEEE, ELV, and RoHS
are rapidly emerging as an important issue for
business to consider. The trend of swinging from
end-of-pipe control to product design, green in-
novation, and even the establishment of image or
brand has affected corporations in almost every
corner in the world, and enlarged to the all
modern global production network. Corporations
must take proactive environmental strategies to
response the challenges. This study adopts bal-
anced scorecard structure and aim at automobile
industries to understand the relationships of inter-
nal and external, financial and non-financial, and
outcome and driving factors. Further relying on
these relationships to draw the “map of environ-
ment strategy” to probe and understand the fea-
sibility of environmental performance evaluation
and environmental strategy control.
Keywords Balanced scorecard · Environmental
performance evaluation · Environmental strategy
management
Y.-L. Hsu
Taiwan Petroleum Chamber of Commerce,
P.O. Box 6-15 Tainan, 717, Taiwan
C.-C. Liu (B)
Chang Jung Christian University, 396 Chang Jung Rd.,
Sec.1, Kway Jen, Tainan, 71101, Taiwan
e-mail: liuchunchu@gmail.com, lcc@mail.cjcu.edu.tw
Introduction
Since Kaplan and Norton (1996) proposed “bal-
anced scorecard” (BSC) structure, many corpo-
rations have tried to implement it for strategy
management. The main idea of BSC is to provide
a structure of performance measures in different
perspectives for focused and effective strategy
management. The BSC measures cover many as-
pects such as internal and external, financial and
non-financial, and driving and outcome factors
aspects, showing long- and short-term measures
simultaneously. The structure provides managers
with a complete and effective control tool for
corporate strategy realization. As BSC is getting
popular and is welcomed worldwide, Kaplan and
Norton published a book “Strategy Maps” re-
cently (2004), further presenting executive guide
for strategy management. Strategy maps extend
the BSC structure to draw a roadmap for strat-
egy control and realization. In their new book,
many case studies were shown to demonstrate
the application of strategy map. One example
of strategy map is about corporate sustainability
strategy, which is another strong support for the
main theme of this article.
On the other hand, many companies have
found that a re-active policy for dealing with in-
creasingly challenging environmental issues is not
enough. Especially, after many influential envi-
ronmental regulations such as WEEE, ELV, and
600
ROHS being announced, corporate environmen-
tal management has emerged to CEOs’ priority
list. The trend of from end-of-pipe control to
product design and green innovation has affected
companies in almost every corner in the world be-
cause of the modern global production network.
High-level managers become aware that a long
term, or say strategic, viewpoint is necessary for
dealing with environmental issues. Changing from
reactive to proactive strategic management, a new
and rigor system of measures should be intro-
duced on top of the conventional environmental
management system. Performance measures cat-
egorized as operational and managerial perfor-
mance measures proposed by ISO series seem not
enough. Various and well structured perspectives
and performance measures should be considered
for strategy management and control.
In an effort to keep up with the trend of
times, business must actively manage and moni-
tor its environmental performance to ensure that
the products or services provided will meet the
environmental standards. The business will be
able to gain a long-term competitive advantage
and, as a result, the business can stand out from
the numerous competitors (Porter 1995). Some
scholars have already conducted research on the
Fig. 1 Generic structure
of Balanced Scorecard.
Source: Kaplan and
Norton (1996)
Environ Monit Assess (2010) 170:599–607
correlation between environmental performances
and business performances. For example, research
results from Klassen et al. (1996), King and Lenox
(2001), and Koner and Cohen (2001) indicate that
better environmental performance can lead to
better financial performance, and businesses with
less pollution have a higher financial performance.
In addition, scholars such as Johnson (1998), Figge
et al. (2002), and Dias-Sardinha et al. (2002) also
believe that the BSC can be used as a tool for en-
terprise environmental strategy management. Not
only can it be used in the selection and develop-
ment of environmental performance assessment
criteria, it can also be used to integrate the cor-
porate environment objectives into the execution
of the business strategy.
BSC is herein strongly recommended to help
establish and ensure proactive environmental
strategy. Figure 1 show the generic structure of
BSC where four perspectives such as (1) learning
and growth, (2) internal process, (3) customer
satisfaction, and (4) financial performances are
included. Conventional environmental manage-
ment does not cover all the perspectives. For ex-
ample, learning and growth perspective has not
been emphasized for long-term performance and
effects.
Environ Monit Assess (2010) 170:599–607 601

Table 1 Measures in Perspective Measures Mean Standard

financial perspective
deviation
Financial f1. cost of pollution treatment 2.984 1.451
perspective f2. cost of cleaner production 4.039 1.063
f3. cost of research and development 3.415 1.835
f4. investment for environmental improvement 3.763 1.138
f5. revenue of green products 3.233 1.476
f6. profit from recycle and resource consumption 3.838 1.444
reduction
f7. return rate of environmental investment 3.237 1.488

The advantages of adopting BSC in en- cate structure and cause–effect relationship of the
vironmental strategy management include the performance measures using BSC.
following:

1. Provide complete performance measures and

perspectives,
2. Offer tighter and effective management sys-
tem and tool,
3. Take care of internal/external, financial/non-
financial, driving/outcome KPI in a “bal-
anced” way, and
4. Implement BSC and generate synergy with
other corporate strategy management.
The following section presents a demonstration
of measure selection of BSC for automobile in-
dustry in Taiwan. A survey has been conducted
on the performance levels (average scores) of
the abovementioned measures in local automobile
companies. In “A survey of performance measure
for automobile industry in Taiwan,” statistical
analysis results are presented to generally describe
the performance measures and the application
potential of BSC. In “Verification of performance
measures’ relations,” canonical correlation analy-
sis and liner structural relationship (LISREL)
analysis are conducted to demonstrate the deli-
Key performance measures in four perspectives
Tables 1, 2, 3, and 4 summarize measures in four
perspectives. The selection of these measures is
based on ISO-14000, published literature and per-
formance evaluation systems adopted in world
leading companies. Approximately ten perfor-
mance measures in each perspective are presented
in the tables.
Companies can pick their own set of perfor-
mance measures based on the company’s priority.
Goal, target, and initiative for each key measure
could be determined involving related personnel.
The close relations between measures should be
noted to enhance the power of BSC. For example,
if a company puts environmental labeling or other
information disclosure as high priority measure,
the education of employees on life cycle assess-
ment may become necessary. Hence, the two mea-
sures may both need to be selected in the BSC
structure.

Table 2 Measures in Perspective Measures Mean Standard

customer perspective
deviation
Customer c1. customer satisfaction 4.004 1.537
perspective c2. quality improvement due to greener products 4.880 1.145
c3. quick response to environmental issues 4.772 1.104
c4. report env. progress to shareholders 2.417 2.233
c5. good relation with community 3.628 1.821
c6. ISO 14001 certification 4.861 1.218
c7. environmental protection award 6.304 0.828
c8. green image and information disclosure 3.577 1.543
602 Environ Monit Assess (2010) 170:599–607

Table 3 Measures of Perspective Measures Mean Standard

internal process
deviation
perspective
Internal i1. innovation on products and technology 4.072 1.589
perspective i2. green design 4.628 1.072
i3. continuous monitoring 5.404 0.972
i4. clear goal for greener products 4.005 1.865
i5. green purchasing 4.592 1.060
i6. cleaner production 4.995 1.061
i7. process efficiency 3.814 1.328
i8. standard for chemicals and other raw materials 4.410 1.498
i9. cleaner working environment 5.075 1.484
i10. customer satisfaction surveyed regularly 4.007 1.697
i11. supplier side management 5.278 0.949
i12. pollution control and treatment 4.340 1.822

Please note that the measures were picked in a
general manner in order to show the advantages
of using BSC later. There are strong relations
among performance measures covering multiple
dimensional but balanced aspects for a delicate
strategy control (Kaplan and Norton 1996). For
example, measures of learning and growth per-
spective could strongly affect internal process per-
spective and therefore affect financial perspective.
A survey of performance measure for automobile
industry in Taiwan
Sample companies and their environmental
efforts
This study conducted a survey on the key mea-
sures aforementioned in Taiwan’s automobile
industry. The questionnaires were sent to 90 com-
panies, while the number of returns is 47. The
return ratio is 52.22%. Table 5 depicts the size
of sample companies with annual revenue, and
Fig. 2 shows the environmental efforts they have
previously put in the past.
The strategies of each perspective
Tables 6, 7, 8, and 9 present results of “factor
analysis” based on the performance scores from
the returned questionnaires. The statistical results
indicate that measures in each perspective can
be grouped (statistical term, “factor”). Names of
groups of performance measures are on the bot-
tom of each table. The performance measures in
each group are closely related and can be used
for strategy control. In the followings, relations
among groups of measures are analyzed and pre-
sented. Often, the relations are interpreted as
cause–effect relations so that balanced control and
tracing actions can be conducted. With statistical
methods, some relationships among the measures
proposed by Kaplan and Norton (1996) could be
identified and verified. These verified relation-
ships are particularly useful and informative for

Table 4 Measures of Perspective Measures Mean Standard

learning and growth
deviation
perspective
Learning and growth g1. environmental education and training 5.723 0.629
perspective g2. skill, ability and knowledge 4.200 1.084
g3. R&D ability and experience 3.592 1.934
g4. employee satisfaction 4.335 1.374
g5. employee’s initiative 4.617 1.027
g6. employee commitment and cooperation 4.612 1.207
g7. understanding to related policy and laws 4.457 1.227
g8. acquisition of environmental information 5.005 1.259
Environ Monit Assess (2010) 170:599–607 603

Table 5 Revenues of the respondent companies Table 6 Factor analysis of measures in financial
perspective
Revenue (NT dollar) Percentage Cumulative
percentage Measure Factor loading
Under 10 hundred million 66.67 66.67 F1 F2
10–20 hundred million 11.11 77.78 f1. 0.682 –
20–30 hundred million 2.22 80.00 f2. 0.911 –
30–40 hundred million 6.67 86.67 f3. – –
More than 40 hundred million 13.33 100.00 f4. 0.809 –
f5. – 0.876
f6. – 0.876
f7. – 0.793
companies interested in using BSC for environ- Factor name Cost of environmental Revenue and
mental strategy management. (strategies) improvement profit

Verification of performance measures’ relations
Canonical correlation analysis
Kaplan and Norton believe internal staff of a
company must understand the financial conse-
quences caused by their decisions and actions. On
the other hand, the management must understand
the driving force of long-term financial success.
As a result, a business must take into account
the performance measures of both the financial
aspect and non-financial aspect. This paper adopts
Kaplan and Norton’s contention and uses canon-
ical correlation analysis to explore the following:
(1) the correlation between the financial aspect
and non-financial aspect and (2) the correlation
between the external performance, and internal
performance. The financial aspect refers to the
financial perspective and the non-financial aspect
includes the customer perspective, the internal
perspective, and the learning and growth perspec-
tive. The external performance consists of the
corporation’s foreign window including the cus-
tomer perspective, whereas the internal perfor-
mance refers to internal perspective and learning
and growth perspective.
1. The correlation between the financial aspect
and non-financial aspect: As illustrated in
Fig. 3, it can be seen that there is a highly pos-
itive correlation between the financial aspect
and non-financial aspect with a correlation

Fig. 2 Environmental
no environmental effort
efforts already put in the
respondent companies environmental performance

20.00% 19.15% 19.15% evaluation

corporate environmental report
18.00%
life-cycle analysis
16.00% 13.40%
14.00% 12.77% waste reduction
12.00% cleaner production
10.00% 8.51% 8.51%
pollution prevention
8.00% 6.38% 6.38%
6.00% 4.26% safety and health
4.00% 2.13% environmental cost and
2.00% accounting
R&D in green product and
0.00%
technology
Environmental effort
604 Environ Monit Assess (2010) 170:599–607

Table 7 Factor analysis of measures in customer

perspective relation coefficient of 0.8639. This indicates
canonical correlation. Quick response to en-
Measures Factor loading
vironmental issues (C3) is the only external
C1 C2 C3
performance variable with a canonical loading
c1. 0.826 – –
c2. – 0.847 –
less than 0.3, which is considered negligible.
c3. – 0.794 – Customer satisfaction (C1) and quality im-
c4. 0.789 – – provement due to greener products (C2) are
c5. – 0.608 – the two external performance variables with
c6. 0.719 – – the highest canonical loadings with values of
c7. – – 0.913 0.8720 and 0.8326, respectively. Conversely,
c8. – 0.767 – innovation on products and technology (I1)
Factor name Customer Product ISO 14001
and R&D ability and experience (G3) are
(strategies) satisfaction requirement certification
and external and Green the two internal performance variables with
relation image the highest canonical loadings with values of
0.8504 and 0.8326, respectively.

coefficient of 0.9105. This indicates canonical LISREL analysis

correlation. Quick response to environmental
issues (C3) in non-financial aspect is the only
variable with a canonical loading less than 0.3,
which is considered negligible. Green design
(I2) has a canonical loading of 0.8657, which
is the highest among the other non-financial
aspect variables.
2. The correlation between the external perfor-
mance and internal performance: As illus-
trated in Fig. 4, it can be seen that there
is a highly positive correlation between the
external and internal performance with a cor-
Figure 5 presents results summary of a statis-
tical method called “LISREL.” The essence of
this method is to verify the multiple relationships
among measures simultaneously. The advantage
of it comparing to conventional regression analy-
sis is that analyst could find a series of relation-
ships among factors more than two. We use it to
verify and explain the relations among measures
in BSC theory.
In this figure, the strong (very significant)
relationships were marked by dark arrows, while

Table 8 Factor analysis Measures Factor loading

of measures in internal
I1 I2 I3 I4
perspective
i1. – 0.628 –
i2. – 0.816 –
i3. 0.725 – – –
i4. – 0.672 – –
i5. 0.755 – – –
i6. 0.778 – – –
i7. – – – –
i8. 0.793 – – –
i9. – – 0.938 –
i10. – – – 0.873
i11. – 0.742 – –
i12. 0.761 – – –
Factor name Environmental Product Cleaner Supplier side
(strategies) performance of conform to working management
process and environmental environment
operation standard
Environ Monit Assess (2010) 170:599–607 605

Table 9 Factor analysis Measure Factor loading

of measures in learning
G1 G2 G3
and growth perspective
g1. – – 0.940
g2. – 0.903 –
g3. – – 0.901
g4. – 0.601 –
g5. 0.612 – –
g6. 0.632 – –
g7. 0.787 – –
g8. 0.833 – –
Factor name Employee’s initiative Employee’s ability R&D education
(strategies) for environmental and satisfaction and experience
information

Fig. 3 The correlation

between the financial
aspect and non-financial
aspect

RI=69.65% RI=30.31%

Fig. 4 The correlation

I1 (0.8504)
between the external
performance and internal
performance I2 (0.7693)

C1 (0.8720) I3 (0.6150)

0.8639
C1 (0.8324) I4 (0.5651)

C3 (0.1465) RIRI=35.71%
35.71 RIRI=35.71%
35.71 G3 (0.8326)

G2 (0.4661)

G3 (0.6527)
606 Environ Monit Assess (2010) 170:599–607

Fig. 5 Route Financial perspective

relationships verified
based on local automobile Customer perspective
Cost of
companies environmental Revenue and
Customer Product
improvement F1 profit F2
satisfaction and requirement and ISO 14001
external relation Green image C2 certification C3
C1

0.5559
0.4796
0.3095 0.2412
0.3997
0.3127

0.6880
Environmental
0.5707 performance of Product conform to
process and environmental
operation I1 standard I2
0.330 0.2580
0.2421
Supplier side
Cleaner working
management I4
environment I3
0.6140

0.3480 0.3261 Customer perspective

Employee's
initiative for Employee's R&D
environmental ability and education and
information G1 satisfaction G2 experience G3

0.4544 Learning and growth perspective

other significant relationships were marked in Conclusion

light arrows. In this survey, statistical results ver-
ify some interlocked relationship. For learning
and growth perspective, the dark arrows pointing
from employee’s initiative for environmental in-
formation (G1) to environmental performance of
process and operation (I1), customer satisfaction
and external relation (C1), and cost of environ-
mental improvement (F1).
In light of these relations, managers can take
a hold of the cause–effect relations and adopt
necessary actions in making better strategy
management. With the verified relationships of
performance measures, companies can get system-
atic overview in pursuing proactive environmental
strategy.
When facing upcoming environmental challenges,
many companies may consider more proactive
environmental strategy in the near future. We
strongly recommend BSC structure to facilitate
a proactive environmental strategy management.
For demonstration, performance measures in four
major perspectives are selected for local automo-
bile industry. A survey of the measure scores from
local leading companies was conducted to verify
the relationships among the measures and per-
spectives according to BSC theory. Some findings
for using BSC in automobile industry based on
the performance measures are briefly discussed.
Hopefully, this illustration and statistical analysis
Environ Monit Assess (2010) 170:599–607
could provide a basic understanding and initiative
for the use of BSC.
The results of this study suggest that (1) the
four perspectives and environmental indicators
of BSC structure can be of assistance, and sug-
gestions for corporation choose the key indica-
tor and perspectives, (2) the four perspectives
and environmental indicators of BSC are corre-
lates and causal mutually to form the drawing
of environmental strategy, and (3) BSC can be a
management tool for environmental performance
evaluation and environmental strategy control.
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