Cleaner Production International LLC

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Foundations
Evolution
SBS Model

 

 

The Sustainable Balanced Scorecard:

Managing Organizations for Sustainable Development

Foundations Evolution SBS Model

"Sustainable Development" has become a mantra for governments, activists, and even some companies. But what does it mean in practice, especially the daily operations of an organization? What framework can organizations use to promote sustainable development and sustainable profits?

Such a framework must meet several important criteria:

  • It must address the "Triple Bottom Line" of Sustainability: Economic, social, and environmental performance;
  • It must have performance metrics that can be clearly understood and communicated;
  • It must add value and be integrated into the main value-adding systems of the organization;
  • It must be extensively supported by existing management tools and resources.

In the last several years, a small number of academics, executives and consultants around the world have been exploring the idea of using the Balanced Scorecard model of business performance measurement as a basis for sustainable management. The Balanced Scorecard concept meets the criteria above rather well. The basic idea is that it provides metrics in four key areas that drive organizational performance: The financial perspective, the operational perspective, the customer perspective, and the learning perspective. While not a radical concept, the Balanced Scorecard has become very popular because it provides a clear organization for these perspectives in support of mission and strategy.

The diagram to the right illustrates how the Balanced Scorecard concepts can be embedded within the "Pyramid" of sustainable development concepts. For each of the three main areas of sustainability, there are four categories of indicators that can support improved organizational performance. This provides the "balanced" perspective we need to make sustainability something real, and not just a nice idea.

Think of the Scorecard as providing dials or meters of performance. If we developed systems for measuring sustainability in a business, our "sustainability dashboard" might look something like this:

We might guess that any manager or leader would be very happy to have "good" ratings on four of these dials. In practice, of course, the ratings tend to vary widely within most organizations. But the benefit to leaders is clear: They can see quickly how well they are performing on key dimensions that are vital to sustainable development and sustainable profits.

Why is the concept of a Sustainable Balanced Scorecard important now?

For two of the three components of the Triple Bottom Line, there are management systems that have been in use for a while. Financial management, obviously, has been around for centuries (although recently it has become obvious that much remains to be improved). And environmental management became somewhat formalized in the early 1990s with the introduction of official standards for Environmental Management Systems, such as ISO 14001 and the European Eco-Management and Audit Scheme (see this page for more information on management systems for environment and cleaner production).

At the same time, Corporate Social Responsibility (CSR) has been gaining popularity among many advocates and organizations. But, unlike environmental management, CSR has never had a widely-recognized organizing framework that clearly supports adding business value. Consequently it remains very difficult to educate about CSR and convince executives that CSR has potential business value to their companies.

However, in the last five years, a few organizations and academics have found that a popular business management model, the Balanced Scorecard, is a very powerful framework for managing both environmental and social issues, and integrating them into the value-creating systems of the organization.

The Balanced Scorecard is one of the most important management concepts of this century, according to the Harvard Business Review. Thousands of companies and organizations, including many government agencies, are using it as the basis for their strategic management systems. A few companies, such as Norvo Nordisk, Shell, and others are already using the Balanced Scorecard to integrate sustainability into their operations. And several leading academic researchers and thinkers have advanced the ideas of the Sustainable Balanced Scorecard in publications. Perhaps the most telling observation that the Balanced Scorecard is a powerful corporate tool for sustainability management is that the Big Three accounting and management firms, KPMG, PricewaterhouseCoopers, and Deloitte and Touche, are all using some version of it as the basis for their sustainability consulting practices.

The objective of this website is to become a central clearinghouse for information about the Sustainable Balanced Scorecard and how it can be used to support sustainable management in organizations. The site is organized into the following sections:

  • Foundations: This section provides a very brief introduction to the Balanced Scorecard and links to the leading Internet and other resources for it.

  • Evolution: This section describes the leading thinkers about the SBC and provides links to their published papers.

  • Model Sustainable Balanced Scorecard:  This section describes original research done to identify market-based indicators for sustainable organizations and put them in a Balanced Scorecard and a Baldrige Performance Excellence framework.

We hope you will find this site useful and encouraging as a resource for helping sustainable development become a practical tool, and not just a nice idea.  Start exploring below:

Foundations Evolution SBS Model

 

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