The Balanced Scorecard (BSC) was developed in its original form by Kaplan and Norton (1992, 1996) to alleviate problems arising from the wide use of financial results control systems and accounting measures, such as transaction-based orientation, focus on the past, lack of congruence with changes in firm value and short-termism, which can cause myopic decision making. The BSC has a multi-dimensional approach to performance measurement. While it retains the emphasis on traditional financial performance measures as the outcome measures for company success, it integrates these with metrics from three additional perspectives – customer, internal process, and learning and growth – based on cause and effect relationships and regarded as the drivers for creating long-term shareholder value. For each perspective, the BSC framework involves defining the objectives, selecting appropriate measures, setting targets, and undertaking congruent actions to meet the targets.

A body of research has emphasized that the BSC may be an appropriate tool to control and account for sustainability issues for different reasons (Epstein & Roy, 2001; Hansen & Schaltegger, 2016; Möller & Schaltegger, 2005): many environmental and social issues are non-financial; the environmental and social effects of organizational actions primarily manifest themselves over the long term; the cause and effect relationships that should be hypothesized to develop the BSC may help managers to clarify the connections between long-term resources and capabilities, including sustainability issues and short-term financial outcomes; the multi-dimensional approach would allow managers to address environmental, social and governance (ESG) goals whereas other approaches only focus on, for example, the environment; and, finally, sustainability involves a performance measurement system including both leading and lagging indicators.

Thus, the concept of the Sustainability Balanced Scorecard (SBSC) was derived from the conventional BSC combining the four perspectives of the BSC with the sustainability dimensions to embed environmental, social, or ethical concerns explicitly and including sustainability-related objectives and performance measures. The SBSC may be a viable tool to satisfy a range of sustainability management needs, namely, to assist companies in the process of implementation of a sustainable strategy, foster sustainability management standards, decision making, and reporting, support regulatory data requirements, meet stakeholders’ information demands and make employees more sensitive to sustainability issues (Epstein &Wisner, 2001; Schaltegger & Wagner, 2006).

Figge et al. (2002) discussed the three main approaches to embedding sustainability within the BSC framework. The first is the integration of environmental and social aspects into the four BSC perspectives. The four perspectives’ arrangement is not modified. The environmental and social aspects add to the other relevant strategic aspects through respective strategic core elements or performance drivers that require setting objectives, lagging and leading indicators, and targets. In this way, cause-and-effect links include the environmental and social aspects. The second possibility involves the introduction of an additional non-market perspective into the BSC. While the conventional BSC perspectives reflect the market logic, environmental and social aspects often represent externalities not fully integrated into the market transactions through prices. However, they can influence the performance in all four BSC perspectives. Thus, strategic core aspects and leading indicators of the non-market perspective must be identified, translated into respective measures, and linked to the other perspectives. These two approaches are not mutually exclusive, as some environmental and social indicators can be included under the four conventional perspectives, while others can be grouped under an additional perspective. The third approach entails deriving an environmental and social scorecard. This scorecard should further differentiate the environmental and social aspects once the two approaches presented above have identified their strategic relevance and position in the cause-and-effect chains (Figge et al.,2002, p. 275). Thus, it must be built and used in conjunction with one of the other two alternatives.


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