In an era when environmental concerns are at the forefront of global discussions, businesses are being called upon to integrate sustainability into their operations. Developed as an extension of the traditional Balanced Scorecard (BSC), the Sustainability Balanced Scorecard (SBSC) aims to provide businesses with a tool to align their environmental, social, and economic objectives, driving positive impact while ensuring long-term success.
The genesis of the SBSC
The concept of the BSC was first introduced by Robert Kaplan and David Norton in the early 1990s as a framework to measure business performance beyond financial metrics. The BSC aimed to provide a more holistic view of an organization’s health by incorporating four hierarchical perspectives: Financial, Customer, Internal Processes, and Learning & Growth.
A decade later, as sustainability became a critical global concern, scholars started looking into the possibility of integrating sustainability considerations into the BSC. They agreed on the potential of extending the focus of the well-established BSC to include measuring business performance through the lens of environmental stewardship, social responsibility, and ethics. Thus, the concept of the SBSC began to crystallize .
How to build an SBSC
When it comes to the best architecture for the SBSC, there have been conflicting discussions ever since the concept was introduced. Two major approaches took prominence: one is to add a fifth perspective to the traditional BSC that was dedicated to sustainability; the other is to integrate sustainability objectives and KPIs into the already existing perspectives.
A 2009 study showed that in the fifth perspective approach, sustainability KPIs tend to be overlooked by management in organizations with no established sustainability culture. That is why the four-perspective approach can be a safer choice, especially for organizations that are only starting to integrate sustainability in their measures.
In a 2021 article, Kaplan supported the four-perspective approach, introducing a suggested restructuring of three out of the four perspectives to make them more relevant to environmental, social, and governance (ESG) elements:
- From “Financial” to “Outcomes” to include environmental and societal objectives besides the financial aspect
- From “Customer” to “Stakeholder” to reflect the value of different members of the whole ecosystem
- From “Learning & Growth” to “Enablers” to encompass the various capabilities across all stakeholders in the ecosystem
Reaping these sustainability integration benefits can be a bit of a long shot, and further studies are needed to prove such benefits even exist. However, the only way to reap said benefits is to plant the seeds of sustainability integration. To help accomplish this, the SBSC can be a potent tool that allows organizations to measure, manage, and optimize their sustainability performance. As global challenges such as climate change, resource depletion, and social inequality loom larger, businesses must go beyond profits and consider their broader impact. The SBSC empowers organizations to embrace sustainability as a strategic imperative, paving the way for a more responsible, resilient, and prosperous future.
For more on utilizing the Balanced Scorecard, The KPI Institute has developed the Certified Balanced Scorecard Management System Professional to help organizations maximize the tools’ potential. And if you are interested in expanding your toolkit further, consider subscribing to smartkpis.com and gain access to the world’s largest database of documented KPIs, which includes a thorough collection of sustainability metrics.