Sustainability and the Balanced Scorecard: Integrating Green Measures Into Business Reporting
Sustainability and the Balanced Scorecard: Integrating Green Measures into Business Reporting
By: Chris Apel
Managerial Accounting
12-2-12
Practices that are good for the environment and society may appear to have a negative impact on corporate profitability, but use of the balance scorecard can result in a clearer picture of the relationship among sustainable practices, corporate strategies, and profitability. This article explores three ways that sustainable practices can be incorporated into BSC and discusses issues that should be considered when selecting sustainability-related measures, targets, and goals. It also examines ways to enhance both internal and external reporting of sustainability-related performance. Adopting green operating practices is certainly good for the environment, yet the implications of such practices for a business’s profitability may be viewed as both positive and negative. On one hand, by contributing to product differentiation in the market- place and enhancing organizational image to investors and customers (both current and potential), green practices may increase a company’s profitability. On the other hand, green practices may actually reduce profitability because of extra costs that result from implementation and continuation of sustainable practices. For example, installing solar panels on a building may lower monthly electricity bills, but, concomitantly, the reduced electricity bills may be more than offset by the high purchase and installation costs associated with the panels. The sustainability concept now runs rampant in business literature, but, unfortunately, there is no agreed- upon definition of sustainability or its underlying tenets. “Sustainable” or “green” practices will be found throughout the operations of a business. These practices can be included in the design features of an organization’s buildings, vendor selection in the supply chain, production of goods and provision of
By: Chris Apel
Managerial Accounting
12-2-12
Practices that are good for the environment and society may appear to have a negative impact on corporate profitability, but use of the balance scorecard can result in a clearer picture of the relationship among sustainable practices, corporate strategies, and profitability. This article explores three ways that sustainable practices can be incorporated into BSC and discusses issues that should be considered when selecting sustainability-related measures, targets, and goals. It also examines ways to enhance both internal and external reporting of sustainability-related performance. Adopting green operating practices is certainly good for the environment, yet the implications of such practices for a business’s profitability may be viewed as both positive and negative. On one hand, by contributing to product differentiation in the market- place and enhancing organizational image to investors and customers (both current and potential), green practices may increase a company’s profitability. On the other hand, green practices may actually reduce profitability because of extra costs that result from implementation and continuation of sustainable practices. For example, installing solar panels on a building may lower monthly electricity bills, but, concomitantly, the reduced electricity bills may be more than offset by the high purchase and installation costs associated with the panels. The sustainability concept now runs rampant in business literature, but, unfortunately, there is no agreed- upon definition of sustainability or its underlying tenets. “Sustainable” or “green” practices will be found throughout the operations of a business. These practices can be included in the design features of an organization’s buildings, vendor selection in the supply chain, production of goods and provision of