Evaluation of the Relationship between the Implementation of Sustainability Balanced Scorecard (SBSC) and the Stock Performance

A Case Study

Thèse de Master , 2019 , 94 Pages , Note: 2,0

Gestion d'entreprise - Controlle de gestion

In this paper, the goals will be emphasized on how the Balanced Score-card (BSC) can be improved towards a Sustainability Balanced Scorecard (SBSC) and used. Furthermore the correlation between the Implementation of Sustainability Balanced Scorecard (SBSC) and the Stock Performance in Study Case of DAX 30 Companies Performance between 2016 and 2018 would be theoretical evaluated and statistically tested.

Nowadays, the term sustainability has become popular among companies to implicate social, economic and environmental pillars to their strategy and management of the company. Today, companies should not only focus on their profits, but they are also forced to concern about other issues such as social, economic and environmental. Unfortunately, many companies still do not know how to implement or measure its outcomes. Therefore, this academic paper might be helpful to assist especially managers to implement the concept of Sustainability Balanced Scorecard (SBSC) as strategic controlling for their long-term success.

However, these issues would be a challenge for all managers who in general have role for planning, organizing, leading, and controlling so that they need a tool such as Sustainability Balanced Scorecard which might be supporting them. Moreover, having concern to other issues above and inserting them into the concept of Balanced Scorecard, which is in general consisting of four perspectives, such as finance, customer, internal process, and learning & growth, it might become a challenge because they probably need to spend extra more money for doing that and it might affect to their profit.

Table of contents

List of Figures

List of Tables

List of Symbols/Abbreviations

1. Introduction
1.1 Background
1.2 Research Question and Development of Hypotheses
1.3 Problem Description
1.4 Objektive
1.5 Structure

2. Literature Review
2.1 The Concept of Balanced Scorecard (BSC) as a Strategic Controlling Instrument
2.2 The Definition of SBSC
2.3 The Process of Formulating SBSC
2.4 A Strategy Map for SBSC represents How the Organization Creates Value
2.5 The Mechanics of SBSC according to Sustainability Strategy Types
2.5.1 SBSC for the Clean Type (Sustainable Market Buffering Strategy)
2.5.2 SBSC for the Efficient Type (Sustainable Cost Strategy)
2.5.3 SBSC for the Innovative Type (Sustainable Differentiation Strategy)
2.5.4 SBSC for the Progressive Type (Sustainable Market Development)
2.6 The Five-Perspectives of SBSC
2.6.1 Financial
2.6.2 Customer
2.6.3 Internal Business Process
2.6.4 Learning and Growth
2.6.5 Non-Market Perspective (Society & Natural Environment)
2.7 The Concept of Indicators
2.7.1 Financial Indicators
2.7.2 Non-Financial Indicators

3. An Example of the Implementation of SBSC shown in Daimler’s Annual- and Sustainability- Report

4. Methodology

5. A Statistical Analysis to examine the link between the Implementation of SBSC and the Stock Performance in Study Case of DAX 30 Companies Performance

6. Summary and Conclusion

List of References

Appendices

List of Figures

Figure 1 - Matrices used in the BSC

Figure 2 - Process of formulating SBSC

Figure 4 - Example of a cause-effect-relationship Diagram of a SBSC of an Organisation Type "clean"

Figure 5 - Example of cause-effect-relationship Diagram of a SBSC of an Organization type "efficient."

Figure 6 - Example of a cause-effect-relationship Diagram of a SBSC of a Company type "Innovative"

Figure 7 - Example of a cause-effect-relationship Diagram of a SBSC of an Organisation type "progressive"

Figure 8 - Basic Layout of a SBSC with fifth, non-market Perspective

Figure 9 - Three Years Summary of Daimler AG‘s Annual Report

Figure 10 - Five Years Summary of Daimler AG‘s Sustainability Report

Figure 11 - Histogram (the percentage change between share price from 2016 and 2018)

List of Tables

Table 1 - A Hypothetical Example of a Sustainable Balanced Scorecard

Table 2 - List of DAX-companies

Table 3 - How to assess Sustainability Score of each company

Table 4 - Descriptive Statistics

Table 5 - Model Summary of linear Regression Analysis

Table 6 – Coefficients Table

List of Symbols/Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

1.1 Background

Figge, et al. (2002, p. 269) argued that, during the last decade, environmental and social issues, are reflected in market transactions and have become an important issue so that many companies implemented specific environmental and social man- agement systems. However, these systems have rarely been integrated with the general management system of a firm so that it affects environmental and social management is often not related to the economic success of the firm and the eco- nomic contribution of environmental and social management and it emerges an un- certainty. Thus, in this academic paper it would be discussed that environmental and social issues have an impact to the economic success of the firm by looking the movement of its stock performance from 2016 to 2018. Through an aid of annual, financial and sustainability reports of 30 companies listed in the Deutsche Aktien Index (DAX30) in 2016, they would be subjectively evaluated and given score, then they would be concluded whether or not a disclosure of non-financial figures will give a positive influence in their share price in 2018. Non-financial figures that are being mentioned consist of GHG (Greenhouse Gas), Energy and Water consumption, Waste management, turnover rate, health rate (e.g.: accidents and injuries rate in a year), the number of trainings, human rights (e.g.: child labor), gender quotas, and philanthropy activities.

According to Sen (2018, pp. 581-582) from Istanbul University - Turkey, she argued that "In today's highly industrialized business arena, harmful effects of corporations to the environment and society cannot be ignored. Organizations are operating in relationship with their stakeholders and for long lasting survival; they need to take into consideration their effects on all related parties."

Hence, topic about Corporate Social Responsibility (CSR) has become familiar now- adays, where companies, especially listed companies, have disclosed their CSR- activities, which involve economic, environmental and social issue, in their annual report or in their sustainability reports to show to the public that they are also con- cerned about these issues. Furthermore, sustainability has increasingly become an important issue for wellbeing of human life and it is responsibility of many parties such as individuals, corporations, or governments.

1.2 Research Question and Development of Hypotheses

These are the questions that would be discussed in this academic paper, as follows:

- How can a Sustainability Balanced Scorecard (SBSC) enable the integration of environmental and social responsibility into the business management sys- tems of a company?
- Why is it so necessary applied for sustainability of the business nowadays?
- What are the views of professionals regarding issues in Sustainability?
- How can the concept of SBSC be implemented and shown in company’s an- nual- or sustainability reports?
- How can the implementation of SBSC help the company performance? (Strat- egy Map, KPI’s aligned to business objectives, Action plan for business ob- jectives and cascading)
- What are the direct and indirect effects of the implementation of SBSC on the stock performance?
- How can the company convince their Stakeholders to use the SBSC concept?

Moreover, this academic paper would be testing the null hypothesis (H0) and the alternative hypothesis (H1) so that at the end of this paper, readers would bring a conclusion whether or not the implementation of Sustainability Balanced Scorecard (SBSC) could be correlated with the increase or the decrease of stock performance of DAX 30 companies, by comparing their stock prices from their annual reports in 2016 and 2018 correlated with the evaluation derived from the appearances of its SBSC variables that discuss about economic, environment and social issues.

H0: The growth rates of stock price performance of 30 DAX companies from 2016 till 2018 shows no statistically significant correlation with the higher score of the im- plementation of the concept of SBSC from their annual- or sustainability reports in 2016 discussing about sustainability issues.

(alternative) Ha = H1: There is a correlation with the growth rates of their stock price performances from 2016 to 2018 when these 30 DAX companies have higher score of the implementation of the concept of SBSC by disclosing their activities regarding sustainability issues in 2016.

- Independent variable: Sustainability Score - the result of scoring in 2016 from GHG (Greenhouse Gas), Energy and Water consumption, Waste man- agement, turnover rate, health rate (e.g.: accidents and injuries rate in a year), the number of trainings, human rights (e.g.: child labor), gender quotas, and philanthropy activities.
- Dependent variable: Percentage Change - the growth rates of their stock price performances from 2016 to 2018

1.3 Problem Description

Nowadays, the term sustainability has become popular among companies to impli- cate social, economic and environmental pillars to their strategy and management of the company. Today, companies should not only focus on their profits, but they are also forced to concern about other issues such as social, economic and environ- mental. Unfortunately, many companies still do not know how to implement or meas- ure its outcomes.

Therefore, this academic paper might be helpful to assist especially managers to implement the concept of Sustainability Balanced Scorecard (SBSC) as strategic controlling for their long-term success. However, these issues would be a challenge for all managers who in general have role for planning, organizing, leading, and con- trolling (Lewis, et al. 2007, pp. 6-7) so that they need a tool such as Sustainability Balanced Scorecard which might be supporting them. Moreover, having concern to other issues above and inserting them into the concept of Balanced Scorecard, which is in general consisting of four perspectives, such as finance, customer, inter- nal process, and learning & growth, it might become a challenge because they prob- ably need to spend extra more money for doing that and it might affect to their profit. Therefore, in this academic paper, the correlation would be evaluated, tested and seen.

1.4 Objektive

In this academic paper, the goals will be emphasized on how the Balanced Score- card (BSC) can be improved towards a Sustainability Balanced Scorecard (SBSC) and used, as follows:

a) to translate sustainability strategies into action, and
b) to integrate sustainability better into the core management systems.

Furthermore, at the end of this academic paper, the correlation between the Imple- mentation of Sustainability Balanced Scorecard (SBSC) and the Stock Performance in Study Case of DAX 30 Companies Performance between 2016 and 2018 would be theoretical evaluated and statistically tested.

1.5 Structure

As already described above, the main topic of this thesis would be discussing about the implementation of Sustainability Balanced Scorecard (SBSC) related to the in- crease or the decrease of stock performance of DAX 30 companies, by comparing their stock prices from their annual reports in 2016 and 2018 correlated with the evaluation derived from the appearances of its SBSC variables that discuss about economic, environment and social issues. However, it would be also more specifi- cally explained about the introduction of indicators-based sustainability balanced scorecard as a strategic controlling instrument for implementation of corporate strat- egy from five different perspectives. Before the conclusion, this thesis would be started from chapter 1 which is an introduction about the problem description, the targets and the structure of this thesis. In this section, the challenges for the manag- ers to manage their primary tasks and to achieve company goals linked to other aspects are introduced. Thus, chapter 1 contains problems which should be solved in the next chapter.

Chapter 2 would explain first about the theories about the concept of balanced score- card (BSC) as a strategic controlling instrument and as a foundation of an existence of Sustainability Balanced Scorecard (SBSC). In addition, how SBSC appeared, what is SBSC, how to implement SBSC, what the five-perspectives of SBSC are and how the concept of indicators system in SBSC works would be more clearly ex- plained so that reader and especially managers should well understand. All these explanations would be used in chapter 3 and 5 to analyze how cause-and-effect correlations of implementing SBSC in a German automobile industry, Daimler AG as an example, so that the reader may evaluate whether SBSC is a good strategic con- trolling instrument which may give benefits for companies if SBSC is applied. Next, chapter 3 would present an example of German automobile industry (Daimler AG). Then, the facts show SBSC giving them more benefits in their company strat- egies would be shown with help of their annual and sustainability reports for three years period so that it should clearly emphasis that this concept would deliver posi- tive impacts especially for their financial reports.

In chapter 4, the methodology to analyse the implementation of SBSC in 30 compa- nies would be explained, for example: how to obtain the sustainability score of each company. Here, we would not evaluate the basic of BSC perspectives of these 30 companies because these basic perspectives are usually already involved in their strategies. Some companies, especially those are listed in DAX30, have already dis- cussed these 4 basic perspectives of Balanced Scorecard (Financial, Customer, In- ternal Business Process, Learning and Growth) in their strategy. Therefore, in chap- ter 4, only sustainability issues would be more assessed and discussed. Moreover, this assessment process would be only focused on how open each company dis- closes their sustainability report to the public using their annual- and sustainability- reports in 2016. After we understand where this sustainability score came from, we would use this sustainability score connected to the percentage change or the growth rate of each company’s stock performance from 2016 and 2018.

In chapter 5, the statistical analysis would be presented to test our hypothesis (H0) using a linear regression analysis with help of SPSS program so that we can answer our objective described above. Then, chapter 6 would conclude or summarize this academic paper regarding the relationship between the implementation of SBSC and stock performance.

2. Literature Review

2.1 The Concept of Balanced Scorecard (BSC) as a Strategic Controlling In- strument

Sustainability balanced scorecard (SBSC) becomes a new model adopted by the concept of the balanced scorecard (BSC) which was introduced by Robert S. Kaplan and David P. Norton for the first time in 1992 in the journal of "Harvard Business Review".

Kaplan & Norton (1996, p. 2) argued that:

"The Balanced Scorecard (BSC) provides managers with the instrumentation they need to navigate to future competitive success. Today, organizations are competing in complex environments so that an accurate understanding of their goals and the methods for attaining those goals is vital". Furthermore, "The scorecard measures organizational performance across four balanced perspectives: financial, customers, internal business processes, and learning and growth. The BSC enables companies to track financial results while simultaneously monitoring progress in building the ca- pabilities and acquiring the intangible assets they need for future growth".

Based on above citation, the BSC, the instrumentation used to navigate to future competitive success, can be visualized as an airplane cockpit (Kaplan & Norton, 1996, pp. 1-2), the manager has a role as a pilot, the company is represented as an airplane and the cockpit is assumed as a tool for manager which is BSC steering where the company would be brought and where to bring the company to reach the intended objectives. They assumed that in the cockpit, there are a lot of devices founded to navigate the airplane. Furthermore, through the cockpit the manager may navigate not only one factor (for example, wind) but also there are many factors (for instance, temperature, speed, etc.) which are also necessary to be monitored to bring the journey towards excellent future results.

According to Savkin (2011, p. 20), the company works usually with the strategy which is made by CEO or top-management. In general, CEO makes a specific busi- ness strategy and then determines the targets to the lower level employees. The lower level managers convert the global strategic targets into specific business works that are necessary to be finished to achieve the strategic goal. In the end, these specific works are distributed and explained to the low-level employee to be executed. In this part, the concept of BSC may be used as systematic approach which may translate the global target to the end-level employee. As a result, the idea of CEO may be easily understood on each level. From this point of view, it may be argued that BSC has an ability to explain the strategy to employees on each level and it could be possible used to explain the organization’s strategy and connected to the company's main goals.

In 2009, Taguchi, Kaneko and Tabe (p. 164) argued that balances in the BSC could be indicated as the balance between short-term and long-term objectives; the bal- ance between the past, present and future; the balance between financial and non- financial perspectives; and the balance between internal and external perspectives.

According to Erichsen (2011, pp. 199-389), Balanced Scorecard (BSC) is one of strategic controlling instruments which can be used to achieve the long-term goals of organization and to deliver guidelines for daily operational business.

Based on above arguments, it stresses that BSC is considered as a complete stra- tegic controlling tool and according to Figge, et al. (2002, p. 269) it becomes a man- agement tool that could be implemented in a company to support corporate strate- gies by connecting operational and non-financial corporate activities with causal chains to the organization's long-term strategy.

"The Balanced Scorecard makes it possible to take into account non-monetary stra- tegic success factors that significantly impact the economic success of a business. The Balanced Scorecard is thus a promising starting-point to also incorporate envi- ronmental and social aspects into the main management system of a firm. Sustain- ability management with the Balanced Scorecard helps to overcome the shortcom- ings of conventional approaches to environmental and social management by inte- grating the three pillars of sustainability into a single and overarching strategic man- agement tool." (Figge, et al. 2002, p. 269)

Compared with operational controlling which is commonly used to lead an organiza- tion to achieve its short-term goals (e.g.: Profit and Liquidity) with timeframe of one to two years and has detail-oriented characteristics (Erichsen, 2011, p. 9), strategic controlling by implementing the concept of BSC would lead an organization to achieve its long-term goals. According to Erichsen (2011, p. 199), strategic control- ling discusses about securing the existence of the organization. Thus, BSC as a complete strategic controlling tool could be considered in strategic planning to fore- see whether or not there are new potentials and opportunities for an organization to run its business for a long-term period.

Here, strategic controlling is reviewed for period of about one to five years in the future and is not commonly operated with detailed figures (e.g., turnovers or liquid- ity), but it provides a concept which is able to give informative, precise and explicit statement that may help managers in taking decision for the further development of its organization and the sustainability of its business model.

Although operational controlling and strategic controlling have different goals, they should be capable to work together and need to synchronise their goals in their daily activities.

Weber and Schäffer (2008, p. 149) stated that the concept of balanced scorecard could be applied as a measurement system and then it can be used as a reliable tool to connect organization’s strategy with its operations. In other words, when a manager has already arranged a strategy for his organization then the manager may integrate the concept of BSC into its strategy in order to support him to control and to track his goals.

According to Procurement Executives’ Association (PEA, 1998, pp. 15-16), in the concept of BSC it is necessary to create vision, mission statement, and strategy for the organization in order to ensure that the performance measures may be devel- oped in each perspective to support in achieving the company's strategic targets and it also supports employees to visualize and understand the connection between the performance measures and successful accomplishment of strategic targets.

PEA also argued that it is necessary to identify what the organization should do well (i.e., the performance goals) to achieve the organization’s vision that had been tar- geted. Setting a clear vision is an example to identify where the organization would be driven in the near future.

For each goal, it is important to know the measures and to arrange goals relating to a reasonable period of time (for example, three to five years). It does not sound complicated. However, many variables have impact how long this exercise would take. For instance, how many employees that an organization has and how many of them who are involved in setting the vision, mission, measures, and goals. BSC may be implemented to translate a company's vision into a set of performance objectives related in four perspectives of BSC: Financial, Customer, Internal Business Process, and Learning and Growth.

PEA (1998, p. 16) added that:

"Some objectives are maintained to measure an organization's progress toward achieving its vision. Other objectives are maintained to measure the long-term driv- ers of success. Through the use of the BSC, an organization monitors both its current performance (financial, customer satisfaction, and business process results) and its efforts to improve processes, motivate and educate employees, and enhance infor- mation systems - its ability to learn and improve."

Abbildung in dieser Leseprobe nicht enthalten

Figure 1 - Matrices used in the BSC.

Source: Procurement Executives' Association (1998, p. 18)

Figure 1 above provides matrices applied in the concept of BSC. It may help man- agers to develop their objectives and measures. In creation of performance measures, PEA (1998, pp. 15-16) recommended that performance measures should be connected to the strategic vision of the company and the measurement should focus on the results to reach the company vision and the objectives of the strategic plan. Therefore, each objective within a perspective needs to be supported by at least one measurement indicating a company's performance against that objective. If a measure is executable and plausible, then its implementation should be sup- ported.

In addition, PEA (1998, pp. 15-16) argued that:

" When developing measures, it is important to include a mix of quantitative and qual- itative measures. Quantitative measures provide more objectivity than qualitative measures. They may help to justify critical management decisions on resource allo- cation (e.g., budget and staffing) or systems improvement".

A manager should capable to identify any available quantitative data and review how it may support the goals and measures integrated into the concept of BSC.

To obtain a qualitative data, for example, it can be acquired from the subjective opin- ions of customers, employees, managers and other stakeholders based on their ex- perience, since they provide important insights into acquisition performance and out- comes. These subjective opinions usually can be seen in annual reports or sustain- ability reports of its organization. In this academic paper, 30 annual reports from 2016 and 30 sustainability reports from 2016 would be analysed in order to allow us doing assessment or scoring to 30 companies who disclosure their non-financial fig- ures such as qualitative or quantitative data to the public through their annual- and sustainability reports.

“The scorecard should tell the story of the strategy, starting with the long-run financial objectives, and then linking them to the sequence of actions that must be taken with financial processes, customers, internal processes, and finally employees and sys- tems to deliver the desired long-run economic performance.“ (Kaplan & Norton, 1996, p. 47)

In an article of Harvard Business Review written by Kaplan and Norton (1993), Larry D. Brady stated that the concept of balanced scorecard translates business unit strategies into a measurement system that connects with entire system of manage- ment. Balanced Scorecard is also becoming a very helpful instrument that may for- ward a corporate vision to the operational actions (Hirt, 2015, pp. 251-252). In other words, BSC enable each employee to indicate what employee should do to achieve corporate targets which are clearly constructed with the additional information of its indicators and then these targets are transformed to be a tangible action. However, an implementation of BSC in an organization is needed a certain openness and transparency in relation to all hierarchical levels in company. Before starting imple- mentation of BSC, it is necessary to review whether this instrument can be harmo- nised with its corporate culture because according to Kaplan and Norton (1993) that implementation of balanced scorecard depends on its business and different score- cards might be required for different market situations, product strategies, and com- petitive environments.

In addition, Kaplan and Norton (1997) claimed that the Balanced Scorecard as a strategic management is able to identify the major strategically relevant issues of a business and to describe the causal contribution of those issues that contribute to a successful achievement of an organization's strategy.

"By formulating and defining the goals and measures based on the strategy top down from the financial perspective through the other perspectives, it becomes clear which influence factors impact most the lagging indicators and thus ultimately the achieve- ment of the objectives. These strategy-specific influence patterns are reflected through cause-and-effect chains, which directly or indirectly link all the goals, indica- tors and measures of the BSC perspectives hierarchically towards the financial per- spective with its long-term financial goals." (Figge, et. al., 2002, p. 271)

Kaplan & Norton (1997, p. 28) in general distinguish between lagging and leading indicators. According to Figge, et al. (2002, p. 271), lagging indicators could be used to indicate whether the strategic goals in each perspective were achieved. While the leading indicators represent the specific competitive advantages of the firm and show how the results, which are reflected by the lagging indicators, should be achieved. In addition, the leading indicators are very firm specific.

“On the one hand, the Balanced Scorecard (BSC) can be described as an instru- ment, a scorecard consisting of 4 dimensions (Finance, Customers, Processes and Organisational Development). The dimensions comprise leading and lagging Key Performance Indicators (KPIs) which are linked to each other by an architecture of relationships of cause and effect. On the other hand, the BSC is also a methodology to transform strategies into action.” (Bieker & Gminder, 2001, p. 4)

Departed from explanations of each author above, it can be concluded that BSC has targets and tasks to measure business units, tell the story of organization’s strategy and to connect the long-term financial objectives into actions so that it would help an organization in easily achieving its vision and its mission.

Moreover, in 2001 Hahn & Wagner (pp. 1 - 2) argued that the concept of balanced scorecard has a special feature to monitor non-financial and long-term success fac- tors (social and environmental aspects) into the management system so that it is applicable for integrated sustainability management. These further aspects would be specifically presented in Sustainability Balanced Scorecard (SBSC) that is going to be more discussed in the next chapter below. An argumentation regarding this meth- odology (SBSC) came from Möller and Schaltegger (2005, p. 76) who argued that the balanced scorecard is able to incorporate sustainability issues in two different ways. One way is to restructure the existing perspectives, and another is to add a new key perspective. They are not the only authors who introduced SBSC concept, but also there had been some authors also discussing regarding this concept. For this topic, would be in chapter 2 more discussed so that we can see further argu- ments from different authors regarding SBSC methodology which might fit for organ- ization that would be generating sustainability strategy.

2.2 The Definition of SBSC

As we already discussed in previous chapter, Sustainability and or related issues with sustainable environment becomes one of the crucial issues in today's organiza- tion strategy (Kalender & Vayvay, 2016, p. 79).

"Moreover, the management and measurement of non-financial issues and objec- tives have become increasingly important as ever more environmental and social issues receive attention through various stakeholder groups." (Hansen & Schalteg- ger, 2012, p. 4)

Hansen and Schaltegger (2012, p. 6) added that organizations are expected to con- cern with issues such as resource depletion, environmental pollution, worker abuses in global supply chains, or global injustice (e.g. local food shortages due to fuel crops designated for export markets). In addition, the organization's performance would be connected to its sustainable growth and behavior. Thus, nowadays, the word of sus- tainability is often emerged in organization’s strategy and might be seen in annual report of companies listed in stock market or some companies would disclosure this topic in extra report called sustainability report in their website. Most of these com- panies start showing not only their financial performance, but also, they show their concern about environmental and social aspects in their annual report or sustaina- bility report. For example, they might disclose information regarding their Corporate Social Responsibility (CSR) activities, energy consumption, water consumption, turnover rate, waste rate, accident rate of their employees, gender ratio on company board, training, human rights and philanthropy activities. This information is used as indicator which can be categorized as non-financial indicator that can be used to evaluate organization’s sustainable growth and behavior.

Kalender & Vayvay (2016, p. 80) argued that sustainability is defined differently by each organization so that indicator system to measure sustainability might be differ- ent from one organization to other organizations, because these indicator systems would be based on organization's strategy and goals. Furthermore, there are no rules about how many indicators that each perspective should have are used, be- cause too many indicators can be distracting and draws attention away from the main organization's strategy. In our study case, there would be 10 non-financial in- dicators would be used to analyze whether or not an organization concerns in sus- tainability topics such as social and environmental.

Figge et. al. (2002, pp. 291 - 283) argued that the SBSC is an open concept that can be applied to integrating environmental and social aspects into the successful imple- mentation of both conventional corporate strategies and explicit corporate sustaina- bility strategies. Furthermore, SBSC is embedded in the wider context of strategic management and has a capability to translate a verbally formulated strategy into operational terms which can be seen as a tool for strategic control.

According to Bieker & Gminder (2001, p. 4), a Sustainability Balanced Scorecard (SBSC) should hence be able to derive effectively operating goals and actions from the economic, social and environmental policies of a company, carry them out effi- ciently and measure them clearly by soundly designed Key Performance Indicators.

Erechtchoukova, Khaiter & Golinska (2013, p. 39) argued that a Sustainability bal- anced Scorecard (SBSC) is a type of BSC specifically designed to reflect the issues and goals of organization sustainability. The managers of organization are recom- mended first to design a separate SBSC, then, it must be integrated into the tradi- tional Balanced Scorecard in order to ensure a holistic view of sustainability.

According to Figge, et al. (2002, p. 273), the Balanced Scorecard helps to identify and to manage environmental and social aspects, which can contribute to financial organization's goals. While, a Sustainability Balanced Scorecard has a capability to fulfils the central requirement of the sustainability concept for a permanent improve- ment of the organization's performance in economic, ecological and social terms.

Hahn & Wagner (2001, pp. 1 - 2) have the same argument with Figge, et al. and they agreed that Sustainability Balanced Scorecard has purpose to integrate three pillars of sustainability concept which include economic, ecology and social aspects into organization strategies. In other words, it shows a causality relationship of the eco- nomic, environmental and social aspects with long-term success of organizations and integrates them into the general management.

Furthermore, Sustainability Balanced Scorecard could be used as an approach to sustainability management which focuses on a simultaneous achievement of eco- logical, social and economic goals (Figge, et al., 2002, p. 272).

According to Figge, et al. (2002, pp. 273), there are basically three approaches to integrate environmental and social aspects in the balanced scorecard so that it be- comes Sustainability Balanced Scorecard (SBSC), as follows:

a) Subsumption - Integration of environmental and social aspects in the four balanced scorecard perspectives (optional first step):

it can be described that these aspects (environmental and social) could be integrated in the four perspectives through respective strategic core elements or performance drivers for which lagging and leading indicators as well as targets and measures are formulated (Kaplan and Norton, 2001, p. 90). Here, Environmental and social aspects are considered as an integral part of the conventional Scorecard and are automatically integrated in its cause-effect relations and hierarchically orientated towards the financial perspective and a successful conversion of a business' strategy. (Figge, et al., 2002, p. 274)

For example, when an organization is oriented to an environmental customer segment which prefer to buy products from organization that supporting pro- gram of against global warming by emphasizing in its sustainability program of reducing CO2. In this case, as an example, BMW with its electric car is environmental-friendly, the core measure "market share" in the customer per- spective would have an environmentally oriented dimension and the leading indicator "product features" would have an environmental dimension.

b) Addition - Introduction of an additional "non-market perspective" into the balanced scorecard (optional first step):

Figge, et al. (2002, p. 274) argued Environmental and social aspects and scarcities are not (yet) fully integrated in the market exchange processes through assigned market prices because they are originally from non-market systems where is as social constructs so that many environmental and social aspects often represent externalities and they are not integrated into the mar- ket coordination mechanism. Furthermore, it becomes clear that with its four perspectives (Financial, Customer, internal business process, Learning & Growth) the standard concept of balanced scorecard can represent the mar- ket system only. Thus, it might have to be extended by an additional perspec- tive for the integration of strategically relevant environmental and social as- pects from outside the market system. Moreover, an additional non-market perspective could affect all four conventional perspectives and be needed when environmental and social aspects significantly impact on the organiza- tion's success from outside the market system. This approach is considered as a more likely acceptable method, because by adding a new perspective, which is non-market perspective, it can be described as the simplest approach for organizations which want to make sustainability as a key value of their company.

c) Deduction of a derived environmental and social scorecard (optional second step):

Here, Figge et al. (2002, p. 275) stated that a derived environmental or social scorecard cannot be developed parallel to the standard scorecard. A derived environmental or social scorecard is used to coordinate, organize and further differentiate the environmental and social aspects. "Thus, this additional variant of derived environmental/social scorecard allows coordinated control of all strategi- cally relevant environmental/social aspects, which are spread and integrated in the whole overarching BSC system." (Figge, et al., 2002, p. 275)

Figge, et al., (2002, p. 275) summarized these three approaches and noted that the first two variants above (subsumption and addition) relate to the structure of the scorecard for business unit. While the derived environmental or social scorecard is deduced from the core scorecard which means it can only be formulated after at least one of the two first approaches has been realized for the core scorecard sys- tem.

2.3 The Process of Formulating SBSC

Abbildung in dieser Leseprobe nicht enthalten

Figure 2 - Process of formulating SBSC.

Source: Figge, et al., (2002, p. 277)

According to Figge et.al., (2002, pp. 276 – 279), also shown in Figure 2, formulating an SBSC can be processed through these three major following steps:

- First, the strategic business unit has to be chosen, because there might be different in business unit level between small sized organizations or medium sized organizations and large organizations. In large organizations there are often several business units that aim at different customer segments and of- ten organized as independent profit centers. While the business unit level in small and medium sized organizations tends to be identical with the corporate level. Thus, it is necessary that top management must be able to recognize what business unit level their organization belongs to and arrives at a com- mon agreement on what strategy would be applied before an SBSC can be formulated.
- Second, the environmental and social aspects of concern have to be identified in order to ensure that the SBSC is linked to the specific needs of the business unit chosen. The purpose following this second step is to analyze all the relevant environmental and social aspects in order to obtain a comprehensive list of all possibly strategically relevant environmental and social aspects. In our case, we will analyze these following aspects: GHG (Greenhouse Gas), Energy and Water consumption, Waste management, turnover rate, health rate (e.g.: accidents and injuries rate in a year), the number of trainings, human rights (e.g.: child labor), gender quotas, and philanthropy activities.
- Third, determining strategic relevance of environmental and social aspects must be done: This step aims to translate the verbally formulated strategy of a business unit into causally linked objectives and indicators.

[...]

• Université: University of Applied Sciences Brandenburg
• Cours: Finance Controlling & Accounting
• Note: 2,0
• Auteur: Christoper Dewangga Pramudita (Auteur)
• Année de publication: 2019
• Pages: 94
• N° de catalogue: V509035
• ISBN (ebook): 9783346074911
• ISBN (Livre): 9783346074928
• Langue: anglais
• mots-clé: Sustainability Balanced Scorecard, Strategic Controlling Tool, Controlling, Stock, SBSC, Stock Performance, DAX30, BMW, Daimler, Stock Market, Sustainability, Balanced Scorecard, Kaplan, Statistic, Applied Econometrix, Finance Controlling, Accounting, Management, Strategic Management, Finance