The first part of this blog series introduced the strategic planning process which included the determination of materiality, Sustainability SWOT tool and the 5 stages of Sustainability. It has been observed by several researchers that during the strategic planning process, the management team enthusiastically participates in determining the SWOT and the current situation of sustainability in an organization. However, once the blueprint is ready the enormity of the elaborate plan dawns upon the management team which is now faced with the uphill task of designing an implementation plan.
One of the greatest management guru, Peter Drucker has often quoted, “you can’t manage what you can’t measure. Similarly, what can be measured can also be improved. The Balanced Scorecard (BSC) tool is a performance measurement tool and is useful for implementation process.
Balanced Scorecard Implementation Tool
The BSC tool created by Kaplan and Norton (1992) is a tool for implementing corporate strategies. Strategic challenges identified by a SWOT tool can be linked to the application of a BSC. Further, the tool links long term future strategy with the operational and non-financial activities with cause and effect chains. The BSC helps in aligning and managing all business activities as per their strategic application. It is a useful tool to consider the non-financial factors that have an effect on the financial success of a business. The BSC is based on the supposition that merely managing investment capital efficiently is not the only determinant for growth and competitive advantage but other soft factors are equally important for business success. In response, Kaplan and Norton put forward a novel performance measurement approach which includes 4 perspectives. This scorecard consists of financial, customer oriented, internal process and the learning and growth perspectives.
The BSC allows a holistic balance between quantitative, non-quantitative, financial and non-financial information related to the past and future. The BSC is an open system; hence sustainability issues and stakeholder interests essential for successful strategic management can be easily integrated with the tool.
Corporate Sustainability along with BSC helps in overcoming inadequacies in the conventional methods by integrating the sustainability pillars into a single tool. Thus it is a valuable application for incorporating and implementing the triple bottom-line aspects of environmental protection and social security in the main strategic management system of an organization.
Sustainability Balanced Scorecard
From a triple bottom-line perspective, the BSC shows interrelationship between long term resources and short term financial effects. The scorecards link the resources, activities, operations and capabilities with all direct and indirect outcomes and are referred to as Sustainability Balanced Scorecards (SBSC). The main perspectives of the SBSC can be modified, restructured or new perspective can be added to integrate sustainability parameters for implementing strategy. The conventional BSC maps and indicators need to be revised to include sustainability related issues. Therefore, all the 4 perspectives not only include the conventional parameters but also sustainable parameters. Further, the SBSC can also include the non-market indicators as they are relevant in the corporate sustainability perspective.
The Implementation Journey
Organizations can begin their journey of developing their own SBSC by following a systematic, step by step process which links their bird’s eye view of vision and mission to ground level operations.
Vision and Mission
A well-defined vision and mission will help organizations to decide on “what they wish to do” in terms of sustainability and what will be the future course of action. The organization can choose to formulate a separate vision and mission for sustainability or align it with the vision and mission of the existing corporate strategy
Sustainability theme integrated with BSC perspectives
Sustainability becomes strategic when it is integrated into the fabric of the organizational planning and management process. The two most visible places where sustainability should be highlighted are the organization’s high-level strategic themes and the strategic objectives that are the strategic building blocks (“strategy DNA”) of this strategy.
Strategic themes are important “pillars” of the strategic planning process and they align with the achievement of the vision and mission. A specific theme is not just an objective but it is a set of objectives interlinked with the four perspectives. This linkage showcases the strategy, “story” of an organization.
An organization has many focus areas like Human resources, Marketing & Sales, Finance, Administration, Operations, Innovation, Change management, Mergers & Acquisitions and Research & development. Similarly, sustainability could be designated as a stand alone theme (focus area) or could be integrated into each of the focus areas mentioned.
The sustainability perspectives could be defined as follows –
- Financial perspective – It means ensuring the continuity of business in a sustainable way and achieving a high ROI not only for the present generation but also for the future one.
- Customer and stakeholder perspective – providing value added products and services to sustainability aware customers and stakeholders.
- Internal Process perspective – Sustainability focuses on management of energy, waste, materials, factories and transportation in an efficient way
- Organizational capacity perspective – permeating a culture of sustainability in the organization and influencing the choices that the employees make during the course of their work and beyond.
Objectives form an important part of a strategy and act as the building block. Objectives provide actionable items to the themes and thus ensure a cause and effect relationship. The perspectives, sustainability theme and its objectives then form a strategy map.
Developing performance measures is a process and demands continual improvement. Performance measures are directly dependent on objectives for the specific theme. The objectives give rise to performance measures. Targets are set for the performance measures and suitable initiatives are designed to fulfill the targets.
A generic map is shown below for an insight into practical application.
The BSC journey requires strong commitment and endorsement from the top management team as it is for the long term as opposed to the short term. The clearly defined vision and mission will lay the foundation for developing the theme, objectives, performance measures, targets and initiatives in a holistic manner.
Using the balanced scorecard can demystify the implementation phase of integrating sustainability into strategy into a clear cut pathway with step by step instructions.
The entire framework for Integrating sustainability into corporate strategy has been summarised in the following diagram for better understanding of the steps involved.
Alstonia can help all types of organizations to achieve their vision of a Sustainable Business. Visit Alstonia for more details.
- Link Sustainability to corporate strategy – http://www.balancedscorecard.org/portals/0/pdf/linkingsustainabilitytocorporatestrategyusingthebalancedscorecard.pdf
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Swarada Chitale is Co-founder of Alstonia, a company which partners with companies and social organisations to deliver holistic sustainability and CSR programs aligned to company profits and community needs.
For more information visit Alstonia