Balanced Scorecard and Sustainability - Insights on the State of this Union

While the Balanced Scorecard is widely discussed in the business world, there is little empirical evidence of its usefulness. The answer to this question is key for those who want to explore the integration of environmental and social actions using the Balanced Scorecard. Adding to this discussion, Francesco Zingales and Kai Hockerts look at examples from literature and practice of Balanced Scorecard in action. They find that despite the fact that the BSC concept was introduced in the early 1990s, firms are far from understanding how (or if) it can be used to their advantage.

by Kai Hockerts,Francesco Zingales

In studying the literature and the practice on the Balanced Scorecard and Sustainability, Francesco Zingales, Research Associate, and Kai Hockerts, CMER Research Programme Manager attempt to add to the discussion around the BSC concept, and in particular, to the question of its usefulness.

In this Working Paper, they review its use in two companies (documented in the literature) and conduct in-depth interviews with four companies that have integrated environmental and/or social indicators in their BSCs. In doing so they add to the discussion on the topic, but concede that more research needs to be done in order to prove or disprove their intuitions.

Based on their research on how the BSC is working, the duo found “a rather scattered situation.” Among a large pool of companies claiming to use the BSC, the authors found it nearly impossible to reach the control department, let alone find the controller responsible for the BSC. A second group of companies had dropped the BSC altogether because it was perceived as “too heavy”. In the end, out of the 28 companies the authors had targeted, they were able to verify only four – Lunds Energi, Novartis, Novo Nordisk, and Royal Dutch Shell – that could be safely classified as “real” BSCs. This suggests that despite the fact that the BSC concept was introduced in the management literature in the early 1990s, companies are far from understanding how the concept can (or if) be used to their advantage.

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