Application of the balanced scorecard approach

The Balanced Scorecard Approach
The Balanced Scorecard seeks to develop performancreas:
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Learning and growth, Internal business processes, Customers, and Finances. 35
by Scott D. Johnson
he world of the environmental professional is undergoing substantial change. The compliance-oriented environmental manager who fails to effectively communicate the link between environmental and economic performance to management may be facing extinction. Threats of noncompliance and potential jail terms, while still a possibility, do not carry the impact they once did. Today, a more successful approach is to encourage the use of environmental performance to gain competitive edge. A developing field environmental performance evaluation provides the “connective tissue” for linking environmental performance to competitive advantage. The field is characterized by development, measurement, and monitoring of
processes; stakeholders; and
3. Customers 4. Finances. The most
and external
fit into each of the BSC indicator
illustrates a generic environmental generic because it should be broadly change is embracing a wider most for-profit organizations. of external stakeholders in the third
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Identificationand Selection of Environmental Performance Indicators:
Application of the Balanced Scorecard Approach
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category. In addition include government mental organizations, is such a modification environmental consistent The
to customers, these stakeholders officials and regulators, environfacility neighbors, model, etc. Not only to the it is also more theory did not In necessary for application stakeholder
Application of the Balanced Scorecard Approach
Scott D. Johnson
For development fied slightly to: 1. Learning, 2. Internal
of EPIs, the categories are modi-
types of EPIs will not be strategically relevant firms (or even applicable to all firms).
Scott 0. Johnson is program manager for Strategic EnvironmentalManagement (SENT)and Environmental Management Systems (EMS) Services for Golder Associates, an internationalenvironmentalconsulting and engineeringfirm with offices in over fifteen countries. Dr. Johnson is an active member of SubTAG4 (EPE) of the U.S. TechnicalAdvisory Groupto lSO/TC 207 on EMSs. He is also an affiliate professor at the Universityof Washington at Bothelland holds a Ph.D. from the Universityof California, Irvine, as well as M.B.A. and B.S. degrees from Baylor University Summer1888 (Vol.5, No. 4)
Using Environmental Performance Financial Performance
for environmental mental performance
to Drive
innovation, business
growth, and people;
Given the overall framework of the BSC application performance, generic environindicators can be developed that categories. Figure 1 BSC model applicable in all of the to all
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environmental performance indicators (EPIs) and the use of EPIs to drive the achievement of environmental goals and objectives. IS0 14031, one of the newest parts of the IS0 14000 series of standards to reach the draft international standard stage,,provides valuable guidance on the development of EPIs. However, strategic managers gain little from the IS0 standard regarding the potential for EPIs to drive financial and competitive performance. One valuable method for developing EPIs is application of the balanced scorecard (BSC) approach (in a slightly modified format). BSC was developed by Harvard Business School professors Dr, Robert Kaplan and Dr. David Norton. The approach provides a valuable mechanism for linking environmental performance with corporate strategic performance. As such, BSC is also an excellent tool for the selection of a “balanced” set of EPIs that drive performance toward the firm’ strategic goals. s
Identification and Selection of Environmental Performance indicators:
Application of the Balanced Scorecard Approach
by Scott D. Johnson The popular “balanced scorecard” system can be applied in the selection and development of environmental performance indicators. As presented, the balanced scorecard integrates environmental performance within the context of corporate strategic objectives. The basic premise of the balanced scorecard is that the ultimate corporate objectives c;ommonly targeted by senior management such as economic value-added, net income, return on equity, and return on assets are of little use in day-to-day decision-making or in the motivation of employees. Rather than look ahead, these measures reflect the past and, therefore, are not closely Zinked with the immediate actions which might be expected to be associated with future performance improvements. To create incentives for future improvements in these long-termmeasures, we must develop “leading” measures, which can be easily monitored in the short term. Such an approach lends itself to the selection of environmental performance indicators which are most clearly associated with the firm’ s strategic goals.