Sustainability balanced scorecards – The big illusion

The so-called Balanced Scorecard is a good example. From the late 1990s on, this tool was promoted to offer managers a more complete picture of financial and non-financial performance figures, including early indicators designed to help managers steer their firms towards even better financial success. After some time, sustainability scholars joined the bandwagon and postulated the Sustainability Balanced Scorecard. This management tool was promoted as the solution to integrate environmental and social aspects into the strategies and the performance assessment of companies. Proponents of this tool even argued that the Sustainability Balanced Scorecard would help put companies on a more sustainable path.

In their recent article in the Journal of Business Ethics, KEDGE Professors Tobias Hahn and Frank Figge call for a more realistic view on the Sustainability Balanced Scorecard and demystify many of the bold expectations that have been raised around this tool. As their analysis shows, proponents of the Sustainability Balanced Scorecard seem to have forgotten about the most important question: Is the Sustainability Balanced Scorecard suitable at all for achieving corporate sustainability?

After taking a closer look the results are rather disillusioning. What the Sustainability Balanced Scorecard can do is to identify those cases where sustainability can help with the successful implementation of standard business strategies and financial performance. But what one cannot expect is that Sustainability Balanced Scorecards will help leaders to question their strategies and develop more sustainable or more innovative ones.

In addition, and probably even more worrying, Sustainability Balanced Scorecards might well lull managers into a false notion of having environmental and social challenges such as climate change and poverty well under control. Sustainability Balanced Scorecards seek to establish a link between social and environmental challenges on the one hand and standard business outcomes, such as profits or sales, on the other hand. They do not look into cases where such a link is absent or not obvious. And they do not question business-as-usual objectives and practices either.

Hence, the use of Sustainability Balanced Scorecards might even slow down a transition of the private sector towards more sustainability. It stabilizes established non-sustainable conventional business routines and objectives and thereby undermines change that is so direly needed if businesses are to contribute more to sustainability.

Unveiling the illusion around Sustainability Balanced Scorecards has a positive side as well. It reminds managers and scholars that moving towards sustainability requires more than a slight adaptation of fancy management tools that are currently in vogue. What appears much more important is that managers are open to question their existing business models and strategies in the light of sustainability, rather than trying to make sustainability fit with outdated business models.