568 Accounting: Business Reporting for Decision Making
success of the entity. Walsh (1996) argues that it is important not only to measure an outcome, but also
to link the outcome with operational processes (drivers) to gain an understanding of the actual business
processes. He states (p. 11):
KPOs (outcomes) are those measures which indicate progress towards corporate objectives; they are
what the business is expected to deliver. KPDs (drivers) are those measures which have a direct influence
on the outcomes; they are the drivers of outcomes.This suggests that the driver should be the focus of efforts. Improve the driver and the outcome will
also improve. For example, an increase in the number of new products to market will increase the per-
centage of new sales from new products.
There have been criticisms that the balanced scorecard framework does not encourage environmental
and social performance measurement. However, given that the objective of the balanced scorecard is
to link strategy with performance measurement, the balanced scorecard can be expanded to include
the environmental and social goals important to the entity. Two approaches could be adopted. The first
approach incorporates the sustainability success factors and key performance indicators within each of
the four original dimensions. Figure 14.3 shows this approach.
Financial perspective Customer perspective• Per cent of sales revenues from ‘green’ products
• Recycling revenues
• Energy costs
• Fines and penalties for pollution• Number of product recalls
• End of customer use recycling volume
• Number of warranty claimsInternal business perspective Innovation and learning perspective• Per cent of suppliers certified
• Volume of hazardous waste
• Packaging volume
• Number of community complaints
• Cost of minority business purchases• Diversity of workforce and management
• Number of volunteer hours
• Cost of employee benefits
• Percent of employees trained regarding sustainabilityFIGURE 14.3 Balanced scorecard measures for sustainabilitySource: Adapted from Epstein, MJ & Wisner, PS 2006, ‘Actions and measures to improve sustainability’, in Epstein, MJ &
Hanson, KO (eds), The Accountable Corporation, vol. 3, Praeger, Westport, CT
The second approach increases the number of perspectives. For example, Moller and Schalteggar
(2005) suggest adding a ‘non-market perspective’. This non-market perspective would link the goals,
measures and drivers relating to the environmental and social strategy to the vision of the entity.
The choice of approach and the goals, measures and drivers to include would depend on the specific
opportunities and challenges of the entity. The main advantage of adding a fifth dimension is that it
reinforces the importance of the environmental and social dimensions to the entity’s core values and
mission.
VALUE TO BUSINESS• Measuring performance helps to evaluate the achievement of the entity’s objectives, and also serves
to consolidate the efforts of employees and harness them to the entity’s goals.
• The balanced scorecard provides a measure of performance based on financial data, customer
satisfaction, internal operations, and innovation and improvement levels. Environmental and social
goals can also be incorporated into an entity’s balanced scorecard.
• The balanced scorecard is designed to encourage the use of a wide range of measures to gauge
performance. It is linked to the identification of performance drivers that are used to monitor
progress towards the entity’s goals.