Accountability for performance against strategic objectives, including sustainable performance, requires an understanding of the causal relationships between the various actions that can be taken, and their impact on financial and non-financial performance. Performance evaluation and measurement is typically a feature in most successful organizations. Organizations making a specific business case for a sustainability strategy and objectives will also rely on effective measurement to understand the resulting impact on the organization and society.
The performance evaluation and measurement step follows naturally from the earlier stages of identifying the key sustainability impacts, and setting and monitoring progress against targets. Some organizations might also to decide to reward managers for their ability to hit sustainability targets. This reinforces the need for a carefully considered approach to performance measurement.
Marc Epstein, in his 2008 book, Making Sustainability Work, usefully includes a corporate sustainability model that describes (a) the drivers of corporate sustainability performance, (b) the actions that can be taken to affect that performance, and (c) the potential consequences of those actions. The inputs of the model include the organization's external context (e.g., regulatory), internal context (e.g., mission, policies, strategy, structure, systems), the business context (e.g., industry sector, customers, products), and its human and financial resources. These inputs allow an organization to develop the process needed to deliver outputs (sustainability performance, stakeholder reactions), and outcomes (long-term financial performance). The book details the range of inputs, processes, outputs, and outcomes that a typical organization might deliver.
This is a framework for helping to implement a sustainability strategy, and therefore helps an organization to consider the relationships between key factors for a successful implementation from which effective performance measurement can flow.
Complementary performance measurement frameworks can help organizations to consider the causal relationships between sustainability performance and financial performance. To manage and deploy organizational resources in such a way as to deliver organizational objectives is a vital role of senior finance and management professionals. Many tools, techniques, and frameworks have evolved to assist them in this, such as value-based management, the balanced scorecard, the performance prism, and others. Such frameworks can also be used to help implement social and environmental strategies.
The balanced scorecard has probably been the most popular of the tools designed to improve corporate performance. The report by the Chartered Institute of Management Accountants, Effective Performance Management with the Balanced Scorecard, describes how it has evolved from a widely used performance measurement tool to a broader approach used to facilitate strategy implementation. Its strength is twofold. First, it helps to ensure consistency and alignment between the non-financial and the financial measures (this helps to facilitate the alignment of the measures and strategy - see Caption 25). Second, it helps to identify and measure the specific value drivers that underpin performance. This allows managers to test their hypotheses on what is driving organizational outcomes. Its use to support a sustainability strategy is considered below.
The performance evaluation and measurement step follows naturally from the earlier stages of identifying the key sustainability impacts, and setting and monitoring progress against targets. Some organizations might also to decide to reward managers for their ability to hit sustainability targets. This reinforces the need for a carefully considered approach to performance measurement.
Marc Epstein, in his 2008 book, Making Sustainability Work, usefully includes a corporate sustainability model that describes (a) the drivers of corporate sustainability performance, (b) the actions that can be taken to affect that performance, and (c) the potential consequences of those actions. The inputs of the model include the organization's external context (e.g., regulatory), internal context (e.g., mission, policies, strategy, structure, systems), the business context (e.g., industry sector, customers, products), and its human and financial resources. These inputs allow an organization to develop the process needed to deliver outputs (sustainability performance, stakeholder reactions), and outcomes (long-term financial performance). The book details the range of inputs, processes, outputs, and outcomes that a typical organization might deliver.
This is a framework for helping to implement a sustainability strategy, and therefore helps an organization to consider the relationships between key factors for a successful implementation from which effective performance measurement can flow.
Complementary performance measurement frameworks can help organizations to consider the causal relationships between sustainability performance and financial performance. To manage and deploy organizational resources in such a way as to deliver organizational objectives is a vital role of senior finance and management professionals. Many tools, techniques, and frameworks have evolved to assist them in this, such as value-based management, the balanced scorecard, the performance prism, and others. Such frameworks can also be used to help implement social and environmental strategies.
The balanced scorecard has probably been the most popular of the tools designed to improve corporate performance. The report by the Chartered Institute of Management Accountants, Effective Performance Management with the Balanced Scorecard, describes how it has evolved from a widely used performance measurement tool to a broader approach used to facilitate strategy implementation. Its strength is twofold. First, it helps to ensure consistency and alignment between the non-financial and the financial measures (this helps to facilitate the alignment of the measures and strategy - see Caption 25). Second, it helps to identify and measure the specific value drivers that underpin performance. This allows managers to test their hypotheses on what is driving organizational outcomes. Its use to support a sustainability strategy is considered below.
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