Sustainability Balanced Scorecard - The Sustainability Management Wiki

Authors: Joleen Sophie Brüning
Edited by: –
Last updated: May 11, 2026

Executive summary

The Sustainability Balanced Scorecard (SBSC) adapts the classic Balanced Scorecard to integrate environmental and social goals alongside financial objectives. It helps organizations translate a sustainability strategy into a manageable set of objectives, indicators, targets, and initiatives across multiple perspectives, making trade-offs explicit and supporting transparent performance steering.

SBSC design starts by clarifying the strategic scope (often a strategic business unit) and identifying the most relevant environmental and social aspects. Organizations then assess which aspects are strategically material, distinguish core outcome objectives from performance drivers, and link them through cause-and-effect logic so that sustainability priorities connect to business value creation and risk management.

The literature describes several ways to integrate sustainability into a scorecard: embedding sustainability indicators within the four classic perspectives, adding a fifth non-market perspective for strategically relevant issues that do not fit market-based cause-and-effect chains, or creating linked environmental and/or social scorecards. Selecting an approach depends on the organization’s strategy, industry, and stakeholder context, and teams should avoid overly complex scorecards with too many indicators.

Effective implementation follows a structured process: secure executive sponsorship, set up governance and workshops, build a strategy map, define indicators and data sources, set realistic targets, assign clear ownership, and establish an implementation plan supported by suitable IT systems. Regular review cycles are essential to refine objectives, indicators, and assumptions, promote organizational learning, and keep the SBSC aligned with changing sustainability requirements and external conditions.

1 Introduction

Sustainability has become increasingly relevant in recent decades.¹ ² Due to global challenges such as climate change and the scarcity of resources and energy, acting sustainably has gained growing importance.¹ ² In connection with this, companies’ interest in assuming ecological and social responsibility is also steadily rising.² In particular, due to regulations, laws and stakeholder as well as customer requirements, the pressure on companies to become more sustainable is increasing.² At the same time, companies can also build long-term competitive advantages through sustainability.²

As a result, organizations have shown growing interest in how sustainability can be measured and managed in companies has steadily grown in recent decades.² In order for companies to implement sustainability efficiently, a good management tool plays a major role. This article focuses on the Sustainability Balanced Scorecard (SBSC) tool.

There are currently many theory-based papers on the (S)BSC, but there is a lack of comprehensive and practical works that map the entire process from the theoretical foundation to implementation. This article addresses this gap by summarizing all the essential information required to both theoretically understand and apply the (S)BSC in practice. To this end, the current state of research on the (S)BSC is systematically summarized and a practice-oriented guideline for its implementation is derived from it. Within this framework, the theoretical foundations, central concepts and theories from the literature are presented in order to enable a comprehensive understanding of the (S)BSC and its structure. Building on this foundation, the article explains how the instrument can be implemented in corporate practice.

2 Theoretical background

In the following section, the concept of the (S)BSC is first introduced. Next, a presentation of the historical background based on the BSC and an explanation of its four performance perspectives. The further course shows the importance of sustainability for companies and then describes how the BSC has developed into the (S)BSC. Various approaches from the literature are then presented by which sustainability aspects can be integrated into the BSC. Next, a presentation of the (S)BSC’s architectural variants. Finally, central points of criticism of the concepts of the BSC and SBSC are discussed, and future research directions are presented.

2.1 Sustainability balanced scorecard

The SBSC is a strategic management instrument that combines all three dimensions of sustainability, economy, ecology and social issues, in one system.³ This concept helps to overcome the weaknesses of environmental, social and economic systems, which have so far mostly been introduced separately.³ The SBSC can be used to comprehensively present corporate contributions to sustainability.⁴ The aim is to achieve improvements in all three dimensions of sustainability and thus contribute to sustainable development.⁴

At its core, the (S)BSC systematically integrates ecological and social goals into its strategic corporate management by expanding and linking sustainability indicators to classic financial and performance indicators.⁵ This strengthens both corporate and social responsibility toward stakeholders such as customers, shareholders and employees.⁵ The SBSC is well suited to disclose a company’s sustainability performance in a comprehensible and transparent manner.⁶

A characteristic feature of the (S)BSC is its flexible adaptability to the company’s specific sustainability strategy.⁵ Each company can define its own environmental and social goals and make them measurable, individually tailored to the industry, strategy and size of the company.⁵ By using the (S)BSC, a company can communicate its sustainability strategy to improve the company’s image and sustainability performance.⁵ Companies continuously review and refine an SBSC, thereby expanding the organizational understanding of sustainability and adapting the strategic management approach.⁷

In practice, the (S)BSC is developed as part of a broader process.⁸ The aim is to embed sustainability in the corporate strategy and thereby improve sustainability performance.⁸ Organizations achieve this by linking sustainability goals to measurable indicators.⁹ The indicators help companies to identify inefficient processes and unnecessary resource consumption in a targeted manner.⁷ On this basis, not only costs can be reduced, but also long-term efficiency gains can be achieved, which in turn has a positive impact on competitiveness.⁷

The SBSC supports companies in coping with the management requirements in the area of corporate sustainability and successfully implementing their sustainable strategy.¹⁰ It also contributes to the further development of sustainability management standards, facilitates compliance with legal requirements and enables the provision of sustainability data.¹⁰ This transparency allows stakeholders to better understand how sustainably the company operates and what successes it is achieving in this area.¹⁰ The SBSC gives managers, employees and external stakeholders the opportunity to try out new strategies and learn from them.¹¹ This allows them to adapt to changes and continuously develop the company’s strategy.¹¹

The SBSC is based on the BSC developed by Kaplan and Norton in the early 1990s.¹² In order to fully understand the (S)BSC, an overview of the classic BSC and its structure is necessary.

2.2 Historical background

The BSC was created against the backdrop of a changed competitive environment and as a new instrument for measuring performance in order to overcome short-term thinking and past-oriented management in accounting.⁴ ¹² Whereas in the past fixed assets and their efficiency were the focus of success, today intangible factors such as employee qualifications or customer relationships are becoming increasingly important.⁴ With the help of the BSC, these intangible factors are to be made visible and controllable.¹³ The BSC was developed to link and balance financial and non-financial objectives as well as short- and long-term measurements.⁵ ⁸ The BSC is not only used to measure performance, but also as a strategic management, communication and control instrument.¹³ A continuous feedback and learning process enables strategic adjustment.¹³ The BSC is a comprehensive management system with a broad scope of application, which can be flexibly adapted to the specific needs of the context and the company.⁷

The BSC helps to avoid sub-optimizations, as managers have to look at all relevant performance areas of the scorecard together and can thus identify possible conflicting goals at an early stage, for example whether improvements in one area have been made at the expense of others.¹² In addition, the BSC helps to identify potential for improvement in the strategy.¹⁴

2.3 The four perspectives

The BSC translates the overarching corporate strategy into concrete goals, measurements and targets and classifies them into four perspectives, the financial perspective, the customer perspective, the internal process perspective and the learning and growth perspective.³ ¹² ¹³ ¹⁴ ¹⁵ It not only reflects financial results (financial perspective) that reflect past actions, but also complements them with operational metrics that reflect the other three perspectives of the BSC.¹² These are considered to be decisive factors influencing future financial success.¹² This involves a top-down process in which all goals and indicators are derived from the overarching strategy and linked to each other via cause-and-effect relationships.³ ¹³ This hierarchical structure ensures that all activities are aligned with the strategic direction of the company.³

The perspectives are substantiated by central guiding questions formulated by Kaplan and Norton (1992): “How do customers see us? (customer perspective), What must we excel at? (internal perspective), Can we continue to improve and create value? (innovation and learning perspective), How do we look to shareholders? (financial perspective)” (p.72).¹²

Figure 1: The four perspectives of the BSC, own illustration (2025).

Figure 1 shows the four perspectives of the BSC and their interrelationships. It is divided into four colors, each of which is assigned to a perspective. The arrows and dashed lines in each color represent the influence of that perspective on the others. The pyramid-like representation shows the hierarchical order in the top-down process and how the perspectives influence each other.

The financial perspective assesses whether the implementation of the strategy will lead to economic success.¹³ Figure 1 shows that this perspective does not affect any other, as it represents the financial outcome resulting from the other perspectives.

The customer perspective clarifies the customer and market segments in which the company operates.¹³ It also shows the value proposition to customers, which is intended to achieve a competitive advantage.¹³ The customer perspective is second in Figure 1. According to the top-down principle, it is subordinate to the financial perspective and at the same time influences it.

The internal process perspective defines the internal business processes that are necessary to meet the expectations of customers and shareholders.¹³ Good customer performance is directly based on the processes, decisions and actions in the company.¹² Therefore, it ranks third in Figure 1, influencing both customers and the financial perspective.

Finally, the learning and growth perspective includes the infrastructure needed to achieve the goals of the other three perspectives.¹³ The focus is on well-qualified and committed employees as well as efficient information systems.¹³ The learning and growth perspective is shown in Figure 1 as the foundation, as it influences all three other perspectives and creates the necessary basis for them to be successfully implemented.

2.4 The importance of sustainability for companies

The importance of sustainability in the corporate context has increased sharply in recent years, as ecological, social and economic factors are increasingly influencing the long-term success of companies.² ³

Sustainable development means meeting the needs of the present generation in a way that at the same time ensures that future generations can also meet their own needs.¹⁶

Reducing greenhouse gas emissions and protecting the climate are among the key challenges facing companies worldwide.¹⁷ In particular, increasing pressure from external stakeholders such as customers, investors and public authorities means that companies are increasingly aligning their strategies with environmental objectives.¹⁷

In connection with this, sustainability brings with it some new challenges for companies, especially for corporate strategy and management.¹⁸ These challenges have led companies to realign and rethink their strategies, management approaches and performance models.¹⁸ Companies are increasingly looking for ways to systematically measure and control sustainability.² ¹⁹ As a result, organizations have shown growing interest in appropriate management and measurement systems for sustainable business has grown significantly.² ¹⁹ ²⁰

Against this background, the question arises as to how sustainability goals can be systematically integrated into corporate management. This is precisely where the BSC offers a suitable basis, as it enables companies to link sustainability aspects with goals in a structured way.

2.5 Development from the BSC to the (S)BSC

Although many companies have introduced independent environmental and social management systems in the past in response to the increasing importance of environmental and social issues, these systems are usually not integrated into the overarching corporate management.³ As a result, the connection between environmental or social management and economic success is often missing, which makes it difficult to make their concrete contribution to the company’s results comprehensible.³ The BSC is an efficient and effective management tool.²¹ Due to its versatility, it provides a suitable basis for systematically integrating sustainability goals.³ The reasons given below illustrate BSC’s suitability.

First of all, a key advantage of the BSC is that goals can be pursued in all three sustainability dimensions at the same time.³ Instead of using several separate management systems, e.g. one for environment, one for social affairs and one for finance, the structure of the BSC allows all dimensions to be combined in a single system.³ It also provides a comprehensive overview of key performance indicators (KPIs) and perspectives.²¹

Many sustainability issues are not financial and usually only become apparent in the long term.⁷ The BSC simplifies the linking of financial and non-financial information, which is particularly important for measuring sustainability performance.² The suitability of the BSC for the integration of all three dimensions of sustainability is therefore demonstrated by the fact that factors that cannot be monetized can also be taken into account.³ The BSC supports the integration of such factors into central management.³ In addition, the cause-and-effect relationships of the BSC make it possible to make the effects of sustainability on long-term financial success visible.⁵

Another advantage is that the BSC integrates both leading and lagging indicators, which makes it possible to control which measures contribute to the achievement of goals and how certain results can be influenced.⁵ The BSC ensures a balance between internal/external, financial/non-financial and driving/results-oriented metrics.²¹

The company’s success is often assessed on the basis of financial indicators.²² However, the success of a company depends not only on financial but also on non-financial factors, such as the quality of products and processes, employee motivation or the image of the company.²³

With the increasing importance of sustainability, interest in management systems for measuring and controlling corporate sustainability is also gaining in importance.² In order to meet these extended requirements, sustainability aspects were added to the BSC, which resulted in the creation of the (S)BSC.

Since environmental and social aspects are often not financially measurable and only have a long-term effect, the BSC offers an opportunity to make cause-and-effect relationships between sustainability and financial results visible.² ⁷ Its multidimensional approach allows it to integrate sustainability goals more comprehensively than other models.² ⁷

Figge et al. (2001, 2002) have made a central contribution to the development of the (S)BSC with their work.³ ⁴ By expanding the classic BSC to include sustainability aspects, they have significantly influenced the discussion on the integration of sustainability goals into corporate management.³ ⁴

In order to expand the BSC to include sustainability, various approaches are discussed, which are presented in the following chapter.

2.6 Integration of sustainability into the BSC

The literature mainly describes three variants of how sustainability can be integrated into the BSC.

First, the integrative approach is proposed, where sustainability aspects are integrated into some or all of the existing four perspectives.⁴ For example, water consumption and energy efficiency can be assigned to the internal process perspective.²⁴ Sustainability aspects are integrated into the cause-and-effect chains of the four perspectives and aligned top-down with the financial perspective.³ Due to the hierarchical orientation toward the financial perspective, only market-related sustainability aspects can be integrated into the existing perspectives.³ In this integration variant, either some of the existing economic goals must be replaced by the sustainability goals or each perspective must be expanded to include the sustainability goals.²⁴ One disadvantage could be that sustainability goals can push economic indicators into the background due to their complexity, which would lead to an imbalance in the (S)BSC.²⁴ A further disadvantage could arise if, as with the second option, additional indicators are included in the perspectives, as this can quickly become complicated and confusing and would lead to higher costs as well as more work in administration and control.²⁴

A second variant is the extended approach, where a fifth non-market perspective is added.⁴ ⁵ The non-market perspective integrates ecological and social aspects that could not be included in the classic four perspectives because they lie outside the usual cause-and-effect chains and have no market relevance.³ ²⁵ Nevertheless, these sustainability aspects are of great importance for business success.³ The prerequisite for the creation of a non-market perspective is therefore that the non-market-related environmental and social aspects are strategically relevant for the company.³ The weight of this new perspective depends on the company’s priorities.⁵ The non-market perspective is understood as the basis for the (S)BSC, as societal factors form the basis for market-related activities (finances, customers, suppliers, employees).²⁵ Environmental and social aspects that lie outside the market system can influence all four classical perspectives through the non-market perspective, as they are interconnected.³ ⁵

The following reasons may speak for the introduction of a fifth non-market perspective.⁵ First, social and environmental responsibility is a central component of corporate strategy, which can create competitive advantages.⁵ It is not only seen as a means of increasing operational efficiency.⁵ With this additional perspective, the non-financial results of the company can therefore also be taken into account.²⁵ Secondly, an additional perspective can help to pay particular attention to social and environmental issues and to highlight their strategic importance.⁵ With the additional perspective, the attention of employees and managers can be drawn to social and environmental responsibility, thereby emphasizing the relevance of this topic.⁵

With this variant, however, there is a risk that this perspective can easily be removed again if management priorities change.⁷ Therefore, only those aspects should be integrated into this perspective that cannot be included in the other perspectives.⁷

Third, it is proposed to create a separate environmental and/or social scorecard linked to the existing BSC.³ ⁴ The inferred SBSC builds on an existing BSC/SBSC of the Company.⁴ It is not a completely new system, but uses the existing scorecard and expands it.⁴ The focus is on working out sustainability aspects more strongly and making their role in management clearer.⁴ In doing so, it primarily assumes organizational and coordinative tasks for particularly important environmental and social issues that are strategically relevant.⁴ For example, ecological and social aspects of energy consumption, waste or employee well-being could be mapped here.²⁴ Figge et al. (2002) emphasize that the environmental or social scorecard cannot be created in parallel with the classical scorecard.³ It must be used in conjunction with one of the other methods, integrative or non-market.³ This variant is therefore an extension of the first two methods and not an independent integration variant.³ First, the cause-and-effect chains of the sustainability aspects are identified by the first two variants and then these aspects can be further differentiated by the derived scorecard.³

One danger here could be that a separate sustainability scorecard contradicts the holistic nature of sustainability, as it separates the core business and environmental or social aspects from each other instead of combining them equally with the financial goals in an integrated system.²⁴

In addition to these three integration variants, there are other suggestions in the literature. For example, Nikolaou and Tsalis (2013) propose to integrate environmental and social issues into the four perspectives of the BSC using the GRI guidelines.²⁶ This is intended to help companies measure their sustainability performance, compare it across industries and inform stakeholders more precisely and transparently.²⁶ In this variant, the financial perspective is to be expanded to include environmental and social indicators and the customer perspective is to be renamed a stakeholder perspective that also takes social and ecological aspects into account.²⁶

Hansen and Schaltegger (2016) show in their literature review that about a quarter of their publications suggest expanding or renaming the customer perspective to include additional stakeholders, e.g., they are renamed “customers and stakeholders”, “customers and suppliers” or a “relational perspective”.⁷

Dias-Sardinha et al. (2003) recommend anchoring sustainability goals at all levels of the company using a cascading BSC, so that environmental and social goals are implemented and measurable from strategy to operational areas.²⁷ This is intended to reduce the gap between sustainability reports and actual practice.²⁷

It is not possible to determine in advance which SBSC integration variant is suitable for a company.⁴ It is only during the formulation of goals and indicators that it becomes clear which variant is most promising.⁴

Figure 2: Integration of environmental and social aspects, own illustration (2025).

Figure 2 shows the first two integration variants, the integration of environmental and social aspects into the existing BSC perspectives and the addition of a non-market perspective.

As in Figure 1, the arrows and dashed lines make it clear which perspective affects which other. Furthermore, each perspective is also assigned a color. In this illustration, the green color represents the environmental and social reference.

The first integration variant is represented by the fact that half of the BSC perspectives are colored green. This color representation symbolizes the integration of environmental and social aspects into each individual perspective. The second integration variant is the additional non-market perspective, which is also shown in green. As already described in the explanation of the integration variant of the non-market perspective, it affects all other perspectives and forms the basis for market-related activities. Therefore, it is shown in Figure 2 as the base and lowest perspective of the pyramid.

2.7 Architecture of the (S)BSC

The architecture of the (S)BSC has been discussed extensively, but sometimes controversially, in the literature, in particular by Hansen and Schaltegger (2016) and Hahn and Figge (2018).⁷ ⁹ In the following, the various architectures of the (S)BSC are presented and then points of criticism are briefly explained.

Basically, the (S)BSC architecture is based on two dimensions.⁷ The first dimension is the type of hierarchy between the individual performance perspectives and the weighting of the associated strategic goals.⁷ These are closely linked to the company’s value system.²⁸ On the one hand, the first form comprises the strictly hierarchical architecture, which has a top-down structure.⁷ The aim here is to maximize profits and support financial goals.⁷ On the other hand, there is the semi-hierarchical architecture, whereby only most (but not all) cause-and-effect relationships are still aligned with the financial perspective.⁷ In addition, the non-hierarchical architecture is described, which has a network structure in which all perspectives are connected to each other or exist as independent categories.⁷

The second dimension includes the integration of sustainability into performance perspectives.⁷ These depend on how proactively the corporate sustainability strategy is implemented.²⁹ As already explained in Chapter 2.6 , there are basically three variants for integrating sustainability.

Corporate sustainability is an evolutionary process characterized by continuous learning, adaptation and development, which also means that corporate strategies and the design of the (S)BSC architecture are constantly changing.³⁰ Hansen and Schaltegger (2016) emphasize that companies can design their architecture flexibly in order to link performance perspectives, strategic goals and their interrelationships in a meaningful way.⁷

Hahn and Figge (2018) criticize the architecture of the (S)BSC and emphasize that its structure is irrelevant for the effect.⁹ They consider the (S)BSC as a whole to be unsuitable for managing corporate sustainability.⁹ The authors argue that sustainability is complex, dynamic and often contradictory, which cannot be adequately represented by BSC’s linear cause-and-effect relationships.⁹ In addition, the (S)BSC does not integrate any non-economic logics of thought and action.⁹ Due to its hierarchical structure, sustainability aspects are subordinated to the financial perspective, so that finances are the focus and sustainability only serves financial success.⁹ Hahn and Figge emphasize that the (S)BSC does not do justice to corporate sustainability, regardless of the architecture variant chosen.⁹

2.8 Criticism of the BSC and SBSC

In the literature, both the BSC and the (S)BSC are viewed critically by some authors. Nørreklit (2000) emphasizes that the cause-and-effect chains of BSC are not causal, but merely logical.³¹ It has not been established that the effects previously assumed will actually materialize.³¹ The thesis argues with the example that more satisfied customers do not automatically lead to more profit.³¹ BSC can lead to suboptimal performance as erroneous assumptions can easily lead to inappropriate performance indicators.³¹

According to Nørreklit (2003), the BSC has gaps as a strategic governance model to support strategy implementation because it does not take into account things such as competition or technological developments that could jeopardize the strategy.³²

In addition, the hierarchical top-down processes are criticized.³² The metrics are assigned by management to teams and individuals.³² Employees are less taken into account, as all decisions are made by the company’s management.³² There is no personal exchange, but everything runs through official channels.³² It is also emphasized that organizational learning and employee participation are problematic due to the strict hierarchical orientation.³²

Antonsen (2014) also deals with this aspect and emphasizes that the BSC strengthens formal control, which in turn negatively influences the active involvement of employees.³³ Critical and reflective work behavior is reduced by top-down communication.³³ Formal control hinders individual learning and employee development.³³ The upper management only introduces standardized work processes and indicators, making the BSC unsuitable for measuring complex work tasks and meeting different customer requirements.³³

Mio et al. (2022) highlight as a disadvantage that the introduction of the (S)BSC requires new learning processes and a strategic rethink for companies already working with the BSC, which involves more time and effort for upper management.⁸

2.9 Research gaps and future research directions

So far, the (S)BSC research has mainly investigated the integration of sustainability into the traditional BSC, while detailed analyses of the individual SBSC perspectives are largely lacking. Future research should therefore consider the (S)BSC more as a stand-alone instrument and show how sustainability aspects are concretely anchored in the individual perspectives and how they relate to each other in the overall structure of the (S)BSC.

There is also a need for research with regard to the integration variants. There is no consensus in the literature as to which integration variant is most suitable. Although many different approaches are being discussed, there is still a lack of concrete recommendations or studies with which the variants can be evaluated or compared.

Due to the existing disagreements and discussions regarding the architecture of the (S)BSC, there is also a need for further research in this area. In particular, there is a lack of empirical work in which the various architectures are examined in practice. In the future, the importance and effectiveness of different architecture variants should be analyzed in particular.

Based on the criticism from the previous chapter, some research gaps and future research recommendations can also be identified. The cause-and-effect relationships of the BSC should be examined in more detail in order to understand to what extent the assumed relationships actually occur and how suboptimal results can be avoided as a result. An in-depth analysis of these relationships would be particularly relevant in the context of sustainability, as many metrics are non-financial in nature and their impact on business performance is often difficult to predict.

In addition, it should be examined to what extent external influences can be integrated into the BSC and SBSC models and how flexibly they react to such influences.

Furthermore, future research could explore how regular SBSC reviews and adjustments can promote organizational learning and ensure that goals and metrics are aligned with changing sustainability requirements.

Research that examines how the top-down structure of the (S)BSC can be further developed to reduce formal control and promote critical thinking and organizational learning seems useful. The aim should also be to consider how employees can be more closely involved in the development and application of SBSC and how the dialogue between different levels of the company can be improved.

3 Comparison of the (S)BSC with ISO 14001

In this chapter, the (S)BSC is compared with the ISO 14001 standard. The comparison was chosen because both systems represent a structured framework for managing sustainability and environmental goals. ISO 14001 is a globally recognized standard for environmental management systems published by the International Organization for Standardization in 1996.³⁴ The information on ISO 14001 is based on information provided by the German Federal Environment Agency (deutsches Umweltbundesamt).³⁴

The standard defines requirements with which companies can improve their environmental performance in a targeted manner and achieve their environmental goals.³⁴ It helps companies to comply with legal and other obligations.³⁴

The implementation of ISO 14001 is divided into four main steps: planning, implementation, control and improvement.³⁴ In the planning, environmental objectives are defined, appropriate measures are defined and the associated responsibilities and procedures are determined.³⁴ Next, implementation, in which the measures and procedures laid down above are implemented.³⁴ The next step is to review the responsibilities, procedures and measures taken in relation to the company’s environmental objectives and environmental guidelines.³⁴ Finally, improvement is carried out by adapting responsibilities, procedures, measures and where appropriate, environmental objectives and guidelines.³⁴

ISO 14001 can be applied regardless of the size and type of an organization, as well as under different geographical, cultural, social and environmental conditions.³⁴

The SBSC and ISO 14001 are based on a similar basic principle and procedure. In both systems, goals and corresponding measures are defined, on the basis of which concrete instructions for action are issued. These are planned, implemented, reviewed and continuously improved. In addition, both approaches are flexible and can be adapted to the specific conditions of a company.

The main difference between ISO 14001 and the (S)BSC is the thematic focus. While ISO 14001 deals exclusively with environmental aspects and thus supports environmental management, the (S)BSC integrates all three dimensions of sustainability, ecology, social issues and economy and links them to form a control system.

In addition, the (S)BSC strategically aligns its environmental and social goals with the financial success of the company. In the classic top-down hierarchy, the financial perspective is at the top, so that all other perspectives align with it. In the (S)BSC’s alternative architecture variants, however, the hierarchical orientation toward the financial perspective is less pronounced, so that the three sustainability dimensions are partly on an equal footing.

The structure also differs significantly, the (S)BSC is divided into different performance perspectives that systematically map strategic goals. A comparable structure is not found in ISO 14001.

Another difference is in the methodology. The SBSC works with cause-and-effect relationships between the goals of the perspectives, while ISO 14001 primarily translates environmental goals into concrete measures and procedures without explicitly presenting these relationships.

4 Best practice example

The Volkswagen Group, headquartered in Wolfsburg, is one of the world’s leading automobile and commercial vehicle manufacturers and the largest automotive group in Europe.³⁵ The company employs around 680,000 people and operates over 100 production facilities worldwide.³⁵ In view of the social and ecological change and the associated challenges, the Volkswagen Group sees it as its responsibility to contribute to sustainable development.³⁶

Figure 3: Dimensions and KPIs of the Volkswagen Group, own illustration based on Volkswagen Group (2025).³⁷

In 2024, the Volkswagen Group introduced their sustainability strategy which is named regenerate+.³⁷ As shown in Figure 3, the Volkswagen Group’s sustainability management regenerate+ is divided into four dimensions: nature, our people, society and business.³⁷ Three main indicators have been defined for each of these dimensions (see Figure 3), each linked to objectives and measures.³⁷ ³⁸

After evaluating the Volkswagen Group’s Annual Report 2024 and regenerate+ Progress Report 2024, several characteristics can be identified that could indicate the possible use of an SBSC or a further development of an SBSC.³⁷ ³⁸

The Volkswagen Group considers sustainability to be a key factor for economic success and has firmly integrated it into corporate management.³⁷ ³⁸ This shows a parallel to the (S)BSC, which systematically links environmental and social goals with financial goals. Sustainability is therefore not viewed in isolation, but strategically as part of the overall management.

Sustainability management is based on four dimensions, nature, our people, society and business, each with defined goals, KPIs and measures.³⁷ That structure is similar to the basic principle of the (S)BSC, in which those points are mapped within several perspectives. The four dimensions of the Volkswagen Group cover the three dimensions of sustainability, ecology, social issues and economy. The business dimension in particular shows an economic orientation, as it combines sustainability-related and financial goals, which can be seen, for example, in the indicator for revenue from sustainable business models.³⁷

Indicators such as the reputation index, societal impact or diversity in management make it clear that stakeholder interests are integrated into management, which is also an important element of the (S)BSC.³⁷

However, the reports do not provide clear evidence of cause-and-effect relationships relevant to the full SBSC logic. Overall, the Volkswagen Group shows parallels to an SBSC, especially through its multidimensional structure and KPI-based management.

5 Implementation process of the (S)BSC

After explaining the theoretical principles of the (S)BSC in the previous chapters, comparing it with ISO 14001 and presenting a company example, the following section focuses on the practical implementation of the (S)BSC.

The development of an SBSC follows the logic of the classic BSC.⁴ If a BSC already exists, it is supplemented by ecological and social aspects, if there is none, the steps for creating a BSC are combined with the extension to the (S)BSC.⁴

The literature on the implementation of an SBSC analyzed in this thesis focuses mainly on the integration of sustainability aspects into the BSC. Aspects of the fundamental development and formulation of classical BSC are dealt with only to a limited extent. Therefore, this thesis proposes a combined implementation process of elements from the BSC and SBSC literature, which is particularly suitable for companies where the BSC does not exist yet.

The following remarks on the implementation of the (S)BSC are based on existing implementation models of the classic BSC as well as on specific literature on the (S)BSC. The approaches of Kaplan and Norton (1997)¹³ and Weber and Schäffer (2000)¹⁵, among others, were originally developed for the BSC and are transferred to the (S)BSC in the course of this work. In addition, sources are consulted that deal with the formulation of an SBSC. On this combined basis, an implementation process for the (S)BSC is developed in the following.

Based on the architecture of the (S)BSC explained in the theoretical part, the implementation process in this thesis follows the strictly hierarchical top-down approach. The financial perspective is chosen as the starting point, from which the further perspectives and sustainability goals are derived.

Figure 4: Implementation steps for the (S)BSC, own illustration.

Figure 4 shows the implementation process of the (S)BSC in a summary overview. It presents the implementation steps from top to bottom, starting with the requirements and preparations and ending with the individual steps 1 to 7.

For the (S)BSC to be successfully implemented, a number of requirements must be met before the project begins. Since the (S)BSC is an instrument for strategy implementation, its introduction requires that the corporate strategy has already been formulated in advance.⁴ ¹³ Another requirement is a clear commitment from top management to create an environment that allows for a change in corporate culture.³⁹ These include incentives, training for employees and the adaptation of systems and processes in the organization.³⁹

Part of the preparation is that a project leader should be appointed at the beginning, who will take responsibility for the framework, the basic idea as well as the methodological design and development of the (S)BSC.¹³ All members of the project team and, if applicable, the steering committee must understand the intention and concept of the (S)BSC.¹⁵

Before starting, the most important questions about the project should be clarified, such as whether external support is needed or in what time frame the project should take place.¹⁵

The development of the (S)BSC is best done in half-day to full-day workshops far away from day-to-day business, with the individual workshops following each other at short intervals.¹⁵ The workshops are used to formulate and coordinate the (S)BSC.¹³ There, results from interviews and analyses are presented, discussed together and open questions clarified in order to create a uniform understanding for further implementation.¹³

The following describes the individual steps of the implementation process of an SBSC.

5.1 Selection of the strategic business unit

The first step is to determine for which strategic business unit (SBU) the (S)BSC is to be created.³ The prerequisite for this is that a strategy already exists for the SBU.³ For small and medium-sized companies, the business unit level may be the same as the company level.³ In large companies or corporations, on the other hand, there are usually several SBUs that serve different customer segments and are often organized as independent profit centers.³

Ideally, the activities of the SBU include a complete value chain. The SBU should have its own production facility, its own products, customers, its own marketing and its own sales.¹³

5.2 Identification of relevant environmental and social aspects

The next step is to identify all potentially important environmental and social issues that affect the business unit.³ The aim is to bring together all of the company’s environmental and social exposures in a complete profile and thus obtain a comprehensive list of relevant aspects.³

When identifying environmental aspects, all environmental interventions caused by the activities and products of a business unit are recorded.⁴⁰ Those interventions form the basis for the environmental effects that arise, since ecological problems can in principle be attributed to physical or chemical changes.⁴⁰

Figge et al. (2001) have drawn up a list of potentially relevant environmental aspects:4

• “Emissions (air emissions, soil emissions, water emissions)

• Waste (solid and liquid waste, hazardous waste)

• Material input / material intensity

• Energy intensity

• Noise and vibrations

• Waste heat and other radiation

• Direct impacts on nature and landscape”

(own translation based on Figge et al., 2001, p.36)⁴

For each business unit, it is examined whether the seven environmental interventions occur in connection with their activities and products and in what form they manifest themselves.³ In this way, a comprehensive profile of specific environmental exposure is created.³

Since social aspects are very different and diverse, it is difficult to fully systematize them.⁴¹ That is easier in the case of environmental aspects because they are based on a scientific basis.⁴¹ Figge et al. (2001) suggest identifying social aspects according to the actors involved using the stakeholder approach.⁴ The first step is to identify which stakeholder groups are relevant for the business unit.³ ⁴ These groups can be divided into:

• Internal stakeholders (e.g., employees, management),

• Stakeholders along the value chain (e.g., suppliers, customers, consumers, waste contractors),

• Stakeholders in the local community (e.g., residents, municipalities, citizen initiatives),

• Societal stakeholders / stakeholders in the societal context (e.g., associations, NGOs, media).³ ⁴

In addition, a distinction is made between direct and indirect stakeholders.³ Direct stakeholders are in direct material exchange with the company.⁴ They thus directly influence the company’s finances.⁴ Indirect stakeholders have no direct material or monetary relationship with the company.⁴

First, the relevant stakeholder groups are determined.³ Based on this, the second step was to determine their social expectations and demands in order to derive the social aspects that are important for the company.³

5.3 Determination of strategic aspects

The initial goal is to determine the strategically relevant aspects, including environmental and social aspects.³ In a second step, these aspects are then translated into targets and then provided with appropriate indicators.³ A total of 15-25 aspects are selected and linked causally and hierarchically.³ The approach is carried out in a cascading manner in a top-down approach, starting with the financial perspective, in order to align all relevant aspects with the implementation of the strategy and long-term success.³

In the following, the strategic relevance of environmental and social aspects is first explained. It outlines the key steps that must be considered in this process. Next, a detailed examination of the four perspectives of the BSC.

5.3.1 Strategic relevance of environmental and social aspects

In this step, the identified environmental and social aspects are examined and classified with regard to their strategic importance.³ The relevance of strategic aspects for the company can be classified on the basis of three levels.³ First, strategic core issues, for which lagging indicators are defined to measure whether the strategic requirements have been achieved in the perspectives.³ Secondly, there are performance drivers that are reflected through leading indicators.³ These show how the results, represented by the lagging indicators, are to be realized in the respective perspectives.³ Third, there are hygiene factors, which are aspects that are necessary for business operations but are not strategic drivers.³ Hygiene factors are not part of the (S)BSC due to this characteristic.³

The classification into the three levels of strategic relevance (strategic core issues, performance drivers, hygiene factors) is not only for environmental and social issues, but equally for all aspects of the BSC.³ This ensures that both the classic dimensions of BSC and ecological and social issues are systematically taken into account in the formulation process.³

Figge et al. (2001) have developed generic categories for lagging and leading indicators for the respective perspectives, which are presented in Table 1 below.⁴ The four perspectives and their lagging and leading indicators will be examined in detail in the following chapters.

Lagging Indicators

Leading Indicators

Financial Perspective

• Revenue growth

• Productivity growth

• Asset utilization

–

Customer Perspective

• Market share

• Customer acquisition

• Customer retention

• Customer satisfaction

• Customer profitability

• Product attributes

• Customer relationship

• Image and reputation

Internal Process Perspective

• Innovation process

• Operations process

• Postsale service process

• Cost indicators

• Quality indicators

• Time indicators

Learning and Growth Perspective

• Employee retention

• Employee productivity

• Employee satisfaction

• Employee potentials

• Technical infrastructure

• Climate for action

Non-Market Perspective

• Freedom of action

• Legitimacy

• Legality

Leading or lagging indicators from all other perspectives

Table 1: Generic categories for the formulation of lagging and leading indicators, own illustration based on Figge et. al (2002), referring to Figge et. al (2001) and Kaplan and Norton (1996).³ ⁴ ⁴²

In the next step, all identified aspects are systematically reviewed and classified.³ The following questions can be asked as you go through the four perspectives:3

• Is it a strategic core issue that is directly measured by lagging indicators?3

• Does the aspect contribute significantly to the achievement of a strategic core issue and therefore represent a performance driver (leading indicator)?3

• What is the contribution of this performance driver to the achievement of the strategic objectives?3

• Is the aspect a hygienic factor that needs to be managed but does not provide any competitive advantage?3

To classify the aspects, the categories listed in Table 1 for performance and management indicators can be used.³ It is advisable to create a matrix in which the categories from Table 1 are systematically compared with the relevant environmental and social aspects.⁴ The process is cascading in all perspectives of the scorecard.³ All aspects and indicators must be directly or indirectly linked to the financial perspective, i.e. that strategic core issues and performance drivers of the lower perspectives serve to achieve the goals of the upper perspectives.³ At each step downwards, it must be made clear how the respective aspects and performance drivers contribute to the achievement of the goals in the overarching perspectives, so that a hierarchical cause-and-effect chain is created that links all strategically relevant aspects with the implementation of the corporate strategy.³

The indicators of each perspective are discussed in detail below, with the environmental and social steps explained above to be applied to each perspective.

5.3.2 Financial perspective

The financial perspective shows the economic impact of past measures.¹³ Financial ratios indicate whether the company’s strategy, implementation and execution are leading to an improvement in financial results.¹⁴ Financial indicators and financial targets show expected financial performance and they serve as end goals for other perspectives.¹³ They describe the expected financial performance and, at the same time, constitute the final objectives and reference objects for the objectives and indicators of the other perspectives.¹³ ¹⁵

Strategic core issue

The economic value of a company can be increased through three strategic core issues, which are revenue growth and mix, cost reduction/productivity improvement and asset utilization.¹³ ¹⁴ Revenue growth and mix is the expansion or adaptation of product and service offerings to reach new customer groups and markets.¹³ Cost reduction and productivity improvement are about reducing direct and indirect costs while uncovering and exploiting synergies.¹³ The use of assets and investment strategy is aimed at reducing net working capital and making more efficient use of the existing asset base.¹³

A top performance indicator of for-profit companies is usually the increase in shareholder value or EVA (Economic Value Added).⁴ ¹⁴ From the shareholders’ point of view, the profitability and sustainability of the company’s operations is particularly relevant.¹⁴ EVA measures the actual economic success of a company by showing how much profit is left after deducting all cost of capital and opportunity cost.⁴³

Strategic environmental or social aspects can only be found in the result figure in exceptional cases, as these ensure value orientation.⁴ Environmental and social aspects are more instrumental in nature, which is why financial ratios are mainly taken into account in the financial perspective.⁴

Performance drivers

The performance indicators of the other perspectives are the performance drivers of the financial perspective, as they are intended to show how the results are achieved in the financial perspective.⁴

5.3.3 Customer perspective

The customer perspective shows in which customer and market segments the company competes and what benefits the company wants to offer its customers.¹³ The goal of the customer perspective is to help management develop segment-based, profit-oriented strategies.¹³ A company should not focus on satisfying all customers at the same time, as this is hardly feasible.¹³ Instead, it makes sense to specifically select specific customer and market segments in which the company wants to be active and create competitive advantages.¹³ For these target segments, concrete goals should be formulated that fit the overarching corporate strategy and mission.¹³

During the strategy formulation, it is helpful to analyze through in-depth market research which market and customer segments are relevant and what specific expectations these target groups have in terms of price, quality, functionality, image, reputation and service.¹³

Strategic core issues

The performance indicators from the customer’s perspective are the performance drivers for the financial perspective.⁴ The objectives and indicators of the strategic core issues are therefore developed on the basis of the specifications, weightings and objectives of the financial perspective.⁴

The core metrics for the customer perspective include market share, customer loyalty, customer acquisition, customer satisfaction, customer profitability.¹³ Market share describes the size of an undertaking within a given market.¹³ This can be measured by the number of customers, units sold or money spent.¹³ Customer loyalty refers to how successful a company is in maintaining long-term customer relationships or retaining existing customers.¹³ Customer acquisition is the extent to which a company acquires or inspires new customers.¹³ This is measured in absolute numbers (e.g., 50 new customers acquired last year) or in relative numbers (e.g., 20% more customers than in the previous year).¹³ Customer satisfaction describes how well a company meets the expectations of its customers.¹³ It evaluates how satisfied customers are with the company based on clearly defined performance criteria such as quality, service or delivery time, within the value specifications set by the company or customers.¹³ Customer profitability calculates the net profit that an individual customer or group of customers generates for the company.¹³ This also takes into account one-off costs incurred in connection with that customer.¹³

These indicators should be tailored to the respective target customer group of the company.¹³

Performance drivers

In order to improve the core metrics, the company should make the right value proposition to customers.¹³ First, the ratios that reflect the result of the existing value proposition are measured.¹³ On this basis, it can then be analyzed how the value proposition needs to be adjusted in order to improve the indicators in a targeted manner.¹³ A value proposition describes what a company specifically offers its customers in order to meet their needs and expectations.¹³ Value propositions can vary greatly depending on the industry or market segment.¹³ According to Kaplan and Norton (1997), three central categories of performance drivers can be identified.¹³ The selection and weighting of these categories depends on the strategy of the business unit.⁴

Value propositions include product/service characteristics, customer relationships and image and reputation.¹³ With regard to product/service characteristics, the company asks itself which product/service characteristics are offered to the customer.¹³ This concerns the functionality of the product/service, the price, the quality and the time.¹³ Customer relationships are about the delivery of the product or service to the customer, with the associated response and delivery times, and how satisfied the customer was with their purchase.¹³ Furthermore, this value proposition also deals with long-term relationships, such as the loyalty of suppliers and customers or close cooperation between the company and the suppliers.¹³ The value proposition of image and reputation is about intangible factors, for example activities in advertising or through quality improvements.¹³ companies actively approach customers by specifically determining their desired customer (e.g. age, occupational group, characteristics, etc.) and trying to influence their purchasing decisions.¹³ The performance drivers of the customer perspective serve as starting points for the results of the other perspectives.⁴

5.3.4 Internal process perspective

The internal process perspective is not only oriented toward internal goals, but also takes into account external expectations, such as customers or shareholders.¹² ¹³ This allows overarching processes such as innovation, operational processes and customer service to be controlled and strategically aligned.¹³ In addition, the indicators and objectives set out in that perspective clarify the way in which products and services are to be developed in order to achieve the desired sales goals in the target customer segment and the planned productivity and investment targets.⁴

Strategic core issues

It is recommended to capture the entire value chain processes, starting with the innovation process, then the operations process, and then the postsale service process.¹³ The innovation process begins with market analyses to identify the relevant segments, their size, specific customer requirements and price conditions.¹³ Based on this, new products or services are created or existing offers are further developed and brought to market maturity.¹³ This process requires investment in research and development to enable both innovation and the adaptation of existing solutions and their introduction to the market.¹³ The operating process includes the efficient and continuous manufacture of existing products and services and their punctual and reliable delivery to existing customers.¹³ Targeted indicators for cost, quality, time and performance should be collected to ensure high product and service quality for target customers.¹³ The postsale service process starts after the purchase and includes all activities that add value to the customer when using the products and services.¹³ These include, but are not limited to, warranty and maintenance work, the processing of errors and complaints and the processing of payments.¹³ This process helps companies better understand and continuously improve key post-purchase service aspects.¹³

These sub-processes are weighted and selected depending on their strategic importance, and then appropriate indicators and targets are defined for them.⁴

Performance drivers

The key performance drivers in the process perspective include cost indicators, quality indicators and time indicators.¹³ To achieve goals such as shorter lead times, better quality, higher productivity and lower costs, the management must develop metrics that can be directly influenced by employees.¹² To do this, it is necessary to translate abstract performance goals such as time, quality or costs into area-specific and actionable indicators.¹² In this way, strategic guidelines of top management can be combined with the concrete actions of individual employees and everyone in the company knows what they should be working toward.¹²

5.3.5 Learning and growth perspective

The learning and growth perspective describes the infrastructure that the company needs to successfully implement the goals of the finance, customer and internal process perspective.⁴ These goals can only be achieved if employees have the necessary skills, information and motivation.⁴

In this perspective, goals and indicators are set to foster a learning and growing organization.¹³ It forms the basis for the other perspectives, as it creates the necessary infrastructure.¹³ Companies must therefore invest in people, systems and processes if they want to achieve long-term financial success, as these areas make up the potential of the company.¹³

Strategic core issues

The first strategic core issues is employee satisfaction, which can be recorded, for example, through regular surveys, annually or randomly.¹³ Satisfied employees perform better, which in turn increases productivity, improves quality and strengthens customer loyalty.¹³ This is a decisive success factor, especially for simple tasks with a lot of customer contact.¹³

Employee retention also plays a major role.¹³ Companies want to retain good employees for as long as possible.¹³ The fluctuation rate is the most important metric here, the lower it is, the better it is.¹³ After all, long-term employees carry knowledge, values and customer relationships that are very valuable to the company.¹³ In order to retain employees in the long term, companies must invest specifically in their further development.¹³

The third indicator is employee productivity.¹³ It shows how employee skills impact innovation, internal operations and customer satisfaction.¹³ Output per employee is usually measured, for example by sales per employee.¹³ The aim is to achieve more performance with the same number or fewer employees.¹³ However, the indicator can also lead to false incentives, for example through excessive pressure to perform or outsourcing.¹³ Alternatively, the ratio of output to payroll can also be considered.¹³

These metrics are fundamental and always relevant for any business.¹³ They are the basic prerequisites for achieving the goals of the other perspectives.¹³ Therefore, according to Figge et al. (2001), the question of environmental or social characteristics is omitted at this point.⁴

Performance drivers

Within the learning and growth perspective, three central categories are distinguished, namely employee potential, technical infrastructure and climate for action.¹³ They also provide indications of how well strategic tasks are covered, how effectively employees are provided with relevant information and how strongly teams and departments are aligned with strategic goals.¹³

The first category refers to employee potential.¹³ Companies are under constant competitive pressure and therefore have to continuously improve.¹³ For this to succeed, it is crucial to provide employees with regular training.¹³ Suggestions for improvement should come not only from the management level, but also from employees who are in daily contact with internal processes and customers.¹³ The aim is for employees to think along, actively participate and act in a customer-oriented manner.¹³

At this point, the Volkswagen Group’s indicator “training of our employees” can be mentioned as an example, which illustrates the performance driver employee potential.³⁷ The company emphasizes that the transformation of mobility can only succeed with employees who actively shape this change.³⁷ The indicator is measured in further training hours per employee.³⁷ In 2024, the current level is 20.8 hours of training per employee, with the goal of increasing this figure to 30 hours by 2030.³⁷ This example illustrates how companies can translate employee potential into measurable indicators.

In the learning and growth perspective, the second category focuses on the potential of technical infrastructure.¹³ Motivation and new skills in employees alone are not enough if there is a lack of relevant information.¹³ Only with the right data can you make informed decisions.¹³ The goal is to improve processes and save time and costs by providing accurate and up-to-date information.¹³ As many employees as possible should have access to relevant and up-to-date information in order to be able to perform their tasks more effectively.¹³ Information systems are designed to help make informed decisions and avoid errors, lost time and unnecessary expenses.¹³

The third category, the learning and growth perspective, deals with the climate for action with the topics of motivation, empowerment and goal orientation.¹³ Even qualified employees cannot develop their potential if they are not motivated or are not involved enough in decision-making processes.¹³ For innovation to emerge, a working environment is needed in which employees are allowed to act independently and suggestions for improvement are welcome.¹³

5.3.6 Non-market perspective

After reviewing the four BSC perspectives, it is checked whether a non-market perspective is required.³ To this end, it is examined whether there are strategically relevant environmental or social aspects that influence the success of the business unit outside the market system.³ The assessment requires the clarification of three essential aspects.³ First, whether environmental or social aspects influence the success of the business entity outside the market.³ Second, whether they represent strategic core issues in which the unit must be particularly efficient.³ Thirdly, what concrete contribution they make to the implementation of the strategy as performance drivers.³ The non-market perspective serves as an overarching framework that embeds the other perspectives and whose aspects must also be directly or indirectly linked to the financial perspective.³ Its core elements can influence goals in all perspectives, so that corresponding performance drivers can also be located in any other perspective.³ If necessary, an additional non-market perspective may be included in the (S)BSC.³

Strategic core issues

The non-market perspective has three core strategic elements.⁴ The first is legality.⁴ This relates to the forward-looking guarantee of compliance with relevant legal requirements in the environmental and social areas.⁴ The second element, legitimacy, includes the forward-looking guarantee of acceptance of the company’s actions by the main stakeholders.⁴ The third is the freedom of action.⁴ This is about expanding the strategic scope of action and the freedom of decision for entrepreneurial action.⁴

Performance drivers

The performance drivers show which of the strategic core issues, legality, legitimacy or freedom of action, are influenced.⁴ The performance drivers of the non-market perspective lie in the other perspectives of the BSC, as these reflect the relevant corporate activities.⁴ From this point on, it is examined which activities of the other perspectives affect the strategic core issues of the non-market perspectives.⁴ This ensures that the non-market perspective is fully integrated into SBSC’s cause-and-effect chains.⁴

The result of the entire process is a cause-and-effect network that maps all strategically relevant aspects.³ This network makes the business unit’s strategy visible and comprehensible.³ The top-down process determines the strategic relevance of environmental and social aspects as well as that of traditional aspects.³ In this way, environmental and social issues are fully integrated into the management system.³

5.4 Strategy map

The result can be presented in a strategy map in which all economic, ecological and social aspects are mapped as a hierarchical cause-and-effect network.³ A strategy map is a structured and holistic instrument that helps to systematically present and link the central elements of a corporate strategy.¹⁴

The strategy map provides a logical and comprehensive framework for the representation of strategy by making central elements and their connections visible.¹⁴ It thus creates a common point of reference for the entire organization and can also be used as a diagnostic tool to identify weaknesses or gaps.¹⁴ This approach is based on cause-and-effect relationships, which reflect the strategy’s hypotheses and illustrate how internal action leads to the desired financial and non-financial outcomes over several stages.¹⁴

5.5 Definition of indicators, targets and measures

After identifying and aligning the relevant aspects, the next step is to define indicators, targets and measures to steer the company’s performance toward sustainability.³ The KPIs are only defined after the strategic aspects have been selected, otherwise there is a risk that the KPIs will dominate the formulation process too much.¹⁵

Firstly, indicators should be defined that best illustrate the intention of the targets and secondly, for each indicator and measure, consideration should be given to the sources from which the necessary data can be taken.¹⁵

The target values are then determined and the measures necessary to achieve them are defined.¹⁵ Weber and Schäfer (2000) define five recommendations for setting targets and measures.¹⁵ There must be a suitable measure for every target, and every measure should be measurable in order to be able to check its success.¹⁵ The targets should not be set too high, they should be realistic and not unattainable.¹⁵ For each target and measure, it must be clearly defined who is responsible for it.¹⁵ The measures should be clearly described so that even outsiders understand precisely what is being done and how success can be monitored.¹⁵ When defining the measures, it is better to use less than too much.¹⁵

To illustrate the theoretically described procedure, the indicators of the Volkswagen Group can be used as a practical example. For example, the Volkswagen Group uses the indicator “diversity in management”.³⁷ The company intends to promote a diverse, inclusive and non-discriminatory corporate culture.³⁷ The indicator is measured as a percentage.³⁷ It aims to increase the proportion of women in top management to 20.2% by 2025, currently (2024) it is 19.9%.³⁷ A second goal here is internationality in top management, with a value of 25% to be achieved by 2025.³⁷ This has already been exceeded, as the current value (2024) is 29.1%.³⁷

Another example is the “proportion of circular materials in vehicles”.³⁷ The Volkswagen Group’s goal is not only to protect nature, but to strengthen it actively.³⁷ It is working to reduce the demand for primary raw materials continuously.³⁷ The proportion of circular materials is measured as a percentage.³⁷ In 2024, that proportion ranged from 12.5% to 26.2%.³⁷ By 2040, they aim to increase this figure to 40%.³⁷

These examples show how strategic environmental and social aspects can be integrated into corporate management through defined indicators and targets so that sustainability becomes measurable.

5.6 Development of an implementation plan

After the targets and measures have been determined, an implementation plan should be developed.¹⁵ ⁴⁴ This should record how the metrics are linked to databases and other sources of information, and how the scorecard is linked to other parts of the management system.¹⁵ ⁴⁴ In addition, it should be clear what contribution each business unit makes to the overarching goals and measures.¹⁵ ⁴⁴

A suitable IT system is also crucial for reliably monitoring KPIs.⁴⁴ Various solutions may be considered, such as modules of existing ERP systems or tailor-made applications.⁴⁴

In a further step, the final vision, objectives and indicators are discussed and agreed upon in a workshop.¹³ The aim is to reach a common agreement on the implementation program.¹³ The plan must be communicated and broken down to all levels of the organization so that responsibilities and tasks are clearly assigned.⁴⁴

In the end, top management and middle management should agree on goals, indicators and the implementation of the strategy, whereby a concrete implementation plan should also have been developed.¹³ The result is the integration of the (S)BSC into the management system, its embedding in the management philosophy and the support provided by an accompanying information system.¹³

5.7 Feedback and learning process

The feedback and learning process is a central component of the (S)BSC.¹³ As part of this process, the organization learns how to improve itself in the long term from mistakes and experiences.¹³ The SBSC supports an ongoing cycle of learning and adaptation.¹³ A regular review process is essential to review and adjust the strategic objectives, measures and cause-and-effect relationships at defined intervals (e.g., annually).¹³ ⁴⁴

Through its cause-and-effect relationships, the (S)BSC makes the connections between individual actions visible and thus creates a uniform overview.¹³ This gives employees a better understanding of all activities, the overall process and their own influence.¹³ This supports both team learning and monitoring company performance.¹³ The identification of performance drivers and measures makes it possible not only to measure changes, but also to control them in a targeted manner.¹³ The involvement and information of all employees play a decisive role in ensuring that the (S)BSC is achieved both in terms of achieving its goals and in ensuring the ongoing maintenance and use of the (S)BSC.⁴⁴

Through a double-loop learning process, not only is it examined whether the set goals have been achieved, but experiences are also used for further learning.¹³ Strategies, assumptions and causes are questioned and adjusted.¹³ Lessons should be learned from mistakes in order to continuously revise and further develop the process.¹³ Strategic learning and adaptation thus form the basis for successful implementation of the corporate strategy.¹³

5.8 Future research directions

The literature reviewed in this thesis has so far lacked recommendations for the selection of suitable sustainability indicators. This gap can make it difficult for companies to implement the (S)BSC because they lack clear guidance or frameworks.

In addition, there are few detailed studies in the literature on how organizational learning can be promoted within the framework of the (S)BSC and how the instrument can be continuously improved. Future research should therefore focus specifically on this process, as continuous development of the (S)BSC is important for its effectiveness and adaptability.

6 Drivers

Several drivers are mentioned in the literature for the successful implementation of a BSC or SBSC.

According to Weber and Schäffer (2000), the planning of the project objectives and the project scope is the most important success factor.¹⁵ Without clear goals, there is a risk that activities will be uncoordinated and not contribute to the actual success of the project.¹⁵ A good project scope prevents expectations from becoming too unrealistic, which in turn can lead to project cancellations.¹⁵ It is equally important that all members of the project team understand the concept and objectives of the (S)BSC.¹⁵

An important driver for the implementation of an SBSC is the commitment of top management, as this is the only way to create an environment that enables cultural change and creates openness to sustainability.³⁹ On this basis, incentive systems and training programs can be developed to promote and strengthen employees.³⁹ It also encourages changes in the company’s systems and processes.³⁹

Mio et al. (2022) identify the consideration of stakeholder interests, organizational culture, top management commitment, organizational structure and company size as the most relevant success factors.⁸

Similarly, Weber and Schäffer (2000) also emphasize the importance of the top management, since the (S)BSC aims at the management of the company and the change of structures and resistance is typically to be expected in such a project.¹⁵

The case study by Papalexandris et al. (2004) identified some drivers for implementation.⁴⁴ First, the communication of the strategy throughout the organization.⁴⁴ This allowed employees to understand the company’s strategic goals and see their own contribution to them.⁴⁴ Secondly, the involvement of employees and the consideration of their suggestions is an important point.⁴⁴ This leads to less resistance to change and also strengthens the motivation of employees.⁴⁴

Even though there is no evidence of a concrete use of an SBSC at the Volkswagen Group, this thesis assumes that it is used accordingly. Under this assumption, some drivers for the successful implementation of sustainability can be derived from the example. The key drivers are clearly defined goals, concrete measures, reliable indicators and transparent performance monitoring.³⁷ Sustainability should not be understood as a moral duty, but as a responsibility.³⁷ Metrics should be strategically prioritized and reviewed regularly, creating internal and external transparency.³⁷ Continuous monitoring and ongoing progress assessment help to consistently integrate sustainability into decision-making processes along the entire value chain.³⁷

Another driver is the involvement of external experts.³⁷ The Volkswagen Group continuously questions its strategic objectives through regular meetings and topic-specific exchanges, which ensures critical reflection and continuous further development of sustainability management.³⁷

In addition, strengthening collaboration and fostering an open corporate culture are important points.³⁷ The Volkswagen Group emphasizes the importance of strong partnerships and respectful dialogue with employees, partners and society in order to specifically amplify positive impact in the four regenerate+ dimensions.³⁷

7 Barriers

In addition to drivers, barriers can also be found in the literature that complicate or hinder the implementation of a BSC and SBSC.

Hubbard (2009) emphasizes that many companies do not succeed in limiting themselves to the number of metrics recommended by Kaplan and Norton.²⁴ In addition, the inclusion of sustainability goals in the scorecard either displaces the economic indicators or makes the scorecard confusing due to too many goals.²⁴

In addition, a challenge is that there are no uniform guidelines or standards on how sustainability should be integrated into the perspectives of BSC.²⁶

Similarly, Hubbard (2009) identifies the identification of cause-and-effect relationships as a common obstacle.²⁴ The linking of indicators through such causal relationships is not implemented by many companies because they are considered too complex and there are no uniform procedures for them.²⁴ Kaplan and Norton (1996) also emphasize that the specification of such relationships is “much easier said than done” in practice (p.22).⁴⁵

An additional barrier, according to Kaplan and Norton (1996), is that companies predominantly use the feedback process for operational control, i.e. to monitor current performance with the defined plan.⁴⁵ Only rarely is there any reflection on whether the corporate strategy actually corresponds to the original plans.⁴⁵

Another challenge is that sustainability parameters are usually qualitative in nature and difficult to quantify, while the four perspectives of the BSC are more quantitative in nature.⁷

Barbosa et al. (2020) note that small business sustainability practices are often characterized by informality and lack of planning, suggesting that small businesses lack clear processes and structures, making implementation much more difficult.²⁰

Weber and Schäffer (2000) identify too tight time and cost planning as a major barrier.¹⁵ In addition, there are underestimated difficulties in data acquisition and technical implementation by IT systems, which further complicate the implementation process.¹⁵

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Kaplan, R. S. & Norton, D. P. Balanced scorecard: Strategien erfolgreich umsetzen. (Schäffer-Poeschel, 1997).
14
Kaplan, R. S. & Norton, D. P. Transforming the balanced scorecard from performance measurement to strategic management: Part 1. Accounting Horizons 15, 87-104 (2001).
15
Weber, J. & Schäffer, U. Balanced Scorecard & Controlling: Implementierung – Nutzen für Manager und Controller – Erfahrungen in deutschen Unternehmen. (Gabler, 2000).
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Galbreath, J. Building corporate social responsibility into strategy. European Business Review 21, 109-127 (2009).
19
Epstein, M. & Roy, M.-J. Managing corporate environmental performance:: A multinational perspective. European Management Journal 16, 284-296 (1998).
20
Barbosa, M., Castañeda-Ayarza, J. A. & Ferreira, D. H. L. Sustainable strategic management (GES): Sustainability in small business. Journal of Cleaner Production 258, 120880 (2020).
21
Hsu, Y.-L. & Liu, C.-C. Environmental performance evaluation and strategy management using balanced scorecard. Environmental Monitoring and Assessment 170, 599-607 (2010).
22
Kolk, A. & Mauser, A. The evolution of environmental management: from stage models to performance evaluation. Business Strategy and the Environment 11, 14-31 (2002).
23
Maltz, A. C., Shenhar, A. J. & Reilly, R. R. Beyond the balanced scorecard: Refining the search for organizational success measures. Long Range Planning 36, 187-204 (2003).
24
Hubbard, G. Measuring organizational performance: beyond the triple bottom line. Business Strategy and the Environment 18, 177-191 (2009).
25
Möller, A. & Schaltegger, S. The sustainability balanced scorecard as a framework for eco‐efficiency analysis. Journal of Industrial Ecology 9, 73-83 (2005).
26
Nikolaou, I. E. & Tsalis, T. A. Development of a sustainable balanced scorecard framework. Ecological Indicators 34, 76-86 (2013).
27
Dias-Sardinha, I., Reijnders, L. & Antunes, P. From environmental performance evaluation to eco-efficiency and sustainability balanced scorecards. Environmental Quality Management 12, 51-51 (2002).
28
Van Marrewijk, M. A value based approach to organization types: Towards a coherent set of stakeholder-oriented management tools. Journal of Business Ethics 55, 147-158 (2004).
29
Aragón-Correa, J. A. & Rubio-Lopez, E. A. Proactive corporate environmental strategies: myths and misunderstandings. Long Range Planning 40, 357-381 (2007).
30
Hockerts, K. & Wüstenhagen, R. Greening Goliaths versus emerging Davids – Theorizing about the role of incumbents and new entrants in sustainable entrepreneurship. Journal of Business Venturing 25, 481-492 (2010).
31
Nørreklit, H. The balance on the balanced scorecard a critical analysis of some of its assumptions. Management Accounting Research 11, 65-88 (2000).
32
Nørreklit, H. The balanced scorecard: what is the score? A rhetorical analysis of the balanced scorecard. Accounting, Organizations and Society 28, 591-619 (2003).
33
Antonsen, Y. The downside of the Balanced Scorecard: A case study from Norway. Scandinavian Journal of Management 30, 40-50 (2014).
34
Umweltbundesamt. ISO 14001 – Umweltmanagementsystemnorm, Accessed [13.10.2025], <https://www.umweltbundesamt.de/themen/wirtschaft-konsum/wirtschaft-umwelt/umwelt-energiemanagement/iso-14001-umweltmanagementsystemnorm#hilfestellungen-zur-umsetzung> (2024).
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39
de Andrade, J. B. S. O. et al. A proposal of a Balanced Scorecard for an environmental education program at universities. Journal of Cleaner Production 172, 1674-1690 (2018).
40
Heijungs, R. et al. Environmental life cycle assessment of products: guide and backgrounds (part 1). Centre of Environmental Science, Leiden, The Netherlands (1992).
41
Clarkson, M. E. A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review 20, 92-117 (1995).
42
Kaplan, R. S. & Norton, D. P. The balanced scorecard: translating strategy into action. (Harvard Business School Press, 1996).
43
Sharma, A. K. & Kumar, S. Economic value added (EVA)-literature review and relevant issues. International Journal of Economics and Finance 2, 200-220 (2010).
44
Papalexandris, A., Ioannou, G. & Prastacos, G. P. Implementing the balanced scorecard in Greece: a software firm’s experience. Long Range Planning 37, 351-366 (2004).
45
Kaplan, R. S. & Norton, D. P. Strategic learning & the balanced scorecard. Strategy & Leadership 24, 18-24 (1996).

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3
Figge, F., Hahn, T., Schaltegger, S. & Wagner, M. The sustainability balanced scorecard – linking sustainability management to business strategy. Business Strategy and the Environment 11, 269-284 (2002).
4
Figge, F., Hahn, T., Schaltegger, S. & Wagner, M. Sustainability Balanced Scorecard. Wertorientiertes Nachhaltigkeitsmanagement mit der Balanced Scorecard. Center for Sustainability Management: Lüneburg (2001).
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Länsiluoto, A. & Järvenpää, M. Environmental and performance management forces: Integrating “greenness” into balanced scorecard. Qualitative Research in Accounting & Management 5, 184-206 (2008).
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Hansen, E. G. & Schaltegger, S. The sustainability balanced scorecard: A systematic review of architectures. Journal of Business Ethics 133, 193-221 (2016).
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Mio, C., Costantini, A. & Panfilo, S. Performance measurement tools for sustainable business: A systematic literature review on the sustainability balanced scorecard use. Corporate Social Responsibility and Environmental Management 29, 367-384 (2022).
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Schaltegger, S. & Wagner, M. Integrative management of sustainability performance, measurement and reporting. International Journal of Accounting, Auditing and Performance Evaluation 3, 1-19 (2006).
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Schaltegger, S. Sustainability as a driver for corporate economic success. Consequences for the development of sustainability management control. Society and Economy 33, 15-28 (2011).
12
Kaplan, R. S. & Norton, D. P. The Balanced Scorecard – Measures That Drive Performance. Harvard Business Review 70, 71-79 (1992).
13
Kaplan, R. S. & Norton, D. P. Balanced scorecard: Strategien erfolgreich umsetzen. (Schäffer-Poeschel, 1997).
14
Kaplan, R. S. & Norton, D. P. Transforming the balanced scorecard from performance measurement to strategic management: Part 1. Accounting Horizons 15, 87-104 (2001).
15
Weber, J. & Schäffer, U. Balanced Scorecard & Controlling: Implementierung – Nutzen für Manager und Controller – Erfahrungen in deutschen Unternehmen. (Gabler, 2000).
16
Brundtland, G. H. Our common future world commission on environment and developement. (1987).
17
Cadez, S., Czerny, A. & Letmathe, P. Stakeholder pressures and corporate climate change mitigation strategies. Business Strategy and the Environment 28, 1-14 (2019).
18
Galbreath, J. Building corporate social responsibility into strategy. European Business Review 21, 109-127 (2009).
19
Epstein, M. & Roy, M.-J. Managing corporate environmental performance:: A multinational perspective. European Management Journal 16, 284-296 (1998).
20
Barbosa, M., Castañeda-Ayarza, J. A. & Ferreira, D. H. L. Sustainable strategic management (GES): Sustainability in small business. Journal of Cleaner Production 258, 120880 (2020).
21
Hsu, Y.-L. & Liu, C.-C. Environmental performance evaluation and strategy management using balanced scorecard. Environmental Monitoring and Assessment 170, 599-607 (2010).
22
Kolk, A. & Mauser, A. The evolution of environmental management: from stage models to performance evaluation. Business Strategy and the Environment 11, 14-31 (2002).
23
Maltz, A. C., Shenhar, A. J. & Reilly, R. R. Beyond the balanced scorecard: Refining the search for organizational success measures. Long Range Planning 36, 187-204 (2003).
24
Hubbard, G. Measuring organizational performance: beyond the triple bottom line. Business Strategy and the Environment 18, 177-191 (2009).
25
Möller, A. & Schaltegger, S. The sustainability balanced scorecard as a framework for eco‐efficiency analysis. Journal of Industrial Ecology 9, 73-83 (2005).
26
Nikolaou, I. E. & Tsalis, T. A. Development of a sustainable balanced scorecard framework. Ecological Indicators 34, 76-86 (2013).
27
Dias-Sardinha, I., Reijnders, L. & Antunes, P. From environmental performance evaluation to eco-efficiency and sustainability balanced scorecards. Environmental Quality Management 12, 51-51 (2002).
28
Van Marrewijk, M. A value based approach to organization types: Towards a coherent set of stakeholder-oriented management tools. Journal of Business Ethics 55, 147-158 (2004).
29
Aragón-Correa, J. A. & Rubio-Lopez, E. A. Proactive corporate environmental strategies: myths and misunderstandings. Long Range Planning 40, 357-381 (2007).
30
Hockerts, K. & Wüstenhagen, R. Greening Goliaths versus emerging Davids – Theorizing about the role of incumbents and new entrants in sustainable entrepreneurship. Journal of Business Venturing 25, 481-492 (2010).
31
Nørreklit, H. The balance on the balanced scorecard a critical analysis of some of its assumptions. Management Accounting Research 11, 65-88 (2000).
32
Nørreklit, H. The balanced scorecard: what is the score? A rhetorical analysis of the balanced scorecard. Accounting, Organizations and Society 28, 591-619 (2003).
33
Antonsen, Y. The downside of the Balanced Scorecard: A case study from Norway. Scandinavian Journal of Management 30, 40-50 (2014).
34
Umweltbundesamt. ISO 14001 – Umweltmanagementsystemnorm, Accessed [13.10.2025], <https://www.umweltbundesamt.de/themen/wirtschaft-konsum/wirtschaft-umwelt/umwelt-energiemanagement/iso-14001-umweltmanagementsystemnorm#hilfestellungen-zur-umsetzung> (2024).
35
Volkswagen Group. Über uns, Accessed [07.10.2025], <https://www.volkswagen-group.com/de/ueber-uns-16013> (2025).
36
Volkswagen Group. Nachhaltigkeitsstrategie, Accessed [07.10.2025], <https://www.volkswagen-group.com/de/nachhaltigkeitsstrategie-18157> (2025).
37
Volkswagen Group. regenerate+ Fortschrittsbericht 2024 [PDF]. (2025). <https://www.volkswagen-group.com/de/nachhaltigkeitsstrategie-18157>. Accessed [13.10.2025]
38
Volkswagen Group. Geschäftsbericht 2024 [PDF]. (2025). <https://www.volkswagen-group.com/de/geschaeftsbericht-und-ergebnisse-geschaeftsjahr-2024-19005>. Accessed [13.10.2025]
39
de Andrade, J. B. S. O. et al. A proposal of a Balanced Scorecard for an environmental education program at universities. Journal of Cleaner Production 172, 1674-1690 (2018).
40
Heijungs, R. et al. Environmental life cycle assessment of products: guide and backgrounds (part 1). Centre of Environmental Science, Leiden, The Netherlands (1992).
41
Clarkson, M. E. A stakeholder framework for analyzing and evaluating corporate social performance. Academy of Management Review 20, 92-117 (1995).
42
Kaplan, R. S. & Norton, D. P. The balanced scorecard: translating strategy into action. (Harvard Business School Press, 1996).
43
Sharma, A. K. & Kumar, S. Economic value added (EVA)-literature review and relevant issues. International Journal of Economics and Finance 2, 200-220 (2010).
44
Papalexandris, A., Ioannou, G. & Prastacos, G. P. Implementing the balanced scorecard in Greece: a software firm’s experience. Long Range Planning 37, 351-366 (2004).
45
Kaplan, R. S. & Norton, D. P. Strategic learning & the balanced scorecard. Strategy & Leadership 24, 18-24 (1996).

Executive summary

1 Introduction

2 Theoretical background

2.1 Sustainability balanced scorecard

2.2 Historical background

2.3 The four perspectives

2.4 The importance of sustainability for companies

2.5 Development from the BSC to the (S)BSC

2.6 Integration of sustainability into the BSC

2.7 Architecture of the (S)BSC

2.8 Criticism of the BSC and SBSC

2.9 Research gaps and future research directions

3 Comparison of the (S)BSC with ISO 14001

4 Best practice example

5 Implementation process of the (S)BSC

5.1 Selection of the strategic business unit

5.2 Identification of relevant environmental and social aspects

5.3 Determination of strategic aspects

5.3.1 Strategic relevance of environmental and social aspects

5.3.2 Financial perspective

5.3.3 Customer perspective

5.3.4 Internal process perspective

5.3.5 Learning and growth perspective

5.3.6 Non-market perspective

5.4 Strategy map

5.5 Definition of indicators, targets and measures

5.6 Development of an implementation plan

5.7 Feedback and learning process

5.8 Future research directions

6 Drivers

7 Barriers

References

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