Creating a Balanced (Scorecard) Green Business Plan

The Balanced Scorecard is a strategic planning and management methodology first developed in 1992. Its main thesis is that businesses and other organizations need to be run on the basis of four factors in order to grow its capabilities during both the short and long term: Financial, Customer, Process, and Innovation/Learning. This mindset turns out to be very valuable in developing green business plans.

The Balanced Scorecard approach can be looked as a cascade of capabilities that support each other. (1) At the top is the traditional business objective of making money (although this singular focus is being challenged by a triple bottom line focus on financial, social, and environmental objectives.) (2) A company needs happy, satisfied customers in order to make money. (3) In order to provide the high quality products and services demanded by customers, the company needs strong, continuously improving business processes. (4) And finally, strong processes require motivated, well trained employees. Looking at it from the bottom up, excellent employees develop good processes, which lead to happy customers who buy more products or services, leading to good financial results.

So how does this play out in creating a sustainable business plan? Let’s focus on sustainability objectives for the first year after a green strategy is introduced. This is a period during which sustainability efforts must typically provide immediately visible benefits, as the company gains expertise and builds an internal business case for more robust efforts in the future.

• Financial: In this early stage most firms will focus with a quick Return on Investment. Examples are revenues from selling green products, lower energy costs, decreased fines for non-compliance, or decreased waste removal costs.

• Customers: A key driver for sustainability efforts are the demands of clients or customers. Examples of customer-focused objectives include: percent of toxic materials in the product, new accounts based on green marketing, average annual energy costs for using the product, and number of suppliers in countries with bad human rights records.

• Processes: Process metrics are at the core of efforts related to green. With the expectation of regulations related to global warming, key objectives are greenhouse gas emissions and energy usage (per product, per $ of production, or overall.) Other possibilities include amount of waste generated, number of recorded accidents, and water usage.

• Learning/Innovation/People: In sustainability, in can be beneficial to think of the Learning/Innovation as being related to People. Sustainability efforts MUST engage people at all levels of the organization in order to be successful over the long term. Examples of encouraging employee and staff engagement are percent of employees involved in green efforts, hours of green training per employee, and number of green employee ideas implemented.

In the next blog, we will explore what makes a good objective and how to pick the right ones for your organization.