A selection of interesting articles we found recently looking at some sustainability tools.
The Sustainability Balanced Scorecard: A systematic review of architectures
The increasing strategic importance of environmental, social and ethical issues as well as related performance measures has spurred interest in corporate sustainability performance measurement and management systems. This paper focuses on the balanced scorecard (BSC), a performance measurement and management system aiming at balancing financial and non-financial as well as short and long-term measures.
Modifications to the original BSC which explicitly consider environmental, social or ethical issues are often referred to as sustainability balanced scorecards (SBSCs). There is much scholarly discussion about SBSC architecture and how it can be designed to relate performance dimensions, strategic objectives and the logical links among these elements. To synthesise the widely scattered research findings and publications on the SBSC, we conducted a thematic analysis based on a systematic literature review containing 69 relevant articles spanning a period of two decades. We found that sustainability-oriented modifications of the BSC architecture are motivated by instrumental, social/political or normative theoretical perspectives.
Moreover, these modifications can be mapped with a typology of generic SBSC architectures. The first dimension of the typology describes the hierarchy between performance perspectives and strategic objectives and how it is related to the organisational value system. The second dimension describes how sustainability-related strategic objectives are integrated into SBSC performance perspectives and how this is related to corporate sustainability strategy. This study contributes to the development of the emerging SBSC literature and practice and, more generally, to research on corporate sustainability performance measurement and management. We conclude with a research agenda and implications for management.
For more information: Erik G. Hansen & Stefan Schaltegger. 2016. The Sustainability Balanced Scorecard: A Systematic Review of Architectures.
Journal of Business Ethics, 133(2), 193-221.
A credit score system for socially responsible lending
Ethical banking, microfinance institutions or certain credit cooperatives, among others, grant socially responsible loans. This paper presents a credit score system for them. The model evaluates social and financial aspects of the borrower. The financial aspects are evaluated under the conventional banking framework, by analysing accounting statements and financial projections. The social aspects try to quantify the loan impact on the achievement of Millennium Development Goals such as employment, education, environment, health or community impact.
The social credit score model should incorporate the lender’s know-how and should also be coherent with its mission. This is done using Multi-Criteria Decision Making (MCDM). The paper illustrates a real case: a loan application by a social entrepreneur presented to a socially responsible lender. The decision support system not only produces a score, but also reveals strengths and weaknesses of the application.
Read more at: Begoña Gutiérrez-Nieto, Carlos Serrano-Cinca & Juan Camón-Cala. 2016. A Credit Score System for Socially Responsible Lending.
Journal of Business Ethics, 133(4), 691-701.
Changes in ethical ranking, financial performance and financial reporting quality
Fayez Elayan and his colleagues examine the equity valuation effect of press releases of upgrades or downgrades reflected in the Covalence Ethical Quote (CEQ), an index ranking the ethical performance of multinational firms. The index is updated quarterly and is comprehensive enough to include 45 criteria reflecting working conditions, impact of product, impact of production, and company institutional impact. Thus, it captures many dimensions of firms’ ethical performance that are not accounted for in previous research.
This research study encompasses a joint test of the value relevance of the index itself and the impact of ethical reputation on a firm’s value. The researchers find first a significant causal relationship between stock market reactions and changes in the CEQ. Specifically, disclosures of positive (negative) changes in firm ethical performance cause increases (decreases) in firm value. Second, cross-sectional analysis indicates a positive association between changes in firm ethical performance and both its financial performance and its financial reporting quality.
Collectively, these results suggest that the CEQ conveys information that is useful to investors. Further, corporate measures taken to increase ethical performance are associated with positive benefits to shareholders. Finally, investors have concluded that good news about their firms’ efforts to be ethical is worth the cost.
For more details, see: Fayez A. Elayan, Jingyu Li, Zhefeng Frank Liu, Thomas O. Meyer & Sandra Felton. 2016. Changes in the Covalence Ethical Quote, Financial Performance and Financial Reporting Quality.
Journal of Business Ethics, 134(3), 369-395.
Are blissful ignorance and the hiding hand really that beneficial?
Not at all, according to Bent Flyvbjerg.
Albert O. Hirschman’s principle of the Hiding Hand stands stronger and more celebrated today than ever. The principle states that ignorance is good in planning, because if decision makers knew the real costs and difficulties of projects, few ventures would ever get started. The paper presents the first systematic test of the principle of the Hiding Hand, including a test of whether Hirschman’s theory may be replicated with more and better data.
This was found not to be the case. First, statistical tests reject the principle of the Hiding Hand at an overwhelmingly high level of significance (p<0.0001). In reality, the exact opposite happens of what the principle states: Instead of project success being secured by “creative error” and “beneficial ignorance” – where higher-than-estimated costs are outweighed by even higher-than-estimated benefits – the average project is in fact undermined by a double whammy of substantial cost overruns compounded by substantial benefit shortfalls. Second, Hirschman was found to have made the error of sampling on the dependent variable, undermining the validity of his findings. Third, Hirschman’s sample of projects, on which he built his principle, is too small to support his wide conclusions. Fourth, Hirschman misrepresented his findings and misled his readers. In sum, the data do not support Hirschman’s proposition that ignorance is good in planning. Ignorance is bad, if by bad we mean that ignorance leads to starting projects that should not have been started. Finally, the data also do not support an interpretation of Hirschman as an early behavioural economist, as proposed by Sunstein. Hirschman was a victim, not a student, of bias.
Read the full-text for free: Bent Flyvbjerg. 2016. The Fallacy of Beneficial Ignorance: A Test of Hirschman’s Hiding Hand (April 2016). World Development, 2016.
Available at SSRN: http://ssrn.com/abstract=2767128
Deficiencies in sustainability-oriented innovation: A systematic review
This paper is intended as a contribution to the ongoing conceptual development of sustainability-oriented innovation (SOI) and provides initial guidance on becoming and being sustainable. The authors organise and integrate the diverse body of empirical literature relating to SOI and, in doing so, develop a synthesised conceptual framework onto which SOI practices and processes can be mapped. Sustainability-oriented innovation involves making intentional changes to an organisation’s philosophy and values, as well as to its products, processes or practices to serve the specific purpose of creating and realising social and environmental value in addition to economic returns.
A critical reading of previous literature relating to environmental management and sustainability reveals how little attention has been paid to SOI, and what exists is only partial. In a review of 100 scholarly articles and 27 grey sources drawn from the period of the three Earth Summits (1992, 2002 and 2012), the authors address four specific deficiencies that have given rise to these limitations: the meaning of SOI; how it has been conceptualised; its treatment as a dichotomous phenomenon; and a general failure to reflect more contemporary practices.
The authors adopt a framework synthesis approach involving first constructing an initial architecture of the landscape grounded in previous studies, which is subsequently iteratively tested, shaped, refined and reinforced into a model of SOI with data drawn from included studies: so advancing theoretical development in the field of SOI.
More detail is at: Adams, R., Jeanrenaud, S., Bessant, J., Denyer, D. & Overy, P. 2016. Sustainability-oriented Innovation: A Systematic Review.
International Journal of Management Reviews, 18, 180–205.
Missing sustainability management tools in SMEs
Many scholars have emphasized the importance of sustainability management in small and medium-sized enterprises (SMEs). Although various publications discuss different approaches and potential barriers of implementation, a review of the existing research on sustainability management tools for SMEs is nonetheless missing.
Based on a systematic review of the academic literature, this paper discusses reasons why SMEs should implement sustainability management tools. A further analysis reveals that most such tools are perceived to have little to no implementation in SMEs. The main implementation barriers and facilitating criteria are discussed. In addition, implications for future research, SME management, and public policy are drawn.
See more at: Johnson, M. P. and Schaltegger, S. (2016), Two Decades of Sustainability Management Tools for SMEs: How Far Have We Come?
Journal of Small Business Management, 54: 481–505.