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Sustainability Balanced Scorecard Architecture and Environmental Investment Decision-Making

Suaad Jassem
Suaad Jassem
, 
Zarina Zakaria
Zarina Zakaria
 and 
Anna Che Azmi
Anna Che Azmi
   | Dec 31, 2020
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Published Online: Dec 31, 2020
Page range: 193 - 210
DOI: https://doi.org/10.2478/fman-2020-0015
Keywords
© 2020 Suaad Jassem et al., published by Sciendo
This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Figure 1

Architecture of SBSC-4 and SBSC-5 (Source: Authors’ own research)
Architecture of SBSC-4 and SBSC-5 (Source: Authors’ own research)

Figure 2

Research Model (Source: Authors’ own research)
Research Model (Source: Authors’ own research)

Conditional direct and indirect effects of SBSC architecture on environmental investment decision-making (with and without risk) (Source: Authors’ own research)

EffectRiskEffectSELLCIULCI
DirectWithout risk−3.2980.511−4.313−2.282
With risk*0.4770.490−0.4971.452
IndirectWithout risk−1.1260.503−2.276−0.215
With risk−2.5160.490−3.570−1.671

An example of the information that the participants could see at one time (SBSC-4)

Financial perspectiveGoalsInvestment AInvestment B
Return on investment17%12–14%16–22%
Annual cash flow increase$325,000$100,000–$300,000$300,000–$400,000
Sales growth24%22–27%18–23%
Payback period3 years5 years3 years
Energy cost savings325,000300,000–400,000100,000–300,000

Index of moderated mediation (Source: Authors’ own research)

MediatorIndexSE (Boot)Boot LLCIBoot ULCI
SBSC knowledge−1.3890.717−2.992−0.216

An example of the information that the participants could see at one time (SBSC-4 with risk)

Financial perspectiveGoalsInvestment ARiskInvestment BRisk
Return on investment17%12–14%>1516–22%<15
Annual cash flow increase$325,000$100,000–$300,000$300,000–$400,000
Sales growth24%22–27%18–23%
Payback period3 years5 years3 years
Energy cost savings325,000300,000–400,000100,000–300,000

An example of the information that the participants could see at one time (SBSC-5)

Environmental perspectiveGoalsInvestment AInvestment B
Energy cost savings325,000300,000–400,000100,000–300,000
Number of community complaints about company pollutant emissions31–37–9
Annual tons of nitrogen dioxide emissions3020–3040–55
Number of hours of training per factory employee for environmental emergency responses275180–250240–300

Pairwise Comparison between SBSC-4 and SBSC-5 (with risk and without risk)(Source: Authors’ own research)

Risk levelSBSC architectureMean difference (MD)SEp-value95% CI for differenceη2
LBUB
Without riskSBSC-4SBSC-54.424*0.638<0.0013.1575.6920.384
With riskSBSC-4SBSC-52.038*0.6250.0020.7973.2790.106

Results of ANOVA for environmental investment decision-making (between subject effect)(Source: Authors’ own research)

SourcedfMSF-Valuep-Valueη2
SBSC architecture1244.80752.39<0.0010.368
Risk1390.36983.541<0.0010.481
SBSC architecture risk133.377.1410.0090.074

Results of the mediation test of SBSC Knowledge between SBSC Architecture and Environmental Investment Decision-Making (with risk) (Source: Authors’ own research)

PathBSET/Zp-valueLLCIULCI
IV to Mediators (path a)

SBSC architecture–SBSC knowledge

−1.5570.252−6.180<0.001−2.064−1.049
Mediator to DV (path b)

SBSC knowledge–env. investment decision-making

1.6330.2187.493<0.0011.1942.071
Direct effect (path c)

SBSC architecture–env. investment decision-making

−0.5030.504−0.9990.323−0.5111.518
Indirect effect (path ab)

SBSC architecture–env. investment decision-making

−2.5420.536−4.743<0.001−3.640−1.695

Path coefficient for the mediation effect of SBSC knowledge between SBSC architecture and environmental investment decision-making (Source: Authors’ own research)

PathBSET/Zp-valueLLCIULCI
IV to Mediators (path a)

SBSC architecture–SBSC knowledge

−0.6970.334−2.085<0.051.371−0.023
Mediator to DV (path b)

SBSC knowledge–env. investment decision-making

1.6060.2107.641<0.0011.1822.030
Direct effect (path c)

SBSC architecture–env. investment decision-making

−3.3050.488−6.766<0.001−4.290−2.320
Indirect effect (path ab)

SBSC architecture–env. investment decision-making

−1.1190.561−1.996<0.05−2.046−0.165

An example of the information that the participants could see at one time (SBSC-5 with risk)

Environmental perspectiveGoalsInvestment ARiskInvestment BRisk
Energy cost savings325,000300,000–400,000<15100,000–300,000>15
Number of community complaints about company pollutant emissions31–37–9
Annual tons of nitrogen dioxide emissions3020–3040–55
Number of hours of training per factory employee for environmental emergency responses275180–250240–300

Evolution of BSC to SBSC-4 and SBSC-5(Source: Authors’ own research)

PhaseSummary of PhaseSource
1BSC: Was introduced as a performance measurement system through a longitudinal research on 12 companies, at the leading edge of performance measurement. The study designed a dashboard (i.e., the BSC) that gives top management a fast and comprehensive view of their business. The BSC includes financial measures that tell the results of actions already taken by complementing financial measures with operational measures on customer satisfaction, internal processes and people within the organization.Kaplan and Norton (2001)
2SBSC-4: Four components (i.e., environment, safety and health performance, employment practices, and community investment) were embedded into the four BSC perspectives. This scorecard was designed for companies to comply with national and local regulations on the environment, employee health and safety, hiring and employment practices to avoid shutdowns or litigations, and so on.Kaplan and Norton (2001)
3SBSC-5: Stephan Schaltegger along with two of his Ph. D students published a seminal paper that introduces the SBSC framework where the sustainability parameters are proposed as a separate 5th perspective. Their initial intent was to introduce non-market perspectives such as “child labor.” In several follow-up papers, Schaltegger and his team introduced other components of sustainability related to the physical environment from environmental management accounting.The introduction of the 5th perspective, thus gave birth to two separate schools of thought on SBSC; one where sustainability parameters are embedded into BSC perspectives (SBSC-4) and the 5th perspective type configuration with sustainability as a separate perspective (SBSC-5), see Fig. 1.Figge, et al. (2002)

Descriptive statistics of environmental investment decision-making(Source: Authors’ own research)

SBSC ArchitectureRiskInvestment AInvestment B
MeanSDMeanSD
SBSC-4Without risk8.409 (42%)2.92211.591 (58%)2.922
With risk5.521 (27.6%)1.64714.478 (72.4%)1.647
SBSC-5Without risk12.833 (64.2%)1.7867.167 (35.8%)1.786
With risk7.56 (37.8%)2.12312.44 (62.2%)2.123

Pairwise comparison between both risk levels (with risk and without risk) (Source: Authors’ own research)

SBSC architectureRiskMean Difference (MD)SEp-value95% CI for differenceη2
LBUB
SBSC-4Without riskWith risk−2.887*0.645<0.001−4.168−1.6070.182
SBSC-5Without riskWith risk−5.273*0.618<0.001−6.501−4.0460.447

Four groups and manipulated conditions (Source: Authors’ own research)

ConditionsConfigurationIncluding riskNumber of SBSC perspectivesExperimental group No.
1SBSC-4 without riskNo4Group 1
2SBSC-4 with riskYes4Group 2
3SBSC-5 without riskNo5Group 3
4SBSC-5 with riskYes5Group 4
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