1. Accounting for Sustainability 22E29100(6cr)
Topic:
MEASURING AND REWARDING
SUSTAINABLE PERFORMANCE
Prof Eduardo Schiehll, PhD, FCPA
Professor of Accounting HEC Montreal
Visiting Professor Aalto School of Business

2. Accounting for Sustainability / Eduardo Schiehll
Learning objectives:
Construct a framework for measuring the sustainability impacts.
Apply an input-process-output-outcome framework to assess the social, environmental, and economic impacts of a company’s accountability practices.
Understanding the “Sustainability Accounting Standards Board (SASB) Materiality Map”
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Accounting for Sustainability / Eduardo Schiehll

3. Accounting for Sustainability / Eduardo Schiehll
Types of value creation:
Internal value creation
External value
creation
Economic value creation
Internationalization, merger, restructuring, entrepreneurial posture, innovation, venturing
Financial performance: stock market returns, assets turnover, return on equity, return on investment, sales growth
Social value
Employee well-being, workplace safety, workplace ethics, sustainable development
Corporate social performance, customer satisfaction, job creation, environmental sustainability
Adapted from Huse M. (2007).
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Accounting for Sustainability / Eduardo Schiehll

4. Accounting for Sustainability / Eduardo Schiehll
Types of value creation:
Internal value creation
External value
creation
Economic value creation
Internationalization, merger, restructuring, entrepreneurial posture, innovation, venturing
Financial performance: stock market returns, assets turnover, return on equity, return on investment, sales growth
Social value
Employee well-being, workplace safety, workplace ethics, sustainable development
Corporate social performance, customer satisfaction, job creation, environmental sustainability
Adapted from Huse M. (2007).
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Accounting for Sustainability / Eduardo Schiehll

5. A framework for the design of a performance measurement system
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Accounting for Sustainability / Eduardo Schiehll

6. Epstein and Roy (2001) Sustainability in action
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Accounting for Sustainability / Eduardo Schiehll

7. Epstein and Roy (2001) Sustainability in action
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Accounting for Sustainability / Eduardo Schiehll

8. Accounting for Sustainability / Eduardo Schiehll
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Accounting for Sustainability / Eduardo Schiehll

9. In-Class exercise related to the team project:
Adapt the Sector Level SASB Materiality Map to the company object of your “Sustainability performance measurement (team project).”
Identify performance dimensions and respective KPIs for “Sustainability performance measurement (team project)” tailored to the sector your company operates.
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Accounting for Sustainability / Eduardo Schiehll

10. Accounting for Sustainability / Eduardo Schiehll
Three steps:
Identify those sustainability aspects of sector- specific performance that impact society either negatively or positively;
Define the most relevant or potential information (financial or non financial) that can be reasonably collected and used to assess it.
Present ways to transform this information into performance metrics
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Accounting for Sustainability / Eduardo Schiehll

11. Why SASB? « Sustainability Accounting Standard Board »
It distinguishes between those sustainability factors that are likely to have material impacts on “environmental and social performance” and those that are not as important.
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Accounting for Sustainability / Eduardo Schiehll

12. Accounting for Sustainability / Eduardo Schiehll
Source: Steve Lydenberg, Jean Rogers, PhD, and David Wood, PhD.
From Transparency to Performance (Harvard University, August 2010)
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Accounting for Sustainability / Eduardo Schiehll

13. Accounting for Sustainability / Eduardo Schiehll
Suggestion:
Dimension
Issue
(« Why is it material? »)
Negative or Positive impact on « performance »
Indicator
Environment
Social Capital
Human capital
Business model and Innovation
Governance
Economic Performance
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Accounting for Sustainability / Eduardo Schiehll

14. Accounting for Sustainability / Eduardo Schiehll
Refer to « ESG Metrics » Exhibit 4: Material topics and KPIs for the Processed Food Industry
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Accounting for Sustainability / Eduardo Schiehll

15. Accounting for Sustainability / Eduardo Schiehll
Balanced Scorecard
Several frameworks were developed to incorporate:
financial and nonfinancial measures,
output and process measures, and
historical and forward-looking measures.
The balanced scorecard approach is without doubt the most referenced framework.
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Accounting for Sustainability / Eduardo Schiehll

16. Accounting for Sustainability / Eduardo Schiehll
Balanced Scorecard
The balanced scorecard includes four dimensions for which performance measures are used to manage the performance of an organization:
Growth and learning,
Internal processes,
Customers and
Finance
How do we integrate the sustainability (environmental and social aspects of) performance
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Accounting for Sustainability / Eduardo Schiehll

17. Accounting for Sustainability / Eduardo Schiehll
Balanced Scorecard
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Accounting for Sustainability / Eduardo Schiehll

18. Figge (2002): core reading class 6 (week 47)
Three different possible approaches of integrating Environmental and social aspects in PMS:
Can be integrated in the existing 4 standard perspectives of the BSC framework.
An additional perspective can be added to take environmental and social aspects into account.
A specific environmental and social scorecard can be formulated.
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Accounting for Sustainability / Eduardo Schiehll

19. Figge (2002): core reading class 6 (week 47)
Three different possible approaches of integrating Environmental and social aspects in PMS:
Sustainability is a market force; incorporated into the economic model.
Sustainability is a non-market force, more a social construct (value).
Implies a deduction (from one of the above) of an environmental and social scorecard.
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Accounting for Sustainability / Eduardo Schiehll

20. 1. (When) Sustainability is a market force; incorporated into the economic model
The Harthrow Case
(Furniture sector)
The beverage industry (Water as Raw material)
The case of packaging industry.
The Soela Case
(Food industry or retailers)
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Accounting for Sustainability / Eduardo Schiehll

21. Balanced scorecard and strategy maps
The balanced scorecard is used as a comprehensive framework
to translate strategy into action, and
to act as a bridge between strategic goals and performance monitoring.
Strategy Maps
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Accounting for Sustainability / Eduardo Schiehll

22. Exhibit 8 Amanco’s Stragey Map (page 20) Amanco_case.pdf

23. Accounting for Sustainability / Eduardo Schiehll
Strategy Maps
The concept of strategy maps is closely linked to the notion of balanced scorecard.
The process of strategy mapping consists in identifying how organizations create value by building on strategic themes such as “growth” and “productivity.”
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Accounting for Sustainability / Eduardo Schiehll

24. Accounting for Sustainability / Eduardo Schiehll
Strategy Maps
Adapted from
Armitage and Scholey (2006)
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Accounting for Sustainability / Eduardo Schiehll

25. Accounting for Sustainability / Eduardo Schiehll
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Accounting for Sustainability / Eduardo Schiehll