Balanced Scorecard and Triple Bottom Line in Business Ethics

Introduction

Over time, various models have been developed in an attempt to bring into focus not only the behavioral, but also the structural ethical performance of organizations. These include the Triple Bottom Line, the Balanced Scorecard, and Six Sigma. This paper concerns itself with the Balanced Scorecard and the Triple Bottom Line, examining their components, their role in driving ethical decision-making, and how organizations have applied them in practice.

Components of the Balanced Scorecard and Triple Bottom Line

The Balanced Scorecard, in basic terms, "is a management system that focuses on all the elements that contribute to organizational performance and success including financial, customer, market, and internal processes" (Ferrell, Fraedrich, & Ferrell, 2014, p. 249). The Triple Bottom Line, as the same authors point out, "provides a perspective that takes into account the social, environmental, and financial impacts of decisions made within an organization" (Ferrell, Fraedrich, & Ferrell, 2014, p. 249).

The four key components of the Balanced Scorecard include the financial perspective, the customer perspective, the learning and growth perspective, and the internal business perspective (Jackson, Sawyers, & Jenkins, 2008). The financial perspective concerns how well an entity is performing on the financial front — with regard to expenses and revenue. To enhance business performance, a company might determine that employee benefits are consuming a significant portion of revenues and seek ways to reduce that cost. Ethical performance can be enhanced by tying bonuses to demonstrated best practices on the ethical front.

The customer perspective encompasses key considerations such as quick response to customer concerns and enhancement of customer satisfaction. This perspective is important for business performance because "it is the customer who ultimately incurs the costs of producing products and contributes to a company's profits" (Jackson, Sawyers, & Jenkins, 2008, p. 443). A key success factor, as those authors note, is the enhancement of the quality of goods and services. In seeking to enhance ethics, a business should ensure that the products it offers meet and surpass quality standards, thereby lowering the probability of harm to the customer and increasing customer satisfaction.

The internal business perspective and the learning and growth perspective concern "the objectives across the company's entire value chain" and "the critical success factors in the other perspectives," respectively (Jackson, Sawyers, & Jenkins, 2008, p. 443). The internal business perspective focuses on areas such as financial reporting, human resource practices, and information technology. To enhance both ethics and business performance, a company should ensure that accounting information is presented in accordance with existing standards and conventions, and that staffing decisions are made in ways that facilitate the achievement of desired business results.

The Triple Bottom Line framework encompasses three key dimensions: financial, environmental, and social. The financial or economic dimension concerns a firm's economic activities and impacts, the social dimension focuses on the firm's impact on stakeholders such as suppliers, consumers, and employees, and the environmental dimension examines the enterprise's impact on the natural environment. A business entity can utilize these dimensions to enhance ethics and performance by charging fair prices and remitting taxes appropriately (economic dimension), making contributions to charitable causes and providing employees with career advancement opportunities (social dimension), and reducing greenhouse gas emissions and water consumption (environmental dimension).

Using the Models to Drive Ethical Decision-Making

Effective leaders continually seek approaches that both enhance business performance and improve ethical behavior. With regard to the Triple Bottom Line, business leaders are increasingly engaging in social and environmental stewardship. This is particularly significant because the core idea behind this ethical auditing system is to redirect the attention of business entities from mere profit-making toward broader societal and environmental concerns. Today, corporate social responsibility has become more of a mandatory concern than an optional one. Businesses can integrate the Triple Bottom Line into their ethics programs by conducting an audit of their organizational mission, values, and conduct. Any gap between the existing framework and the broader performance of the business would necessitate a restatement of both the operational values held by managers and employees and the organization's core purpose.

The Balanced Scorecard management system can also help transform an organization's strategies and vision into a set of performance measures that are both rational and consistent. To fully utilize the Balanced Scorecard to drive ethical decision-making, all levels of management must be engaged in the process. Top managers must adopt a work ethic oriented not merely toward working in the business, but on the business. Their actions should be tailored to reflect this orientation. It is through the precedent set by senior leaders that an entire organization can make a full transition to a Balanced Scorecard framework — one in which business systems are optimized, product development is enhanced, and management behavior is improved. The Balanced Scorecard model can be integrated into business ethics programs through the re-articulation of organizational values, the formulation of goals for change, and a comprehensive review of the organization's standards of conduct.