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Measuring strategic environmental performance

Author

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  • Giovanni Azzone
  • Raffaella Manzini

Abstract

It is now widely acknowledged that environmental issues will increasingly affect the performance of firms in western countries, both in the short and in the long run. Environmental issues can act on revenues and on costs. They can influence revenues when a firm follows a ‘green strategy’, i.e. it enhances the characteristics of environmental compatibility of its products or it promotes a credible image of a ‘green company’, that employs only clean technologies. They can influence costs as, on the one hand, more limiting environmental standards can result in higher manufacturing and non manufacturing costs and, on the other hand, programmes focused on improving environmental performances can result in less spoils and wastes, hence in lower costs. Hence, environmental performance should be a structured part of the management control system of an industrial firm. Unfortunately, it is not completely clear how accounting information can be structured in order to obtain this result. This paper is aimed at developing a set of information that can be used for a managerial control focused on the environmental performance of an industrial firm. This paper is organized in three main sections. Section I describes the conceptual requirements of a management control system based on accounting information for monitoring the environmental performance of an industrial firm (completeness, long term orientation, external orientation, measurability and cost). Section II analyses different classes of Environmental Performance Indicators (EPI) used in practice. Both accounting measures (prevention costs and investments; operating environmental costs; contingent environmental liabilities) and non financial measures (physical indicators; compliance) are considered. Section III suggests an integrated approach to the design of a management control system focused on environmental issues, where different classes of indicators are used jointly. More specifically, two integrated systems, one mostly based on physical measures and aimed at external communication, the other focused on accounting measures and supporting managerial decision making, are suggested.

Suggested Citation

  • Giovanni Azzone & Raffaella Manzini, 1994. "Measuring strategic environmental performance," Business Strategy and the Environment, Wiley Blackwell, vol. 3(1), pages 1-14.
    • Handle: RePEc:bla:bstrat:v:3:y:1994:i:1:p:1-14
    DOI: 10.1002/bse.3280030101
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    1. Mendes, Carlos & de Souza, Leonardo Silva & Kalid, Ricardo & Esquerre, Karla & Kiperstok, Asher, 2011. "Assessment of the uncertainty associated with the energy indicator," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(6), pages 3156-3164, August.
    2. J. Emil Morhardt, 2010. "Corporate social responsibility and sustainability reporting on the Internet," Business Strategy and the Environment, Wiley Blackwell, vol. 19(7), pages 436-452, November.
    3. Banerjee, Subhabrata Bobby, 2002. "Corporate environmentalism: the construct and its measurement," Journal of Business Research, Elsevier, vol. 55(3), pages 177-191, March.
    4. P. Michel & P.-A. Jouvet & Gilles Rotillon, 2003. "A theoretical measure of environmental efficiency," THEMA Working Papers 2003-21, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    5. Antonio Corvino & Silvio Bianchi Martini & Federica Doni, 2021. "Extinction accounting and accountability: Empirical evidence from the west European tissue industry," Business Strategy and the Environment, Wiley Blackwell, vol. 30(5), pages 2556-2570, July.
    6. William L. Smith & Yue Cai Hillon & Yanni Liang, 2019. "Reassessing measures of sustainable firm performance: A consultant's guide to identifying hidden costs in corporate disclosures," Business Strategy and the Environment, Wiley Blackwell, vol. 28(2), pages 353-365, February.
    7. Harsh V. Verma & Ekta Duggal, 2015. "Environmental Concerns, Behavior Consistency of Emerging Market: Youth and Marketing," Emerging Economy Studies, International Management Institute, vol. 1(2), pages 171-187, November.
    8. Sophie Marquet-Pondeville, 2003. "L'impact de la stratégie environnementale, des pressions perçues des " stakeholders " environnementaux et de l'incertitude perçue de l'environnement écologique sur un système de contrôle de ," Post-Print halshs-00582803, HAL.
    9. Solveig Lothe & Ingunn Myrtveit & Teresa Trapani, 1999. "Compensation systems for improving environmental performance," Business Strategy and the Environment, Wiley Blackwell, vol. 8(6), pages 313-321, November.
    10. Pacini, G. Cesare & Merante, Paolo & Lazzerini, Giulio & Van Passel, Steven, 2015. "Increasing the cost-effectiveness of EU agri-environment policy measures through evaluation of farm and field-level environmental and economic performance," Agricultural Systems, Elsevier, vol. 136(C), pages 70-78.
    11. Mei-Chee Tan & Tuan-Hock Ng & Ying-San Lim & Chun-Teck Lye & Hishamuddin Ismail, 2018. "Modeling the Impacts of Corporate Environmental Responsibility on Information and Communication Technology -waste Management," International Journal of Energy Economics and Policy, Econjournals, vol. 8(4), pages 347-355.
    12. Minna Halme, 1996. "Shifting Environmental Management Paradigms In Two Finnish Paper Facilities: A Broader View Of Institutional Theory," Business Strategy and the Environment, Wiley Blackwell, vol. 5(2), pages 94-105, June.
    13. J. Emil Morhardt & Sarah Baird & Kelly Freeman, 2002. "Scoring corporate environmental and sustainability reports using GRI 2000, ISO 14031 and other criteria," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 9(4), pages 215-233, December.
    14. Jong-Wan Bae & Sang-Joon Kim, 2022. "How Do Active Firms Implementing Corporate Environmental Responsibility Take Technological Approaches to Environmental Issues? A Resource-Allocation Perspective," Sustainability, MDPI, vol. 14(14), pages 1-13, July.
    15. Nagy, Szabolcs, 2004. "Environmentally Conscious Marketing," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 110949, July.
    16. Giovanni Azzone & Raffaella Manzini & Giuliano Noci, 1996. "Evolutionary Trends In Environmental Reporting," Business Strategy and the Environment, Wiley Blackwell, vol. 5(4), pages 219-230, December.
    17. Daniel Tyteca & Jérôme Carlens & Frans Berkhout & Julia Hertin & Walter Wehrmeyer & Marcus Wagner, 2002. "Corporate environmental performance evaluation: evidence from the MEPI project," Business Strategy and the Environment, Wiley Blackwell, vol. 11(1), pages 1-13, January.
    18. Pujari, Devashish & Wright, Gillian & Peattie, Ken, 2003. "Green and competitive: Influences on environmental new product development performance," Journal of Business Research, Elsevier, vol. 56(8), pages 657-671, August.
    19. David Skidmore, 1994. "Dynamics of sustainable business practice: Setting quantitative targets," Business Strategy and the Environment, Wiley Blackwell, vol. 3(4), pages 29-32.
    20. Shuangyu Xie & Kohji Hayase, 2007. "Corporate environmental performance evaluation: a measurement model and a new concept," Business Strategy and the Environment, Wiley Blackwell, vol. 16(2), pages 148-168, February.
    21. Idalina Dias‐Sardinha & Lucas Reijnders, 2005. "Evaluating environmental and social performance of large Portuguese companies: a balanced scorecard approach," Business Strategy and the Environment, Wiley Blackwell, vol. 14(2), pages 73-91, March.

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