Composite indicator for measuring corporate sustainability

Abstract Corporate sustainability performance is a multidimensional concept based on the original idea of sustainable development, replacing the traditional understanding of corporate performance only as capital appreciation for owners. The objective of this paper is to present a model for the measurement of corporate sustainability – Complex Performance Indicator (CPI). CPI integrates the environmental, social, economic and corporate governance performance of the company. CPI contains seventeen key performance indicators which were gradually determined from the basic set of performance indicators using statistical methods. CPI sums up the complex corporate performance into a single value but, at the same time, the set of aggregated sub-indicators of individual performance areas enables a detailed analysis and determination of the impact of various performance areas and factors on the complex corporate performance. The introduction of benchmarking is a crucial element in the entire model, as it enables to interpret the aggregated information and to quantify the performance gap. The results including their visualisation are presented in the case study. The complex assessment of corporate performance helps to uncover the weaknesses of the company that could become a threat and to identify strengths which the company might pursue as an opportunity. The results of such an analysis serve as the point of reference for deciding about the future.

[1]  S. Lundbergh,et al.  The Governance of Corporate Sustainability , 2010 .

[2]  P. Glavič,et al.  How to compare companies on relevant dimensions of sustainability , 2005 .

[3]  John Elkington,et al.  Partnerships from cannibals with forks: The triple bottom line of 21st‐century business , 1998 .

[4]  Giuseppe Munda,et al.  Noncompensatory/nonlinear composite indicators for ranking countries: a defensible setting , 2009 .

[5]  A. K. Dikshit,et al.  Development of composite sustainability performance index for steel industry , 2007 .

[6]  Stefan Schaltegger,et al.  The Sustainability Balanced Scorecard as a Framework for Eco‐efficiency Analysis , 2005 .

[7]  A. Carroll.  The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders , 1991 .

[8]  Thomas Dyllick,et al.  Beyond the business case for corporate sustainability , 2002 .

[9]  Michael J. Ellenbecker,et al.  Indicators of sustainable production: framework and methodology , 2001 .

[10]  T. Brown,et al.  Exploratory Factor Analysis: A Five-Step Guide for Novices , 2010 .

[11]  L. Cronbach.  Coefficient alpha and the internal structure of tests , 1951 .

[12]  Elisa Morgera,et al.  OECD Guidelines for Multinational Enterprises , 2011 .

[13]  M. V. Marrewijk.  Concepts and definitions of CSR and corporate sustainability: Between agency and communion , 2013 .

[14]  D. Crowther,et al.  Governance and sustainability: an investigation into the relationship between corporate governance and corporate sustainability , 2008 .

[15]  Luk N. Van Wassenhove,et al.  Closed - Loop Supply Chain Models with Product Remanufacturing , 2004, Manag. Sci..

[16]  Ioannis Ioannou,et al.  Is Sustainability Now the Key to Corporate Success , 2012 .

[17]  Marc J. Epstein,et al.  Using a Balanced Scorecard to Implement Sustainability , 2001 .

[18]  Eugenio Avila Pedrozo,et al.  Towards to sustainable development strategies: a complex view following the contribution of Edgar Morin , 2006 .

[19]  A. Carroll.  Corporate Social Responsibility , 1999, The Routledge Companion to Corporate Social Responsibility.

[20]  Thomas Graedel,et al.  Industrial Ecology and Global Change: Industrial Ecology: Definition and Implementation , 1994 .

[21]  John Tribe,et al.  Sustainability Indicators for Small Tourism Enterprises – An Exploratory Perspective , 2008 .

[22]  D. Rigby,et al.  Constructing a farm level indicator of sustainable agricultural practice , 2001 .

[23]  Brian R. Chabowski,et al.  The Structure of Sustainability Research in Marketing, 1958-2008: A Basis for Future Research Opportunities , 2010 .

[24]  C. Laszlo,et al.  Chapter 4 – The Ten Principles , 2000 .

[25]  K Mengersen,et al.  Creating a Sustainability Scorecard as a predictive tool for measuring the complex social, economic and environmental impacts of industries, a case study: assessing the viability and sustainability of the dairy industry. , 2014, Journal of environmental management.

[26]  K. Reddy,et al.  The Effect of Sustainability Reporting on Financial Performance: An Empirical Study Using Listed Companies , 2010 .

[27]  A. Brent,et al.  Assessing the sustainability performances of industries , 2005 .

[28]  Stefano Tarantola,et al.  Handbook on Constructing Composite Indicators: Methodology and User Guide , 2005 .

[29]  G. Brundtland,et al.  Our common future , 1987 .

[30]  Peter Glavič,et al.  A model for integrated assessment of sustainable development , 2005 .

[31]  S. Schaltegger,et al.  The Sustainability Balanced Scorecard – linking sustainability management to business strategy , 2002 .

[32]  Graham Miller,et al.  The development of indicators for sustainable tourism: results of a Delphi survey of tourism researchers , 2001 .

[33]  D. Melé,et al.  Corporate Social Responsibility Theories: Mapping the Territory , 2004 .

[34]  Bengt Karlöf,et al.  Benchmarking: A Signpost to Excellence in Quality and Productivity , 1994 .

[35]  P. Glavič,et al.  Indicators of sustainable production , 2003 .

[36]  R. O’Brien,et al.  A Caution Regarding Rules of Thumb for Variance Inflation Factors , 2007 .

[37]  Archie B. Carroll,et al.  Ethical Challenges for Business in the New Millennium: Corporate Social Responsibility and Models of Management Morality , 2000, Business Ethics Quarterly.

[38]  R. Freeman.  Strategic Management: A Stakeholder Approach , 2010 .

[39]  Vesela Veleva,et al.  Indicators of sustainable production , 2001 .

[40]  Adisa Azapagic,et al.  Developing a framework for sustainable development indicators for the mining and minerals Industry , 2004 .

[41]  Gregory M Peters,et al.  Aggregating sustainability indicators: beyond the weighted sum. , 2012, Journal of environmental management.

[42]  C. Egbunike,et al.  Benefits of Triple Bottom Line Disclosures on Corporate Performance: An Exploratory Study of Corporate Stakeholders , 2013 .

[43]  Daniel Tyteca,et al.  Towards indicators of sustainable development for firms: A productive efficiency perspective , 1999 .

[44]  Uwe Jirjahn,et al.  Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages , 2001, SSRN Electronic Journal.

[45]  R. Kaplan,et al.  Transforming the Balanced Scorecard from Performance Measurement to Strategic Management: Part II , 2001 .

[46]  R. Kaplan,et al.  The Balanced Scorecard: Translating Strategy into Action , 1996 .

[47]  D. Cassidy.  Maximizing shareholder value: the risks to employees, customers and the community , 2003 .

[48]  P. Bansal.  Evolving sustainably: a longitudinal study of corporate sustainable development , 2005 .

[49]  L. Preston,et al.  The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications , 1995 .

[50]  David Parmenter,et al.  Key Performance Indicators: Developing, Implementing,and Using Winning KPIs , 2007 .

[51]  A. Carroll.  A Three-Dimensional Conceptual Model of Corporate Performance , 1979 .

[52]  Frank Figge,et al.  The Cost of Sustainability Capital and the Creation of Sustainable Value by Companies , 2005 .

[53]  David Nelson,et al.  The Determinants of Corporate Sustainability Performance , 2009 .

[54]  Yongrong Yang,et al.  Sustainability performance evaluation in industry by composite sustainability index , 2012, Clean Technologies and Environmental Policy.