The Adaptive Quadruple Bottom Line Scorecard

1. The Adaptive Quadruple Bottom Line Scorecard Henk Hadders University of Groningen Accountability Through Measurement 2nd National CSIN Conference Toronto, March 2-3, 2010.

2. Intro • Organizational Sustainability 2. A new Strategic Performance Scorecard: • The Adaptive Quadruple Bottom Line Scorecard (AQBLSC) 3. A new Sustainability Measurement and Reporting Tool: • Capitals-based approach • Context-based sustainability & Context-based metrics • Quotients-based sustainability approach

3. A Reference Model Duties and obligations to stakeholders regarding impact on vital capitals (Norm) Social Contract Stakeholders Knowledge Integration Appropriations Affective, Evaluative Response and behavior Surviving Knowledge Claims Actual impact Knowledge on Well-Being Internal and External stakeholders Organizational Operations Knowledge Claim Evaluation Interaction Adaptation Create flow of goods and services needed and used for Create new Knowledge Claims needed for Problem solution Actual Impact on Vital Forms of Capital Natural ,Human, Social, Constructed Problem Detection and Knowledge gaps Knowledge Production

4. Reactive Learning “downloading” Mental models Reenacting habits Thinking Doing All learning integrates thinking and doing. In reactive learning, thinking is governed by established mental models and doing is governed by established habits of action Adopted from Senge, P. et al : Presence (2004)

5. Deeper Levels of (Creative) Learning Thinking Doing Increasing awareness of the whole Action that increasingly serves the whole Deeper levels of learning create increasing awareness of the larger whole – both as it is and as it is evolving– and actions that increasingly become part of creating alternative futures. Adopted from Senge, P. et al : Presence (2004)

6. The Adaptive Maturity Model Thinking Doing Financial Metrics Increasing awareness of the whole Action that increasingly serves the whole Balanced Scorecard Adaptive Scorecard AQBLSC Adopted from Joe Firestone (2006)

7. A different way of viewing organizational performance scorecards • A life cycle approach enables managers to… • Design more complex scorecards to account for more variables, and • Assess more types of organizational performance • Financial • Environmental • Social • Economic • Learning • Knowledge • Organizational Intelligence • Organizational Adaptation

8. What is the Adaptive Quadruple Bottom Line Scorecard ? • The AQBLSC is a tool for measuring business performance that not only considers standard metrics, such as financial, customer, business process, and employee development – it also evaluates a firm’s • Organizational Learning and Intelligence • Routine learning processes • Deeper creative learning processes • Social Responsibility • Sustainability • Adaptive Capacity

9. Major Benefits of the Adaptive Quadruple Bottom Line Scorecard The AQBLSC…… • Balances between internal and external impacts of the organization • Incorporates a management evaluation perspective that provides a basis for evaluating the quality of management processes used • Provides a conceptual foundation that can enable more sophisticated formal modeling of measures, and simulation of strategy dynamics • Offers greater applicability to account for the many ways in which organizational complexity impacts performance • Builds a foundation for formulating more sophisticated business strategies • Adopts a broad-view systems approach that offers a high probability of achieving organizational sustainability and adaptability

10. The AQBLSC Business Processing (BP) and Management (BM) Knowledge Processing (KP) and Management (KM) Intelligence Performance Measures Operational Performance Measures Managing (BM) Doing (KP) Managing (KM) Doing (BP) Outcome Impact Outcome Impact Outcome Impact Outcome Impact Financial Bottom Line Internal Stakeholders Environmental Bottom Line External Stakeholders Internal Stakeholders Social Bottom Line External Stakeholders Internal Stakeholders Economic Bottom Line External Stakeholders

11. Business Processing (BP) and Management (BM) Knowledge Processing (KP) and Management (KM) Intelligence Performance Measures Operational Performance Measures Managing (BM) Doing (KP) Managing (KM) Doing (BP) Outcome Impact Outcome Impact Outcome Impact Outcome Impact Financial Bottom Line Internal Stakeholders Environmental Bottom Line External Stakeholders Internal Stakeholders Social Bottom Line • Advocating for non-financial impact • measurement, using • Capitals-Based Theory • Context-Based Metrics (CBMs) • Ecological and Social Footprints with • Sustainability Quotient Method TBL External Stakeholders Internal Stakeholders Economic Bottom Line External Stakeholders

12. Non-Financial Capitals and Well-Being Available Flows of Beneficial Goods and Services Resulting Levels of Individual and Collective Well-Being Natural Capital Appropriations by Individuals and Collectives Anthro Capital This is the capitals-based theory of Sustainability to which we subscribe!

13. The 4 Bottom Lines and their Capitals Area of Impact ANTHRO Capital Monetary Capital Natural Capital Human Capital Social Capital Constructed Capital Bottom Line Financial Bottom Line Internal Stakeholders Environmental Bottom Line External Stakeholders Internal Stakeholders Social Bottom Line External Stakeholders Internal Stakeholders Economic Bottom Line External Stakeholders

14. Adding Organizations to the Mix management interventions and impacts on organizational activity organizational contributions to supplies of vital capital (pos.& neg.) quality and size of stocks of capital quality and volume of flows from capital basic needs being met ? (yes/no) Organizational activity Positive & Stocks of Vital Capital Positive & Human Well-being neg. impacts neg. impacts indicators and metrics indicators and metrics indicators and metrics indicators and metrics indicators and metrics …..and mapping indicators and metrics to this causal theory of human well-being Adopted from McElroy (2009)

15. Definition of CBMs: • Measures of sustainability performance that express impacts on social and/or environmental resources in the world, relative to what such impacts ought to be in order to ensure human well-being • Grounded in the context of actual social and/or environmental conditions in the world • Literal measures (absolute, not relative) of sustainability performance

16. An Example: Water Use (w/o context) Fortune 500 Company’s Annual Water Use Mark W. McElroy, 2008

17. An Example: Water Use (with context) Fortune 500 Company’s Annual Water Use Mark W. McElroy, 2008

18. CBMs Take Form of Quotients A Actual impacts on vital resources Sustainability Performance = N Normative impacts on vital resources For environmental areas, scores of < 1.0 = Sustainable Scoring Conventions For social areas, scores of > 1.0 = Sustainable Mark W. McElroy, 2008

19. I thank my US Friends • Joe Firestone PhD, CEO of Knowledge Management Consortium International: eisai@comcast.net • the Adaptive Scorecard • Steve Cavaleri PhD, Professor Connecticut State University: cavaleri@ccsu.edu • System Dynamics and Modeling • Mark W. McElroy PhD, CEO of the Center for Sustainable Innovation & Director of Research at Deloitte’s Center for Sustainable Performance in Waltham, Mass, : mmcelroy@vermontel.net • the Social Footprint and the Quotient approach to sustainability

20. and Thank You! For more information, contact us at Henk Hadders University of Groningen henk.hadders@home.nl