The adoption of the key performance indicators to integrate sustainability in the business strategy: A novel five‐dimensional framework

Abstract

Over the past few years, the role of the organization has radically changed, moved from the traditional value creation process, based on the accounting data and cost analysis, to an innovative and proactive approach, sustainability oriented. The resulting sustainable development (SD) issues and their integration in the business strategy for managing environmental complexity are more relevant than ever. Despite the growing interest of the literature related to these themes, a more in‐depth analysis on the key value drivers of sustainability, positively perceived by managers, and their integration at a business level is strongly required to support an effective SD process. Accordingly, to generate a strategic alignment in the sustainability transition process, scholars and practitioners require a clear view of the key drivers, metrics, and potential solutions. To this end, we focused on two main purposes aimed (1) to provide a sustainable key performance indicator (KPI) system useful to support decision‐making process of managers and (2) to identify how can sustainable indicators be integrated into business strategy with a view to performance improvement, suggesting future paths to analysis. In view of the research proposes addressed, based on semistructured interviews with 110 managers specialized in sustainable practices, we provided a novel five‐dimensional framework, built on a specific set of SD indexes. The model aims to provide a structured way to adequately integrate sustainability at a strategic level. The results generate a robust roadmap for future analysis in this research field.

Enhancing the strategic alignment between environmental drivers of sustainability and the performance management system in Italian manufacturing firms

“…Therefore, the development of a suitable KPI system, aimed to incorporate nonfinancial/ qualitative and financial/quantitative information, assumes a fundamental role in supporting the PMS's implementation by generating strategic alignment (Rojas-Lema et al, 2021Aguinis, 2012Armstrong and Baron, 2005) between sustainability issues and the business level. In this paper, we used the concept of "sustainability KPIs" (Zharfpeykan and Akroyd, 2022;Hristov et al, 2022a;Neri et al, 2021;Di Vaio and Varriale, 2018) to denote an indicator IJPPM 72,10 linked to a quantitative and/or qualitative sustainability variable that provides significant, synthetic, critical and priority information, which is crucial for the decision-making process of managers (Aguinis, 2009).…”

“…The importance of these indicators is because of their effectiveness in obtaining useful information from both the financial statements and from other external factors besides economic ones, such as social and environmental factors (Singh et al, 2016;Broadbent and Laughlin, 2009), which still have a basic importance in all companies' lifecycles (Neri et al, 2021;Hristov et al, 2022a;Kerr et al, 2015). Different studies have analysed the sustainable KPIs for the evaluation of a firm's sustainability and, mainly from a quantitative point of view Ahi et al (2018), with regard to the operational process (Neri et al, 2021).…”

Identification of the Right Environmental KPIs for Manufacturing Operations: Towards a Continuous Sustainability Framework

“…In the same context, to mitigate the need for reviewing multiple sets of indicators, Hristov et al [ 62 ] introduced composite KPIs which combine multiple aspects of system performance into a single measurement, based on a common scientific or economic standard. An example of these KPIs is ecological footprint (EF) which aimed to measure how much of the biosphere’s annual regenerative capacity is needed to renew the natural resource demand each year.…”

Managing sustainability—Does the integration of environmental, social and governance key performance indicators in the internal management systems contribute to companies' environmental, social and governance performance?

“…One of these factors refers to the commitment to sustainability, especially from top management. For instance, Hristov et al (2022) investigate the application of key performance indicators (KPIs) as a possibility to integrate sustainability aspects into business strategy.…”

“…Building on studies like Hristov et al (2022) and Silvestre et al (2022), this study aims to provide companies with more clarity, especially regarding potential ways to improve their ESG performance. In particular, the following two research questions (RQs) are being investigated: (RQ1) Does the implementation of ESG KPIs in the IMS influence the ESG performance of companies? (RQ2) Does the consistent use of ESG KPIs in the IMS and the MCS influence the ESG performance of companies? To answer our RQs, we use data from German capital market‐oriented companies, which are required to report their KPIs used in the IMS according to GAS 20.…”