Carol Thayn, president of Milton, Inc., a consumer products firm, has decided to follow an environmental improvement strategy. The goal is to increase profits by increasing revenues and decreasing environmental costs. Carol is convinced that revenues could be increased if she could improve the company’s environmental image. Customers have been demanding cleaner products, and her marketing manager had indicated that producing “greener” products would definitely lead to an increase in market share. Furthermore, Carol had recently returned from an environmental management seminar where she had learned about ecoefficiency. She now believes that costs could be reduced while simultaneously improving environmental performance. She has two objectives in mind: Reduce packaging and reduce production and release of contaminating residues. Carol has decided on the following actions to achieve the desired improvements:

1. Hire two environmental engineers to provide the capabilities needed to improve environmental performance. One engineer would be responsible for a new packaging design and reduction process. The other would be given responsibility to redesign products and processes with the objective of reducing the production of residues. Carol expected the actions to reduce packaging costs and pollution control costs.

2. All employees would be sent to several training seminars to learn about environmental management. They would then be empowered to make improvements in environmental performance (e.g., ways to reduce contaminants and packaging materials).

3. Once the processes and products were redesigned, she would participate in a third-party environmental certification program so that customers would be assured that the environmental improvements were valid.

Required:

1. Explain why adding an environmental perspective to the Balanced Scorecard is considered to be legitimate.

2. Express the environmental improvement strategy as a series of cause-and-effect relationships expressed as if-then statements.

3. Illustrate the strategy using a causal flow diagram with one important modification:

add an environmental perspective (the flow diagram should then illustrate five perspectives). Place the environmental perspective in between the customer and process perspectives.