Understanding and Measuring Sustainability Performance in the Banking Sector

Abstract

Stakeholders have increasingly demanded the adoption of sustainable strategies and the increase in sustainability reports from the business. At the same time, the assessment and measurement of corporate performance now extend beyond its established financial return. This paper follows the argument that it is important for companies to be an entity that plays an active role in sustainable development. However, it is commonly accepted that there is no single, integrated way of assessing this performance. The purpose of this paper is to provide a framework for understanding and measuring corporate sustainability in the banking sector. More specifically, the paper aims to fill the gap in the corporate sustainability assessment in the banking sector because there is, in fact, a tendency to underestimate the indirect impact these sectors have on environmental issues and social responsibility. A theoretical framework of an integrated composite sustainability index is analyzed based on the adoption of the GRI sustainability guidelines and the application of the analytic hierarchy process. The construction of a composite sustainability index includes the economic, environmental and social dimension of entrepreneurship. Each of the three sub-indices is a synthesis of several key performance indicators, which are usually the subjects of annual sustainability reports of an organization. This process is used to benchmark a company over a period of time and provides an indicative tool in order to analyze banking companies. Managers can use this analysis as a valuable component for comparing them over time, so as to adopt appropriate sustainable strategies and to improve the economic, environmental and social performance. A key tool to achieve sustainability in the banking sector is to analyze the corporate performance of the organizations. This will give a competitive advantage to the bank operators.