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How not to measure sustainable value (and how one might)

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  • Kuosmanen, Timo
  • Kuosmanen, Natalia

Abstract

Sustainability is a complex multidimensional concept that entails economic, environmental, and social aspects. The sustainable value (SV) method developed by F. Figge and T. Hahn [Ecol. Econ. 48(2004) 173-187] is one of the most promising attempts to measure sustainability performance of firms. SV measures corporate contributions to sustainability by valuing resource use based on the opportunity cost, which must be estimated. This paper critically examines Figge and Hahn's estimator for opportunity cost, and shows that the proposed estimator rests on a number of strong, unrealistic assumptions. Evidence from Monte Carlo simulations conducted by authors shows that the proposed estimator performs very poorly even under ideal conditions. Having identified shortcomings in the SV method, we review some econometric approaches with a proven statistical foundation, which might be usefully applied in the present context.

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Bibliographic Info

Article provided by Elsevier in its journal Ecological Economics.

Volume (Year): 69 (2009)
Issue (Month): 2 (December)
Pages: 235-243

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Handle: RePEc:eee:ecolec:v:69:y:2009:i:2:p:235-243

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Web page: http://www.elsevier.com/locate/ecolecon

Related research

Keywords: Eco-efficiency Environmental performance Opportunity cost Productive efficiency analysis Sustainability;

References

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Cited by:
  1. Azad, Md A.S. & Ancev, Tihomir, 2010. "Using ecological indices to measure economic and environmental performance of irrigated agriculture," Ecological Economics, Elsevier, vol. 69(8), pages 1731-1739, June.
  2. Zhou, P. & Ang, B.W. & Wang, H., 2012. "Energy and CO2 emission performance in electricity generation: A non-radial directional distance function approach," European Journal of Operational Research, Elsevier, vol. 221(3), pages 625-635.

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