How not to measure sustainable value (and how one might)
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
- Van Passel, Steven & Nevens, Frank & Mathijs, Erik & Van Huylenbroeck, Guido, 2007. "Measuring farm sustainability and explaining differences in sustainable efficiency," Ecological Economics, Elsevier, vol. 62(1), pages 149-161, April.
- Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
- Fan, Yanqin & Li, Qi & Weersink, Alfons, 1996. "Semiparametric Estimation of Stochastic Production Frontier Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(4), pages 460-68, October.
- Timo Kuosmanen & Mika Kortelainen, 2012. "Stochastic non-smooth envelopment of data: semi-parametric frontier estimation subject to shape constraints," Journal of Productivity Analysis, Springer, vol. 38(1), pages 11-28, August.
- Zhou, P. & Ang, B.W. & Poh, K.L., 2007. "A mathematical programming approach to constructing composite indicators," Ecological Economics, Elsevier, vol. 62(2), pages 291-297, April.
- Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
- Timmer, C P, 1971. "Using a Probabilistic Frontier Production Function to Measure Technical Efficiency," Journal of Political Economy, University of Chicago Press, vol. 79(4), pages 776-94, July-Aug..
- Kuosmanen, Timo & Bijsterbosch, Neil & Dellink, Rob, 2009. "Environmental cost-benefit analysis of alternative timing strategies in greenhouse gas abatement: A data envelopment analysis approach," Ecological Economics, Elsevier, vol. 68(6), pages 1633-1642, April.
- Kortelainen, Mika, 2008. "Dynamic environmental performance analysis: A Malmquist index approach," Ecological Economics, Elsevier, vol. 64(4), pages 701-715, February.
- Lozano, Sebastián & Gutiérrez, Ester, 2008. "Non-parametric frontier approach to modelling the relationships among population, GDP, energy consumption and CO2 emissions," Ecological Economics, Elsevier, vol. 66(4), pages 687-699, July.
- Fare, Rolf & Grosskopf, Shawna & Pasurka, Carl Jr., 2007. "Pollution abatement activities and traditional productivity," Ecological Economics, Elsevier, vol. 62(3-4), pages 673-682, May.
- Hendry, David F., 1984. "Monte carlo experimentation in econometrics," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 16, pages 937-976 Elsevier.
- Zaim, Osman, 2004. "Measuring environmental performance of state manufacturing through changes in pollution intensities: a DEA framework," Ecological Economics, Elsevier, vol. 48(1), pages 37-47, January.
- Zhou, P. & Ang, B.W. & Poh, K.L., 2008. "A survey of data envelopment analysis in energy and environmental studies," European Journal of Operational Research, Elsevier, vol. 189(1), pages 1-18, August.
- Callens, Isabelle & Tyteca, Daniel, 1999. "Towards indicators of sustainable development for firms: A productive efficiency perspective," Ecological Economics, Elsevier, vol. 28(1), pages 41-53, January.
- Figge, Frank & Hahn, Tobias, 2004. "Sustainable Value Added--measuring corporate contributions to sustainability beyond eco-efficiency," Ecological Economics, Elsevier, vol. 48(2), pages 173-187, February.
- Kuosmanen, Timo, 2006. "Stochastic Nonparametric Envelopment of Data: Combining Virtues of SFA and DEA in a Unified Framework," Discussion Papers 11864, MTT Agrifood Research Finland.
- Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
- Christensen, Laurits R & Greene, William H, 1976. "Economies of Scale in U.S. Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 655-76, August.
- Richmond, J, 1974. "Estimating the Efficiency of Production," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(2), pages 515-21, June.
- Bosetti, Valentina & Buchner, Barbara, 2009. "Data Envelopment Analysis of different climate policy scenarios," Ecological Economics, Elsevier, vol. 68(5), pages 1340-1354, March.
When requesting a correction, please mention this item's handle: RePEc:eee:ecolec:v:69:y:2009:i:2:p:235-243. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.