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

* This paper is a replication of an original study

Author

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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.

Suggested Citation

  • Kuosmanen, Timo & Kuosmanen, Natalia, 2009. "How not to measure sustainable value (and how one might)," Ecological Economics, Elsevier, vol. 69(2), pages 235-243, December.
  • Handle: RePEc:eee:ecolec:v:69:y:2009:i:2:p:235-243
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    References listed on IDEAS

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    4. Mokoena Bakae Aubrey, 2019. "The Relationship Between Selected Market Orientation Dimensions and Organizational Performance within Universities in South Africa," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 64(3), pages 54-68, December.
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    6. Paolo Cupo & Rinalda Alberta Di Cerbo, 2016. "The determinants of ranking in sustainable efficiency of Italian farms," RIVISTA DI STUDI SULLA SOSTENIBILITA', FrancoAngeli Editore, vol. 2016(2), pages 141-159.
    7. Jean-Philippe Boussemart & Hervé Leleu & Zhiyang Shen & Vivian Valdmanis, 2020. "Performance analysis for three pillars of sustainability," Journal of Productivity Analysis, Springer, vol. 53(3), pages 305-320, June.
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    9. Pacini, G. Cesare & Merante, Paolo & Lazzerini, Giulio & Van Passel, Steven, 2015. "Increasing the cost-effectiveness of EU agri-environment policy measures through evaluation of farm and field-level environmental and economic performance," Agricultural Systems, Elsevier, vol. 136(C), pages 70-78.
    10. Paúl Sarango-Lalangui & José Álvarez-García & María De la Cruz Del Río-Rama, 2018. "Sustainable Practices in Small and Medium-Sized Enterprises in Ecuador," Sustainability, MDPI, vol. 10(6), pages 1-15, June.
    11. Buerke, Anja & Weinrich, Kai & Kirchgeorg, Manfred, 2013. "Wenn Werte entscheiden – Ein Ansatz zur Identifizierung von Nachhaltigkeitstalenten im Employer Branding auf Basis persönlicher Werte," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 67(2), pages 194-217.
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    14. Siti Nur Atikah Zulkiffli & Nur Farah Zafira Zaidi & Siti Falindah Padlee & Najahul Kamilah Aminy Sukri, 2022. "Eco-Innovation Capabilities and Sustainable Business Performance during the COVID-19 Pandemic," Sustainability, MDPI, vol. 14(13), pages 1-17, June.
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    16. Ang, Frederic & Van Passel, Steven & Mathijs, Erik, 2011. "An aggregate resource efficiency perspective on sustainability: A Sustainable Value application to the EU-15 countries," Ecological Economics, Elsevier, vol. 71(C), pages 99-110.
    17. Zifeng Liang & Manli Zhang & Qingduo Mao & Bingxin Yu & Ben Ma, 2018. "Improvement of Eco-Efficiency in China: A Comparison of Mandatory and Hybrid Environmental Policy Instruments," IJERPH, MDPI, vol. 15(7), pages 1-20, July.
    18. Zhou, Haibo & Yang, Yi & Chen, Yao & Zhu, Joe, 2018. "Data envelopment analysis application in sustainability: The origins, development and future directions," European Journal of Operational Research, Elsevier, vol. 264(1), pages 1-16.
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    20. Jason West, 2015. "Capital valuation and sustainability: a data programming approach," Review of Quantitative Finance and Accounting, Springer, vol. 45(3), pages 591-608, October.
    21. 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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    Replication

    This item is a replication of:
  • 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.
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