This study presents a systematic method for aggregating firm level sustainable value indicators to sector, region or industry levels. The proposed method applies the generalized sustainable value that is based on frontier production functions. The method is illustrated by an empirical application to the Finnish crop and dairy sectors, where the benchmark technology is estimated by data envelopment analysis. Our efficiency assessment shows that the representative crop farm achieves only about a half of its potential output. Efficiency of the representative dairy farm is somewhat higher.
References
[1]
Tyteca, D. On the measurement of the environmental performance of firms—A literature review and a productive efficiency analysis. J. Environ. Manage. 1996, 46, 281–308, doi:10.1006/jema.1996.0022.
[2]
Callens, I.; Tyteca, D. Towards indicators of sustainable development for firms: a productive efficiency perspective. Ecol. Econ. 1999, 1, 41–53, doi:10.1016/S0921-8009(98)00035-4.
[3]
Bell, S.; Morse, S. Measuring Sustainability: Learning from Doing; Earthscan: London, UK, 2003.
[4]
Figge, F.; Hahn, T. Sustainable value added: measuring corporate contributions to sustainability beyond eco-efficiency. Ecol. Econ. 2004, 2, 173–187, doi:10.1016/j.ecolecon.2003.08.005.
[5]
Figge, F.; Hahn, T. The cost of sustainability capital and the creation of sustainable value by companies. J. Ind. Ecol. 2005, 4, 47–58, doi:10.1162/108819805775247936.
[6]
Van Passel, S.; Nevens, F.; Mathijs, E.; van Huylenbroeck, G. Measuring farm sustainability and explaining differences in sustainable efficiency. Ecol. Econ. 2007, 1, 149–161.
[7]
Ang, F.; van Passel, S.; Mathijs, E. An aggregate resource efficiency perspective on sustainability: a sustainable value application to the EU-15 countries. Ecol. Econ. 2011, 71, 99–110, doi:10.1016/j.ecolecon.2011.08.008.
[8]
Van Passel, S.; Meul, M. Multilevel and multi-user sustainability assessment of farming systems. Environ. Impact Assess. 2012, 32, 170–180, doi:10.1016/j.eiar.2011.08.005.
[9]
Van Passel, S.; van Huylenbroeck, G.; Lauwers, L.; Mathijs, E. Sustainable value assessment of farms using frontier efficiency benchmarks. J. Environ. Manage. 2009, 10, 3057–3069.
[10]
Kuosmanen, T.; Kuosmanen, N. How not to measure sustainable value (and how one might)? Ecol. Econ. 2009, 2, 235–243, doi:10.1016/j.ecolecon.2009.08.008.
[11]
Kuosmanen, T.; Kuosmanen, N. Role of benchmark technology in sustainable value analysis: An application to Finnish dairy farms. Agr. Food Sci. 2009, 18, 302–316.
[12]
Blackorby, C.; Russell, R.R. Aggregation of efficiency indices. J. Prod. Anal. 1999, 12, 5–20, doi:10.1023/A:1007848122559.
[13]
F?re, R.; Zelenyuk, V. On aggregate Farrell efficiency scores. Eur. J. Oper. Res. 2003, 3, 615–620.
[14]
Kuosmanen, T.; Cherchye, L.; Sipil?inen, T. The law of one price in data envelopment analysis: restricting weight flexibility across firms. Eur. J. Oper. Res. 2006, 3, 735–757.
[15]
Farrell, M.J. The measurement of productive efficiency. J. R. Stat. Soc. 1957, 120, 253–281.
[16]
Charnes, A.; Cooper, W.W.; Rhodes, E. Measuring the efficiency of decision making units. Eur. J. Oper. Res. 1978, 2, 429–444, doi:10.1016/0377-2217(78)90138-8.
[17]
Fried, H.; Lovell, C.A.K.; Schmidt, S. The Measurement of Productive Efficiency and Productivity Change; OxfordUniversity Press: New York, NY, USA, 2007.
[18]
Kuosmanen, T.; Kortelainen, M.; Sipil?inen, T.; Cherchye, L. Firm and industry level profit efficiency analysis using absolute and uniform shadow prices. Eur. J. Oper. Res. 2010, 2, 584–594.
[19]
Nerlove, M. Estimation and Identification of Cobb—Douglas Production Functions, 1st ed.; Rand McNally: Chicago, IL, USA, 1965.
[20]
Lehtonen, H.; Pyykk?nen, P. Structural Change in Finnish Agriculture up to 2013 (Maatalouden rakennekehitysn?kym?t vuoteen 2013); MTT:n selvityksi? 100: Helsinki, Finland, 2005.