Role of benchmark technology in sustainable value analysis An application to Finnish dairy farms

Abstract

Sustainability is a multidimensional concept that entails economic, environmental, and social aspects. The sustainable value (SV) method is one of the most promising attempts to quantify sustainability performance of firms. SV compares performance of a firm to a benchmark, which must be estimated in one way or another. This paper examines alternative parametric and nonparametric methods for estimating the benchmark technology from empirical data. Reviewed methods are applied to an empirical data of 332 Finnish dairy farms. The application reveals four interesting conclusions. First, the greater flexibility of the nonparametric methods is evident from the better empirical fit. Second, negative skewness of the regression residuals of both parametric OLS and nonparametric CNLS speaks against the average-practice benchmark technology in this application. Third, high positive correlations across a wide spectrum of methods suggest that the findings are relatively robust. Forth, the stochastic decomposition of the disturbance term to filter out the noise component from the inefficiency term yields more realistic efficiency estimates and performance targets.;

Sustainability values for business: A perspective of value alignment in a supplier-client relationship for case Aqualogy

“…They defined it as 'the size of the contribution of a company to more sustainability measured in monetary terms' and thereby propose in their study, a monetary measure of corporate contributions. Later, Van Passel, Van Huylenbroeck, Lauwers and Mathijs (2009) and Kuosmanen and Kuosmanen (2009) introduced sustainable value-added calculus based on the theory of productive efficiency. Afterward, last authors argued with Figge and Hahn in relation to benchmark from which the value must be measured (interest, desire or need).…”

Consistent Aggregation of Generalized Sustainable Values from the Firm Level to Sectoral, Regional or Industry Levels

“…Furthermore, they demonstrated mathematically that the SV and sustainable efficiency are the special cases of the standard efficiency indices known in the field of productive efficiency analysis for more than five decades. In the follow up study [11], the GSV method was applied to firm level data to assess corporate contributions towards sustainability in agriculture. The study included a detailed examination and classification of alternative methods available for estimating the benchmark technology in the context of GSV, and demonstrated the use of GSV in estimating the benchmark technology by an empirical application to Finnish dairy farms.…”

“…Previous empirical applications of the conventional SV and GSV methods assess data of individual firms or aggregate entities such as industries, sectors, or countries (see [6][7][8][9]11]). However, the connection between the firm level analysis and the aggregate level analysis has not been formally investigated.…”

“…In (2), the production technology f can be estimated from empirical data using well established econometric methods, such as stochastic frontier analysis (SFA) or data envelopment analysis (DEA), see e.g., [17] for a review of these methods. In the context of the GSV, for a review of econometric approaches to estimating production functions and environmental performance can be found in [11].…”

“…These average values x and y characterize the representative firm of group I. The representative firm's data are next included in the data set as an additional entity; and the production technology f is estimated by some econometric method available (see e.g., [11]). …”