Towards indicators of sustainable development for firms - A productive efficiency perspective

Sustainable development can be reflected by various economic, social and environmental factors that are closely interconnected with each other, and with the additional dimension of time, which stresses the long-term perspective of several factors. Due to their central role in human activities and development, firms should play an important part in the attainment of sustainability goals. The purpose of this paper is to contribute to the methodology of indicators that allow for the assessment of business participation into sustainable development. A fundamental standpoint adopted is to view economic, social and environmental efficiency as a necessary (but not sufficient) step towards sustainability. To work out indicators, we build on both the concepts of cost-benefit analysis and the principles of productive efficiency. We assume that we have observations on economic, social and environmental factors for a set of decision making units (DMUs), e.g. firms in an industrial (sub-) sector. The efficiency of each DMU is computed from a set of observed data, using mathematical programming techniques, resulting in DMUs that are 'efficient' and define the efficiency frontier among the set of DMUs, and DMUs that are 'inefficient'. To cope with the multidimensionality of sustainable development, it is important not to base decisions on one unique, aggregate sustainability indicator; instead, it is suggested to develop two or three partial indicators that stress different aspects of the problem. The proposed indicators could be used as an aid to detect so-called factors of unsustainability, and hence to provide for recommendations as to the regulations and incentives, or managerial practices, that will contribute to overall sustainability. (C) 1999 Elsevier Science B.V. All rights reserved.