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

Sustainable development can be reflected by various economic, social and en vironmental factors that are closely interconnected with each other, and wi th the additional dimension of time, which stresses the long-term perspecti ve of several factors. Due to their central role in human activities and de velopment, firms should play an important part in the attainment of sustain ability goals. The purpose of this paper is to contribute to the methodolog y of indicators that allow for the assessment of business participation int o sustainable development. A fundamental standpoint adopted is to view econ omic, social and environmental efficiency as a necessary (but not sufficien t) step towards sustainability. To work out indicators, we build on both th e concepts of cost-benefit analysis and the principles of productive effici ency. We assume that we have observations on economic, social and environme ntal factors for a set of decision making units (DMUs), e.g. firms in an in dustrial (sub-) sector. The efficiency of each DMU is computed from a set o f observed data, using mathematical programming techniques, resulting in DM Us that are 'efficient' and define the efficiency frontier among the set of DMUs, and DMUs that are 'inefficient'. To cope with the multidimensionalit y of sustainable development, it is important not to base decisions on one unique, aggregate sustainability indicator; instead, it is suggested to dev elop two or three partial indicators that stress different aspects of the p roblem. The proposed indicators could be used as an aid to detect so-called factors of unsustainability, and hence to provide for recommendations as t o the regulations and incentives, or managerial practices, that will contri bute to overall sustainability. (C) 1999 Elsevier Science B.V. All rights r eserved.