Efficiency measurement of the environmental systems: a two-stage structure considering undesirable outputs

Abstract

PurposeEach production unit is responsible for the protection of the environment. The restricted undesirable production effects lower environmental damage. This paper emphasizes a proportional reduction of the undesirable outputs, and it supports the growth of desirable outputs as much as possible as well. The two-stage proposed model not only considers the viewpoint of the managers to follow the environmental regulations but also it assigns some bounds on producing undesirable factors according to international environmental protocols. Additionally, the restricted bounds on the undesirable outputs, in both stages, enhance the discriminatory ability of the model.Design/methodology/approachTwo-stage network structure based on Data Envelopment Analysis (DEA) is applied as the main methodology for this paper. The advantages of the proposed model are appointed to assess the environmental units.FindingsComparing with the existing models, the proposed approach presents a new two-stage model to deal with the environmental issues. Furthermore, the discriminatory ability of the efficiency scores is improved. The distribution of this model is greater than the existing ones.Research limitations/implicationsThis paper is fully written, submitted and revised during limitations caused by coronavirus .Practical implicationsThe proposed method is employed in two different cases. The efficiency scores of 25 power plants and 13 poultry farms are determined. In fact, the undesirable outputs never meet zero in the process of production but they can be reduced. The results of this research support the effect of the undesirable factors' restriction on the reduction scenario. Both of the examples show that imposing the upper bounds for the undesirable products provide low-efficiency results in comparison with the existing model. On the other hand, the results cover the arguments of sustainability in the evaluation of environmental efficiency.Originality/valueIn the production process, desirable outputs and undesirable factors are produced jointly so undesirable factors never meet zero. This paper develops a new two-stage method to reduce the undesirable outputs at each stage. First, the model confirms the reduction of undesirable outputs. Second, this model imposes restrictions on intermediate and final undesirable outputs according to environmental rights and the concerns of the managers. The model increases the discrimination of the efficiency assessment of real-life two-stage environmental systems as well. Then it focuses on the production of desirable outputs. The new objective function is defined according to the aim of the proposed model that not only declares better efficiency decomposition to the individual system but also the efficiency score is evaluated for each stage.