Measuring corporate sustainability performance– the case of European food and beverage companies

Abstract

Abstract Measuring corporate sustainability performance is necessary to guide sustainability improvements. Although many indicators exist that capture the different dimensions of sustainability, a composite indicator that integrates across all indicators is important as it helps to summarize multi-dimensional issues and provide synthesized information. This paper discusses and evaluates a method that builds on a combinantion of prinicipal component analysis and data envelopment analysis for developing a composite indicator of corporate sustainability. Principal component analysis is used to reduce the number of indicators and remove correlations among the indicators. The composite indicator of sustainability for each company is then obtained by using data envelopment analysis with a bootstrapping procedure. The method is illustrated for companies in the European food and beverages sector, using data from Sustainalytics. The paper also shows how the composite indicator of sustainability can be complemented by a decomposition analysis to identify priorities for sustainability improvements. The approach is valuable for stakeholders who aim to enhance corporate sustainability.