Sustainable Value Approach Research Articles

Approaches to Sustainable Enterprise Value

Over the last two decades, business has taken a more systematic approach to understanding its impact on all of its stakeholders. Companies are striving to operate in a more sustainable way to improve the environmental, social and economic impact of their activities. Even today, the interest in determining the value of a company or parts of a company has not waned. As the economy continues to evolve, there are reasons and impulses that encourage companies to find out what their value is. The new approach is dependent on re-thinking value creation. There has been a growing understanding that sustainability requires a more comprehensive view of value that includes economic, social and environmental benefits. The aim of this paper is to propose a methodology for determining the sustainable value of an enterprise with respect to the factors influencing its value. This study is based on information that was gathered through an extensive literature review (research publications and research studies; the company’s financial statements with notes) using Internet and research databases and the authors’ own experiences. Methods of analysis, comparison, selection, abstraction, induction, deduction and statistics were used. The main findings of this study are as follows: the stakeholders require a company’s sustainable value; the modification of the EVA method with the sustainable value approach brings a different perspective to the issue of determining the value of an enterprise. In addition to the positives, the proposed methodology has limitations that can be removed or improved with further research.

Sustainable value of rice farm based on economic efficiency in Yogyakarta, Indonesia

AbstractAn analytical and integrated approach to farming needs to be formulated to assist decision-making by policymakers. This is important for the sustainability of agriculture in Indonesia, especially in the Special Region of Yogyakarta, which has experienced a decrease in land area, production, and productivity in the last 5 years. This study aims to analyze the sustainability of rice farming using the sustainable-value approach, which is based on the economically efficient use of agricultural resources. Data were collected from rice farmers in 25 observation areas attached to eight river irrigation sources throughout the province. A criterion for economic efficiency has been used as a guideline for setting benchmarks for optimal input use. The study reveals that, in general, these rice farms had poor economic productivity values. The sustainable value distribution for rice farms exceeded the highest value but there was low sustained quality. This indicates the limited overall longevity but also the potential for sustainability. Therefore, in managing rice farms, economic, social, and environmental resources have to be used more effectively.

Comparison of Environmental Performance of the Regions of Czech Republic from 2006 to 2012

This paper presents a systematic method for calculating regional level Environmental sustainability by using the sustainable value approach. The quest for achieving sustainability has led to the development of various tools and measures for structuring and conducting sustainable development policy analyses and the metrics used for the measurement of sustainability are still evolving. Sustainable Value approach is another simple tool for measuring sustainability performance. In general, Sustainable Value integrates the three dimensions of sustainability: the economic development, environmental sustainability and social development. This paper uses the principles of the sustainable value approach to calculate the environmental sustainability of the regions of the Czech Republic.

Impact of Policy and Factor Intensity on Sustainable Value of European Agriculture: Exploring Trade-Offs of Environmental, Economic and Social Efficiency at the Regional Level

Although sustainable development is a topic broadly discussed in the literature in relation to existing policy stimulus, a holistic approach to the implementation of sustainability in agriculture—for which there are three dimensions (economic, social and environmental)—is still missing. A regional approach, which averages the entire EU region, could therefore be useful in the long term for recommending directional guidelines for the Common Agricultural Policy (CAP). The objective of this study is to investigate the impact of key groups of CAP instruments and factor intensity on the three above-mentioned aspects of sustainability in the 2004–2017 period, with the assumption that they are all reciprocally related. This goal was achieved by measuring sustainability using the modified sustainable value approach combined with frontier-based nonparametric assessment and applying structural equation modelling, including multilevel random intercept. This research highlights trade-offs between environmental, economic and social efficiency and checks the impact of the EU CAP schemes on the sustainability of environmental, economic, and social dimensions in agriculture. Despite common indications of trade-offs, particularly between economic performance and eco-efficiency, our study shows that in the long term, such feedback has not occurred in any EU regions. Moreover, there are positive interactions between all three dimensions of sustainability from a cross-sectional perspective. The analysis of the impact of CAP subsidies proves that the current system of agri-environmental, set-aside and rural development payments has been effective in the long term, although broader implementation of environmental schemes in regions with lower labour productivity may negatively affect social sustainability.

SUSTAINABLE VALUE CREATION IN LATVIA, LITHUANIA AND ESTONIA: COMPARATIVE ANALYSIS OF ECONOMIC RETURN FROM THE USE OF ECONOMIC, SOCIAL AND ENVIRONMENTAL RESOURCES

Baltic neighbouring countries Latvia, Lithuania and Estonia all over the world are considered as brotherly nations that have similar historical events and political economic system. However, for the period of 25 years after gaining their independence from the Soviet Union in 1990, these countries have been implementing different socio-economic development models. It can be concluded on the achieved development results by the world recognized and widely used index indicators as Human Development Index (HDI), Global Competitiveness Index (GCI), Doing Business Index (DBI), revealing a trend that Estonia according to the socio-economic indicators is a step ahead of both Latvia and Lithuania. However, the above-mentioned indices calculation does not include the environmental indicators (HDI report includes Environmental Sustainability subindex, which is calculated separately) that cannot take account of national sustainable development which is becoming increasingly important under the conditions of global resource scarcity. The aim of the research is to determine sustainability of Latvia, Lithuania and Estonia, using the Sustainable Value (SV) approach, calculating how efficiently and with what return (Country's Gross Domestic Product) their economic, social and environmental resources are consumed. SV is a value-based assessment that measures contributions to sustainability in monetary terms while being able to use non-monetary environmental and social input variables. Calculating SV of Latvia, Lithuania and Estonia, the author has used 10 indicators of 2014 that cover the economic, social and environmental dimensions of sustainability, using the average efficiency of these countries as benchmark. As a result the author concluded that, overall, Latvia and Lithuania have almost equal footing with the Return to Cost Ratio (RCR) results, respectively 1.41 and 1.32 (>1 means that resources are used more efficiently than the benchmark), while Estonia's RCR value is 0.52 (

Integrated assessment of agro-ecological systems: The case study of the “Alta Murgia” National park in Italy

Several indicators and methods are already applied for sustainability assessment in agriculture. The links between sustainability indicators, agricultural management and policies are not well explained. The aim of this study is to combine biophysical and monetary sustainability assessment tools to support agriculture policy decision-making. Three methodological steps are considered: i) the environmental impacts of farms are assessed using terrestrial acidification, freshwater eutrophication, soil and freshwater ecotoxicity as well as natural land transformation; ii) the most relevant indicators of agriculture damages on ecosystems quality are aggregated into an index; iii) the farms' index scores are integrated with farm assets, land and labor, into the Sustainable Value approach (SVA), as indicator of natural resources used by farms. As a case study, the methodology was applied to arable farms with and without animal husbandry of the “Alta Murgia” National Park. The crop farms, in our sample, have a higher sustainable value using their economic and environmental resources. Mixed farms need to improve their resources use efficiency. Although crop farms have lower land-use efficiency compared to mixed farms, our results suggest supporting, by means of policy options, the specialized crop farms that, on average, perform better in terms of ecosystems quality preservation. Finally, we find that Life Cycle Assessment (LCA) to soundly measure the environmental impacts clearly enriches the SVA.

Sustainable Value creation of nine countries of the Baltic region. Value, changes and drivers

The Baltic region comprises countries of great diversity. They have in common that they all face the challenge to combine a sound economic development with the stewardship for their environmental, social and economic resources. Using the Sustainable Value approach we first analyze their overall sustainability performance. We then further develop the value drivers of Sustainable Value to enhance the explanatory power of our analysis. We find that there are significant differences between countries. We show both conceptually and using our examples that there is no unambiguous link between economic growth, environmental and social stewardship and the efficient use of resources.

Increasing the cost-effectiveness of EU agri-environment policy measures through evaluation of farm and field-level environmental and economic performance

A lot of attention in the debate on the 2014–2020 programming period of the EU CAP and rural development policy revolves around the policy's contribution to enhancing resource use efficiency, decreasing environmental impact, restoring ecosystems and how to ensure more efficient and effective agri-environmental measures (AEMs). Nevertheless, studies that simultaneously address multiple measures with multiple environmental objectives and targets are underrepresented in the scientific literature. The objectives of the present article are (i) to present an integrated tool-kit for AEM design resulting from the combination of farm modelling with the Sustainable Value Approach (SVA), and (ii) to evaluate the potential of the tool-kit to support AEM design through an application to estimate cost-effective organic agriculture payments for the dairy sector in Mugello, northern Tuscany. Sustainability assessment of organic and conventional farming systems (OFS and CFS, respectively) under the 2007–2013 EU CAP support schemes and a no EU support scenario show better OFS performances regarding nitrogen leaching (−52% and −47% under the current CAP and the no EU support scenarios, respectively), soil erosion (−24% and −34%), potential pesticide risks (−100%), biodiversity (+13% and +30%). Income foregone for the production of environmental benefits from organic agriculture under a no EU support scenario is equal to 210 Euro/ha. Sustainable value calculations combined with modelling results indicate soil erosion and nitrogen leaching as the environmental processes to be addressed with specific policy measures to further increase the efficiency of organic farming. A new organic agriculture support scheme designed based on such indications further increases the OFS SV and almost closes the GAP with a benchmark farm of the area, featured with ideal performances in terms of environmental and economic indicators. The payment scheme we designed with the support of the integrated tool-kit shows to be more cost-effective and efficient of current AEMs.

Using agro-environmental models to design a sustainable benchmark for the sustainable value method

Farms contribute heavily to overall sustainability. To date, various frameworks, approaches, methods and indicators have been developed to appraise how much corporations (firms, farms) contribute to sustainability. Among these, the Sustainable Value (SV) method helps to determine by which economic entity resources should be used in order to achieve the highest contributions to sustainability, by comparing company's efficiency of capital use against the efficiency of a benchmark. In this work we argue that the SV benchmark does not include certain crucial environmental concepts, such as the carrying capacity of an ecosystem or the multiple vital functions provided by ecosystem services. Thus, it is not a suitable reference for companies to evaluate their contribution to sustainability. As an alternative benchmark to standard SV applications, we propose a farm whose resource use productivity is correlated to the fulfilment of pre-determined environmental constraints: the Environmentally Sustainable Farm (ESF). To design this farm, we created an agro-environmental farm modelling framework that includes: (i) methods and approaches to assess indicators concerning specific environmental issues; (ii) an integrated ecological–economic model based on linear programming. This farm modelling framework is employed to determine both the environmental performance and the economic returns of two farming systems, conventional (CFS) and organic (OFS), which are compared using the Sustainable Value approach. Despite the fact that the OFS environmentally outperforms the CFS, none of them reaches the sustainable performances achieved by the ESF, both performing a negative Sustainable Value. The environmental constraints forced the ESF towards management choices that, although decreasing the economic performance, increase its environmental sustainability behaviour. Hence, the ESF is a viable benchmark that can be used to evaluate farms' environmental sustainability.

Sustainable Value Creation in Commercial Banks During Financial Crisis

Sustainable value leads to the financial institution's positive economic performance during financial crisis. More and more banks in European Union are implementing sustainable development strategy, in order to avoid economic downturn in crisis time. The main goal of this paper is to propose a model of sustainable value measurement in commercial banks during financial crisis. To reach this goal the sustainable value approach and the importance of corporate social responsibility in the commercial banking and the role of shareholder value in sustainable value were analysed. Moreover, the model of measurement of shareholder value is analysed and created the joint model of sustainable value measurement. Based on these methods and models, the share-holder value of the banks is established, the sustainable value of the bank was evaluated and compared. Relationship of sustainable value and shareholder value was established. The results show that sustainable value creation helps bank industry to maintain positive economic performance even in crisis time.

Sustainable value of degraded soils in China's Loess Plateau: An updated approach

China's Loess Plateau is a highly distressed region where intensive crop production has been undermined by high soil erosion rates that threaten the long-term livelihood of its inhabitants. Regional policy goals aim to balance economic performance with the sustainable use of natural resources. From a practical perspective, challenges arise when measuring sustainability levels that mix multiple dimensions, scales, and benchmarks. This study addresses these challenges by comparing the sustainability of agricultural systems across varied crops, land types, and cropping techniques in China's Loess Plateau. Sustainability levels for each system are compared to benchmarks using data envelopment analysis, which is then used to calculate a sustainable value (SV). The SV approach provides a monetary measure of sustainability that includes economic, environmental and social dimensions. Results demonstrate that the most sustainable agricultural systems in the Loess Plateau involve machine intensive cropping systems, a corn–soybean–corn rotation, mulching, furrows ridging, and bench terracing.

An aggregate resource efficiency perspective on sustainability: A Sustainable Value application to the EU-15 countries

The Sustainable Value approach integrates the efficiency with regard to environmental, social and economic resources into a monetary indicator. It gained significant popularity as evidenced by diverse applications at the corporate level. However, its introduction as a measure adhering to the strong sustainability paradigm sparked an ardent debate. This study explores its validity as a macroeconomic strong sustainability measure by applying the Sustainable Value approach to the EU-15 countries. Concretely, we assessed environmental, social and economic resources in combination with the GDP for all EU-15 countries from 1995 to 2006 for three benchmark alternatives. The results show that several countries manage to adequately delink resource use from GDP growth. Furthermore, the remarkable difference in outcome between the national and EU-15 benchmark indicates a possible inefficiency of the current allocation of national resource ceilings imposed by the European institutions. Additionally, by using an effects model we argue that the service degree of the economy and governmental expenditures on social protection and research and development are important determinants of overall resource efficiency. Finally, we sketch out three necessary conditions to link the Sustainable Value approach to the strong sustainability paradigm.

Multilevel and multi-user sustainability assessment of farming systems

Sustainability assessment is needed to build sustainable farming systems. A broad range of sustainability concepts, methodologies and applications already exists. They differ in level, focus, orientation, measurement, scale, presentation and intended end-users. In this paper we illustrate that a smart combination of existing methods with different levels of application can make sustainability assessment more profound, and that it can broaden the insights of different end-user groups. An overview of sustainability assessment tools on different levels and for different end-users shows the complementarities and the opportunities of using different methods. In a case-study, a combination of the sustainable value approach (SVA) and MOTIFS is used to perform a sustainability evaluation of farming systems in Flanders. SVA is used to evaluate sustainability at sector level, and is especially useful to support policy makers, while MOTIFS is used to support and guide farmers towards sustainability at farm level. The combined use of the two methods with complementary goals can widen the insights of both farmers and policy makers, without losing the particularities of the different approaches. To stimulate and support further research and applications, we propose guidelines for multilevel and multi-user sustainability assessments.

The Sustainable Value approach: A clarifying and constructive comment

Recently, the original benchmarking methodology of the Sustainable Value approach became subjected to serious debate. While Kuosmanen and Kuosmanen (2009b) critically question its validity introducing productive efficiency theory, Figge and Hahn (2009) put forward that the implementation of productive efficiency theory severely conflicts with the original financial economics perspective of the Sustainable Value approach. We argue that the debate is very confusing because the original Sustainable Value approach presents two largely incompatible objectives. Nevertheless, we maintain that both ways of benchmarking could provide useful and moreover complementary insights. If one intends to present the overall resource efficiency of the firm from the investor's viewpoint, we recommend the original benchmarking methodology. If one on the other hand aspires to create a prescriptive tool setting up some sort of reallocation scheme, we advocate implementation of the productive efficiency theory. Although the discussion on benchmark application is certainly substantial, we should avoid the debate to become accordingly narrowed. Next to the benchmark concern, we see several other challenges considering the development of the Sustainable Value approach: (1) a more systematic resource selection, (2) the inclusion of the value chain and (3) additional analyses related to policy in order to increase interpretative power.

Not measuring sustainable value at all: A response to Kuosmanen and Kuosmanen

In their article in this issue of Ecological Economics, Kuosmanen and Kuosmanen [Kuosmanen, T. and Kuosmanen, N., this issue. How Not to Measure Sustainable Value (and How One Might). Ecological Economics.] aim to criticise the measurement of Sustainable Value as proposed in our previous research. By adopting a production perspective and based on a productive efficiency analysis, they claim that the proposed way of measuring Sustainable Value represents an invalid simplification that rests on restrictive and unrealistic assumptions. Our response is to show that their argument rests on a fundamental misspecification of the Sustainable Value approach. We identify three conceptual misfits: a mismatch in the perspective of the analysis, a misspecification of opportunity costs and the irrelevance of production functions. Ultimately, Kuosmanen and Kuosmanen's train of thought rests entirely within the realm of productive efficiency analysis, whereas Sustainable Value builds on the foundations of financial economics and consequently adopts a macro rather than a firm perspective. It is thus not surprising that the findings of Kuosmanen and Kuosmanen appear to contradict the Sustainable Value approach. However, this is due to their fundamental misspecification of the Sustainable Value approach. As a result, rather than providing novel insights into how Sustainable Value might be measured in a better way, they do not measure Sustainable Value at all.

Sustainable value assessment of farms using frontier efficiency benchmarks

Appropriate assessment of firm sustainability facilitates actor-driven processes towards sustainable development. The methodology in this paper builds further on two proven methodologies for the assessment of sustainability performance: it combines the sustainable value approach with frontier efficiency benchmarks. The sustainable value methodology tries to relate firm performance to the use of different resources. This approach assesses contributions to corporate sustainability by comparing firm resource productivity with the resource productivity of a benchmark, and this for all resources considered. The efficiency is calculated by estimating the production frontier indicating the maximum feasible production possibilities. In this research, the sustainable value approach is combined with efficiency analysis methods to benchmark sustainability assessment. In this way, the production theoretical underpinnings of efficiency analysis enrich the sustainable value approach. The methodology is presented using two different functional forms: the Cobb–Douglas and the translog functional forms. The simplicity of the Cobb–Douglas functional form as benchmark is very attractive but it lacks flexibility. The translog functional form is more flexible but has the disadvantage that it requires a lot of data to avoid estimation problems. Using frontier methods for deriving firm specific benchmarks has the advantage that the particular situation of each company is taken into account when assessing sustainability. Finally, we showed that the methodology can be used as an integrative sustainability assessment tool for policy measures.

Sustainable investment analysis with the sustainable value approach a plea and a methodology to overcome the instrumental bias in socially responsible investment research

The increased demand for sustainable investments has resulted in an increased interest in sustainable investment analysis. Existing sustainable investment analysis assesses environmental and social performance in isolation and/or subordinates environmental and social performance under economic performance. Neither is in-line with the demands of sustainable development. This article shows how the sustainable value approach can be used for sustainable investment analysis. Sustainable value is the first value-oriented sustainability assessment. In contrast to existing approaches it is fully integrated and it does not subordinate environmental and social aspects under economic aspects. Using the example of Danone we demonstrate the applicability of the sustainable value approach for sustainable investment analysis.

Sustainable Value creation among companies in the manufacturing sector

In this paper, we present empirical results of a study on the creation of Sustainable Value among European manufacturing companies. As sustainable development is a future oriented concept we assess the use of environmental resources in companies in the light of the EU15 performance targets for 2010. By using the Sustainable Value approach and based on publicly available company data we measure in monetary terms how individual companies perform vis-a-vis the 2010 performance targets already today. This shows the specific exposure and vulnerability of companies to more stringent policy regimes, and allows meaningful comparisons between both companies and sectors.