The role of benchmark technology in sustainable value analysis

Sustainable Value Analysis (SVA) [F. Figge, T. Hahn, Ecol. Econ. 48(2004) 173-187] is a method formeasuring sustainability performance consistent with the constant capital rule and strongsustainability. SVA compares eco-efficiency of a firm relative to some benchmark. The choice of thebenchmark implies some assumptions regarding the underlying production technology. This paperpresents a rigorous examination of the role of benchmark technology in SVA. We show that Figge andHahn’s formula for calculating sustainable value implies a peculiar linear benchmark technology. Wepresent a generalized formulation of sustainable value that is not restricted to any particular functionalform and allows for estimating benchmark technology from empirical data. Our generalized SVAformulation reveals a direct link between SVA and frontier approaches to environmental performancemeasurement and facilitates statistical hypotheses testing concerning the benchmark

Role of benchmark technology in sustainable value analysis : an application to Finnish dairy farms

Sustainability is a multidimensional concept that entails economic, environmental, and social aspects. The sustainable value (SV) method is one of the most promising attempts to quantify sustainability performance of firms. SV compares performance of a firm to a benchmark, which must be estimated in one way or another. This paper examines alternative parametric and nonparametric methods for estimating the benchmark technology from empirical data. Reviewed methods are applied to an empirical data of 332 Finnish dairy farms. The application reveals four interesting conclusions. First, the greater flexibility of the nonparametric methods is evident from the better empirical fit. Second, negative skewness of the regression residuals of both parametric OLS and nonparametric CNLS speaks against the average-practice benchmark technology in this application. Third, high positive correlations across a wide spectrum of methods suggest that the findings are relatively robust. Forth, the stochastic decomposition of the disturbance term to filter out the noise component from the inefficiency term yields more realistic efficiency estimates and performance targets

Consistent Aggregation of Generalized Sustainable Values from the Firm Level to Sectoral, Regional or Industry Levels

Peer reviewe

Optimal resource allocation: Convex quantile regression approach

Optimal allocation of resources across sub-units in the context of centralized decision-making systems such as bank branches or supermarket chains is a classical application of operations research and management science. In this paper, we develop quantile allocation models to examine how much the output and productivity could potentially increase if the resources were efficiently allocated between units. We increase robustness to random noise and heteroscedasticity by utilizing the local estimation of multiple production functions using convex quantile regression. The quantile allocation models then rely on the estimated shadow prices instead of detailed data of units and allow the entry and exit of units. Our empirical results on Finland's business sector reveal a large potential for productivity gains through better allocation, keeping the current technology and resources fixed

Renewal of Companies: Industry Switching as a Form of Structural Change

The contributions of entry and exit of firms to aggregate productivity growth are well-established in the literature. However, the impact of industry switching of firms on productivity remains overlooked. The purpose of this report is to shed new light on the role of industry switching as a form of structural change.The results show that industry switching is very common and occurs in all industries in Finland, especially during the times of recession. Industry switching has had both positive and negative contributions to aggregate productivity in different periods. Intra-industry switching had mainly negative impact on productivity growth suggesting that switching was taken as a strategy to survive. On the other hand, inter-industry switching had mainly positive impact on productivity growth, suggesting that switching was associated with new products and technologies.The study also looked at the structural developments of industries relevant for combating climate change. As emission reduction targets require companies to renew their product and service offerings, climate policy can help guide companies to switch industries. However, in the industries examined in the study, restructuring has so far taken place mainly through entry and exit.</p

Structural change in the ICT sector: Where have former Nokia employees ended up?

This study empirically examines the reemployment of employees displaced from a high-tech firm. Since 2008, the plummeting market share of Nokia, the world’s largest mobile phone manufacturer at the time, has resulted in massive layoffs and the downsizing of its workforce. We analyze the labor market status of more than twenty thousand former Nokia employees in Finland who left the company during 2009-2014. Using a unique matched employee-employer dataset, we identify the key factors associated with the probability of reemployment. Our findings show that the majority of former Nokia employees were successful in becoming reemployed. According to the latest available data from 2017, more than three-quarters of these employees found new jobs. The remaining share includes people who retired or returned to study. Reemployment was often found in the service sector. Employees with higher education levels and those who had held senior positions at Nokia were more successful in finding new jobs than others. Some regional differences in reemployment were also found

Labor productivity and reallocation in Finland in 2000-2018

Labor productivity of the Finnish economy has stuck close to the level of year 2007 for over a decade. Positive productivity development still occurs in many establishments and firms in various industries. This report examines the impacts of resource allocation and structural changes on the labor productivity growth in Finland’s manufacturing and service sectors, information and communication technology industry, and the entire business sector during the period 2000-2018. The purpose of this study is to present an empirical comparison of structural change productivity decompositions known in the literature, and based on the results, draw conclusions regarding the productivity impacts of resource allocation and structural changes. We find that different decomposition methods yield to some extent different empirical results. All methods considered suggest that positive productivity growth mainly occurs in the continuing firms. Most decompositions suggest that the impact of structural change has been generally negative. The role of resource allocation between firms is particularly notable during the recession, however, the allocation has improved to some extent during the last years of the study period. Inefficient allocation of resources between industries contributes to the productivity slowdown of Finland’s business sector.This publication is part of the implementation of the Government Plan for Analysis, Assessment and Research. (tietokayttoon.fi) The content is the responsibility of the producers of the information and does not necessarily represent the view of the Government

How big is the bioeconomy?

The critical role of the Circular Bioeconomy in the sustainable transition has been widely recognised, to the point that a number of countries worldwide have elaborated their bioeconomy strategies and others are in the process of framing their own. The purpose of this report is to advance more objective and rigorous measurement and analysis of the bioeconomy according to the broad definition of the European Commission in 2018. Our focus is mainly on the economic indicators, aiming at the inclusion of bio-based services derived from the symmetric input-output tables from the system of national accounts available from Eurostat and additional expert information. As the main conclusion of the report, we propose a synthesis of input- and output-based approaches. This is motivated by the fact that determining the bio-based weights according to the input-output tables implicitly assumes that the bio-based share of outputs is the same as that of inputs. Clearly, this is not the case for the primary bio-based production sectors – agriculture, forestry, fisheries and aquaculture. Where the outputs are completely bio-based for these sectors, the inputs are far from being 100% bio-based. On the other hand, relying exclusively on the bio-based content of the output would ignore the use of bio-based inputs in the production process. To take into account the bio-based content in both inputs and outputs, we propose to consider weighted averages for the industries. Before applying the new methodology, adjustments are performed with regard to the value added of the bioeconomy by adding the net subsidies, the bio-based shares of the wholesale and retail trade industries, the water supply, sewerage and recycling, as well as the sports and recreation sectors. Applying the methodology with the adjustments proposed, our estimate for the EU-28 bioeconomy in 2015 reaches €1,460.6 billion value added, which is 11% of the GDP. The nova-JRC methodology, used in many bioeconomy publications, calculates €621 billion value added for the same year. This difference is mainly explained by the contribution of €872 billion by the tertiary bioeconomy sectors in the proposed methodology. This novel methodology addresses different challenges for measuring the size of the bioeconomy and eventually providing a basis for evaluating its contribution for a sustainable transition. The approach allows for yearly updates following the calendar of Eurostat I-O tables, probably with a 3 to 4 years delay. It relies on a thorough estimation of the bio-based shares of the inputs and outputs of the various sectors. The authors believe that these are fundamental elements to ensure that “The next era of industry will be one where the physical, digital and biological worlds are coming together” (European Commission 2020a). Taking account of the diversity of EU’s bioeconomies and sectors, this report broadens the ongoing discussion on how to measure and determine the contribution of the bioeconomy to a sustainable and circular economy.JRC.D.4-Economics of Agricultur

Uudistuminen toimialavaihtojen kautta ja sen tuottavuusvaikutukset

Yritysten perustamisten ja lopettamisten lisäksi yrityskenttä uudistuu myös sisältäpäin. Osa yrityksistä uudistaa tuote- ja palvelutarjontaansa niin paljon, että se johtaa toimialan vaihtumiseen. Tulosten perusteella alan vaihdokset ovat yllättävän yleisiä Suomen yrityskentässä. Niistä 2000-luvun alun yrityksistä, jotka jatkavat toimintaansa edelleen, peräti neljäsosa on vaihtanut toimialaa.Kuten yritysten syntyminen ja lopettaminen myös tuote- ja palvelutarjonnan uudistuminen on osa toimialojen rakennemuutosta, ja se voi vaikuttaa niiden tuottavuuskasvuun. Tulosten mukaan toimialavaihdosten tuottavuusvaikutukset vaihtelevat aloittain ja ajankohdittain. Vähittäisillä alanvaihdoksilla on pääasiassa negatiivisia tuottavuusvaikutuksia, mikä viittaa siihen, että vaihdos on tehty yrityksen selviytymisen vuoksi.Toisaalta suurilla eli radikaaleilla alanvaihdoksilla on pääsääntöisesti positiivinen tuottavuusvaikutus. Tämä tulos on tärkeä Suomen innovaatiopolitiikan kannalta, joka pyrkii kannustamaan yrityksiä uudistumiseen. Markkinoille pääsyn esteistä on tehty paljon tutkimusta keskittyen lähinnä aloittaviin yrityksiin. Esteet voivat kuitenkin vaikuttaa samalla tavalla myös niihin yrityksiin, jotka pyrkivät pääsemään markkinoille toimialavaihdoksen kautta. Alan vaihtaminen olisi siis tunnistettava eräänä markkinoille tulon muotona.</p