DEA Environmental Assessment (I): Concepts and Methodologies

This study consists of two chapters (I and II, in Chaps. 16 and 17 , respectively). One of the two chapters discusses an empirical study in which this research explains how to use DEA environmental assessment to establish corporate sustainability. The other chapter summarizes previous works on the research area. The first chapter (I) discusses that environmental assessment and protection are important concerns in modern business. Consumers are interested in environmental protection and they avoid purchasing products from dirty-imaged companies even if their prices are much less than the ones produced by green-imaged companies. A green image (often, not reality) of corporations is recently becoming very important for corporate survivability in a global market. By extending previous works on environment assessment and corporate sustainability, where companies need to consider both economic prosperity and pollution prevention in their business operations, this study discusses a use of Data Envelopment Analysis (DEA) for environmental assessment by utilizing the radial measurement. The proposed approach analytically incorporates different combinations of disposability concepts into the proposed radial models. It is easily envisioned that the proposed radial measurement for environmental assessment can guide corporate leaders and managers in identifying how to invest for eco-technology innovation on the abatement of undesirable outputs (e.g., industrial pollution). To document the practicality, this study applies the proposed approach to 153 observations on S&P 500 corporations in 2012 and 2013. The empirical investigation confirms that investors pay more serious attention on company’s green image for corporate sustainability in a long horizon than profitability in a short horizon.