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.