A two-phase method to assess the sustainability of water companies

Abstract

Composite indicators are becoming more relevant for evaluating the performance of water companies from a holistic perspective. Some of them are related with economic aspects, and others focus on social and environmental features. Consequently, a multidimensional evaluation is necessary for handling the great amount of information provided by multiple single indicators of a different nature. This paper presents a two-phase approach to evaluate the sustainability of water companies. First, a partial composite indicator for each dimension (social, environmental, economic) is obtained using multi-criteria decision making (MCDM). Then, a global indicator is obtained, in terms of the values reached in the previous stage for every partial indicator, by means an optimization problem rooted in data envelopment analysis (DEA). Our proposal offers the possibility of analyzing the performance of each water company under each dimension that characterizes the concept of sustainability, as well as a joint assessment including all the dimensions, facilitating the decision-making process. We apply it to evaluate the sustainability of 163 Portuguese water companies. The results show the strengths and weaknesses of each unit and serve as a guideline to decision-makers on the aspects for improving the performance of water utilities.