ANALYSIS Measuring farm sustainability and explaining differences in sustainable efficiency Steven Van Passel a, ⁎ , Frank Nevens a , Erik Mathijs b , Guido Van Huylenbroeck c a Policy Research Centre for Sustainable Agriculture, Belgium b Division of Agricultural and Food Economics, Catholic University Leuven, Belgium c Department of Agricultural Economics, Ghent University, Belgium ARTICLE INFO ABSTRACT Article history: Received 24 February 2006 Received in revised form 1 June 2006 Accepted 5 June 2006 Available online 21 July 2006 A major objective of European agricultural policy is to have a sustainable and efficient farming sector that is applying environmentally-friendly production methods. Policy makers aim to combine a strong economic performance and a sustainable use of natural resources. Therefore, it is important to measure and to assess farm sustainability. For a large dataset of Flemish dairy farms, a valuation method that is based on the concept of opportunity costs is used to calculate and analyze differences among the sample farms with respect to the creation of “sustainable value”. But more important than measuring the creation of sustainable value is to analyze differences in sustainable efficiency. Therefore, sustainable efficiency measures are calculated and differences in sustainable efficiency are explained. Using panel data, an effect model captures the determinants of sustainable efficiency of the studied farms. The empirical model shows that, in general, larger farms have a higher sustainable efficiency. Also farmer's age and dependency on support payments proved to be determining characteristics for observed differences in sustainable efficiency. © 2006 Elsevier B.V. All rights reserved. Keywords: Sustainability assessment Sustainability Efficiency Sustainable value Dairy farming Performance measurement JEL classification: Q51, Q56, Q57, Q58, Q12 1. Introduction One of the major objectives of European agricultural po- licy is to have a sustainable and efficient farming sector, which uses safe and environmental-friendly production methods and provides quality products that meet consu- mers' demands. Sustainability is seen as a key element towards a profitable long-term future for farming and rural areas. Policy makers aim to combine strong econo- mic performance with the sustainable use of natural resources in the field of agriculture (Boel, 2005; European Commission, 2004). An important conclusion of the United Nations Conference on Environment and Development in 1992 is that the major cause of the continued deterioration of the global environment is the unsustainable pattern of consumption and production (United Nations, 1992, pp. 18). While sustainable consumption targets consumers, sustainable production is related to compa- nies or organisations that make products or offer services (Veleva and Ellenbecker, 2001). Despite the difficulty of defining sustainable production and the vagueness of several defini- tions, there is a clear consensus to move from definition attempts toward developing and using concrete tools for measuring and promoting actual sustainability achievements. ECOLOGICAL ECONOMICS 62 (2007) 149 – 161 ⁎ Corresponding author. Potaardestraat 20, 9090 Gontrode, Belgium. Tel.: +32 9 264 90 71; fax: +32 9 264 90 94. E-mail address: Steven.VanPassel@Ugent.be (S. Van Passel). 0921-8009/$ - see front matter © 2006 Elsevier B.V. All rights reserved. doi:10.1016/j.ecolecon.2006.06.008 available at www.sciencedirect.com www.elsevier.com/locate/ecolecon