The Internal Carbon Emissions Reduction Efficiency Of The South African Banking Sector: A Data Envelopment Analysis

Abstract

In this study, a BCC/CCR Data Envelopment Analysis (DEA) Input-Oriented model is employed to measure the carbon reduction efficiency of the four major banks in South Africa (ABSA, Standard Bank, First National Bank, and Nedbank). Specifically, the Banxia Frontier Analysis DEA software is utilized to make two runs on publicly available data. In the first run, number of employees and operating costs are treated as inputs and carbon emissions as the output. In the second run, again, the number of employees and operating costs are treated as inputs, but electricity usage, paper usage, and business travel are treated as outputs. Results are opposite to those generated by the DEA input-oriented model; firms distant from the efficiency frontier are deemed efficient in terms of reducing carbon emissions and firms lying on the efficiency frontier are deemed inefficient. The first run reveals one bank (ABSA) to be inefficient and the second run demonstrates two banks (ABSA and Standard Bank) to be inefficient. Taken in sum, the current research study seeks to facilitate the measurement of carbon reduction efficiency within the banking sector.