Comparative evaluation of PROMETHEE and ELECTRE with application to sustainability assessment

The selection of robust method for sustainability assessment of companies is a challenging decision, particularly for manufacturers with high safety requirements and large number of consumers such as aerospace, automotive components and, oil & gas companies. These overriding industries consider environmental, social and governance (ESG) criteria as well as non-financial factors that have direct effect on infrastructure investments to reach monetary value for its stakeholders and development of a sustainable long term strategy for their portfolio company. These factors however may be often associated with internal and external uncertainties making it difficult to obtain precise sustainability measurement. Actually, the problem comes from addressing 'how' and 'which' questions to select a solid ranking method for sustainability assessment. In this thesis, we investigate the application of outranking based Multi-Criteria Decision Making (MCDM) methods called ELECTRE III and PROMETHEE I & II for sustainability assessment of industrial organizations. ELECTRE III is a preference based method that considers pseudo-criteria which can be applied for uncertain, imprecise and ill-determined data. PROMETHEE I is a positive and negative flow based multi-criteria method that generates partial rankings. PROMETHEE II is net flow based method and generates complete ranking for alternatives. PROMETHEE methods are more compatible with human judgments. To compare the performance of ELECTRE III and PROMETHEE I & II, we conducted a sustainability assessment case study and performed model verification and robustness analysis, model validation and sensitivity analysis. The data for the study was obtained from Sustainalytics, a firm specializing in sustainability. The results of our study show that ELECTRE III method outperforms PROMETHEE I & II and is therefore recommended for sustainability assessment of industrial organizations.

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