Carbon footprint and firm performance: evidence from Spanish companies

What the paper says

Purpose The objective of this research is to determine whether there is a positive relationship between the transparency of information on a company's environmental impacts and its main economic-financial ratios, such as profitability or leverage, for a sample of 1,170 Spanish companies, 585 of which submit detailed non-financial reports on their carbon footprint emissions and the other 585 do not report, assuming a control sample. Design/methodology/approach The methodology employed uses a counterfactual analysis to help determine the existence of significant differences between the different samples, as well as several regression models to explain the relationship between carbon footprint and financial ratios. In this way, it can be tested whether the greater the transparency of information on the ecological footprint, the better the business performance and, within the companies that report their carbon footprint, whether the lower the emissions, the higher the return on assets. Findings The results indicate that the impact of carbon footprint disclosure is not identical across sectors. Thus, industries with high emissions, such as energy and manufacturing, show stronger relationships between environmental transparency and financial performance, due to the influence of sector-specific regulations on the matter. On the other hand, large companies are subject to greater control by public authorities, as well as by different interest groups or stakeholders. Originality/value The value is that companies that opt for greater transparency in the disclosure of their non-financial carbon footprint information tend to gain competitive advantages in financial terms. These companies demonstrate that sustainability can not only be environmentally friendly, but also lead to better economic and financial performance.