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The Impact Of Eu Sustainability Regulations On The Financial Performance Of European Oil And Gas Companies

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  • Elena-Andreea Popa

    (Alexandru Ioan Cuza University of Iasi)

Abstract

Financial performance (FP) is a subjective yet pivotal measure of how effectively a firm can use its assets from primary business activities to generate revenues and thus maximize value, a core aim within the economic system. FP acts not only as a key indicator of a firm's overall financial health but also as an important criterion for assessing how well a business can adapt to market changes, enhance operational methods, and face potential challenges. This study seeks to understand how sustainability initiatives affect financial performance and whether they facilitate or obstruct the pursuit of value maximization in the corporate sector. This study aims to explore the impact of Directive 2014/95/EU, which for the first time in Europe mandates the disclosure of non-financial information, on the financial performance of European oil and gas companies listed on Euronext. Employing retrospective analysis and utilizing secondary data sources such as annual reports, the research analyzes how sustainability regulations influence profitability indicators like return on assets (ROA), return on equity (ROE), and return on invested capital (ROIC). The financial data covering five years before and seven years after the directive s implementation is subjected to Wilcoxon SignedRank Test analysis using the SPSS software. The purpose of this test is to determine if there are statistically significant differences in financial performance between the periods before and after the implementation of the directive. Results of the Wilcoxon Signed-Rank Test, applied to multi-year averages over a five-year pre and seven-year post directive period, indicate that the values of these indicators did not change significantly between the two timeframes for oil and gas companies. In this context, the non-financial reporting requirements introduced by the directive did not have a statistically significant impact on the profitability of the analyzed companies. The limitations of the study include the selection of financial indicators that remains an subjective choice and may not fully capture the broader effects of sustainability related regulations. Additionally, external economic and geopolitical factors affecting the oil and gas sector during the analyzed period were not controlled for and may have influenced financial performance independently of the directive.

Suggested Citation

  • Elena-Andreea Popa, 2025. "The Impact Of Eu Sustainability Regulations On The Financial Performance Of European Oil And Gas Companies," EUFIRE Conference Proceedings Series, Alexandru Ioan Cuza University Publisher, vol. 1(1), pages 262-276, October.
    • Handle: RePEc:cxa:eu2025:v:1:y:2025:i:1:p:262-276
    DOI: 10.47743/eufire-2025-1-21
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    References listed on IDEAS

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    1. Giovanni Catello Landi & Francesca Iandolo & Antonio Renzi & Andrea Rey, 2022. "Embedding sustainability in risk management: The impact of environmental, social, and governance ratings on corporate financial risk," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(4), pages 1096-1107, July.
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    Keywords

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    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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