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The impact of profitability on scope 1, 2 and 3 GHG emissions in Europe

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  • Hohenstein, Yannick

Abstract

This thesis examines the effect of corporate profitability on the levels of greenhouse gas (GHG) emissions, specifically analyz-ing Scope 1, 2, and 3 emissions for European companies listed on the STOXX Europe 600 index from 2017 to 2023. Givenincreasing regulatory pressures, inconclusive evidence on whether profitability drives sustainability, and potential bidirectionalcausality, researching this relationship is highly relevant. Using a systematic literature review (SLR) and fixed-effects regres-sions, this thesis investigates this relationship. Results show profitability, measured by return on assets (ROA), negativelycorrelates with Scope 3 emissions, suggesting higher profits may promote sustainability. However, no significant correlationexists for Scope 1 and 2 emissions, except for a positive link with Scope 2 emissions in low-emission sectors. High-emissionindustries show stronger model explanatory power, indicating a closer profitability-emissions link. Findings are robust againstoutliers but vary with changing profitability metrics. This research contributes to the profitability-sustainability debate, offer-ing insights for policymakers, scholars, and managers, while emphasizing the need to consider industry and Scope-specificdynamics to combat climate change.

Suggested Citation

  • Hohenstein, Yannick, 2025. "The impact of profitability on scope 1, 2 and 3 GHG emissions in Europe," Junior Management Science (JUMS), Junior Management Science e. V., vol. 10(2), pages 292-333.
    • Handle: RePEc:zbw:jumsac:320449
    DOI: 10.5282/jums/v10i2pp292-33
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    References listed on IDEAS

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    4. Olivier Boiral, 2013. "Sustainability reports as simulacra? A counter-account of A and A+ GRI reports," Accounting, Auditing & Accountability Journal, Emerald Group Publishing Limited, vol. 26(7), pages 1036-1071, September.
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