The Influence of Sustainability Reporting on the Profitability of Listed Companies in the European Union
Sustainability reporting, an imperative for European companies, is a multidimensional effort that results in performance measured by ESG metrics. The unintended consequence of this imperative has been the influence on companies’ profitability. By using quantitative research methods, the objective...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Editura ASE
2025-08-01
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| Series: | Amfiteatru Economic |
| Subjects: | |
| Online Access: | https://www.amfiteatrueconomic.ro/temp/Article_3455.pdf |
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| Summary: | Sustainability reporting, an imperative for European companies, is a multidimensional effort
that results in performance measured by ESG metrics. The unintended consequence of this
imperative has been the influence on companies’ profitability. By using quantitative research
methods, the objective of the study is to identify the indicator, i.e., the combined ESG score
and its components Environment (ENV), Social (SOC) and Governance (GOV), with the
most significant impact on the profitability of companies in the European Union, measured
by using the Return on Assets (ROA) and Earnings Before Interests and Taxes (EBIT)
indicators. The statistical analysis, using multiple linear regression models applied to the
panel data, led to the achievement of the research objective. The sample is composed of 432
companies operating in 18 of the EU member countries, and the period under analysis is
2014-2023. The obtained results revealed that the factor with the most significant impact on
the ROA profitability indicator is the Social Pillar, and in terms of the EBIT profitability
indicator, the factor with the highest impact was shown to be the combined ESG score. Thus,
we prove that although sustainability reporting is a complex process involving numerous
efforts and organisational changes for companies it also delivers value-added by medium and
long-term financial performance and by confirming the estimated positive effects of the
Corporate Sustainability Reporting Directive (CSRD). The study contributes to the ESG
literature by bringing together companies from developed and emerging EU economies,
using the EBIT indicator to test the influence of the ESG score and its components on
profitability.
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| ISSN: | 1582-9146 2247-9104 |