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How Responsible Are Energy and Utilities Companies in Terms of Sustainability and Economic Development?

Author

Listed:
  • Adelina Fometescu

    (Doctoral School of Economics and Business Administration, West University of Timisoara, 300115 Timisoara, Romania)

  • Camelia-Daniela Hategan

    (Department of Accounting and Audit, ECREB—East European Center for Research in Economics and Business, Faculty of Economics and Business Administration, West University of Timisoara, 300115 Timisoara, Romania)

  • Ruxandra-Ioana Pitorac

    (Department of Marketing, International Affairs and Economics, Faculty of Economics and Business Administration, West University of Timisoara, 300115 Timisoara, Romania)

Abstract

The increasing importance of ESG (environmental, social, governance) scores in investment decisions has led to a growing interest in understanding their impact on corporate performance, particularly in the energy and utilities sector. This study’s focus is to identify the research gap regarding the connection between corporate adherence to Sustainable Development Goals (SDGs) and the financial outcomes of these companies. The research objective is to examine the correlation between ESG scores and key financial metrics, such as return on assets (ROAs) and return on equity (ROE), using a quantitative approach to analyze a dataset of publicly traded companies in this sector. Using a panel data regression analysis, we identified a significant correlation suggesting that higher ESG scores are associated with improved financial performance for the entire sample and separately for the two sectors. These findings indicate that companies with robust ESG practices enhance their sustainability profile and achieve better operational efficiency and profitability. This research contributes to the existing literature by providing empirical evidence of the positive impact of ESG factors on corporate performance in a sector characterized by high environmental impact and regulatory scrutiny. Ultimately, this study underscores the necessity for energy and utilities companies to integrate ESG considerations into their strategic frameworks, thereby aligning financial objectives with sustainable practices to drive long-term success.

Suggested Citation

  • Adelina Fometescu & Camelia-Daniela Hategan & Ruxandra-Ioana Pitorac, 2024. "How Responsible Are Energy and Utilities Companies in Terms of Sustainability and Economic Development?," Energies, MDPI, vol. 17(23), pages 1-21, December.
    • Handle: RePEc:gam:jeners:v:17:y:2024:i:23:p:6209-:d:1539962
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    References listed on IDEAS

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    1. Sakis Kotsantonis & Chris Pinney & George Serafeim, 2016. "ESG Integration in Investment Management: Myths and Realities," Journal of Applied Corporate Finance, Morgan Stanley, vol. 28(2), pages 10-16, June.
    2. Abraham Puente De La Vega Caceres, 2024. "Drivers of Value Creation and the Effect of ESG Risk Rating on Investor Perceptions through Financial Metrics," Sustainability, MDPI, vol. 16(13), pages 1-21, June.
    3. Kolk, Ans, 2016. "The social responsibility of international business: From ethics and the environment to CSR and sustainable development," Journal of World Business, Elsevier, vol. 51(1), pages 23-34.
    4. Camelia-Daniela Hategan & Ruxandra-Ioana Pitorac & Nicoleta-Daniela Milu, 2021. "Assessment of the Mandatory Non-Financial Reporting of Romanian Companies in the Circular Economy Context," IJERPH, MDPI, vol. 18(24), pages 1-17, December.
    5. Gabriella D’Amore & Maria Testa & Luigi Lepore, 2023. "How Is the Utilities Sector Contributing to Building a Sustainable Future? A Systematic Literature Review of Sustainability Practices," Sustainability, MDPI, vol. 16(1), pages 1-19, December.
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