Does Reducing Carbon Emissions Affect Business Profitability? An Analysis of Family and Non-family Businesses

With regard to greenhouse gas (GHG) emissions, this chapter addresses the question of whether it is more profitable to be an environmentally friendly company or one that ignores recommendations to limit GHG emissions. The academic discussion has an additional interest when it applies to the field of familiar companies that have demonstrated their leadership in green practices. The basis of data used in this chapter corresponds to the Spanish Ministry for Ecological Transition, complemented with financial data from manufacturing companies from the SABI database (Iberian Balance Sheet Analysis System). The sample consists of 1.217 observations corresponding to 593 companies. The methodology consisted of developing a regression model in which the GHG emissions released into the atmosphere are related to the type of ownership of the company and to other variables that characterise each company in the sample. In the end, the results show that GHG emissions are negatively associated with the level of ROA, which means that reducing a company’s emissions contributes to improving its economic performance. The results also show that family ownership of the organisation has a significant negative influence on total emissions, from which we conclude that there are economic benefits to be gained from environmental investment by family businesses. The recommendation for policy makers is that regulation can push companies towards an effective carbon reduction strategy and encourage financial market recognition of low carbon companies.