Moderation of Clean Energy Innovation in the Relationship between the Carbon Footprint and Profits in CO₂e-Intensive Firms: A Quantitative Longitudinal Study

Round 1

Reviewer 1 Report

What is EBITDA?

Can you please provide more information that how all scenarios are set up based on Figure 1?

What are there Eurasia but also Europe and Asia in defining regions?

Can you further explain the implications?

Author Response

Comment #1: What is EBITDA?

Answer: The EBITDA margin measures a company’s operating profit as a percentage of its revenue. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization (see the operational definition provided in Table 3).

Comment #2: Can you please provide more information that show all scenarios are set up based on Figure 1?

Answer: The independent variable CCFP (corporate carbon footprint) is broken down into direct (Scope 1) and indirect (Scope 2 and Scope 3 CO₂e) emissions. The breakdown of the CCFP also includes the sum of Scope 1+2 CO₂e emissions to capture a firm’s total carbon footprint, and the sum of Scope 1+2+3 CO₂e emissions to account for the entirety of the supply chain’s greenhouse gas (GHG) emissions. This information is explained in Section 3.2.1 of the paper “Corporate Carbon Footprint”. Finally, these five CCFP sub-variables are directly related to each one of the three sub-variables that make up the dependent variable CP (corporate profits), thus obtaining fifteen research hypotheses, with each one of these relationships moderated by variable CEI (clean energy innovation).

 

Comment #3: What are there Eurasia but also Europe and Asia in defining regions?

Answer: According to the Organization for Economic Cooperation and Development (OECD), Eurasia is a geographic area comprising countries located in both Europe and Asia. In practice, Turkey is the only OECD member country located in Eurasia included in the study sample (see Table 1).

 

Comment #4: Can you further explain the implications?

Answer: The paragraph on policy implications contained in Section 5 (Conclusion and Implications) has been revised to read as follows:

“According to WBCSD and WRI (2015) [32], carbon reduction policies focus on achieving significant reductions within specific countries or regions. Extrapolating from the results of this research, one policy implication is that particular attention needs to be paid to Scope 3 CO₂e emissions produced by CO₂e-intensive firms operating in different industries and countries, in order to design regulatory and control mechanisms that incentivize renewable energy consumption. Second, these results could lead to applying greater pressure to energy-intensive firms to disclose their upstream and downstream supply chain emissions (Scope 3 CO₂e) can lead to more effective eco-innovation strategies and greater CO₂e reductions. Third, these results also imply that policies and regulatory frameworks for clean energy innovation must engage in a harmonization process among countries and regions considered high CO₂e emitters by helping CO₂e-intensive companies to build greater environmental benefits and further competitive advantages.”

 

Author Response File: Author Response.docx

Reviewer 2 Report

Introduction: - The research contribution from both the modeling and literature sides needs to be clarified more. - There are some repetitions and inaccurate expressions. I think the English would greatly benefit from additional polishing. - The authors have not properly written and built the introduction section. Please do note that in the introduction section you need to motivate the research area and find the research gap (what this study tries to fill). Currently, from my perspective research area is not written properly to motivate the reader, the research gap is vague and even references are not enough to justify the topic. -The significance of this paper needs to be highlighted more. 1“ Alternate energy sources and environmental quality: The impact of inflation dynamics”  2. “How do green energy investment, economic policy uncertainty, and natural  resources affect greenhouse gas emissions? A Markov-switching equilibrium approach”  3 “ Role of alternative and nuclear energy in stimulating environmental ustainability: impact of government expenditures” 4” Linking economic growth and ecological footprint through human capital  and biocapacity

Methodology: - The authors should explain more the reason for the selection of sample; - Theortical framework should be provide to better understand model of the study

 

Results: I am worried how author counter baisedness in the data this should be consider in the analsysis, seperate estimation techniques should be used for checking baisedness in the data. - More therotical impication of the resutls should be provided, that would be only possiable by defining theortical framework for the study

 

-Procedure of data collection need to be further explained. 

 

Moderate editing of English language required

Author Response

Comment #1a: Introduction: - The research contribution from both the modeling and literature sides needs to be clarified more.

Answer: The paper contributes to the literature by proposing a longitudinal structural model (see Figure 2) based on Bayesian multiple-indicator latent growth curve (B-LGC) models to analyze the moderating effect of clean energy innovation (CEI) in the relationship between corporate carbon footprint and corporate profits. This study also emphasizes the importance of renewable energy consumption (REC) as a moderating sub-variable of clean energy innovation (CEI) on the relationship between supply chain emissions (Scope 3 CO₂e) and gross profit margin (Pr_Mrg) in fossil fuel intensive industries.

To clarify this, the following paragraph has been included in the introduction:

“This paper contributes to the literature by proposing a longitudinal structural model for the moderation effect of clean energy innovation using Bayesian multiple-indicator latent growth curve models (B-LGC models), in the link between corporate carbon footprint and corporate profits. This study also highlights the importance of renewable energy consumption as a moderating indicator for measuring clean energy innovation in the relationship between corporate value chain emissions (Scope 3 CO₂e) and gross profit margin (Pr_Mrg) in energy-intensive industries.”

Comment #1b: - There are some repetitions and inaccurate expressions. I think the English would greatly benefit from additional polishing.

Answer:  The manuscript went through an extensive English revision by a native English-language -editor.

Comment #2a: - The authors have not properly written and built the introduction section. Please do note that in the introduction section you need to motivate the research area and find the research gap (what this study tries to fill).

Answer:  Section 1.0 (Introduction) has been revised following your recommendations and comments. It now includes more details about the research gap, thus strengthening the paper’s significance.

The following texts has been included in the new Introduction:

 “While there is a large body of recent literature with evidence of a direct relationship between environmental performance, measured by using the addition of Scope 1 and Scope 2 corporate carbon footprints, and corporate profits [15,16,17,18,19], the results are still inconclusive. For instance, those studies used absolute metrics associated with Scope 1 and Scope 2 CO₂e emissions, but none used Scope 3 CO₂e emissions to measure total corporate carbon footprints. They also used other relative metrics, such as carbon intensity and environmental, social and governance (ESG) ratings. Consequently, this study filled an existing research gap involving the total measurement of corporate carbon footprint in a longitudinal study, to measure its impact on corporate profits. This is the first study to do this. Another research gap addressed by this research was the measurement of the moderating effect of clean energy innovation (CEI) on the relationship between corporate carbon footprint (CCFP) and corporate profits (CP).”

“Furthermore, this paper contributes to the literature by proposing a longitudinal structural model for the moderation effect of clean energy innovation using Bayesian multiple-indicator latent growth curve models (B-LGC models), in the link between corporate carbon footprint and corporate profits. This study also highlights the importance of renewable energy consumption as a moderating indicator for measuring clean energy innovation in the relationship between corporate value chain emissions (Scope 3 CO₂e) and gross profit margin (Pr_Mrg) in energy-intensive industries.”

Comment #2b: Currently, from my perspective research area is not written properly to motivate the reader, the research gap is vague and even references are not enough to justify the topic. -The significance of this paper needs to be highlighted more. 1“ Alternate energy sources and environmental quality: The impact of inflation dynamics”  2. “How do green energy investment, economic policy uncertainty, and natural resources affect greenhouse gas emissions? A Markov-switching equilibrium approach”  3 “ Role of alternative and nuclear energy in stimulating environmental sustainability: impact of government expenditures” 4” Linking economic growth and ecological footprint through human capital  and biocapacity

Answer: Dear Reviewer, items 1 through 4 mentioned by you are not related to the focus of this research, which was – as stated earlier, analyzing the moderating effect of clean energy innovation in the relationship between corporate carbon footprint and corporate profits. We therefore suggest leaving out any reference to these items in this paper.

 

Comment #3: Methodology: - The authors should explain more the reason for the selection of sample;

Answer: The criterion used by this study to select the companies included in the population and the sample was the following: large firms that are big emitters of CO₂ emissions. As shown in Table 2,  information on sample selection comprises a varied sample of large firms in fossil fuel intensive industries, as well as other large CO₂e emitters, from different countries and regions. This sample was obtained from the Carbon Disclosure Project (CDP), a global corporative environmental data disclosure system that acts on behalf of investors, buyers, and governments (e.g., CO₂ emissions). The database includes companies in high-impact sectors with processes that require high levels of energy consumption.

 

Comment #4: - Theoretical framework should be provided to better understand the model of the study

Answer: It was indeed necessary to include a theoretical framework to better support the conceptual model. Therefore, the following new paragraph has been added up to the reviewed manuscript:

“2. Theoretical Framework and Hypothesis

The ecological modernization theory (EMT) supports the concept of clean energy innovation. EMT states that ecology and the economy can be combined to get a better result, for the company, the country and society [24,25]. It also states that increases in energy and resource efficiency can lead to improved productivity, and therefore more available resources for future growth. This knowledge encourages energy and pollution-intensive firms to embrace clean energy technologies that allow them to lessen the environmental effect of their economic operations [24]. Similarly, the natural re-source-based view (NRBV) theory proposes that competitive advantage is related directly to the company´s relationship with the natural environment [26]. It then supports the idea that competitive advantages can be based on institutional capabilities that support natural resources conservation. An example is pollution prevention through the reduction of greenhouse gas emissions as an effective strategy for protecting the environment while also being profitable for business [25]. On the other hand, the anthropogenic theory of global warming predicts that human influence is the dominant cause of global warming and of other adverse impacts of climate change [26,27,28]. Likewise, [29] suggested that "anthropogenic influence is evident from the emission of greenhouse gases such as CO2 from human activities" (p. 1141).”

 

Comment #5a: Results: I am worried how author counter biasedness in the data should be considered in the analysis, separate estimation techniques should be used for checking biasedness in the data. - More theoretical implications of the results should be provided, that would be only possible by defining theoretical framework for the study

Answer: While the bias in the data may be considered a limitation of the study, the secondary database used (created by the CDP)—consisting of data collected using a well-designed survey that is responded by companies, which is contrasted with the Sustainability Report that those same companies send to the Global Reporting Initiative (GRI), ensures data’s reliability.

Comment #5b: More theoretical implications of the results should be provided, that would be only possible by defining theoretical framework for the study

In addition, policy implications contained in Section 5.0 (Conclusions and Implications) have also been revised and updated, as follows:

“According to WBCSD and WRI (2015) [32], carbon reduction policies focus on achieving significant reductions within specific countries or regions. Extrapolating from this, one policy implication is that particular attention needs to be paid to Scope 3 CO₂e emissions produced by CO₂e-intensive firms operating in different industries and countries in order to design regulatory and control mechanisms that incentivize renewable energy consumption. Second, applying greater pressure to energy-intensive firms to disclose their upstream and downstream supply chain emissions (Scope 3 CO₂e) can lead to more effective eco-innovation strategies and greater CO₂e reductions. Third, policies and regulatory frameworks for clean energy innovation must engage in a harmonization process among countries and regions considered high CO₂e emitters by helping CO₂e-intensive companies to build greater environmental benefits and further competitive advantage.”

 

Comment #6: Procedure of data collection need to be further explained

Answer: In addition to the explanation of the sample selection given in response to Comments 3 and 5, it should be noted that the data on CO₂e emissions and clean energy innovation were taken from the CDP database. The financial data were taken from the Thomson Reuters Eikon database making sure that they correspond to the same companies. Both databases are highly regarded and trusted by academics and policy-makers. The selection of the 167 firms was done using the definitions of the Global Industry Classification Standard (GICS), which included seven types of energy-intensive primary industries: materials, consumer discretionary, industrials, utilities, technology, energy, and health care), which is also highly regarded by government officials and academics.

Author Response File: Author Response.docx

Reviewer 3 Report

Dear Editors, 

I carefully read the study titled “Moderation of Clean Energy Innovation in the Relationship between the Carbon Footprint and Profits in CO₂e-Intensive Firms: A Quantitative Longitudinal Study”. This research mainly analyzes the moderating impact of clean energy innovation on the relationship between corporate carbon footprint and corporate profits in industrial sectors associated with high demand for fossil fuels where it is difficult to "reduce" CO₂e emissions. The study findings reveal that the corporate carbon footprint has a significant impact on company profits. It also shows that innovations in clean energy positively affect the relationship between greenhouse gas emissions and gross profits.

I liked the purpose of the study and the results it produced. In addition, the comprehensive and originality of the sample on which the study is based has added great value to the study. So, congratulations to the authors. However, I would like to make some recommendations to further improve the current quality of the manuscript.

Studies 15-19 examined the relationship between corporate carbon footprint and corporate profits. This shows that the subject discussed has been studied before in the literature. Although the contribution of the study to the literature is given at the end of the introduction, there are some deficiencies. For example, what exactly did the previous literature focus on? What kind of gap still exists in the literature? How does this study differ from previous studies? What is the absolute contribution of the study to the literature? These questions should be answered clearly in the introduction. In this way, the reader can fully appreciate the quality and contribution of the study.

The results obtained are very important. However, the policy recommendations made within the framework of these results are quite inadequate. Therefore, policy recommendations need to be developed.

 

When these small deficiencies are eliminated, the manuscript will reach a much better level and will make an important contribution to the literature. Congratulations again to the authors.

Best regards,

The study is not problematic in terms of grammar.

Author Response

Comment #1: Dear Editors, I carefully read the study titled “Moderation of Clean Energy Innovation in the Relationship between the Carbon Footprint and Profits in CO₂e-Intensive Firms: A Quantitative Longitudinal Study”. This research mainly analyzes the moderating impact of clean energy innovation on the relationship between corporate carbon footprint and corporate profits in industrial sectors associated with high demand for fossil fuels where it is difficult to "reduce" CO₂e emissions. The study findings reveal that the corporate carbon footprint has a significant impact on company profits. It also shows that innovations in clean energy positively affect the relationship between greenhouse gas emissions and gross profits.

I liked the purpose of the study and the results it produced. In addition, the comprehensive and originality of the sample on which the study is based has added great value to the study. So, congratulations to the authors. However, I would like to make some recommendations to further improve the current quality of the manuscript.

Answer: Thank you for your kind words, as well as for your recommendations on how to further improve the quality of this paper.

 

Comment #2: Studies 15-19 examined the relationship between corporate carbon footprint and corporate profits. This shows that the subject discussed has been studied before in the literature. Although the contribution of the study to the literature is given at the end of the introduction, there are some deficiencies. For example, what exactly did the previous literature focus on?

Answer: Previous studies [15-19] only focused on analyzing the direct relationship between corporate environmental and financial performance. Furthermore, these studies only used Scope 1 and Scope 2 CO₂e  emissions as absolute metrics to measure environmental performance, but not Scope 3 CO₂e  emissions. They also included relative metrics, such as carbon intensity and environmental, social and governance (ESG) ratings. To reflect this, the following paragraph has been added to the introduction:

“While there is a large body of recent literature with evidence of a direct relationship between environmental performance, measured by using the addition of Scope 1 and Scope 2 corporate carbon footprints and corporate profits [15,16,17,18,19], the results are still inconclusive. For instance, those studies used absolute metrics associated with Scope 1 and Scope 2 CO₂e emissions, but none used Scope 3 CO₂e emissions to measure total corporate carbon footprints. They also used other relative metrics, such as carbon intensity and environmental, social and governance (ESG) ratings. Consequently, this study filled an existing research gap involving the total measurement of corporate carbon footprint in a longitudinal study, to measure its impact on corporate profits. This is the first study to do this. Another research gap addressed by this research was the measurement of the moderating effect of clean energy innovation (CEI) on the relationship between corporate carbon footprint (CCFP) and corporate profits (CP).”

 

Comment #3: What kind of gap still exists in the literature?

Answer: The recent studies mentioned in the preceding answer have obtained mixed results in terms of the direct relationship between corporate environmental and financial performance. However, there is still a significant research gap in the literature due to a lack of longitudinal quantitative studies that examine the moderating effect of clean energy innovation on the direct relationship between corporate carbon footprint (CCFP) and corporate profits (CP). The following text has been added to the paper’s introduction:

“For instance, those studies used absolute metrics associated with Scope 1 and Scope 2 CO₂e emissions, but none used Scope 3 CO₂e emissions to measure total corporate carbon footprints. They also used other relative metrics, such as carbon intensity and environmental, social and governance (ESG) ratings. Consequently, this study filled an existing research gap involving the total measurement of corporate carbon footprint in a longitudinal study, to measure its impact on corporate profits. This is the first study to do this. Another research gap addressed by this research was the measurement of the moderating effect of clean energy innovation (CEI) on the relationship between corporate carbon footprint (CCFP) and corporate profits (CP).”

 

Comment #4: How does this study differ from previous studies?

Answer: Firstly, this study includes a varied sample of large firms from fossil fuel intensive industries in different countries and regions (see Table 2). Secondly, this is the only longitudinal empirical study to examine the moderating effect of clean energy innovation (CEI) on the direct relationship between corporate carbon footprint (CCFP) and corporate profits (CP). Finally, it is the only longitudinal quantitative study that addresses the greenhouse gas (GHG) effect of the whole supply chain by including Scope 3 CO₂e emissions as an independent variable (see Figure 1).

 

Comment #5: What is the absolute contribution of the study to the literature?

Answer: The paper contributes to the literature by proposing a longitudinal structural model (see Figure 2) based on Bayesian multiple-indicator latent growth curve (B-LGC) models to analyze the moderating effect of clean energy innovation (CEI) in the relationship between corporate carbon footprint and corporate profits. This study also emphasizes the importance of renewable energy consumption (REC) as a moderating sub-variable of clean energy innovation (CEI) on the relationship between supply chain emissions (Scope 3 CO₂e) and gross profit margin (Pr_Mrg) in fossil fuel intensive industries. To clarify this, the following paragraph has been included in the introduction:

“This paper contributes to the literature by proposing a longitudinal structural model for the moderation effect of clean energy innovation using Bayesian multiple-indicator latent growth curve models (B-LGC models), in the link between corporate carbon footprint and corporate profits. This study also highlights the importance of renewable energy consumption as a moderating indicator for measuring clean energy innovation in the relationship between corporate value chain emissions (Scope 3 CO₂e) and gross profit margin (Pr_Mrg) in energy-intensive industries.”

 

Comment #6: These questions should be answered clearly in the introduction. In this way, the reader can fully appreciate the quality and contribution of the study.

Answer: Section 1.0 (Introduction) has been revised to take into account the reviewer’s comments and suggestions. It now includes more details on the research gap, thus strengthening the paper’s significance. The following texts has been included in the new Introduction:

 “While there is a large body of recent literature with evidence of a direct relationship between corporate environmental performance, measured by using the addition of Scope 1 and Scope 2 carbon footprints and corporate profits [15, 16, 17, 18, 19], the results of those studies are still inconclusive. For instance, those studies used absolute metrics associated with Scope 1 and Scope 2 CO₂e emissions, but none used Scope 3 CO₂e emissions to measure total corporate carbon footprints. They also used other relative metrics, such as carbon intensity and environmental, social and governance (ESG) ratings. Consequently, this study filled an existing research gap involving the total measurement of corporate carbon footprint in a longitudinal study, to measure its impact on corporate profits. This is the first study to do this. Another research gap addressed by this research was the measurement of the moderating effect of clean energy innovation (CEI) on the relationship between corporate carbon footprint (CCFP) and corporate profits (CP).”

“This paper contributes to the literature by proposing a longitudinal structural model for the moderation effect of clean energy innovation using Bayesian multiple-indicator latent growth curve models (B-LGC models), in the link between corporate carbon footprint and corporate profits. This study also highlights the importance of renewable energy consumption as a moderating indicator for measuring clean energy innovation in the relationship between corporate value chain emissions (Scope 3 CO₂e) and gross profit margin (Pr_Mrg) in energy-intensive industries.”

 

Comment #3: The results obtained are very important. However, the policy recommendations made within the framework of these results are quite inadequate. Therefore, policy recommendations need to be developed.

Answer: The paragraph on policy implications in Section 5 (Conclusion and Implications) has been revised to read as follows:

“According to WBCSD and WRI (2015) [32], carbon reduction policies focus on achieving significant reductions within specific countries or regions. Extrapolating from this, one policy implication is that particular attention needs to be paid to Scope 3 CO₂e emissions produced by CO₂e-intensive firms operating in different industries and countries in order to design regulatory and control mechanisms that incentivize renewable energy consumption. Second, applying greater pressure to energy-intensive firms to disclose their upstream and downstream supply chain emissions (Scope 3 CO₂e) can lead to more effective eco-innovation strategies and greater CO₂e reductions. Third, policies and regulatory frameworks for clean energy innovation must engage in a harmonization process among countries and regions considered high CO₂e emitters by helping CO₂e-intensive companies to build greater environmental benefits and further competitive advantage.”

 

Comment #4: When these small deficiencies are eliminated, the manuscript will reach a much better level and will make an important contribution to the literature. Congratulations again to the authors.

Best regards,

Answer: We appreciate your comments and recommendations very much. We did our best to address and respond to each of them. We do hope the paper is much better right now

Author Response File: Author Response.docx