MERCATOR PROJECT

„JUST PROFIT“

What are the societal and environmental costs of corporate CO₂ emissions?
How do these emissions impact a company’s financial performance?
How can investors and stakeholders meaningfully assess CO₂-related risks in their decision-making?

These are the core questions addressed by the Just Profit research project, jointly conducted by the University of Hamburg and the University of Cologne, with funding from the Mercator Foundation. The project aims to explore policy options for integrating the costs of CO₂ emissions into established financial accounting and disclosure regulations. Current regulatory efforts to align capital markets with the goals of the Paris Agreement typically rely on market-based instruments (e.g., carbon pricing) and transparency mechanisms (e.g., disclosure requirements). However, these approaches often operate in parallel rather than in combination.

The "Just Profit" project fills a gap in current research and regulation by combining elements of CO₂ disclosure and CO₂ pricing. At the heart of the project is the conceptual design of a CO₂-adjusted key performance indicator (KPI) that reflects a firm’s imputed CO₂ costs in its financial performance metrics. Key elements of this development process include determining the scope of emissions to be considered (e.g., Scope 1, 2, and 3), identifying appropriate CO₂ prices, exploring suitable presentation formats and its compatibility with generally accepted accounting principles (GAAP). In addition, the project includes an experimental component that investigates how such a KPI can be integrated into traditionally financial reporting contexts.

As part of the "Just Profit" project, two policy briefs were already published that address the issues of the scope of emissions to be considered and the level of appropriate CO₂ pricing within the framework of a CO₂-adjusted KPI. More information can be found on the project website: https://www.just-profit.de/.