Environmental Risk and Oil Prices Uncertainty: A Threat to Firm Profitability?

In today's era of global challenges, profitability remains a key indicator of corporate success. However, environmental risk and volatile oil prices have become critical factors affecting business performance, particularly in resource-intensive sectors. This study examines the influence of environmental costs and oil prices on profitability. The study targets companies in the energy and basic materials sectors that were listed on the Indonesia Stock Exchange (IDX) between 2021 and 2023. The study uses panel data regression with a random effects model to examine the relationships among the variables. The results indicate that environmental costs and oil prices have a positive and significant impact on profitability. These outcomes reveal that environmental responsibility and external economic factors, such as oil prices, are crucial in shaping financial performance. The study provides firms with insights for managing sustainability strategies and offers policymakers perspectives to strengthen regulations that support sustainability and energy market stability.