Variables for the statistical analyses.

Global efforts to limit global temperature rise require significant corporate emission reductions, but there is growing concern about carbon leakage from regulated markets to regions with weaker environmental governance. While companies in the Global North increasingly adopt emission reduction targets, the effectiveness of corporate climate action in emerging markets remains poorly understood, particularly regarding the relationship between economic growth and emissions reduction. This study investigates the emissions from 2019 to 2023 of publicly listed companies in Brazil, a major global emitter and the largest economy in South America. Our panel data analysis reveals that firm-level financial performance, particularly profitability, is a primary driver of emissions, outweighing the average effects of corporate emission targets. While macroeconomic variables such as GDP growth and sectoral shocks are included as controls, the most consistent and significant economic effect stems from company profits. We evaluate emissions while controlling for sectoral and macroeconomic effects. Results reveal that companies have focused on energy consumption, while supply chain emissions increased, without a proper sectoral-level engagement and report. Notably, sectors exposed to international pressure show greater progress in emission reduction, highlighting the importance of market forces in driving corporate climate action. Our findings highlight developing countries’ challenges in decoupling economic growth from emissions and the necessary engagement with supply chains in the Global South. These findings have important implications for climate policy in emerging markets. This study contributes to understanding how emerging markets must advance global decarbonization while managing economic development pressures.