Economic and Financial Sustainability in the Biogas Sector: An Application to a Sample of Italian Agricultural Firms

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Original abstract

Under Article 2135 of the Italian Civil Code, agricultural biogas firms represent a strategic expansion of traditional farming boundaries. By driving corporate diversification, environmental sustainability, and circular economy objectives, these firms are attracting substantial investment within the European Union and particularly in Italy. However, the bioenergy sector is structurally characterized by high capital intensity and low asset turnover efficiency, necessitating extensive external financing. Despite these unique dynamics, empirical evidence regarding their capital structure remains scarce. To address this literature gap, this study analyzes a 10-year balanced panel dataset comprising 350 firm-year observations, representing the most extensive research conducted to date on specialized Italian agricultural biogas firms. To answer the research questions (RQs), financial ratios (FRs) were calculated from financial statement (FINSTAT) data by applying the DuPont decomposition framework. The main findings are that (1) firms exhibit high profitability, but with some cases of loss and equity erosion; (2) firms exhibit low capital turnover and some cases of short-term financial unsustainability; (3) capital structure is often characterized by excessive debt. Our findings reveal a capital-intensive sector that, while profitable, remains vulnerable to financial instability. We provide actionable insights for practitioners and policymakers to foster a culture of financial sustainability. Our findings help mitigate information asymmetries, fostering more transparent market operations and ensuring that public subsidies are channeled into resilient capital structures.

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