Corporate Governance for Reducing Greenhouse Gas Emissions in Oil and Gas Companies

Abstract

Constantly increasing attention to greenhouse gas emissions performance posits managers at a crossroads, weighing the decision to adopt a comprehensive governance approach for the sustainability agenda or to employ precise governance tools specifically targeting greenhouse gas emissions. Answering this managerial dilemma, the study employs a fixed-effects regression analysis, focusing on data from 2016 to 2022 for 81 publicly traded oil and gas companies. The research findings highlight the importance of stakeholder-oriented corporate governance elements in achieving carbon neutrality, contrasting with the irrelevance of agency-based metrics. Specifically, board expertise and stakeholder engagement, with a focus on emissions reduction in the oil and gas industry, emerged as effective elements, while other metrics were found to be insignificant or even detrimental, diverting resources away from corporate emissions management. These most effective mechanisms promote a resource-based perspective for corporate governance aimed at achieving carbon neutrality, considering the high level of competition they face with a company’s broader environmental agenda.