A Cross-country Study of Stakeholder Pressure on Oil and Gas companies’ Environmental Performance and Disclosures

Abstract

The oil and gas industry is a vital aspect of the global economy and is considered the main economic resource in many countries. However, this industry is responsible for numerous environmental issues, such as global warming, air pollution, hazardous discharges and catastrophic environmental events. These environmental issues have put pressure on oil and gas companies to be more environmentally responsible. The aim of this study is to investigate the impact of stakeholder pressure on voluntary environmental disclosures (VEDs) and environmental performance (EP) in oil and gas companies. It will employ stakeholder theory and the new institutional perspective of institutional theory to do the analysis. The research is a cross-country study in two phases. The first phase is a quantitative content analysis to investigate the impact of governmental environmental policies, board size, company size, and company leverage on the VEDs of 189 companies for 2019-2020 from 14 of the top oil producing countries in. Multiple regression was used in this stage to investigate the impact of independent variables on VEDs. The second phase is a questionnaire survey. Primary data is collected to investigate the impact of pressure from governments, customers, NGOs, shareholders, employees, and the pandemic on EP. The participants of the survey are managers and high-level employees linked to environmental practices of oil and gas companies. Structural equation modelling (SEM) was used to link the factors with the dependent variable (EP). The findings of the study will reveal that company size and board size have a significant positive impact on VEDs. Also, there has been a significant increase in oil and gas company 2 VEDs in 2020 compared to 2019. However, it would appear that governmental environmental policies, leverage, and profitability have a statistically insignificant influence on VEDs. On the other hand, governmental pressure, customer pressure and employee pressure have a significant positive effect on the EP of oil and gas companies. Pressure from NGOs, shareholders and the pandemic is statistically insignificant. This research contributes knowledge about voluntary environmental disclosures and environmental performance, specifically in the global oil and gas industry. Also, it contributes to a better understanding of the role of stakeholder group pressure and their impact on environmental practices and disclosure in this industry. This study also investigates the impact of the pandemic on environmental practices in the oil and gas industry. This study is one of the first academic studies to consider the pandemic's impact on the oil and gas industry’s VEDs and EP. Lastly, it provides an example of combining stakeholder theory and institutional theory to investigate the impact of stakeholders on a firm’s environmental performance and disclosure.