Annals of the University of Oradea: Economic Science (Jul 2020)
SUSTAINABLE BUSINESS PRACTICES AND CORPORATE PERFORMANCE: EVIDENCE FROM OIL AND GAS INDUSTRY
Abstract
Recently more companies focus on developing and implementing socially responsible strategies and policies to reduce the negative impacts on society, economy, and environment. The oil and gas industry is one of the most harmful industry on the environment. Therefore, we decided to study some of the companies operating in this industry in the United Kingdom, where the extraction of petroleum and natural gas is significant for the economy. Lately, more of these companies try to promote their activities as sustainable and as environmentally friendly as possible. Oil and gas companies started to report annually their sustainability performance and their actions in managing climate, environmental, and social impacts as well as the opportunities for undertaking sustainable actions. Moreover, they seem to pay more attention to human resource policies, promoting an inclusive culture, with no differences in gender, ethnicity, or disabilities. Nowadays, based on gender quotas within board members, the corporate performance faced some downturns, as companies seem to appoint the wrong board members to conform to the countries regulations or recommendations: increase the number of women in the board for quota-setting for women in leadership roles. Our analysis is focused on financial data (ROA, profit margin, taxes paid) as well as on information available in the annual reports and sustainability reports (Greenhouse Gas Emissions - CO2 Equivalent, number of male and female board members) of six companies. The database overviews the period 2006-2014. The descriptive analysis highlights a decreased trend of corporate performance along with the compositions of the board in oil and gas companies operating in the UK and a reduced level of gas emissions. Based on the regression models employed we underlined the importance that variables related to sustainable practices have on profitability. According to the main results, in terms of governance, oil and gas companies register higher performance when their boards have fewer members. In terms of gas emissions, lower levels would increase performance, although in our case the companies still impact the environment with high levels of GHC emissions. Finally, in terms of taxation, these companies have the potential to develop a country, as these taxes can cover important public expenditures.
