TECHNICAL PROGRAMME | Energy Leadership – Future Pathways
ESG and Governance
Forum 28 | Technical Programme Hall 5
28
April
14:30
16:00
UTC+3
This forum will delve into the integration of Environmental, Social, and Governance (ESG) criteria into corporate governance frameworks. Discussions will cover the importance of ESG factors in driving sustainable business practices and long-term value creation. The panel will explore best practices for ESG reporting, stakeholder engagement, and the role of governance in ensuring transparency and accountability. The forum will also highlight case studies demonstrating successful ESG implementation and its impact on corporate reputation and performance.
Venture capital (VC) has become a key enabler of the energy transition, channeling resources into firms that pioneer renewable technologies, digital solutions, and sustainable infrastructure (Bocken, 2015). While VC-backed companies are often credited with driving innovation and growth, little is known about their efficiency when environmental, social, and governance (ESG) measures are considered alongside financial outcomes (Manigart and Khosravi, 2023).
This study investigates the efficiency of energy VC-backed companies in the United States during 2020–2022, using firm-level data from the Refinitiv Eikon database. A one-stage data envelopment analysis (DEA) framework (Banker et al., 1984) is applied, incorporating fixed assets, equity, and employment as inputs, and revenue and ESG scores as outputs. Five DEA models are estimated: a baseline ESG model, separate models for environmental (E), social (S), and governance (G) dimensions, and a no-ESG model to isolate the influence of sustainability measures.
Findings indicate that only a small share of firms achieve full efficiency scores annually, highlighting the challenges of balancing financial growth with sustainability performance. Importantly, incorporating ESG measures significantly improves efficiency levels compared to the no-ESG model, demonstrating that sustainable practices enhance firm performance in the energy VC sector. Results further suggest that governance and environmental dimensions have stronger impacts on efficiency than the social dimension. Robustness checks confirm the stability of results across alternative model specifications.
This research offers one of the first systematic attempts to evaluate the efficiency of energy VC-backed firms through the integration of ESG considerations. The findings have implications for venture capitalists, policymakers, and corporate leaders seeking to strengthen the productivity and resilience of firms driving the energy transition.
Keywords: Energy venture capital, ESG, firm efficiency, Data Envelopment Analysis, sustainable finance
References:
BANKER, R. D., CHARNES, A. & COOPER, W. W. 1984. Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management science, 30, 1078-1092.
BOCKEN, N. M. P. 2015. Sustainable venture capital – catalyst for sustainable start-up success? Journal of cleaner production, 108, 647-658.
MANIGART, S. & KHOSRAVI, S. 2023. Unanswered questions in entrepreneurial finance. Venture Capital, 1-29.
Co-author/s:
Norah Almubarak, Assistant Professor, King Faisal University.
This study investigates the efficiency of energy VC-backed companies in the United States during 2020–2022, using firm-level data from the Refinitiv Eikon database. A one-stage data envelopment analysis (DEA) framework (Banker et al., 1984) is applied, incorporating fixed assets, equity, and employment as inputs, and revenue and ESG scores as outputs. Five DEA models are estimated: a baseline ESG model, separate models for environmental (E), social (S), and governance (G) dimensions, and a no-ESG model to isolate the influence of sustainability measures.
Findings indicate that only a small share of firms achieve full efficiency scores annually, highlighting the challenges of balancing financial growth with sustainability performance. Importantly, incorporating ESG measures significantly improves efficiency levels compared to the no-ESG model, demonstrating that sustainable practices enhance firm performance in the energy VC sector. Results further suggest that governance and environmental dimensions have stronger impacts on efficiency than the social dimension. Robustness checks confirm the stability of results across alternative model specifications.
This research offers one of the first systematic attempts to evaluate the efficiency of energy VC-backed firms through the integration of ESG considerations. The findings have implications for venture capitalists, policymakers, and corporate leaders seeking to strengthen the productivity and resilience of firms driving the energy transition.
Keywords: Energy venture capital, ESG, firm efficiency, Data Envelopment Analysis, sustainable finance
References:
BANKER, R. D., CHARNES, A. & COOPER, W. W. 1984. Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management science, 30, 1078-1092.
BOCKEN, N. M. P. 2015. Sustainable venture capital – catalyst for sustainable start-up success? Journal of cleaner production, 108, 647-658.
MANIGART, S. & KHOSRAVI, S. 2023. Unanswered questions in entrepreneurial finance. Venture Capital, 1-29.
Co-author/s:
Norah Almubarak, Assistant Professor, King Faisal University.
The oil and gas sector in emerging markets faces significant environmental, social, and governance (ESG) risks arising from environmental fragility, social instability, and regulatory uncertainty, posing challenges to sustainable energy transitions. Developing co-governance frameworks that integrate energy law with global ESG standards is essential for effective risk management. This study employs behavioral game theory to examine interactions among governments, enterprises, and communities, analyzing how legal, market, and social mechanisms collectively mitigate ESG risks and inform evidence-based policy design.
A co-governance framework is proposed, harmonizing enforceable energy laws with voluntary ESG compliance through policy coordination and stakeholder engagement. The framework is operationalized using a multi-agent game model based on Quantal Response Equilibrium (QRE), which accounts for bounded rationality, social preferences (e.g., inequality aversion), and non-rational behaviors (e.g., loss aversion). The model simulates strategic interactions among governments (strict or lenient regulation), enterprises (high or low ESG strategies), and communities (cooperation or protest). Dynamic payoff functions incorporate market profits, compliance costs, regulatory incentives, and social fairness considerations. Monte Carlo simulations demonstrate that combining strict regulation with ESG incentives increases high-ESG outcome probabilities by 15 % to 20 %, achieving stable equilibria. Among oil and gas cooperation modes, Production Sharing Contracts (PSCs) yield the highest compliance probabilities (0.75 to 0.82), driven by robust regulatory frameworks and incentives, while Concession Agreements show lower compliance (0.55 to 0.65) due to weaker oversight and higher protest risks. Joint Ventures achieve moderate compliance (0.65 to 0.72), requiring enhanced coordination. Sensitivity analyses reveal that a 0.2 increase in government incentives boosts PSC compliance by 7 %, and a 10 % increase in community engagement reduces protest costs, fostering cooperation.
These findings inform policy recommendations, prioritizing the adoption of PSCs, implementation of green subsidies, standardization of ESG reporting, and establishment of community dialogue platforms to enhance compliance and equity. Financial and infrastructural constraints necessitate international financing and dynamic monitoring systems to optimize regulatory and incentive outcomes. By providing data-driven governance strategies, this study enhances transparency, stakeholder collaboration, and sustainable practices in the oil and gas sector, contributing to global energy accessibility and sustainability.
Keywords: Energy law, ESG standards, behavioral game theory, ESG risk management, emerging markets, sustainable energy transition, corporate governance
A co-governance framework is proposed, harmonizing enforceable energy laws with voluntary ESG compliance through policy coordination and stakeholder engagement. The framework is operationalized using a multi-agent game model based on Quantal Response Equilibrium (QRE), which accounts for bounded rationality, social preferences (e.g., inequality aversion), and non-rational behaviors (e.g., loss aversion). The model simulates strategic interactions among governments (strict or lenient regulation), enterprises (high or low ESG strategies), and communities (cooperation or protest). Dynamic payoff functions incorporate market profits, compliance costs, regulatory incentives, and social fairness considerations. Monte Carlo simulations demonstrate that combining strict regulation with ESG incentives increases high-ESG outcome probabilities by 15 % to 20 %, achieving stable equilibria. Among oil and gas cooperation modes, Production Sharing Contracts (PSCs) yield the highest compliance probabilities (0.75 to 0.82), driven by robust regulatory frameworks and incentives, while Concession Agreements show lower compliance (0.55 to 0.65) due to weaker oversight and higher protest risks. Joint Ventures achieve moderate compliance (0.65 to 0.72), requiring enhanced coordination. Sensitivity analyses reveal that a 0.2 increase in government incentives boosts PSC compliance by 7 %, and a 10 % increase in community engagement reduces protest costs, fostering cooperation.
These findings inform policy recommendations, prioritizing the adoption of PSCs, implementation of green subsidies, standardization of ESG reporting, and establishment of community dialogue platforms to enhance compliance and equity. Financial and infrastructural constraints necessitate international financing and dynamic monitoring systems to optimize regulatory and incentive outcomes. By providing data-driven governance strategies, this study enhances transparency, stakeholder collaboration, and sustainable practices in the oil and gas sector, contributing to global energy accessibility and sustainability.
Keywords: Energy law, ESG standards, behavioral game theory, ESG risk management, emerging markets, sustainable energy transition, corporate governance
The global energy sector is undergoing a profound transformation, driven by the urgent need to balance economic viability with environmental responsibility. The transition towards a low-carbon future is not just a regulatory necessity but a strategic imperative for energy companies navigating increasing stakeholder expectations, shifting market dynamics, and evolving policy landscapes. However, achieving ambitious Environmental, Social, and Governance (ESG) commitments while maintaining financial resilience presents a critical challenge for industry leaders.
This presentation explores pragmatic frameworks for aligning corporate strategy, operational efficiency, and ESG priorities in a way that fosters long-term value creation without compromising profitability. Drawing on over 25 years of executive leadership experience in industrial services, energy infrastructure, and business transformation, this session will provide real-world insights and actionable solutions for organizations managing the complexities of energy transition.
Key Discussion Points:
The Business Case for Sustainability:
Frameworks for a Pragmatic Energy Transition:
The Role of Executive Leadership in ESG Integration:
Infrastructure, Industrial Services, and Long-Term Energy Transition:
As the global energy landscape evolves, leaders must take a strategic, purposeful approach to sustainability; one that prioritizes innovation, operational excellence, and responsible governance. This session will equip decision-makers with the tools and insights needed to successfully navigate the energy transition while maintaining competitiveness and financial strength.
This presentation explores pragmatic frameworks for aligning corporate strategy, operational efficiency, and ESG priorities in a way that fosters long-term value creation without compromising profitability. Drawing on over 25 years of executive leadership experience in industrial services, energy infrastructure, and business transformation, this session will provide real-world insights and actionable solutions for organizations managing the complexities of energy transition.
Key Discussion Points:
The Business Case for Sustainability:
- Demonstrating how integrating ESG principles enhances financial performance, reduces risk, and improves investor confidence.
- Case studies of companies successfully embedding sustainability into core business strategy while driving revenue growth.
Frameworks for a Pragmatic Energy Transition:
- Bridging traditional energy models with emerging renewable technologies to maintain energy security and economic stability.
- Leveraging hybrid energy solutions, innovative financing models, and policy alignment to accelerate sustainable transformation.
The Role of Executive Leadership in ESG Integration:
- How corporate governance and leadership shape ESG priorities and drive cultural transformation within energy organizations.
- Overcoming resistance to change and fostering alignment between operational teams, investors, and regulatory bodies.
Infrastructure, Industrial Services, and Long-Term Energy Transition:
- The role of asset maintenance, contract structures, and industrial service optimization in supporting a balanced energy transition.
- Strategies to improve efficiency, reduce emissions, and ensure long-term infrastructure resilience.
As the global energy landscape evolves, leaders must take a strategic, purposeful approach to sustainability; one that prioritizes innovation, operational excellence, and responsible governance. This session will equip decision-makers with the tools and insights needed to successfully navigate the energy transition while maintaining competitiveness and financial strength.
Oil and gas (O&G) companies have developed large innovation capacities with unexploited potential for sustainability (Roberts & Flin, 2020). However, how these firms are navigating sustainability challenges and their role in the energy transition remain under discussion (Herzog-Hawelka & Gupta, 2023).
In order to gain a comprehensive understanding of this complex issue, this analysis demonstrates the application of the sustainable business model archetypes framework to the O&G sector, following the methodology defined by Yip and Bocken (2018) for different industries. In particular, our work takes as case study an O&G company with large socio-economic importance in the Basque Country region (Spain), gathering information via semi-structured interviews.
The research results indicate that a sustainable transformation of the O&G business rely on a combination of existing techno-industrial capabilities (namely related to energy and material efficiency and large-scale industrial processes) with new growing capabilities (mainly regarding circular economy and renewable energies). As a whole, unlocking the synergies of these combined capabilities requires adopting a stewardship role within the regional industrial ecosystem, which allows widening the decarbonization initiatives with a cross-sectorial approach (Menéndez-Sánchez et al., 2025).
In particular, industrial clusters associations play a foundational role in building this cross-sectorial decarbonization stewardship role in the region. Therefore, our analysis aims to gain a deeper understanding of two major industrial decarbonization initiatives in the Basque Country region: the Basque Hydrogen Corridor and the Net-Zero Basque Industrial Super Cluster. Both are public-private multi-stakeholder collaboration initiatives based on industrial clusters engagement, in which the company chosen as case study is involved in a leading position. The central role of industrial clusters channels cross-sectorial efforts for shared sustainability targets.
Overall, adopting this regional stewardship role suggests a key competitive advantage for O&G companies in overcoming political and social resistance to industrial decarbonization initiatives, with unexplored and promising implications for stakeholder engagement, long-term value creation and corporate reputation.
References:
Herzog-Hawelka, J., & Gupta, J. (2023). The role of (multi)national oil and gas companies in leaving fossil fuels underground: A systematic literature review. Energy Research & Social Science, 103, 103194. doi:10.1016/j.erss.2023.103194
Menéndez-Sánchez, J. Fernández-Gómez, J., Araujo-de-la-Mata, A. (2025). Understanding the role of oil and gas companies in the current sustainability trends: an application of the sustainable business model archetypes, Cambridge Journal of Regions, Economy and Society, Volume 18, Issue 1, March 2025, Pages 57–78, https://doi.org/10.1093/cjres/rsae042
Roberts, R., & Flin, R. (2020). Unlocking the potential: Understanding the psychological factors that influence technology adoption in the upstream oil and gas industry. SPE Journal, 25(01), 515–528. doi:10.2118/198903-PA
Yip, A. W. H., & Bocken, N. M. P. (2018). Sustainable business model archetypes for the banking industry. Journal of Cleaner Production, 174, 150–169. doi:10.1016/j.jclepro.2017.10.190.
In order to gain a comprehensive understanding of this complex issue, this analysis demonstrates the application of the sustainable business model archetypes framework to the O&G sector, following the methodology defined by Yip and Bocken (2018) for different industries. In particular, our work takes as case study an O&G company with large socio-economic importance in the Basque Country region (Spain), gathering information via semi-structured interviews.
The research results indicate that a sustainable transformation of the O&G business rely on a combination of existing techno-industrial capabilities (namely related to energy and material efficiency and large-scale industrial processes) with new growing capabilities (mainly regarding circular economy and renewable energies). As a whole, unlocking the synergies of these combined capabilities requires adopting a stewardship role within the regional industrial ecosystem, which allows widening the decarbonization initiatives with a cross-sectorial approach (Menéndez-Sánchez et al., 2025).
In particular, industrial clusters associations play a foundational role in building this cross-sectorial decarbonization stewardship role in the region. Therefore, our analysis aims to gain a deeper understanding of two major industrial decarbonization initiatives in the Basque Country region: the Basque Hydrogen Corridor and the Net-Zero Basque Industrial Super Cluster. Both are public-private multi-stakeholder collaboration initiatives based on industrial clusters engagement, in which the company chosen as case study is involved in a leading position. The central role of industrial clusters channels cross-sectorial efforts for shared sustainability targets.
Overall, adopting this regional stewardship role suggests a key competitive advantage for O&G companies in overcoming political and social resistance to industrial decarbonization initiatives, with unexplored and promising implications for stakeholder engagement, long-term value creation and corporate reputation.
References:
Herzog-Hawelka, J., & Gupta, J. (2023). The role of (multi)national oil and gas companies in leaving fossil fuels underground: A systematic literature review. Energy Research & Social Science, 103, 103194. doi:10.1016/j.erss.2023.103194
Menéndez-Sánchez, J. Fernández-Gómez, J., Araujo-de-la-Mata, A. (2025). Understanding the role of oil and gas companies in the current sustainability trends: an application of the sustainable business model archetypes, Cambridge Journal of Regions, Economy and Society, Volume 18, Issue 1, March 2025, Pages 57–78, https://doi.org/10.1093/cjres/rsae042
Roberts, R., & Flin, R. (2020). Unlocking the potential: Understanding the psychological factors that influence technology adoption in the upstream oil and gas industry. SPE Journal, 25(01), 515–528. doi:10.2118/198903-PA
Yip, A. W. H., & Bocken, N. M. P. (2018). Sustainable business model archetypes for the banking industry. Journal of Cleaner Production, 174, 150–169. doi:10.1016/j.jclepro.2017.10.190.
Kairzhan Abdykhalykov
Vice Chair
Professor, KBTU Business School
Kazakh British Technical University
Tarifa Almulhim
Speaker
Associate Professor of Business Analytics
King Faisal University
Venture capital (VC) has become a key enabler of the energy transition, channeling resources into firms that pioneer renewable technologies, digital solutions, and sustainable infrastructure (Bocken, 2015). While VC-backed companies are often credited with driving innovation and growth, little is known about their efficiency when environmental, social, and governance (ESG) measures are considered alongside financial outcomes (Manigart and Khosravi, 2023).
This study investigates the efficiency of energy VC-backed companies in the United States during 2020–2022, using firm-level data from the Refinitiv Eikon database. A one-stage data envelopment analysis (DEA) framework (Banker et al., 1984) is applied, incorporating fixed assets, equity, and employment as inputs, and revenue and ESG scores as outputs. Five DEA models are estimated: a baseline ESG model, separate models for environmental (E), social (S), and governance (G) dimensions, and a no-ESG model to isolate the influence of sustainability measures.
Findings indicate that only a small share of firms achieve full efficiency scores annually, highlighting the challenges of balancing financial growth with sustainability performance. Importantly, incorporating ESG measures significantly improves efficiency levels compared to the no-ESG model, demonstrating that sustainable practices enhance firm performance in the energy VC sector. Results further suggest that governance and environmental dimensions have stronger impacts on efficiency than the social dimension. Robustness checks confirm the stability of results across alternative model specifications.
This research offers one of the first systematic attempts to evaluate the efficiency of energy VC-backed firms through the integration of ESG considerations. The findings have implications for venture capitalists, policymakers, and corporate leaders seeking to strengthen the productivity and resilience of firms driving the energy transition.
Keywords: Energy venture capital, ESG, firm efficiency, Data Envelopment Analysis, sustainable finance
References:
BANKER, R. D., CHARNES, A. & COOPER, W. W. 1984. Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management science, 30, 1078-1092.
BOCKEN, N. M. P. 2015. Sustainable venture capital – catalyst for sustainable start-up success? Journal of cleaner production, 108, 647-658.
MANIGART, S. & KHOSRAVI, S. 2023. Unanswered questions in entrepreneurial finance. Venture Capital, 1-29.
Co-author/s:
Norah Almubarak, Assistant Professor, King Faisal University.
This study investigates the efficiency of energy VC-backed companies in the United States during 2020–2022, using firm-level data from the Refinitiv Eikon database. A one-stage data envelopment analysis (DEA) framework (Banker et al., 1984) is applied, incorporating fixed assets, equity, and employment as inputs, and revenue and ESG scores as outputs. Five DEA models are estimated: a baseline ESG model, separate models for environmental (E), social (S), and governance (G) dimensions, and a no-ESG model to isolate the influence of sustainability measures.
Findings indicate that only a small share of firms achieve full efficiency scores annually, highlighting the challenges of balancing financial growth with sustainability performance. Importantly, incorporating ESG measures significantly improves efficiency levels compared to the no-ESG model, demonstrating that sustainable practices enhance firm performance in the energy VC sector. Results further suggest that governance and environmental dimensions have stronger impacts on efficiency than the social dimension. Robustness checks confirm the stability of results across alternative model specifications.
This research offers one of the first systematic attempts to evaluate the efficiency of energy VC-backed firms through the integration of ESG considerations. The findings have implications for venture capitalists, policymakers, and corporate leaders seeking to strengthen the productivity and resilience of firms driving the energy transition.
Keywords: Energy venture capital, ESG, firm efficiency, Data Envelopment Analysis, sustainable finance
References:
BANKER, R. D., CHARNES, A. & COOPER, W. W. 1984. Some models for estimating technical and scale inefficiencies in data envelopment analysis. Management science, 30, 1078-1092.
BOCKEN, N. M. P. 2015. Sustainable venture capital – catalyst for sustainable start-up success? Journal of cleaner production, 108, 647-658.
MANIGART, S. & KHOSRAVI, S. 2023. Unanswered questions in entrepreneurial finance. Venture Capital, 1-29.
Co-author/s:
Norah Almubarak, Assistant Professor, King Faisal University.
The global energy sector is undergoing a profound transformation, driven by the urgent need to balance economic viability with environmental responsibility. The transition towards a low-carbon future is not just a regulatory necessity but a strategic imperative for energy companies navigating increasing stakeholder expectations, shifting market dynamics, and evolving policy landscapes. However, achieving ambitious Environmental, Social, and Governance (ESG) commitments while maintaining financial resilience presents a critical challenge for industry leaders.
This presentation explores pragmatic frameworks for aligning corporate strategy, operational efficiency, and ESG priorities in a way that fosters long-term value creation without compromising profitability. Drawing on over 25 years of executive leadership experience in industrial services, energy infrastructure, and business transformation, this session will provide real-world insights and actionable solutions for organizations managing the complexities of energy transition.
Key Discussion Points:
The Business Case for Sustainability:
Frameworks for a Pragmatic Energy Transition:
The Role of Executive Leadership in ESG Integration:
Infrastructure, Industrial Services, and Long-Term Energy Transition:
As the global energy landscape evolves, leaders must take a strategic, purposeful approach to sustainability; one that prioritizes innovation, operational excellence, and responsible governance. This session will equip decision-makers with the tools and insights needed to successfully navigate the energy transition while maintaining competitiveness and financial strength.
This presentation explores pragmatic frameworks for aligning corporate strategy, operational efficiency, and ESG priorities in a way that fosters long-term value creation without compromising profitability. Drawing on over 25 years of executive leadership experience in industrial services, energy infrastructure, and business transformation, this session will provide real-world insights and actionable solutions for organizations managing the complexities of energy transition.
Key Discussion Points:
The Business Case for Sustainability:
- Demonstrating how integrating ESG principles enhances financial performance, reduces risk, and improves investor confidence.
- Case studies of companies successfully embedding sustainability into core business strategy while driving revenue growth.
Frameworks for a Pragmatic Energy Transition:
- Bridging traditional energy models with emerging renewable technologies to maintain energy security and economic stability.
- Leveraging hybrid energy solutions, innovative financing models, and policy alignment to accelerate sustainable transformation.
The Role of Executive Leadership in ESG Integration:
- How corporate governance and leadership shape ESG priorities and drive cultural transformation within energy organizations.
- Overcoming resistance to change and fostering alignment between operational teams, investors, and regulatory bodies.
Infrastructure, Industrial Services, and Long-Term Energy Transition:
- The role of asset maintenance, contract structures, and industrial service optimization in supporting a balanced energy transition.
- Strategies to improve efficiency, reduce emissions, and ensure long-term infrastructure resilience.
As the global energy landscape evolves, leaders must take a strategic, purposeful approach to sustainability; one that prioritizes innovation, operational excellence, and responsible governance. This session will equip decision-makers with the tools and insights needed to successfully navigate the energy transition while maintaining competitiveness and financial strength.
Jaime Menéndez-Sánchez
Speaker
Researcher
Orkestra - Basque Institute of Competitiveness
Oil and gas (O&G) companies have developed large innovation capacities with unexploited potential for sustainability (Roberts & Flin, 2020). However, how these firms are navigating sustainability challenges and their role in the energy transition remain under discussion (Herzog-Hawelka & Gupta, 2023).
In order to gain a comprehensive understanding of this complex issue, this analysis demonstrates the application of the sustainable business model archetypes framework to the O&G sector, following the methodology defined by Yip and Bocken (2018) for different industries. In particular, our work takes as case study an O&G company with large socio-economic importance in the Basque Country region (Spain), gathering information via semi-structured interviews.
The research results indicate that a sustainable transformation of the O&G business rely on a combination of existing techno-industrial capabilities (namely related to energy and material efficiency and large-scale industrial processes) with new growing capabilities (mainly regarding circular economy and renewable energies). As a whole, unlocking the synergies of these combined capabilities requires adopting a stewardship role within the regional industrial ecosystem, which allows widening the decarbonization initiatives with a cross-sectorial approach (Menéndez-Sánchez et al., 2025).
In particular, industrial clusters associations play a foundational role in building this cross-sectorial decarbonization stewardship role in the region. Therefore, our analysis aims to gain a deeper understanding of two major industrial decarbonization initiatives in the Basque Country region: the Basque Hydrogen Corridor and the Net-Zero Basque Industrial Super Cluster. Both are public-private multi-stakeholder collaboration initiatives based on industrial clusters engagement, in which the company chosen as case study is involved in a leading position. The central role of industrial clusters channels cross-sectorial efforts for shared sustainability targets.
Overall, adopting this regional stewardship role suggests a key competitive advantage for O&G companies in overcoming political and social resistance to industrial decarbonization initiatives, with unexplored and promising implications for stakeholder engagement, long-term value creation and corporate reputation.
References:
Herzog-Hawelka, J., & Gupta, J. (2023). The role of (multi)national oil and gas companies in leaving fossil fuels underground: A systematic literature review. Energy Research & Social Science, 103, 103194. doi:10.1016/j.erss.2023.103194
Menéndez-Sánchez, J. Fernández-Gómez, J., Araujo-de-la-Mata, A. (2025). Understanding the role of oil and gas companies in the current sustainability trends: an application of the sustainable business model archetypes, Cambridge Journal of Regions, Economy and Society, Volume 18, Issue 1, March 2025, Pages 57–78, https://doi.org/10.1093/cjres/rsae042
Roberts, R., & Flin, R. (2020). Unlocking the potential: Understanding the psychological factors that influence technology adoption in the upstream oil and gas industry. SPE Journal, 25(01), 515–528. doi:10.2118/198903-PA
Yip, A. W. H., & Bocken, N. M. P. (2018). Sustainable business model archetypes for the banking industry. Journal of Cleaner Production, 174, 150–169. doi:10.1016/j.jclepro.2017.10.190.
In order to gain a comprehensive understanding of this complex issue, this analysis demonstrates the application of the sustainable business model archetypes framework to the O&G sector, following the methodology defined by Yip and Bocken (2018) for different industries. In particular, our work takes as case study an O&G company with large socio-economic importance in the Basque Country region (Spain), gathering information via semi-structured interviews.
The research results indicate that a sustainable transformation of the O&G business rely on a combination of existing techno-industrial capabilities (namely related to energy and material efficiency and large-scale industrial processes) with new growing capabilities (mainly regarding circular economy and renewable energies). As a whole, unlocking the synergies of these combined capabilities requires adopting a stewardship role within the regional industrial ecosystem, which allows widening the decarbonization initiatives with a cross-sectorial approach (Menéndez-Sánchez et al., 2025).
In particular, industrial clusters associations play a foundational role in building this cross-sectorial decarbonization stewardship role in the region. Therefore, our analysis aims to gain a deeper understanding of two major industrial decarbonization initiatives in the Basque Country region: the Basque Hydrogen Corridor and the Net-Zero Basque Industrial Super Cluster. Both are public-private multi-stakeholder collaboration initiatives based on industrial clusters engagement, in which the company chosen as case study is involved in a leading position. The central role of industrial clusters channels cross-sectorial efforts for shared sustainability targets.
Overall, adopting this regional stewardship role suggests a key competitive advantage for O&G companies in overcoming political and social resistance to industrial decarbonization initiatives, with unexplored and promising implications for stakeholder engagement, long-term value creation and corporate reputation.
References:
Herzog-Hawelka, J., & Gupta, J. (2023). The role of (multi)national oil and gas companies in leaving fossil fuels underground: A systematic literature review. Energy Research & Social Science, 103, 103194. doi:10.1016/j.erss.2023.103194
Menéndez-Sánchez, J. Fernández-Gómez, J., Araujo-de-la-Mata, A. (2025). Understanding the role of oil and gas companies in the current sustainability trends: an application of the sustainable business model archetypes, Cambridge Journal of Regions, Economy and Society, Volume 18, Issue 1, March 2025, Pages 57–78, https://doi.org/10.1093/cjres/rsae042
Roberts, R., & Flin, R. (2020). Unlocking the potential: Understanding the psychological factors that influence technology adoption in the upstream oil and gas industry. SPE Journal, 25(01), 515–528. doi:10.2118/198903-PA
Yip, A. W. H., & Bocken, N. M. P. (2018). Sustainable business model archetypes for the banking industry. Journal of Cleaner Production, 174, 150–169. doi:10.1016/j.jclepro.2017.10.190.
Ye Xiong
Speaker
Deputy Director of the Business Management Research Office
Research Institute of Natural Gas Economy, PetroChina Southwest Oil & Gasfield Company
The oil and gas sector in emerging markets faces significant environmental, social, and governance (ESG) risks arising from environmental fragility, social instability, and regulatory uncertainty, posing challenges to sustainable energy transitions. Developing co-governance frameworks that integrate energy law with global ESG standards is essential for effective risk management. This study employs behavioral game theory to examine interactions among governments, enterprises, and communities, analyzing how legal, market, and social mechanisms collectively mitigate ESG risks and inform evidence-based policy design.
A co-governance framework is proposed, harmonizing enforceable energy laws with voluntary ESG compliance through policy coordination and stakeholder engagement. The framework is operationalized using a multi-agent game model based on Quantal Response Equilibrium (QRE), which accounts for bounded rationality, social preferences (e.g., inequality aversion), and non-rational behaviors (e.g., loss aversion). The model simulates strategic interactions among governments (strict or lenient regulation), enterprises (high or low ESG strategies), and communities (cooperation or protest). Dynamic payoff functions incorporate market profits, compliance costs, regulatory incentives, and social fairness considerations. Monte Carlo simulations demonstrate that combining strict regulation with ESG incentives increases high-ESG outcome probabilities by 15 % to 20 %, achieving stable equilibria. Among oil and gas cooperation modes, Production Sharing Contracts (PSCs) yield the highest compliance probabilities (0.75 to 0.82), driven by robust regulatory frameworks and incentives, while Concession Agreements show lower compliance (0.55 to 0.65) due to weaker oversight and higher protest risks. Joint Ventures achieve moderate compliance (0.65 to 0.72), requiring enhanced coordination. Sensitivity analyses reveal that a 0.2 increase in government incentives boosts PSC compliance by 7 %, and a 10 % increase in community engagement reduces protest costs, fostering cooperation.
These findings inform policy recommendations, prioritizing the adoption of PSCs, implementation of green subsidies, standardization of ESG reporting, and establishment of community dialogue platforms to enhance compliance and equity. Financial and infrastructural constraints necessitate international financing and dynamic monitoring systems to optimize regulatory and incentive outcomes. By providing data-driven governance strategies, this study enhances transparency, stakeholder collaboration, and sustainable practices in the oil and gas sector, contributing to global energy accessibility and sustainability.
Keywords: Energy law, ESG standards, behavioral game theory, ESG risk management, emerging markets, sustainable energy transition, corporate governance
A co-governance framework is proposed, harmonizing enforceable energy laws with voluntary ESG compliance through policy coordination and stakeholder engagement. The framework is operationalized using a multi-agent game model based on Quantal Response Equilibrium (QRE), which accounts for bounded rationality, social preferences (e.g., inequality aversion), and non-rational behaviors (e.g., loss aversion). The model simulates strategic interactions among governments (strict or lenient regulation), enterprises (high or low ESG strategies), and communities (cooperation or protest). Dynamic payoff functions incorporate market profits, compliance costs, regulatory incentives, and social fairness considerations. Monte Carlo simulations demonstrate that combining strict regulation with ESG incentives increases high-ESG outcome probabilities by 15 % to 20 %, achieving stable equilibria. Among oil and gas cooperation modes, Production Sharing Contracts (PSCs) yield the highest compliance probabilities (0.75 to 0.82), driven by robust regulatory frameworks and incentives, while Concession Agreements show lower compliance (0.55 to 0.65) due to weaker oversight and higher protest risks. Joint Ventures achieve moderate compliance (0.65 to 0.72), requiring enhanced coordination. Sensitivity analyses reveal that a 0.2 increase in government incentives boosts PSC compliance by 7 %, and a 10 % increase in community engagement reduces protest costs, fostering cooperation.
These findings inform policy recommendations, prioritizing the adoption of PSCs, implementation of green subsidies, standardization of ESG reporting, and establishment of community dialogue platforms to enhance compliance and equity. Financial and infrastructural constraints necessitate international financing and dynamic monitoring systems to optimize regulatory and incentive outcomes. By providing data-driven governance strategies, this study enhances transparency, stakeholder collaboration, and sustainable practices in the oil and gas sector, contributing to global energy accessibility and sustainability.
Keywords: Energy law, ESG standards, behavioral game theory, ESG risk management, emerging markets, sustainable energy transition, corporate governance
