ESG-SDG Nexus: Assessing How Top Integrated Oil and Gas Companies Align Corporate Sustainability Practices with Global Goals

Abstract

Placed at the core of the energy transition, the integrated oil and gas sector is facing growing pressure to balance sustainability requirements with financial performance. While ESG ratings are widely used to evaluate and benchmark corporate sustainability, their connection to broader SDG commitments (and real transition outcomes) remains underexplored, especially in carbon-intensive industries. Against this background, this paper aims to investigate how well the world’s largest integrated oil and gas companies (as classified by LSEG Data and Analytics) align their ESG performance with the SDGs, and to assess (the robustness of) their sustainability trajectories. Using a panel dataset—including ESG (overall, by pillars, and controversies) scores (2019–2023), SDG commitments (2019–2023), and the (recently released) FTSE Russell Green Revenues (2024)—the study applies a quantitative, longitudinal, and explanatory design. It follows a process logic—from inputs (ESG performance) to intentions (SDG commitments) and ultimately to outcomes (Green Revenues)—to identify performance patterns, strategic archetypes, and materiality insights. The study adds to the ongoing debate on how ESG metrics can better capture real SDG/sustainability impacts, while providing insights for strategists, investors, and policymakers seeking to align financial and sustainability agendas during the energy transition.

1. Introduction

The oil and gas sector remains the cornerstone of global energy supply, ensuring 58.7% of global consumption in 2024, with oil representing 33.6% and natural gas 25.1% of the global energy mix [1]. However, the sector represents one of the most significant environmental challenges of our time: if considered as a single entity, it would rank as the third-largest source of greenhouse gases (behind only China and the United States)—encompassing nine of the ten most carbon-intensive assets worldwide and seven of the biggest historical corporate polluters (including Saudi Aramco, Chevron, and ExxonMobil) [2].

Given this, the integrated oil and gas industry is currently undergoing a fundamental transformation amid intensifying global decarbonization efforts. Despite record investment of USD 2.1 trillion in 2024 (up 11% from 2023 but slower than the 24–29% growth of prior years) annual investments of USD 5.6 trillion will be needed from 2025 to 2030 to stay on track for net zero by 2050 [3]. Consequently, large vertically integrated fossil fuel companies are increasingly scrutinized not only for their financial returns (both current profits and long-term financial resilience amid regulatory, market, and societal pressures), but also for their environmental, social, and governance (ESG) performance/impact and alignment with the Sustainable Development Goals (SDGs). This scrutiny is especially acute for the sector, which is under significant pressure to balance legacy hydrocarbon operations with credible transition strategies “to align with sustainability imperatives” [4].

ESG ratings have emerged as a central tool for investors, regulators, and external stakeholders to evaluate and benchmark corporate sustainability performance [5]. Developed by distinct rating agencies, these composite indices aggregate multidimensional metrics—ranging from carbon emissions and resource use to labor practices and board oversight—into standardized, comparable scores [6]. Yet, a persistent question remains: to what extent do high ESG Scores meaningfully correspond to real/tangible sustainability outcomes or alignment with the SDGs? The criticism is that ESG Scores—built on self-reported data and according to different methodologies [7,8]—may instead reflect disclosure quality, reputational positioning, or governance formality rather than genuine progress [9], real environmental impact [10], or corporate sustainability performance [11]. This disparity is particularly significant in carbon-intensive industries like oil and gas [12], where the higher likelihood of greenwashing or inflated scores makes empirical investigation essential for assessing SDG progress and genuine sustainability outcomes [6,9].

Against this background, a growing body of research seeks to explore the ESG–SDG relationship in greater depth. For instance, Li and Xu [13] document that ESG ratings significantly curb corporate carbon emissions in Chinese A-share companies (2010–2020), mainly by easing financing constraints and agency problems—an effect strengthened by analyst and media attention, especially in high-pollution industries. Xu and He [6] find that strong ESG performance significantly enhances green technology innovation, especially when moderated by a company’s digital transformation capabilities. Xie, Qin, and Li [14] report that ESG performance reduces corporate carbon emission intensity by boosting profitability, productivity, and green innovation (though the effect varies across firm characteristics) and reveal a partial “green paradox”, where emission growth merely slows rather than reverses.

In the oil and gas context specifically, recent studies investigate how ESG disclosure/performance interacts with financial performance and firm value, demonstrating that credible ESG engagement and disclosure translate into superior market valuation and financing attractiveness [15]. Moreover, strong environmental and governance performance has been shown to enhance market value and reduce systematic risk, indicating that robust ESG profiles (particularly environmental strategies) enhance financial returns and investor confidence beyond traditional factors [16]. Other studies emphasize the relationship between ESG performance and (specific) SDG/sustainability outcomes, including environmental impacts (e.g., greenhouse gas emission reduction), social responsibilities (e.g., mutual value creation), and governance structures (e.g., board oversight mechanisms) [4,17,18]. However, systematic, multidimensional studies that connect long-term ESG trends, SDG commitments, and monetizable green outcomes across integrated oil and gas companies are still scarce.

This paper aims to address that gap by investigating the ESG–SDG nexus in the integrated oil and gas industry. Leveraging a panel dataset from LSEG Data and Analytics (2019–2023) including overall, pillar-level, and controversy-adjusted ESG Scores, combined with corporate SDG commitments and FTSE Russell’s Green Revenues (2024) metric, the study conducts a layered analysis of performance, strategic differentiation, and material linkages. We adopt a census approach of the world’s largest integrated oil and gas companies (as classified by LSEG TRBC), utilizing a panel dataset (2019–2023) of ESG Scores, SDG commitments, and FTSE Russell Green Revenues. We adopt a conceptual framework structured around Inputs → Intentions → Outcomes (I²O), where (a) ESG Scores (2019–2023) provide the inputs; (b) SDG commitments (2019–2023) reflect the intentions; and (c) Green Revenues (2024) constitute the outcomes.

As a result, we contribute to ongoing debates in corporate sustainability by shedding light on how effectively ESG metrics capture real-world SDG/sustainability outcomes in a key yet highly polluting industry amid the energy transition. We also assist investors, managers, and policymakers in distinguishing robust/credible trajectories from symbolic/superficial initiatives, especially in sectors subject to intense scrutiny and stakeholder pressure.

2. Theoretical Framework

This study adopts an Inputs–Intentions–Outcomes (I²O) framework to examine how organizational ESG capabilities (inputs) shape sustainability commitments (intentions) and influence Green Revenue generation (outcomes). The framework integrates four complementary theoretical perspectives.

First, resource-based view (RBV) [19,20] provides the foundation for understanding ESG capabilities as strategic organizational resources that enable competitive advantage and facilitate sustainability integration. Second, institutional theory [21,22] explains why firms adopt SDG commitments in response to stakeholder pressures, regulatory expectations, and legitimacy concerns, while also accounting for potential formal adoption (where commitments serve symbolic rather than substantial functions). Third, signaling theory [23,24] clarifies how sustainability commitments function as strategic signals to stakeholders, yet acknowledging that signal credibility depends on the alignment of stated intentions and observable actions. Fourth, stakeholder theory [25,26] depicts the mechanisms through which ESG integration creates value by addressing diverse stakeholder expectations, ultimately translating into performance outcomes such as Green Revenue generation [27,28].

2.1. The Inputs–Intentions–Outcomes Framework: Conceptual Foundations

The I²O framework conceptualizes ESG-SDG integration as a three-stage process linking organizational capabilities to strategic commitments and performance outcomes, building on established resource–capability–performance models [29,30] while incorporating insights on intention–behavior gaps in corporate sustainability [31,32,33]. Recent research reinforces this capability–performance logic, demonstrating that green supply chain and green human resource management initiatives enhance environmental innovation capacity through AMO-based pathways (ability, motivation, opportunity)—suggesting that capability-building mechanisms represent critical inputs for translating sustainability practices into monetizable outcomes such as Green Revenues [34].

Inputs: ESG capabilities and organizational resources. ESG performance scores are conceptualized as aggregated firm-level sustainability capabilities (encompassing environmental management systems, social license to operate, and governance quality), which function as heterogeneous, path-dependent resources shaping companies’ capacity for sustainability integration [35]. In the oil and gas context, environmental innovation represents a specialized capability that may facilitate low-carbon transition [36].

Intentions: SDG commitments as strategic signals. SDG commitments represent formalized sustainability objectives that signal strategic priorities to stakeholders [37,38]. However, institutional theory suggests these commitments may reflect isomorphic legitimacy-seeking rather than authentic reorientation [39], particularly in carbon-intensive sectors facing contested legitimacy [40]. Research shows SDG reporting (in oil and gas) often remains symbolic rather than substantive [41,42].

Outcomes: Green Revenues and performance monetization. The ultimate test of ESG-SDG integration lies in companies’ ability to monetize environmental capabilities through Green Revenue generation. Despite stakeholder theory’s value creation logic, the translation of ESG inputs and SDG intentions into revenue outcomes remains empirically contested, particularly in industries where core business models conflict with decarbonization imperatives [43,44].

2.2. Theoretical Mechanisms and Boundary Conditions

The I²O framework also recognizes several theoretical mechanisms that may enable or constrain the translation of inputs into outcomes:

Decoupling mechanisms. Neo-institutional theory predicts potential decoupling between formal sustainability commitments and actual operational practices when firms face conflicting institutional demands [22,45]. In the oil and gas sector, conflicting pressures to lead on climate action while sustaining fossil fuel profitability may encourage symbolic sustainability adoption to secure legitimacy [46,47].

Strategic archetypes and configuration effects. ESG-SDG integration may not follow a universal linear path. Configuration theory [48] suggests firms adopt distinct strategic archetypes in achieving sustainability outcomes [49,50]: some companies may pursue deep environmental innovation (input-focused), others extensive SDG signaling (intention-focused), and still others concentrate on Green Revenue diversification (outcome-focused).

Institutional context and national frameworks. Cross-national variations in ESG performance reflects differences in regulatory stringency, normative expectations, and cultural–cognitive frameworks [51,52]. At the same time, national ESG frameworks and governance systems drive both the adoption of sustainability practices and companies’ accountability to their stakeholders [53,54], creating boundary conditions for I²O predictions.

The oil and gas sector offers a particularly relevant context for analyzing ESG-SDG integration dynamics, as companies face an unavoidable contradiction: increasing pressure to lead on climate action while depending on fossil fuels for profitability [4,55,56]. This tension creates conditions for both strategic decoupling—where SDG commitments serve legitimation without operational transformation [57,58,59]—and genuine transitional investments, where companies develop low-carbon capabilities while maintaining carbon-intensive core businesses [36,43,44]. What makes this moment critical is the dual pressure: shareholder activism is intensifying demands for sustainability accountability [60,61,62], while regulatory landscapes remain turbulent, with ongoing debates around the EU’s Corporate Sustainability Reporting Directive (CSRD) implementation [63] and the US Securities and Exchange Commission (SEC) climate disclosure rollbacks [64]. These suggest that the I²O framework operates under unprecedented scrutiny, where intention–outcome gaps carry real consequences.

3. Literature Review

Having established the theoretical foundations of the I²O framework, attention now turns to reviewing the empirical literature relevant to this study. The literature review examines the ESG-SDG nexus in the oil and gas sector as a complex phenomenon—shaped by temporal dynamics, regulatory heterogeneity, company-level strategic choices, innovation pathways, and national institutional frameworks—thereby providing the foundation for developing the study’s research questions and hypotheses.

3.1. ESG in the Oil and Gas Sector: Temporal Evolutions and Regional Dynamics

Due to its ambivalence as a major source of carbon emissions and a potential catalyst for the energy transition, the oil and gas sector has become increasingly relevant in ESG discourse. The literature indicates that industry ESG approaches and practices have evolved substantially over recent decades, moving from primarily compliance-driven reporting to more strategic, performance-oriented disclosure frameworks [65].

The shift accelerated following the Paris Agreement (2015) and the institutionalization of global/regional standards (e.g., GRI, IFRS/ISSB S1-S2, SASB, TCFD, and CSRD) that explicitly link ESG metrics to enterprise risk and financial valuation [66,67,68,69,70]. However, studies document important disparities and limitations: ESG reporting quality still varies greatly (between jurisdictions), on the one hand, and improvements in disclosure have not consistently translated into corresponding sustainability outcomes at the company level (e.g., reductions in operational emissions), on the other hand [71,72,73]. Moreover, data quality challenges are particularly acute in this sector. Scope 3 emissions (especially downstream use of sold products) dominate the footprint, yet reporting remains incomplete and inconsistent across companies and emission categories, which undermines comparability and reliability for stakeholders and ESG rating agencies [74,75,76].

Regional ESG dynamics exhibit considerable heterogeneity, shaped by regulatory frameworks, stakeholder pressures, and financial environments [77]. Operating under stringent regulatory frameworks (e.g., EU Taxonomy Regulation, SFDR, and CSRD) and national laws, European-headquartered majors (typically) demonstrate higher climate ambition with “Paris-aligned” targets [78], stronger ESG profiles [79], greater capital allocation to low-carbon projects [80], and strategic focus on business model transformation encompassing Scope 3 commitments—forcing fundamental business change [81]. While European and Canadian oil and gas companies surpass their US rivals on environmental (transition) scores [82], Asian companies typically lag behind both American and European peers [83].

Despite growing evidence of ESG adoption by oil and gas companies, longitudinal patterns across 2019–2023 and regional convergence/divergence dynamics remain underexplored. To address these gaps, we ask and hypothesize the following:

RQ1a. 

How has the overall ESG performance of integrated oil and gas firms evolved between 2019 and 2023?

RQ1b. 

Do firms converge toward similar ESG profiles (convergence), or do gaps persist or even widen (polarization)?

RQ1c. 

Which ESG pillar (E, S, or G) has experienced the largest shifts?

H1. 

Post-pandemic periods will show ESG Score improvements, particularly in governance and environmental metrics, reflecting intensified disclosure and transition efforts.

H2. 

European-headquartered firms will outperform non-European peers due to more stringent regulatory regimes and stakeholder pressure.

3.2. Pillar Contributions and Interrelationships

Recent literature highlights the importance of relative pillar weighting and the relationships among pillars in shaping overall ESG performance; however, it also stresses that pillar weighting (and transparency) lack uniformity across rating providers, which can significantly influence ESG Scores [84,85,86]—an inconsistency that is also documented by institutional analyses [83,87] (with specific implications for the oil and gas industry).

Empirical evidence suggests asymmetric pillar impacts in this sector. A panel regression study (2018–2022) on 105 oil and gas companies [45] found that environmental performance may be less priced into firm value than social or governance pillars, due to lower average disclosure scores and high costs of environmental initiatives in an industry characterized by its environmental sensitivity. Similarly, a cross-sectoral ANOVA analysis of 576 energy companies [19] revealed significant E/S/G score variation across subsectors, with the largest differences in environmental scores and the smallest—though still significant—in governance.

Regarding pillar interactions, the literature shows mixed (though encouraging) evidence that governance acts as an enabling lever. Some scholars [88] argue that governance represents the structural foundation of a firm’s ESG architecture, operationalizing top management’s commitment to ESG objectives via comprehensive risk management, strategic alignment, and transparent oversight mechanisms. Others [73] caution that this enabling effect is conditional and fragile: governance can enable better environmental outcomes, but governance failures can massively weaken ESG effectiveness. Notably, other scholars [65] found that governance shows weak, inconsistent links to environmental and social performance, indicating that energy sector governance is not yet well aligned with environmental and social priorities.

While governance is theorized as an ESG enabler, empirical tests of pillar interrelationships in oil and gas are still limited. We therefore ask and hypothesize the following:

RQ2a. 

Which ESG pillar is most developed in this sector?

RQ2b. 

What is the relative weight of each pillar in the total ESG Score?

RQ2c. 

Are there interrelationships among pillars—especially governance acting as a lever for environmental or social performance?

H3. 

Governance quality will positively moderate the effects of environmental and social performance across firms, reflecting its enabling role.

3.3. ESG and SDG Commitments: Alignment and Integration

The degree to which corporate ESG performance aligns (and integrates) with the UN SDGs represents a critical, yet emerging, empirical field. Cross-sector studies—from firm-level case studies to complex clusterizations in search for sustainable business model archetypes, reviews of corporate ESG strategies, or investor research—acknowledge the value of ESG—SDG mapping but also report limited and fragmented evidence of robust alignment at scale [89,90,91,92,93,94].

In sectors like oil and gas—that face dual imperatives to provide affordable energy (SDG 7) while addressing climate action (SDG 13)—ESG-SDG alignment/integration becomes particularly complex. Recognizing these tensions, the UN Department of Economic and Social Affairs developed the Oil and Gas Industry–SDG Atlas [95], which explicitly maps how oil and gas operations touch on all 17 SDGs, highlighting both enabling factors (e.g., job creation and energy access) and constraints (climate risk and environmental degradation). Within Europe, policy instruments (e.g., CSRD, EU Taxonomy, and SFDR) are explicitly designed to connect disclosure to outcomes, progressively tightening the ESG–SDG link [18,96].

Despite the promising mapping and the growing body of literature, empirical evidence on whether SDG commitments correlate with ESG performance is scarce. To examine this alignment, we ask and hypothesize the following:

RQ3a. 

Are firms that commit to more SDGs associated with higher ESG Scores?

RQ3b. 

To what extent do firms adopt the SDGs, and how does their level of commitment to the sustainability agenda change over time?

H4. 

Firms with higher ESG Scores commit to a larger number of SDGs.

3.4. Environmental Innovation and Green Revenue Monetization

A common critique is that headline ESG Scores often reflect intentions (i.e., policies and promises) more than real-world outcomes—e.g., a recent OECD Report [87] shows that 68% of ESG metrics are input-based, while only 17% are quantitative, output-based metrics. In response, recent research has shifted toward evaluating whether ESG performance translates into tangible outcomes—such as innovation outputs (e.g., green patents) or Green Revenue generation—thereby moving beyond policy signals to assess the material effectiveness of companies’ sustainability efforts.

Studies examining large Chinese samples [6,97,98] find that higher ESG performance is associated with stronger green technology innovation, with digital transformation and/or digital technology diffusion reinforcing these effects. Collectively, these works indicate that the relationship between ESG Scores and outcomes is often non-linear, conditional on company characteristics (e.g., size, industry, and digital maturity), and sometimes weak—suggesting that ESG Scores, as currently measured, may not fully capture genuine sustainability impact.

Outcome-side measures such as FTSE Russell Green Revenues, which classify revenue streams by environmental contribution, are increasingly used (e.g., by academic finance) to analyze cross-firm green exposure and connect corporate transition strategies to monetized sustainability [99,100,101].

The pathway from environmental innovation to Green Revenue generation in oil and gas companies remains empirically underexplored. To test this mechanism, we ask and hypothesize the following:

RQ4a. 

Is a firm’s Environmental Innovation Score predictive of its Green Revenue performance?

RQ4b. 

Do firms with stronger ESG performance better monetize sustainability via Green Revenues?

H5. 

Firms with higher Environmental Innovation Score will exhibit higher Green Revenue shares in the following year.

3.5. ESG Strategic Archetypes and Typologies

Beyond scores and averages, a growing stream of research uses clustering/configurational approaches to identify ESG leaders versus laggards and to examine governance feature combinations (e.g., board composition, executive compensation, and monitoring mechanisms) that correlate with high or low ESG performance levels. Lewellyn et al. [102] show that distinct board configurations underpin high versus low ESG performance, reinforcing governance as an enabler. At the measurement frontier, Şahin et al. [103] propose adding a “Missing (M)” pillar to ESG—creating an ESGM framework—to account for non-disclosure risk, which is particularly relevant in sectors with incomplete emissions data.

With reference to the oil and gas industry, research increasingly shows that companies follow different/divergent sustainability trajectories. Menéndez-Sánchez et al. [93] demonstrate that oil and gas companies adopt different sustainability-oriented business model archetypes, suggesting strategic variation across them. Similarly, Dimitriou et al. [4] identify four strategic pillars/factors influencing strategic decisions, pointing (if extrapolating) to distinct strategic archetypes within the industry.

These frameworks justify the need to classify oil and gas companies into ESG–sustainable/green outcomes archetypes (e.g., High ESG–High Green vs. High ESG–Low Green) and into credibility quadrants incorporating both outcomes and disclosure completeness. While most research treats ESG and green performance as continuous variables, extending the above configurational logic to the ESG—Green Revenues nexus suggests distinct firm archetypes may emerge. To explore these patterns, we ask and hypothesize the following:

RQ5a. 

Can firms be grouped into distinct ESG–Green paradigms, e.g., “High ESG and High Green”, “High ESG and Low Green”, etc.?

H6. 

Strategic clustering will reveal meaningful archetypes, with European majors clustering more frequently in the “high–high” quadrant.

3.6. National ESG Frameworks and Corporate Governance

According to institutional theory, national regulatory and governance frameworks greatly influence corporate sustainability practices [104], with national ESG Scores (capturing country-level sustainability profiles) acting as both constraints and enablers for company-level (environmental, social, and particularly) governance performance [105,106,107]. The literature introduces the “headquarters (or country-of-origin) effect” to indicate that multinational companies maintain a strong home country influence on their governance practices with core governance elements tending to reflect home country legal and institutional frameworks [108,109], while social and environmental practices apparently being more responsive to host country institutional and stakeholder environments [110]. Recent evidence on cross-border mergers and acquisitions reinforces this perspective, demonstrating that home country policy enforcement substantially shapes corporate ESG-related strategic behavior—including driving weaker-ESG firms toward ‘ESG haven’ host countries, a strategy that ultimately undermines acquisition performance [111].

Existing research suggests that the governance performance of oil and gas companies is influenced by their national ESG and institutional context, although empirical studies are limited. National oil companies in emerging markets typically score lower on governance due to state ownership and weaker institutional controls, while private and publicly listed companies perform better [73,112]. Sector-specific analyses confirm that companies’ governance practices vary with national ESG norms and regulatory frameworks [113].

Although institutional theory predicts that national contexts shape corporate sustainability, company–country ESG linkages remain underexamined in the oil and gas sector. To test this relationship, we ask and hypothesize the following:

RQ6a. 

Does a firm’s governance pillar correlate with its host country’s sustainability profile (proxied by national ESG Score)?

H7. 

Firms headquartered in countries with stronger national ESG frameworks will display superior governance metrics.

3.7. ESG Controversies and ESGC Impact

Referring to corporate news events related to E/S/G issues (e.g., environmental incidents, social conflicts, governance failures, or legal violations) that draw significant media attention and, consequently, investor interest [114], ESG Controversies (ESGCs) function as ex-post shocks to perceived corporate credibility and can attenuate or reverse the benefits associated with underlying environmental and social practices. In the oil and gas sector, controversies (e.g., environmental disasters, governance failures, and social license conflicts) heavily shape ESG assessments: major incidents trigger material downgrades in ESG ratings [115], disrupt investor perceptions [116], and often redirect firms onto divergent sustainability trajectories [113].

García-Amate et al. [9], using PLS-SEM on 264 global companies, show that ESGC moderate the relationship between E/S/G performance and corporate financial performance (CFP), weakening the positive effects that environmental and social performance typically have on market outcomes, while identifying no relationship between governance and CFP. This aligns with the broad market reaction literature documenting that negative ESG incidents have larger (and more persistent) valuation effects than positive news [117,118].

From a measurement perspective, controversy-adjusted indicators are thus essential complements to ESG Sscores, especially in high-risk sectors. Rating (agencies and their) methodologies distinguish ESG Scores (measuring disclosed policies, systems, and performance data) from ESGC scores (integrating controversy penalties), creating analytical opportunities to assess how negative events alter sustainability trajectories [119,120].

While controversy impacts on ESG are documented broadly, sector-specific patterns and asymmetric effects by company size remain unclear. To examine these dynamics, we ask and hypothesize the following:

RQ7a. 

To what extent do controversies impact ESG trajectories?

H8. 

Controversies impose asymmetric penalties—smaller firms experience sharper controversy penalties than larger firms.

3.8. Research Gaps and Study Positioning

Despite extensive research in understanding the ESG-SDG nexus within the oil and gas sector in recent years, several gaps remain: (1) there are few studies examining longitudinal ESG evolution during the disruptive 2019–2023 period across the integrated oil and gas industry; (2) interpillar dynamics, particularly governance as moderator, remain underexplored (and inconclusive) in sector-specific contexts; (3) research on the ESG-SDG nexus is nascent, with limited evidence (especially in the integrated oil and gas industry); (4) environmental innovation and financial monetization (Green Revenues) are rarely studied together; (5) ESG-Green Revenues strategic archetypes lack empirical validation in oil and gas; (6) national ESG ecosystems have not been systematically linked to corporate governance; and (7) ESGC impacts are documented broadly, but their effects in the oil and gas sector remain understudied.

This study addresses these gaps through a multidimensional research design of the ESG-SDG nexus built around a panel of integrated oil and gas firms; ESG Scores, including E/S/G pillars and ESG Controversies; SDG commitments; and FTSE Russell Green Revenues. This design enables systematic testing of the process linking ESG Scores (as inputs), SDG commitments (as intentions), and Green Revenues (as outcomes), while simultaneously assessing the credibility gap between corporate ESG disclosures and sustainability outcomes.

4. Materials and Methods

The analysis adopts an explanatory research design in a theory-informed sense, aiming to explain observed alignment patterns between ESG performance, SDG commitments, and sustainability-related outcomes through established theoretical mechanisms.

4.1. Research Design: The Census Approach

This study applies a quantitative, longitudinal, and explanatory design [121,122] to assess how the ESG performance of the world’s largest integrated oil and gas companies (classified according to LSEG Data and Analytics) aligns with the United Nations Sustainable Development Goals (SDGs) [123] through corporate commitments and leads to measurable transition outcomes, such as FTSE Russell Green Revenues [99]. A critical methodological distinction of this study is the use of a census approach rather than random sampling.

Building on the proposed I²O conceptual framework, the research design follows thew following process logic: (a) ESG Scores provide the inputs, capturing companies’ reported E/S/G performance (including pillar-specific scores and controversies) and reflecting the internal management systems and disclosure practices in place between 2019 and 2023; (b) SDG commitments reflect the intentions, indicating companies’ strategic alignment with the SDGs and signaling their publicly stated sustainability priorities over the same period; and (c) Green Revenues constitute the outcomes, derived from the FTSE Russell 2024 dataset and indicating the extent to which companies’ strategies and operations translate ESG performance and SDG alignment into tangible (energy) transition/sustainability impacts.

Thus, the design supports both temporal/lagged and cross-sectional analyses to identify how ESG practices translate into measurable sustainability results, following a methodological approach consistent with prior SDG-oriented studies that link corporate sustainability practices to performance outcomes [18,124].

We targeted the “Integrated Oil and Gas” industry group as defined by the Refinitiv Business Classification (TRBC) system (TRBC Code: 5010201010). This classification is hierarchical and distinct from “Oil and Gas Exploration and Production” or “Oil and Gas Services.” The “Integrated” designation is reserved for massive, vertically integrated companies that operate across the entire value chain: upstream (extraction), midstream (pipelines/transport), and downstream (refining/marketing).

This industry group represents a finite population (N = 19) of large global integrated companies, including national oil companies (NOCs). Therefore, since the analysis covers the entire population of integrated oil and gas companies classified by LSEG at the global level, the descriptive statistics presented are parameters of the industry population rather than estimates of a larger unobserved group.

4.2. Data and Variables

All variables were obtained from LSEG (London Stock Exchange Group) Data and Analytics [120] portal/database. The sample includes the world’s largest nineteen integrated oil and gas companies, as classified by LSEG. ESG and SDG commitment data span 2019–2023, while FTSE Russell Green Revenues data reflect the latest available release (2024). The 19 companies (along with the countries where they are headquartered in) analyzed in the document are as follows: Saudi Arabian Oil Co (Dhahran, Saudi Arabia), Chevron Corp (Houston, TX, USA), PetroChina Co, Ltd. (Beijing, China), Shell PLC (London, UK), TotalEnergies SE (Paris, France), Petroleo Brasileiro SA Petrobras (Rio de Janeiro, Brazil), Equinor ASA (Stavanger, Norway), Eni SpA (Rome, Italy), Cenovus Energy Inc. (Calgary, AB, Canada), PTT PCL (Bangkok, Thailand), NK KazMunayGaz AO (Astana, Kazakhstan), OMV AG (Vienna, Austria), Santos Ltd. (Adelaide, Australia), Galp Energia SGPS SA (Lisboa, Portugal), Guanghui Energy Co Ltd. (Urumqi, China), Transportadora de Gas del Sur SA (Buenos Aires, Argentina), Vermilion Energy Inc. (Calgary, AB, Canada), Capex SA (Buenos Aires, Argentina), and Sociedad Comercial del Plata SA (Buenos Aires, Argentina).

LSEG’s ESG methodology [120] aggregates 186 metrics into three pillars (environmental, social, governance) and 10 thematic categories (Resource Use [E], Emissions [E], Innovation [E], Workforce [S], Human Rights [S], Community [S], Product Responsibility [S], Management [G], Shareholders [G], and CSR Strategy [G]), producing a composite ESG Score (0–100). The ESGC score adjusts ESG for controversies identified from verified media and third-party sources.

The study relies on the following key variables:

• ESG Score: An aggregate measure (0–100) based on company-reported metrics across three pillars (environmental, social, governance). According to LSEG methodology, this measures a company’s relative ESG performance based on verifiable reported data.
• ESGC Score: The ESG Score discounted by ESG Controversies. LSEG overlays the ESG Score with controversy data derived from global media sources (lawsuits, spills, strikes). The difference between ESG and ESGC serves as a “controversy penalty”. This captures the extent to which negative incidents undermine firms’ baseline sustainability performance.
• SDG Commitments: A binary count (0–17) of the Sustainable Development Goals the company has publicly committed to in its annual reporting. Accordingly, SDG counts are interpreted as indicators of strategic orientation rather than measures of substantive SDG impact.
• Green Revenues: The percentage of total revenue derived from products and services classified as “green” under the FTSE Russell Green Revenues 2.0 data model. This serves as the outcome variable. We note that analyses involving Green Revenues were conducted on a sample of N = 17, as companies with missing data in the source dataset were excluded.
• Environmental Innovation Score: A subpillar of the environmental score reflecting R&D and product innovation capacity.
• Country HQ ESG Score (as a proxy for sustainability context, 2023).
• Market capitalization and regional dummy (Europe vs. the rest of the world).

4.3. Data Processing

Data cleaning and transformation were performed in Python 3.11. Operations included removal of non-data headers, standardization of units, reshaping into long-format panels, creation of regional dummies, and consistency checks between ESG and ESGC values. The final dataset comprised a balanced panel of 19 firms × 5 years. Minitab 20 was used to perform the statistical analysis of the data.

4.4. Analytical Procedures

The analysis combines descriptive statistics, correlation matrices, and OLS regressions to examine ESG performance patterns and their links to SDG commitments and Green Revenue outcomes. Pearson correlation coefficients and pillar-level regressions assessed the interrelationships among ESG dimensions and their contributions to the 2023 overall ESG Score. ESG performance was related to sustainability intentions by correlating 2023 ESG Scores with firms’ SDG commitments. Lagged regressions tested whether Environmental Innovation Scores (2023) and broader environmental indicators predicted Green Revenues (2024). Pairwise correlations and multiple regressions further examined governance as an enabling driver of environmental and social performance, as well as the influence of country-level sustainability-related frameworks on firm-level governance. Finally, OLS models assessed the influence of the Controversy Penalties (2019–2023 average) on ESG Scores (2023).

While lagged regressions are employed, the analysis does not fully eliminate endogeneity risks arising from unobserved firm characteristics (such as long-term R&D intensity or regulatory exposure). The study refrains from instrumental variable or fixed-effects estimations; accordingly, the results should be interpreted as indicative associations.

Building on prior work that highlights multidimensional sustainability perspectives, [49,125] this study adapts typology logic by integrating ESG Scores—as indicators of companies’ overall sustainability performance—with FTSE Russell Green Revenues, reflecting the proportion of a company’s revenue generated from environmentally sustainable business lines [126]. Standardized z-scores of ESG (2023) and Green Revenues (2024) were clustered using k-means and Ward’s method to derive strategic archetypes.

The clustering approach prioritizes interpretability by focusing on ESG performance and Green Revenue outcomes as the two most directly comparable dimensions across firms. While additional dimensions (e.g., SDG commitment breadth or controversy exposure) could enrich the typology, preliminary tests indicated increased instability and reduced interpretability.

The ESG–ESGC differential captured controversy penalties. Changes in this penalty over 2019–2023 were examined to identify how consistently firms manage reputational risk. This was then mapped against ESG Scores to visualize sensitivity to controversy-related fluctuations.

4.5. Reliability and Ethics

All data (aggregated from publicly available information [120]) were collected from LSEG sources. While these data are subject to rigorous collection, standardization, and internal controls by LSEG, they do not guarantee that each individual disclosed metric has been externally audited. Therefore, findings should be interpreted with due consideration of this limitation. Analyses were executed in Python and validated in Minitab 20. No confidential or personal data were used. Cross-validation across overall, pillar, and category scores enhanced construct reliability, while the use of consistent scoring scales ensured comparability.

5. Results

This section reports empirical results utilizing the census data of the 19 integrated oil and gas majors. (2019–2023 ESG and SDG data; 2024 FTSE Russell Green Revenues). We organize results by the research questions: (i) ESG trends and regional differences; (ii) pillar contributions and interrelations; (iii) ESG–SDG linkages; (iv) environmental innovation and Green Revenues; (v) ESG–Green Revenues archetypes; (vi) national ESG frameworks and corporate governance; and (vii) controversies and ESGC effects.

5.1. ESG Evolution (2019–2023) and Regional Patterns

Figure 1 shows the evolution of equal-weighted (EW) mean scores, calculated as the simple arithmetic average of scores (for ESG and its three pillars, and ESGC) across analyzed companies (thus assigning each company an identical weight regardless of size).

The ESG (EW) score modestly increased during 2019–2021 (around 63–65), before having a slight decline after 2022 (Figure 1). ESGC (controversy-adjusted) (EW) score trailed a similar trajectory (however, starting lower, at 50 in 2019). Governance (EW) is consistently the highest pillar (at roughly 67 early on), slightly improving until 2021 before declining to ~65 by 2023. Comparatively, the social (EW) score is flatter, remaining relatively stable between 63 and 65. The environmental (EW) score indicates steady improvement from 2019 (~60) to 2022 (~64), followed by a noticeable drop in 2023.

Table 1. Descriptive statistics.

Year	ESG_EW	ESG_CW	ESGC_EW	ESGC_CW	E_EW	E_CW	S_EW	S_CW	G_EW	G_CW
2019	62.63	57.23	49.99	47.41	59.58	64.14	62.47	41.17	67.39	75.73
2020	64.06	59.88	52.28	51.84	61.6	63.38	64.05	46.03	67.66	79.43
2021	64.76	61.74	54.49	51.47	63.87	69.73	63.71	47.19	67.94	75.98
2022	64.71	67.58	54.01	58.61	63.85	69.83	64.66	59.27	66.04	79.09
2023	62.92	63.52	50.53	52.66	61.53	68.43	62.99	53.4	64.84	74.33

displays capitalization-weighted (CW) scoring contrasting EW scores. The CW score weights each company’s score by its market capitalization, thus reflecting the ESG profile of larger-cap firms. In the early analyzed years (2019–2021), smaller companies were recording higher ESG averages (CW < EW). At the same time, controversies hurt large-cap firms. Beginning in 2022, larger firms’ ESG Scores surpassed those of smaller firms.

E_CW > E_EW indicates that large firms perform better environmentally. The gap is even wider in favor of large firms on governance factors. On the other hand, big firms remain behind smaller peers on social factors.

Regional differences are displayed in Figure 2a (means) and Figure 2b (dispersion). European-headquartered firms exhibit higher mean ESG levels and lower dispersion (standard deviation), suggesting mild convergence within Europe relative to the rest of the world. The narrowing dispersion over time (Figure 2b) indicates a slight reduction in variability as well as modest cross-firm convergence, although outliers persist.

5.2. Pillar Contributions and Interrelationships

The three ESG pillars—environmental (E), social (S), and governance (G)—provide the conceptual basis for sustainability assessment, holding particular relevance for the integrated oil and gas sector. Understanding how these dimensions interact provides insight into the strategic integration of corporate sustainability efforts.

As shown in Figure 3, the 2023 correlation matrix reveals positive and significant associations among all three pillars, with the strongest linkage between social and environmental scores (r = 0.74), followed by governance and environmental (r = 0.37), and finally governance and social (r = 0.29). The relatively weaker relationships involving governance suggest that while governance improvements are associated with better social and environmental performance, these links are less pronounced than the connections within social and environmental factors. Overall, the data underscore the interdependent nature of ESG criteria, highlighting that integrated approaches may yield more consistent improvements across sustainability dimensions.

Table 2. Multiple linear regression between ESG Score and the three pillar scores.

Independent Variable	β (Standardized Coefficient)	Standard Error	t-Statistic	p > |t|
Social Pillar Score	0.565	0.000048	11,700	<0.001
Environmental Pillar Score	0.390	0.000050	7823	<0.001
Governance Pillar Score	0.236	0.000035	6813	<0.001

shows the results of the multiple linear regression conducted to quantify the influence of each dimension on the overall ESG Score, with the three pillar scores as predictors. The estimated standardized coefficients (β) reveal the relative importance on the overall ESG Score as follows: the pillar that contributes most strongly to the overall ESG variation is the social pillar (β ≈ 0.565), followed by the environmental pillar (β ≈ 0.390), and finally the governance pillar (β ≈ 0.236).

This suggests that, for the analyzed peer group in 2023, high social performance (covering factors like workforce, human rights, product responsibility, and community) is the most powerful determinant of a high overall ESG Score. This finding further indicates that ESG performance is systemic, with the social and environmental pillars contributing most strongly to overall ESG Score variation, while the governance pillar plays a consistent but comparatively less influential role in determining the final aggregated result.

5.3. ESG and SDG Commitments

The chart displayed in Figure 4 highlights the evolution of SDG commitments among the analyzed companies from 2019 to 2023. While individual trajectories vary, the overall sector mean (discontinued gray line) shows a slight upward trend until 2021, before lightly declining afterwards. Most firms increased the number of SDGs they committed to between 2019 and 2021. On the other hand, some companies (e.g., Cenovus Energy Inc., Chevron Corp, Equinor ASA, NK KazMunayGaz AO, OMV AG, Petroleo Brasileiro SA Petrobras, and Transportadora de Gas del Sur SA) no longer reported alignment with certain SDGs beginning in 2021.

Despite this overall trend, with the sector mean ranging roughly between 9 and 11 SDGs committed during 2019–2023, high cross-company dispersion underlines the heterogeneity of commitment levels. Some companies (e.g., Eni SpA, Shell PLC, and PetroChina Co Ltd. (Beijing, China)) reached and maintained a maximum commitment to (all 17) SDGs, while others—Equinor ASA and Petroleo Brasileiro SA Petrobras—show more limited or fluctuating involvement.

Figure 5 presents an empirical validation of the conceptual link between a company’s consolidated sustainability performance and its strategic commitment by plotting the ESG Score (2023) against the number of SDGs committed (2023). The scatter plot includes an Ordinary Least Squares (OLSs) regression line to visually represent the linear relationship. This analysis serves to quantify whether companies achieving higher scores across environmental, social, and governance metrics simultaneously exhibit broader alignment with the United Nations’ 17 Sustainable Development Goals (SDGs).

The visualization in Figure 5 and the regression summary (

Table 3. Regression summary of ESG Score (2023) vs. SDG commitments (2023).

Statistic	Value
Pearson Correlation (r) (Strength/Direction)	0.781
OLS Slope Coefficient (b)	0.297
OLS Intercept (a)	−5.385
Coefficient of Determination (R2)	0.610
Observations (N)	19

) indicate a strong, positive association between a firm’s ESG Score (2023) and the number of SDGs committed (2023), with a Pearson correlation of r = 0.781 and R² = 0.610. This finding is consistent with the fact that companies with superior overall ESG performance are significantly more likely to formally adopt and disclose commitments across a wider range of the 17 SDGs. This relationship reflects deeper sustainability integration, as the ESG Score often precedes sophisticated, multi-faceted disclosure practices like SDG reporting.

The presence of European firms (e.g., Shell PLC and TotalEnergies SE) within the high ESG, high SDG commitment (virtual) quadrant—marked by diamond shapes—reinforces the notion that greater regulatory and stakeholder pressures in EU markets drive stronger alignment between ESG performance and comprehensive SDG disclosure. For the integrated oil and gas sector, this finding suggests that SDG commitments are associated with broader ESG performance and disclosure maturity, rather than functioning as isolated or purely symbolic signals.

Analyzing specific company data from 2023 reveals distinct “Intention Profiles”:

• Maximum Intention (17 SDGs): Firms like Shell PLC (ESG 90.23), Eni SpA (ESG 84.10), and Galp Energia (ESG 68.45) committed to all 17 SDGs. These are predominantly European firms.
• Selective Intention: Saudi Aramco (ESG 57.75) committed to 12 SDGs, focusing on economic goals (SDGs 8 and 9) and climate (SDG 13) while omitting others. This reflects a strategic, resource-constrained approach typical of an “Emergent Transitioner”.
• Low Intention: Cenovus Energy (ESG 58.08) committed to only two SDGs in 2023.

This variance highlights that intention is not uniform but contingent on the firms’ ability to manage the complex reporting requirements associated with multiple SDGs.

5.4. Environmental Innovation and Green Revenues

The relationship between a firm’s environmental innovation capabilities and its ability to generate sustainable revenues is central to the transition of the energy sector. Figure 6 illustrates this association using 2023 Environmental Innovation Scores (EISs) on the x-axis and 2024 FTSE Russell Green Revenues (GRs) on the y-axis. The scatter plot and statistical summary (

Table 4. Regression summary of Environmental Innovation score (2023) and FTSE Russell Green Revenues (2024).

Statistic	Value
Pearson Correlation (r)	0.099
OLS Slope Coefficient (b)	0.016
OLS Intercept (a)	1.897
Coefficient of Determination (R2)	0.010
Observations (N)	17

) reveal a negligible positive relationship between the Environmental Innovation Score (2023) and FTSE Russell Green Revenues (2024), quantified by a Pearson correlation of r = 0.099. The OLS regression line confirms this weak association, with a low slope (b = 0.016) and a coefficient of determination (R² = 0.010) indicating that Environmental Innovation explains only 1.0% of the variance in subsequent Green Revenues.

The statistical relationship between the Environmental Innovation score (2023) and FTSE Russell Green Revenues (2024) is summarized in Table 4:

While innovation is essential for improving environmental efficiency, the evidence from this sample does not indicate that it predicts sustainability-related revenue growth in the short term. For the integrated oil and gas sector, this suggests that the initiatives captured by the Environmental Innovation score have not yet translated into measurable diversification of products and services classified as “green” under the FTSE Russell framework.

To transition from the descriptive observation of a positive visual trend (Figure 6) to a formalized quantitative understanding, we first examined the bivariate correlations between 2023 environmental performance indicators and subsequent 2024 Green Revenues (GRs).

Table 5. Pearson correlation between 2023 environmental indicators and 2024 Green Revenues.

Indicator	Pearson Correlation (r)
Emissions Score	0.282
Resource Use Score	0.222
ESG Score (Overall)	0.107
Environmental Innovation Score	0.099

presents the Pearson correlation coefficients for the firm’s overall ESG Score, as well as specific environmental sub-indicators—Resource Use, Emissions, and Environmental Innovation—against the percentage of revenue classified as green by FTSE Russell.

The bivariate correlation analysis presented in Table 5 reveals that the linear relationship between the 2023 environmental performance indicators and 2024 Green Revenues (GRs) is generally weak across all measured dimensions. The strongest preliminary association is observed for the Emissions Score (r = 0.282), suggesting that better performance in managing greenhouse gases and pollutants is marginally linked to increased Green Revenue generation. In contrast, the Environmental Innovation score (r = 0.099) and the overall ESG Score (r = 0.107) exhibit negligible correlations with GR. This finding suggests a potential lagged effect: while firms are actively engaged in sustainability efforts that boost their overall ESG ratings, these initiatives have not yet translated into a substantial or statistically significant share of commercially realized Green Revenues in the subsequent year.

5.5. ESG–Green Revenues Archetypes

To uncover patterns linking sustainability performance with transition-related financial outcomes, companies were clustered based on their ESG Score (2023) and FTSE Russell Green Revenues (2024). The resulting typology, visualized in Figure 7, reveals four distinct strategic archetypes—each representing a different approach to integrating environmental, social, and governance performance with monetized sustainability results.

Figure 7 plots firms along two axes: the ESG (2023) score on the x-axis, and Green Revenues (2024) on the y-axis, indicating the extent to which business activities contribute to environmentally classified revenue streams.

The intersection of the sample means divides the space into four quadrants, corresponding to the following archetypes:

• High ESG—High Green (Strategic Leaders). Firms in the upper-right quadrant exhibit both strong ESG performance and a high share of Green Revenues. Typically, these are large, European-headquartered companies that have embedded sustainability within core operations. Their performance suggests mature ESG systems that translate directly into marketable green products or services. Examples include companies such as Shell PLC, Equinor ASA, or PTT PLC. Firms in this quadrant exhibit concurrent high ESG Scores and higher Green Revenue shares, suggesting a closer alignment between ESG performance and monetized outcomes.
• High ESG—Low Green (Signalers or Transition Planners). Organizations in the lower-right quadrant maintain strong ESG credentials but have yet to realize substantial Green Revenue outcomes (e.g., OMV AG, TotalEnergies SE, and Vermilion Energy Inc.). Their profile shows that they may be in earlier stages of strategic transition, where sustainability ambition and disclosure outpace the commercial deployment of green products or services.
• Low ESG—High Green (Emergent Transitioners). Companies located in the upper-left quadrant report relatively lower ESG Scores yet achieve comparatively higher Green Revenues. These firms appear to commercialize green technologies or services despite limited ESG disclosure sophistication. Their strategy may prioritize technological innovation over formal ESG frameworks. As such, they represent an under-recognized transition path—achieving tangible sustainability impacts without parallel reporting infrastructure. In this quadrant there is only one company: PetroChina Co Ltd. This unique archetype suggests that “doing green” (revenue) does not always require “reporting green” (ESG Scores). It implies that in some markets (like China), transition is operational rather than informational.
• Low ESG—Low Green (Conventional Laggards). Firms in the bottom-left quadrant underperform on both ESG metrics and Green Revenue generation (e.g., Cernovus Energy Inc. (Calgary, AB, Canada), Guanghui Energy Co Ltd., Santos Ltd., Saudi Arabian Oil Co, and Transportadora de Gas del Sur SA). Their business models remain heavily carbon-intensive, and sustainability reporting is limited or fragmented. This group illustrates the traditional hydrocarbon-centric profile. Persistent controversies and weaker governance systems tend to depress both ESGC and ESG Scores. These firms remain tethered to the traditional extraction model, treating green economy factors primarily as costs to be minimized rather than resources to be leveraged.

The k-means analysis provides support for statistically distinct groupings across the two performance dimensions. From a strategic perspective, these archetypes highlight heterogeneity in the sector’s transition trajectories. While all firms face regulatory and investor pressures, their ability to convert ESG performance into economic sustainability outcomes varies substantially. European companies stand out in the High ESG–High Green quadrant (also with Galp Energia SGPS SA transitioning). In contrast, North American and non-EU companies are more dispersed, often occupying the High ESG–Low Green or Low ESG–Low Green spaces (see

Table 6. Company (N = 17) allocation in clusters based on ESG Score (2023) and Green Revenues (2024).

Company Name	ESG Score 2023	Green Revenues 2024 (%)	Cluster
Saudi Arabian Oil Co	57.75	0.58	1
Transportadora de Gas del Sur SA	56.95	0.00	1
Guanghui Energy Co Ltd.	48.71	0.00	1
Santos Ltd.	49.27	0.00	1
Cenovus Energy Inc.	58.08	0.00	1
Sociedad Comercial del Plata SA	11.52	0.00	1
PetroChina Co Ltd.	53.61	18.96	2
Galp Energia SGPS SA	68.45	2.56	3
Equinor ASA	68.87	4.94	3
Shell PLC	90.23	10.60	3
PTT PCL	77.29	3.15	3
OMV AG	83.73	0.00	4
Vermilion Energy Inc.	76.83	0.00	4
Eni SpA	84.10	0.90	4
TotalEnergies SE	83.97	1.67	4
Petroleo Brasileiro SA Petrobras	72.47	0.72	4
Chevron Corp	65.28	0.00	4

Note: Companies with missing data in the source sheet were necessarily excluded from the clustering analysis.

).

Overall, the evidence presented in Figure 7 and Table 6 underscores that high ESG performance does not automatically guarantee high Green Revenue generation, but firms achieving both reveal the strongest strategic alignment between corporate sustainability and business transformation.

5.6. National ESG Frameworks and Corporate Governance

To explore the relationship between the (institutional and) policy environment of a company’s home country and its corporate sustainability practices—particularly in the domain of governance—Figure 8 plots each company’s Governance Pillar Sscore (2023) against the Country HQ ESG Score (2023) derived from the LSEG database.

The analysis found a moderate positive correlation (r = 0.46) between a firm’s Governance Pillar Score and its Country HQ ESG Score, distinguishing between the following groups:

• European cluster: Firms’ HQ in Europe (Avg Country ESG ~80) have an average governance score of 75.76.
• Rest of the world: Firms’ HQ elsewhere (Avg Country ESG ~60) have an average governance score of 65.23.

This 10-point gap reflects the institutional isomorphism required by the EU’s “Brussels Effect”. European companies utilize governance not just for compliance, but as a strategic ability to navigate complex regulatory landscapes.

A simple regression analysis provides indicative support for this relationship: when Governance Pillar Score (2023) is regressed on the Country HQ ESG Score (2023), controlling for firm size (log market capitalization) and a regional dummy (Europe = 1), the country-level ESG coefficient remains positive (β = 0.23, p < 0.10). While the result is marginally significant (statistically weak, but consistent), it implies that a one-point increase in the host country’s ESG Score is associated, on average, with a 0.23-point increase in the firm’s governance score, holding other factors constant.

Firms headquartered in countries with high environmental stringency and robust legal enforcement—notably within the European context—are structurally compelled to adopt advanced governance models. The high ESG, high commitment peer group includes European-headquartered companies such as Eni SpA (Italy), Equinor ASA (Norway), Galp Energia SGPS SA (Portugal), OMV AG (Austria), Shell PLC (United Kingdom), and TotalEnergies SE (France).

The bivariate correlation between national ESG frameworks and firm-level governance performance is positive (r = 0.443) and approaches statistical significance (p = 0.063), suggesting that companies headquartered in stronger institutional environments tend to exhibit higher governance scores. This pattern persists in the multivariate OLS model, where the effect of the Country ESG Score remains positive (β = 0.354, p = 0.078) even after controlling for regional membership. The Europe dummy also displays a sizeable coefficient (β = 9.076, p = 0.068), indicating that European firms score nearly nine points higher in governance relative to non-European peers. Although neither predictor reaches the conventional significance threshold, the combined model explains a substantive proportion of score variation (R² = 0.334), and the Mann–Whitney U test similarly identifies higher governance levels among European companies (μ_EU = 75.76 vs. μ_RoW = 65.23; p = 0.077).

5.7. Controversies and ESGC Impact

A relevant dimension of ESG assessment involves understanding how corporate controversies—such as environmental incidents, social disputes, or governance failures—affect firms’ overall ESG profile. To capture this effect, LSEG provides both the ESG Score (performance-based) and the ESGC score, which adjusts the ESG Score based on the reported controversies in which a company has been involved in. The difference between the two (ESG—ESGC), called controversy penalty, indicates how much a company’s ESG Score is reduced due to negative news or scandals affecting its reputation. It can also be understood as the extent to which reputational or operational risks diminish a company’s baseline ESG profile.

Figure 9 plots the average controversy penalty (2019–2023) against analyzed firms’ ESG Scores (2023). The scatter reveals clear heterogeneity in both exposure and resilience across the peer group. While many companies cluster near the lower penalty zone (under 10 points), several exhibit noticeably higher deductions—reaching over 35 points in extreme cases—indicating that specific incidents can substantially erode the credibility of otherwise strong ESG profiles.

The analysis of the controversy penalty (calculated as the difference between the performance-based ESG Score and the adjusted ESGC Score) against the ESG Score (2023) reveals an important dynamic in corporate sustainability management. The regression yields a positive, though moderate, Pearson correlation coefficient of r = 0.407, supported by an OLS slope of β = 0.181 and an R² of 0.166.

To examine whether controversy-related score deductions disproportionately affect smaller firms, a series of statistical tests were conducted. The bivariate correlation between average controversy penalty (2019–2023) and firm size—measured as the natural logarithm of market capitalization—shows a negative association (r = −0.198), though not statistically significant (p = 0.452). Similarly, the OLS regression model is consistent with this negative relationship, with a coefficient of β = −2.671 (p = 0.383; R² = 0.039), indicating that larger firms tend to experience smaller deductions, but firm size alone explains little of the variance in penalty magnitude. Group-level comparisons further support this directional pattern: the Mann–Whitney U test shows that smaller firms exhibit a higher mean controversy penalty (μ = 13.565) compared to larger firms (μ = 11.082), although the difference is again statistically insignificant (U = 39.0; p = 0.382). A robustness regression controlling for the Governance Pillar Score slightly strengthens the size effect (β = −3.267), yet neither firm size nor governance achieves statistical significance (p > 0.25; R² = 0.089).

6. Discussion

Below, we address the research questions and hypothesis through the lens of the obtained results, highlighting how the analyzed relationships unfold across the integrated oil and gas sector. The discussion integrates statistical evidence with theoretical perspectives to interpret the patterns observed and to clarify their implications for corporate sustainability trajectories.

6.1. ESG Performance Trends

RQ1 asked how ESG performance evolved over 2019–2023 and whether firms converged or polarized, while H1 and H2 concerned post-pandemic improvements and regional differences. ESG Scores increased modestly until 2021 but stagnated or declined thereafter—particularly in the environmental pillar. Results reveal that large firms initially underperformed smaller peers but overtook them from 2022 onward, especially on the environmental and governance pillars. These patterns challenge H1 and suggest that the post-pandemic period did not produce a sustained uplift in ESG performance (progress appears rather incremental and fragile than transformative, reinforcing arguments that transition efforts remain bounded by core business model inertia) [44]. For the integrated oil and gas sector, this pattern suggests that firms are undertaking modest measures [127], while deeper decarbonization remains limited. Business models continue to be anchored in hydrocarbons, constraining the extent to which these companies can shift meaningfully toward low-carbon strategies [128].

Regional patterns reveal higher and more homogeneous ESG Scores among European-headquartered firms, with mild convergence over time. This provides support for H2 and aligns with the fact that (large) European oil and gas companies face more stringent regulatory requirements, stronger investor scrutiny, and more demanding civil society expectations than firms operating outside Europe [21,51,129]. Results indicate that ESG improvements in this group are uneven, being more pronounced in jurisdictions with robust regulatory and stakeholder pressures.

6.2. Pillar Contributions and Interrelationships: Governance as Enabler

RQ2 looked into pillar contributions and interrelationships, and H3 proposed governance as an enabling driver for environmental and social performance. The results indicate that the social pillar explains the largest share of cross-sectional ESG variation, followed by environmental and governance dimensions. This aligns with the literature findings [46,130], but also with the general logic of the LSEG methodology [120], which assigns substantial weight (and more granularity) to social factors. However, it differs from the oil- and gas-specific weighting scheme, where environmental elements are assessed as most material. This further suggests that observable firm-level ESG differences in this sector are driven more by (firm-specific risks and) heterogeneous social practices—often assessed through qualitative assessments—than by (systemic/industry-related risks and) environmental disclosures—which tend to be more standardized and regulated [32,69]—in an industry where environmental performance is still technologically constrained (thereby limiting cross-firm dispersion) [131,132].

The relatively weaker direct contribution of governance does not undermine its enabling role; rather, it suggests that governance operates partly as a foundational condition that allows environmental and social systems to function effectively, consistent with stakeholder and institutional governance theories [25,26], but is not the sole driver of the combined score. Prior opinions [35] show that board structures and CSR strategies shape how firms respond to environmental and social pressures. In this sense, the results offer partial support for H3: better governance is associated with higher environmental and social scores, but the strength of this linkage is moderate. From a managerial perspective, this underscores that formal governance mechanisms—such as board-level ESG committees—need to be coupled with changes in operational management, workforce policies, and stakeholder engagement if they are to translate into strong, holistic ESG performance.

6.3. ESG–SDG Alignment

RQ3 and H4 focused on whether firms with stronger ESG performance indicate broader SDG commitment. The cross-sectional evidence for 2023 revealed that ESG Scores and the number of SDGs committed are strongly and positively related. This finding aligns with prior research suggesting that ESG maturity and SDG alignment often co-evolve as part of broader sustainability governance architectures [37,92]. The pattern is consistent with H4 and suggests that SDG alignment is not merely symbolic for these companies but forms part of a wider sustainability maturity profile [24]. The results extend prior literature [92,133] to the integrated oil and gas sector, indicating that high ESG performers formalize SDG commitments across a wide spectrum, sometimes covering all 17 goals. However, the substantial dispersion in SDG counts highlights persistent heterogeneity in sustainability ambition, with prior studies cautioning that SDG engagement often reflects breadth rather than depth [33,58]. Accordingly, while the findings support the hypothesis that ESG leaders exhibit broader SDG alignment, they do not imply uniform substantive impact across goals.

From a strategic perspective, this is consistent with the idea that aligning corporate strategy with the SDGs requires embedding sustainability objectives into core operations and governance, rather than treating SDG references as a communication add-on [134]. At the same time, results reinforce calls to distinguish between formal SDG alignment and material contribution, especially in sectors facing conflicting regulatory, economic, and technological pressures during the energy transition [38,42].

6.4. Innovation as a Transition Mechanism

RQ4 examined whether Environmental Innovation Scores predict Green Revenues, and H5 hypothesized a positive relationship. The results provide little support for this expectation and suggest that innovation inputs have not yet translated into measurable revenue diversification toward FTSE-classified green activities. This outcome is consistent with the long development cycles, capital intensity, and technological uncertainty that characterize large-scale energy transition investments in the oil and gas sector [36,78].

This finding appears at odds with broader evidence that green and environmental innovation can enhance financial performance [135,136]. Still, recent literature [137] emphasizes that even green economy-oriented financial indicators may lag behind underlying structural transformation in the raw materials sectors, suggesting that weak short-term associations between environmental innovation and Green Revenues do not necessarily imply an absence of transition efforts. To this, a complementary explanation can be added, rooted in the timing and structure of innovation processes in capital-intensive industries, where a temporal disconnect often exists between innovation inputs and commercialization outcomes. At a more granular perspective, prior literature [138] conceptualizes this misalignment through the notion of a “green innovation paradox”, whereby firms invest in environmental R&D to meet regulatory or legitimacy expectations, while revenue-generating applications materialize only after extended time lags or outside the firm’s core business segments [39,47].

Strategically, the results call for oil and gas firms to complement innovation portfolios with accelerated commercialization (and portfolio rebalancing) if they are to convert sustainability initiatives into material transition-aligned revenues.

6.5. ESG–Green Revenues Typologies and Strategic Differentiation

RQ5 and H6 addressed whether firms could be grouped into ESG–Green Revenues archetypes. The identified profiles and their regional patterns are aligned with H6. However, the resulting ESG–Green Revenues typologies reflect heterogeneous transition pathways rather than uniform strategic archetypes. The coexistence of firms with high ESG performance but limited Green Revenues alongside firms exhibiting the opposite configuration underscores the partial decoupling between ESG processes and transition outcomes [31,45,139,140,141]. This reinforces concerns that strong ESG Scores may reflect governance quality and disclosure sophistication without necessarily implying business model transformation.

These archetypes echo earlier typologies distinguishing proactive, compliance-oriented, and symbolic sustainability strategies in high-impact industries [35,40,142]. Still, all cluster-based findings should be interpreted as descriptive rather than as evidence of stable strategic archetypes, given the limited sample size and the generally modest explanatory power of the models.

From a policy and investment standpoint, the typology underlines that ESG Scores alone are insufficient to presume transition performance. For investors seeking credible decarbonization trajectories, combining ESG assessments with outcome-oriented measures such as FTSE Green Revenues can better contribute to distinguishing substantial transition strategies from rather reputational approaches [101].

6.6. National ESG Frameworks and Corporate Governance

RQ6 and H7 focused on whether country-level sustainability frameworks shape firm-level governance. The positive association between national ESG performance and firm-level governance supports institutional theory arguments that corporate practices are shaped by embedded regulatory, cultural, and normative environments [109]. European firms’ stronger governance profiles and broader SDG engagement appear consistent with more demanding disclosure regimes, enforcement mechanisms, and stakeholder expectations [53,54,143,144].

Rather than reflecting purely discretionary strategy, these patterns suggest that governance structures in high-impact sectors are, at least partially, institutionally induced. While the results are indicative rather than definitive, they reinforce the view that strengthening national sustainability frameworks can indirectly elevate corporate governance standards, particularly in industries with systemic environmental and social implications [104,108].

6.7. Controversies and ESG Credibility

RQ7 and H8 investigated how controversies affect ESG trajectories and whether penalties are asymmetric across firm sizes. The analysis shows that average controversy penalties (ESG—ESGC) vary substantially across the peer group and are positively associated with ESG Scores. High ESG firms tend, on average, to experience larger deductions when controversies occur. This finding is consistent with a “visibility paradox”: companies that invest heavily in ESG programs, set ambitious targets, and engage in extensive disclosure become more visible [114,145] (to NGOs and the media, among others) and are therefore more likely to see their incidents highlighted and penalized. Nevertheless, ESG performance explains only a modest share of the variation in controversy penalties, meaning that controversy exposure is influenced by multiple factors (that go beyond ESG performance). Recent findings [118,146] indicate that firms with high ESG or sustainability claims are particularly exposed to reputational and financial damage when controversies or greenwashing accusations arise, precisely because stakeholders perceive a gap between stated commitments and actual behavior.

Regarding asymmetry by firm size, the evidence is directional but not statistically conclusive. Given that the sample comprises only large and very large integrated oil and gas companies, with limited dispersion in size, it is not surprising that statistical power is insufficient to confirm H8. The findings tentatively suggest that smaller players may have fewer resources and less sophisticated crisis management systems to protect against controversies, whereas larger firms may partially absorb reputational shocks through established governance, communication structures, and stakeholder relationships [147,148].

Nevertheless, the results show that high ESG Scores do not safeguard firms against reputational risk. On the contrary, they raise stakeholder expectations, making robust risk management, incident prevention, and credible remediation essential complements to governance and disclosure improvements in sustaining ESG credibility over time [71,115].

7. Conclusions

This study evaluated the sustainability alignment of the world’s largest integrated oil and gas companies through the lens of Inputs–Intentions–Outcomes (I²O) framework. By analyzing a census of the LSEG “Integrated Oil and Gas” industry group (2019–2023), the research highlights a “input–outcome gap” in the analyzed group’s transition.

7.1. Key Findings and Implications

Key findings reveal a bumpy progression toward sustainability. ESG performance improved only modestly from 2019 to 2023, with noticeable regional differences led by European firms. Governance acted as a moderate enabler of environmental and social performance, while ESG Scores strongly predicted the breadth of SDG commitments—indicating deeper sustainability integration among high-performing firms. However, environmental innovation showed no meaningful relationship with short-term Green Revenues, highlighting a gap between sustainability-oriented initiatives and business model transformation. Country-level sustainability frameworks modestly shaped governance outcomes, and controversy penalties showcased a visibility effect, though size asymmetries remained statistically inconclusive. This suggests that for the analyzed companies, ESG performance remains largely a function of institutional compliance and governance sophistication rather than a proxy for rapid business model transformation. The findings validate the “home country effect” [111], showing that European firms—subject to stricter enforcement—exhibit superior governance and tighter ESG-SDG alignment. For policymakers, this underscores that voluntary disclosures are insufficient and that mandatory frameworks are needed to drive convergence. For investors, the study demonstrates that ESGC (controversy-adjusted) scores and Green Revenues are more reliable indicators of transition risk than headline ESG ratings.

Overall, the study shows that the ESG–SDG architecture within the analyzed industry group captures meaningful differences in sustainability maturity but also reveals constraints that inhibit deeper transformation. While some firms emerge as Strategic Leaders, the group remains characterized by symbolic progress on disclosure rather than large-scale reorientation of business models. Strengthening the coherence between sustainability commitments and operational realities remains a challenge for the industry’s transition trajectory.

Nevertheless, conclusions should be considered preliminary and interpreted as exploratory, reflecting current data limitations and the still-evolving nature of Green Revenue classification. The contribution lies primarily in identifying structural tensions and misalignments that warrant deeper investigation rather than in providing definitive assessments of sustainability performance.

7.2. Limitations and Directions for Future Research

While this study offers a comprehensive view of ESG–SDG linkages in the integrated oil and gas sector, several limitations merit attention:

• The analysis relies on LSEG-reported data, which, while standardized, may not capture unreported sustainability activities or firm-specific methodological nuances. Moreover, results may reflect methodological choices that differ from other ESG ratings, potentially leading to different outcomes.
• The five-year panel (2019–2023) limits the ability to observe longer-term transition trajectories. Future studies could extend the timeframe as Green Revenues and SDG reporting mature. Also, given that the current landscape—with evolving regulatory and market context—may signal an inflection point for corporate sustainability, extended time-series analyses would offer clearer insights.
• The focus on integrated oil and gas firms limits generalizability. Sustainability dynamics can differ not only across energy subsectors but also across unrelated industries, where ESG pillars manifest differently. While these companies play a major role in global energy markets and sustainability disclosure practices, the exclusion of smaller firms and those headquartered in underrepresented regions limit the generalizability of the results.
• Although the study leverages standardized ESG- and SDG-related indicators to ensure comparability, such quantitative measures cannot fully capture the strategic intent or internal decision-making processes underlying sustainability commitments. Future research integrating qualitative analyses (based on sustainability reports or executive interviews) could further differentiate between symbolic alignment and substantive strategic transformation.
• The small clustering sample (N = 17), which yielded only a 2 × 2 matrix (built on ESG Scores and Green Revenues while not comprising SGD breath), may have limited the detection of more granular patterns. As data availability improves (especially in light of the emerging and still-evolving nature of Green Revenue classification and reporting), future research could rely on larger and more diverse samples and apply alternative clustering approaches that incorporate additional dimensions (such as SDG depth or controversy exposure), to identify more detailed and stable sustainability patterns across firms and industries.

Building on these limitations, additional future research should explore the causal mechanisms linking ESG investment, innovation intensity, and economic outcomes through longer-term longitudinal designs or system dynamics modeling. It could examine whether the country of headquarters shapes firms’ sustainability behavior in contexts where public accountability is limited and regulatory frameworks do not strongly enforce ESG or SDG alignment. Lastly, future research could also examine the depth of SDG commitments across companies—combining quantitative indicators with qualitative evidence, especially given the heterogeneous patterns observed.