ESG transformation of business models of oil and gas companies in the context of energy transition based on adaptation strategies

Abstract

The article examines the ESG transformation of business models of oil and gas companies and their adaptation strategies in the context of the global energy transition. The relevance of the research is due to the fact that in the oil and gas industry, value creation is determined not only by the efficiency of production processes, but also by the management of natural capital, environmental risks, investment cycles and interaction with the state. The article uses a two-level approach combining a comparison of indicators of sustainable development of oil and gas producing regions with an analysis of the environmental, social and managerial performance of oil and gas companies. A comparison of regional and corporate indicators revealed differences between the conditions of ESG adaptation of oil and gas producing territories and imbalances between the environmental, social and managerial components of the companies' activities. Four combinations of regional conditions have been identified, differing in the priorities of technological modernization, economic diversification, climate adaptation, and social investment. The position is argued that it is necessary to abandon the unified ESG strategies of oil and gas companies in favor of building them based on the specifics of the region: climatic and natural conditions, the state of the socio-economic sphere, as well as established institutional practices. It is suggested that cascading corporate ESG goals to the level of regional divisions will achieve a greater balance between the environmental, social and managerial areas of their activities. This, in turn, will create prerequisites both for strengthening the companies' positions in international ESG ratings and for increasing the sustainability of oil and gas producing regions in the context of the ongoing energy transition. The results of the study can be used by oil and gas companies in improving corporate ESG strategies in the context of energy transition, as well as by government authorities in developing mechanisms for the sustainable development of resource-dependent territories.