Impact of Corporate Governance Mechanisms on Environmental Sustainability in Nigeria’s Oil and Gas Sector

Impact of Corporate Governance Mechanisms on Environmental Sustainability in Nigeria’s Oil and Gas Sector

Ajibua Gbenga¹, Nelson Christopher²

¹Department of Business Administration Grace Bay, Charisma University, Turks & Caicos Island

²Department of Economics Bingham University, Karu. Nasarawa State, Nigeria

DOI: https://dx.doi.org/10.47772/IJRISS.2025.907000474

Received: 14 July 2025; Accepted: 22 July 2025; Published: 23 August 2025

ABSTRACT

This study investigates the impact of corporate governance mechanisms on environmental sustainability in Nigeria’s oil and gas sector, focusing on three key governance variables: board composition, audit committee independence, and board independence. Using a survey research design, primary data were collected through a structured Likert-scale questionnaire administered to 196 respondents across selected firms. Descriptive statistics, correlation analysis, and multiple linear regression were employed using SPSS version 26 to analyze the data. Findings revealed that board composition, audit committee independence, and board independence each have a positive and statistically significant effect on environmental sustainability. The correlation coefficients indicated strong associations, with board composition showing the highest relationship. Regression analysis further confirmed the predictive power of the governance variables, with an R Square of 0.829, suggesting that over 82% of the variation in environmental sustainability practices can be explained by the model. The ANOVA result and F-statistic (F = 8662.235, p < 0.01) affirmed the overall significance of the model. These findings are consistent with recent studies and theoretical perspectives such as Agency Theory and Resource Dependency Theory, which highlight the role of governance structures in promoting transparency, accountability, and stakeholder responsiveness in sustainability issues. The study concludes that effective corporate governance significantly enhances environmental sustainability efforts and recommends improved board diversity, audit committee empowerment, and mandatory integration of environmental oversight into corporate governance codes.

Keywords: Corporate Governance, Environmental Sustainability, Board Composition, Audit Committee, Oil and Gas Sector, Nigeria.

INTRODUCTION

Corporate governance mechanisms have evolved globally to address the increasing complexities of corporate operations and stakeholder expectations. In recent years, there has been a heightened emphasis on integrating sustainability into corporate governance frameworks. Boards worldwide are now focusing on enhancing transparency, accountability, and stakeholder engagement to ensure long-term value creation and risk mitigation. The 2024 Global Corporate Governance Trends report highlights that sustainability has become a central agenda for boards, with increased scrutiny on environmental, social, and governance (ESG) factors influencing corporate strategies and operations (Russell Reynolds Associates, 2024).​

Concurrently, environmental sustainability has emerged as a critical global concern, driven by the escalating impacts of climate change and environmental degradation. The 2024 United Nations Environment Programme’s Emissions Gap Report underscores the urgent need for accelerated action to limit global warming, noting that current efforts are insufficient to meet the targets set by the Paris Agreement (UNEP, 2024). The report emphasizes that without significant reductions in greenhouse gas emissions, the world is on a trajectory toward catastrophic climate consequences. This global context has intensified the call for corporate entities to adopt sustainable practices that minimize environmental footprints and contribute to broader climate goals.​

In Nigeria, the oil and gas sector play a pivotal role in the nation’s economy but has also been associated with significant environmental challenges, particularly in the Niger Delta region. Issues such as oil spills, gas flaring, and land degradation have raised concerns about the sector’s environmental sustainability practices. Despite existing regulatory frameworks, enforcement remains weak, and corporate governance practices often fall short in addressing environmental risks. Recent studies have highlighted the need for stronger governance mechanisms to enhance environmental performance in Nigeria’s oil and gas industry (Obialor, 2024). Furthermore, the failure of initiatives like the Hydrocarbon Pollution Remediation Project (HYPREP) to effectively clean up oil pollution underscores systemic governance deficiencies and the pressing need for reform (AP News, 2025).​

This study aims to empirically examine the impact of corporate governance mechanisms on environmental sustainability within Nigeria’s oil and gas sector. By analysing the relationship between governance structures—such as board composition, audit committees, and stakeholder engagement—and environmental performance indicators, the research seeks to identify governance practices that effectively promote environmental sustainability. The findings are expected to provide insights for policymakers, industry stakeholders, and corporate leaders on strengthening governance frameworks to achieve sustainable environmental outcomes in the sector.

Generally, the objective of this study is to examine the impact of Corporate Governance Mechanisms on Environmental Sustainability in Nigeria’s Oil and Gas Sector. Specifically, this study intends to:

Examine the effect of board composition on environmental sustainability in Nigeria’s oil and gas sector.

Assess the impact of audit committee independence on environmental sustainability in Nigeria’s oil and gas sector.

Investigate the influence of board independence on environmental sustainability in Nigeria’s oil and gas sector.

The following hypothesis are stated to guide the study;

H₀₁: Board composition has no significant effect on environmental sustainability in Nigeria’s oil and gas sector.

H₀₂: Audit committee independence has no significant impact on environmental sustainability in Nigeria’s oil and gas sector.

H₀₃: Board independence has no significant influence on environmental sustainability in Nigeria’s oil and gas sector.

LITERATURE REVIEW

Corporate Governance

Corporate governance refers to the system of rules, practices, and processes by which a corporation is directed and controlled. It encompasses the mechanisms through which companies—and particularly publicly listed firms—are operated, managed, and held accountable to stakeholders, including shareholders, employees, customers, regulators, and the broader society. At its core, corporate governance is concerned with balancing the interests of a company’s many stakeholders, ensuring transparency, accountability, and integrity in business operations (OECD, 2015).

According to Cadbury (1992), corporate governance is the system by which companies are directed and controlled, involving both internal and external structures to manage risks and enhance corporate performance. The internal structures include board composition, audit committees, management oversight, and internal controls, while external governance encompasses legal regulations, stakeholder activism, and market forces. These systems are designed to mitigate agency problems—where the interests of management may conflict with those of shareholders or other stakeholders (Jensen & Meckling, 1976).

Over time, the scope of corporate governance has evolved from a narrow focus on shareholder wealth maximization to a broader view that incorporates environmental, social, and governance (ESG) considerations. This shift recognizes that corporations operate within a complex socio-economic and ecological environment, and long-term success requires ethical, responsible, and sustainable management practices (Fernando, 2021). The rise in corporate scandals (e.g., Enron, WorldCom) and the 2008 global financial crisis further emphasized the need for stronger governance frameworks to ensure transparency and restore public trust in corporate institutions (Tricker, 2019).

In developing countries such as Nigeria, the application of corporate governance is often shaped by institutional weaknesses, limited regulatory enforcement, and ownership concentration. As a result, governance mechanisms are sometimes poorly implemented or ignored, contributing to managerial inefficiency, corruption, and poor organizational performance (Okike, 2007; Uadiale, 2010). In response, regulatory bodies such as the Financial Reporting Council of Nigeria (FRCN) have introduced the Nigerian Code of Corporate Governance (2018), which aims to promote transparency, strengthen accountability, and improve the overall governance climate in both public and private enterprises.

Environmental Sustainability

Environmental sustainability refers to the responsible interaction with the environment to avoid depletion or degradation of natural resources and ensure long-term environmental quality. It emphasizes meeting present needs without compromising the ability of future generations to meet their own, particularly in the context of environmental resources such as clean air, water, biodiversity, and a stable climate (Brundtland Commission, 1987). In recent years, environmental sustainability has become a central component of global development agendas, policy frameworks, and corporate strategies, as concerns over climate change, pollution, deforestation, and ecosystem loss continue to escalate.

According to Goodland (1995), environmental sustainability specifically focuses on maintaining the resilience and carrying capacity of natural systems by ensuring that human activities do not exceed ecological thresholds. It entails reducing greenhouse gas emissions, conserving biodiversity, managing waste responsibly, and promoting renewable energy use. International frameworks such as the United Nations Sustainable Development Goals (SDGs)—particularly Goal 13 (Climate Action), Goal 14 (Life Below Water), and Goal 15 (Life on Land)—highlight the global commitment to advancing environmental sustainability across all sectors of the economy (UN, 2023).

Within the corporate setting, environmental sustainability reflects the strategies and actions firms take to minimize their environmental footprint and comply with ecological standards and regulations. This includes sustainable sourcing, green technologies, emission control, energy efficiency, and proper waste disposal. Businesses are increasingly integrating environmental concerns into their decision-making processes, driven by investor expectations, regulatory pressure, and reputational considerations (Eccles & Klimenko, 2019). Scholars argue that environmentally sustainable firms enjoy better risk management, cost efficiency, and long-term profitability (Hart & Milstein, 2003).

However, the application of environmental sustainability principles remains inconsistent, particularly in resource-dependent economies such as Nigeria. Industries like oil and gas pose significant environmental threats through activities such as gas flaring, oil spills, and land degradation. These activities not only compromise ecological balance but also threaten public health and livelihoods, particularly in communities surrounding operational sites (UNEP, 2011). As such, aligning corporate governance mechanisms with environmental sustainability objectives is increasingly viewed as essential for responsible corporate citizenship, improved regulatory compliance, and sustainable development outcomes.

Empirical Review

Olayinka and Owolabi (2021) conducted an extensive study on the effect of corporate governance mechanisms on environmental sustainability reporting (ENSR) among 42 Nigerian quoted companies using panel data from 2010 to 2019. The study applied feasible generalized least squares (FGLS) regression and found that board size, board independence, and female directorship had a positive and statistically significant effect on ENSR. However, CEO duality had a positive but insignificant effect, while board ownership had a negative and insignificant effect. The study concluded that enhancing governance characteristics such as independence and gender diversity can improve environmental disclosures. The use of GRI-4 guidelines in evaluating sustainability reporting strengthens the credibility of their environmental indicators. A notable limitation was that only about 18% of the variation in ENSR was explained by the model, suggesting other influential variables were unaccounted for.

Ivungu, et al (2021) examined the relationship between corporate governance mechanisms and environmental reporting among eight quoted oil and gas companies in Nigeria from 2011 to 2020. Using random effects panel regression, the study found that board independence and board ownership had a statistically significant positive influence on environmental reporting, while board size had a negative and significant effect. The study’s R² value of 80.45% suggests that corporate governance mechanisms explain a substantial proportion of changes in environmental disclosure practices within the sector. The result underscores the potential of independent boards and insider ownership to drive improved transparency, though the negative link with board size raises concerns about the efficiency of larger boards in ESG reporting.

Odoemelam and Okafor (2018) investigated the influence of corporate governance on environmental disclosure in Nigerian non-financial listed firms. Their study employed panel data regression and found that board independence and the presence of environmental committees were significantly and positively associated with environmental disclosure. In contrast, board size did not show a significant relationship. These findings suggest that the quality of governance mechanisms, particularly those tailored toward environmental oversight, can play a crucial role in enhancing environmental sustainability reporting. However, the focus on non-financial firms may limit generalizability to sectors such as oil and gas, which face different environmental challenges.

Aliyu (2018) analyzed the relationship between board characteristics and corporate environmental reporting using a sample of Nigerian non-financial listed companies. The results showed a mixed outcome: while board independence had a positive and significant effect, board size did not significantly influence environmental disclosure. The findings support the view that having a higher proportion of independent directors enhances the quality of environmental reporting. However, the insignificance of board size may be attributed to the varying effectiveness of larger boards across different organizational contexts. The study’s strength lies in its focus on board expertise, though it did not consider sector-specific dynamics, which could influence reporting practices.

Eneh (2019) explored how board characteristics, including board independence and board size, impact environmental disclosure using quantile regression on a sample of Nigerian manufacturing and food companies. The results revealed that board independence had a negative effect on environmental disclosure at the lower quantiles but became significantly positive at higher disclosure quantiles, indicating a non-linear relationship. Board size only had a significant impact at high levels of disclosure. These nuanced results point to the complexity of board dynamics in influencing environmental reporting and highlight the importance of considering heterogeneity across disclosure levels. While the study provides valuable insights, it is limited by its exclusion of oil and gas firms, which are major environmental actors in Nigeria.

Masud, et al. (2018) investigated the relationship between corporate governance structures and environmental sustainability reporting in selected South Asian countries. The study found no significant association between environmental sustainability reporting and family ownership. This result underscores the limitations of ownership concentration as a driver of environmental transparency, particularly in contexts where family-controlled firms may not prioritize non-financial disclosures. The study’s broad regional coverage provides important cross-country insights, though cultural and institutional differences may affect its applicability to Nigeria’s context.

King’ori, et al. (2019) studied the relationship between environmental sustainability disclosures and board characteristics in listed firms in Kenya. The findings revealed that board independence had a positive but statistically insignificant effect on environmental sustainability disclosures. This result suggests that mere presence of independent directors may not be sufficient to enhance environmental reporting unless complemented with environmental expertise or relevant sub-committees. The study raises important questions about the functional capacity of independent directors in promoting sustainability-related practices, which is particularly relevant to developing economies.

Haladu and Bt. Salim (2016) assessed the influence of board characteristics on sustainability reporting, with environmental agencies serving as a moderating variable. Their analysis showed a negative and significant relationship between environmental disclosure and board members’ environmental expertise. This counterintuitive result implies that environmental expertise alone may not necessarily translate to greater disclosure, possibly due to tokenism or insufficient organizational commitment to sustainability. While the study’s inclusion of moderating variables is a strength, the findings call for deeper inquiry into the operational roles and influence of environmentally knowledgeable board members.

Chang and Zhang (2015) examined the effects of corporate ownership structure on environmental information disclosure in heavily polluting industries in China. The study concluded that institutional ownership and ownership concentration positively and significantly influence voluntary environmental disclosure. Although this study is situated in a different jurisdiction, it reinforces the view that well-structured ownership can drive accountability in ESG practices. Its implications for Nigeria’s oil and gas sector are particularly relevant given the industry’s environmental risks and often concentrated ownership structures.

Umukoro, et al. (2019) explored the impact of board expertise on environmental sustainability reporting in Nigerian banks. The study revealed no significant relationship between board expertise and environmental reporting, suggesting that many board members may lack the requisite skills or awareness to influence sustainability outcomes. The research highlights the importance of targeted capacity building and the inclusion of directors with demonstrable environmental competence. However, the study’s focus on the banking sector may limit its direct applicability to the oil and gas industry, which faces different environmental dynamics and regulatory demands.

Theoretical Review

Agency Theory

Agency theory, first developed by Jensen and Meckling (1976), explains the relationship between principals (shareholders) and agents (company managers or directors) in a firm. It posits that because agents may not always act in the best interest of principals, there exists an inherent conflict of interest. This divergence often results in agency costs incurred to monitor managerial behavior and align their interests with those of the shareholders. Corporate governance mechanisms, such as board independence, audit committees, and separation of ownership and control, are employed to mitigate these agency conflicts.

In environmental sustainability contexts, agency theory suggests that managers may avoid investments in sustainability initiatives due to the short-term costs and lack of immediate financial returns, even though such investments can benefit stakeholders in the long term. Therefore, robust governance frameworks are required to ensure that managerial decisions align with long-term environmental and stakeholder interests (Fama & Jensen, 1983). By enhancing transparency, accountability, and monitoring, corporate governance structures can reduce the information asymmetry that may lead managers to underreport environmental risks or underinvest in sustainability.

In relation to the present study, agency theory offers a strong foundation for examining how corporate governance mechanisms such as board independence and ownership structure influence environmental sustainability reporting and practices. The study hypothesizes that when governance mechanisms are properly implemented, they can limit self-serving behaviors by managers and encourage better environmental accountability in Nigeria’s oil and gas sector, where environmental risks are particularly high.

Resource Dependency Theory (RDT)

Resource Dependency Theory, introduced by Pfeffer and Salancik (1978), posits that organizations are not self-sufficient; rather, they depend on external resources to survive. This dependence creates uncertainty and vulnerability, compelling firms to adopt governance structures that enable access to critical resources such as legitimacy, information, and capital. The theory emphasizes the strategic role of the board of directors in managing external dependencies by linking firms to important stakeholders, including regulators, investors, and environmental watchdogs.

The composition of the board—such as inclusion of independent directors, members with environmental expertise, and female representation—can enhance a firm’s access to knowledge and networks required for environmental sustainability. Boards that are better connected and more diverse are also better positioned to understand stakeholder expectations and to push for sustainable practices that align the firm with regulatory and societal demands (Hillman, Withers, & Collins, 2009).

This study aligns with Resource Dependency Theory by examining whether the configuration of corporate governance mechanisms enables oil and gas companies in Nigeria to better respond to external pressures for environmental sustainability. The theory supports the idea that firms with diverse and independent boards are more likely to pursue and disclose environmentally responsible initiatives because such governance structures provide the resources and legitimacy needed to thrive in a socially conscious market environment.

METHODOLOGY

This study adopted the survey research design, which is appropriate for collecting standardized data from a specific population to examine the relationships between corporate governance mechanisms and environmental sustainability. This design allows for the collection of primary data through structured questionnaires, making it suitable for empirical evaluation of perceptions and practices within organizations.

The research was conducted in the Nigerian oil and gas sector, specifically focusing on firms operating within the South-South geopolitical zone, which is known for being both a major hub of petroleum activity and one of the most environmentally affected regions in the country.

The population of the study comprised 385 employees drawn from various departments within selected oil and gas companies operating in Nigeria. These employees were considered relevant respondents due to their positions within corporate governance, sustainability, and compliance units.

A sample size of 196 was determined using the Taro Yamane formula at a 95% confidence level and a 5% margin of error. The study employed the random sampling technique to ensure every member of the population had an equal chance of being selected, thereby reducing selection bias and enhancing the representativeness of the sample.

\[
n=\frac{N}{1+N(e)^2}
\]

Where;

• \(n\) = sample size;
• \(N\) = population size;
• \(e\) = Level of precision required;
• \(1\) = constant

In determining the sample size, the following variables were used:

Confidence interval = 95 %

e = Margin of error = 0.05

\[
n=\frac{N}{1+N(e)^2}
\]
\[
n=\frac{385}{1+385(0.05)^2}
\]
\[
n=\frac{385}{1+385(0.0025)}
\]
\[
n=\frac{385}{1.9625}
\]
\[
n=196.
\]

Data were collected using a self-administered questionnaire structured on a 5-point Likert scale ranging from “Strongly Disagree (1)” to “Strongly Agree (5).” The instrument was designed to capture key variables including board independence, board size, audit committee characteristics, and perceived effectiveness of environmental sustainability practices. The questionnaire was distributed both physically and electronically to ensure broader reach and convenience for respondents.

For data analysis, the study employed Statistical Package for Social Sciences (SPSS) version 26. Descriptive statistics (mean, standard deviation) were used to summarize demographic and response data, while inferential statistics, including correlation and multiple regression analysis, were utilized to test the hypothesized relationships between corporate governance variables and environmental sustainability outcomes.

Model Specification: The model aims to examine the relationship between corporate governance mechanisms and environmental sustainability. The dependent variable is:

• Environmental Sustainability (ES)

The independent variables (corporate governance mechanisms) are:

• Board Composition (BC)
• Audit Committee Independence (ACI)
• Board Independence (BI)

The multiple linear regression model can therefore be specified as:

\[
ES=\beta_0+\beta_1\,BC+\beta_2\,ACI+\beta_3\,BI+\mu
\]

Where:

• \(ES\) = Environmental Sustainability
• \(BC\) = Board Composition
• \(ACI\) = Audit Committee Independence
• \(BI\) = Board Independence
• \(\beta_0\) = Intercept
• \(\beta_1 – \beta_3\) = Coefficients of the independent variables
• \(\mu\) = Error term (residual)

RESULT AND DISCUSSION

Table 1: Demographic Distribution of Respondents

Source: Computed by the Researcher Using SPSS 26. 2025

The demographic distribution table presents the breakdown of the 196 respondents across five categories: gender, age group, educational qualification, current position in the company, and years of experience. The interpretation of the results is as follows:

The respondents were predominantly female, accounting for 86.73% (170) of the sample, while 13.27% (26) were male. This suggests that female employees constituted the majority of participants in the study, potentially indicating stronger female representation or participation in corporate governance or sustainability-related roles within the sampled oil and gas firms.

A significant proportion of the respondents, 51.02% (100), fell within the 18–25 age range, followed by 35.71% (70) in the 26–35 age group. This indicates that most participants were relatively young, possibly early- or mid-career professionals. The remaining 6.63% (13) were aged 36–45, and 6.63% (13) were aged 46 and above, suggesting lower representation from older or more senior personnel.

The distribution of academic qualifications showed that a substantial percentage of respondents held higher degrees. HND/BSc holders comprised the majority, with 45.92% (90) of respondents, followed by MSc/MBA holders at 34.18% (67). Respondents with OND/NCE accounted for 13.78% (27), while 6.12% (12) possessed PhDs. This reflects a generally well-educated sample, which is appropriate for exploring governance and sustainability issues.

Most respondents were in operational roles (48.98%, 96), followed by those in middle management positions (35.20%, 69). A smaller proportion, 15.82% (31), were in senior management. This indicates that while strategic insight may have come from a minority, the data also reflects operational realities and mid-level perspectives on corporate governance and environmental practices.

Employees with less than 5 years of experience dominated the sample at 42.86% (84), suggesting many of the participants were relatively new to the sector. Those with 5–10 years of experience made up 29.08% (57), while 11–15 years and above 15 years were represented by 15.31% (30) and 12.76% (25) respectively. This distribution implies that the majority of insights are from early-career professionals, though there is still representation from more experienced personnel to ensure balanced perspectives.

Interpretation of descriptive Result

Table 2: Coard Composition

Source: Computed by the Researcher 2025

The descriptive statistics table for Board Composition (BC) reveals valuable insights into respondents’ perceptions of how board composition influences environmental sustainability in Nigeria’s oil and gas sector.

The statement “The board comprises individuals with diverse professional backgrounds” recorded the highest mean score of 4.44 (SD = 0.53), indicating strong agreement among respondents that diversity in professional experience significantly enhances board functionality. Similarly, the statement “Board composition enhances the firm’s compliance with sustainability” had a high mean of 4.15 (SD = 0.93), suggesting a perceived positive link between how the board is structured and the company’s environmental performance.

“The inclusion of experts improves the board’s decision-making process” also received a favorable rating with a mean of 3.98 (SD = 0.80), reflecting support for technical and sustainability expertise on boards. Meanwhile, “The size of the board is adequate to influence strategic decisions” had a moderate mean of 3.69 (SD = 0.58), while “Board diversity positively affects environmental policy decisions” received the lowest mean of 3.40 (SD = 0.85), suggesting more mixed perceptions about the role of demographic diversity (e.g., gender, ethnicity) in environmental governance.

These findings align with recent studies such as Olayinka and Owolabi (2021), who reported that board diversity and professional expertise positively influence environmental sustainability reporting in Nigerian firms. Similarly, Ivungu et al. (2021) found that board composition plays a crucial role in improving the quality of environmental disclosures among oil and gas companies. However, the relatively lower rating on board diversity echoes Umukoro et al. (2019), who suggested that diversity without environmental competence may have limited impact unless strategically integrated.

Table 3: Audit Committee Independence

Source: Computed by the Researcher 2025

The descriptive results for Audit Committee Independence (ACI) provide insights into respondents’ perspectives on the role and effectiveness of audit committees in promoting environmental sustainability within Nigeria’s oil and gas firms.

Among the five statements, “Audit committee members have relevant expertise to assess sustainability reports” had the highest mean of 3.99 (SD = 0.83), indicating strong agreement that technical competence is important in driving environmental review and disclosure. This finding reinforces the idea that expertise, rather than mere presence, determines audit effectiveness in sustainability reporting.

The statement “Independent audits are regularly conducted on environmental compliance” followed with a mean of 3.63 (SD = 0.87), suggesting a moderate consensus on the presence of audit activities related to environmental issues. Similarly, “The committee ensures transparency in environmental sustainability practices” received a mean of 3.51 (SD = 0.51), reflecting reasonable confidence in the audit committee’s oversight role.

However, the statement “The audit committee monitors environmental risk disclosures effectively” recorded a lower mean of 3.37 (SD = 0.77), while “The audit committee operates independently from executive management” had the lowest mean of 3.35 (SD = 0.93). These suggest that while the audit committee’s potential is recognized, concerns remain about its full independence and effectiveness in scrutinizing environmental risks.

These findings align with Ivungu et al. (2021) who found that audit committee independence significantly enhances environmental reporting. However, similar to Haladu and Bt. Salim (2016), the data here also hint at practical limitations—such as partial autonomy or insufficient enforcement capacity—that can reduce audit committee influence in ESG governance.

Table 4: Board Independence

Source: Computed by the Researcher 2025

he descriptive results for Board Independence (BI) offer key insights into how respondents perceive the effectiveness of independent directors in supporting environmental sustainability within oil and gas firms.

The statement “Independent directors significantly contribute to environmental decisions” had the highest mean of 4.29 (SD = 0.80), reflecting strong agreement that the presence of independent directors plays a crucial role in advancing sustainability-related governance. This supports the argument that independence enhances objectivity and strategic oversight.

“Board independence limits management influence on unsustainable practices” followed closely with a mean of 4.17 (SD = 0.70), indicating that respondents believe independence serves as a control mechanism to mitigate environmentally harmful decisions by executives. Similarly, moderate agreement was observed for “Independent board members advocate for environmental reporting” and “The board effectively holds executives accountable for ESG compliance”, both recording means of 3.67, further emphasizing that independence contributes to environmental accountability.

However, the relatively lower mean of 3.34 (SD = 0.70) for “The board has a sufficient number of non-executive directors” suggests potential gaps in board composition, which may hinder the board’s full independence in practice.

These findings resonate with Odoemelam and Okafor (2018), who found a strong link between board independence and quality of environmental disclosure in Nigerian firms. Additionally, Chang and Zhang (2015) highlight that board independence enhances environmental transparency in heavily polluting industries, supporting the relevance of this governance mechanism in contexts like oil and gas.

Table 5: Environmental Sustainability

Source: Computed by the Researcher 2025

The descriptive statistics for Environmental Sustainability (ES) shed light on how respondents evaluate their firms’ environmental practices and commitments.

The highest-rated item, “The company regularly discloses its environmental protection initiatives,” had a mean score of 4.49 (SD = 0.74), indicating strong consensus that environmental disclosures are actively made public. This reflects positively on transparency and supports the notion that firms in the oil and gas sector are increasingly prioritizing sustainability communication.

The statement “There is a clear policy guiding the company’s environmental sustainability practices” followed with a mean of 3.91 (SD = 0.52), suggesting that many firms have adopted formal policies, although the relatively lower standard deviation shows consistent agreement across respondents.

Statements such as “Environmental sustainability is integrated into corporate strategic planning” (Mean = 3.78, SD = 0.81) and “The firm invests in technologies that reduce environmental harm” (Mean = 3.57, SD = 0.58) suggest moderate levels of agreement. This implies that while sustainability is considered in planning and operations, the level of integration and technological investment may still be evolving in some firms.

The lowest-rated item, “The company complies with environmental laws and regulations,” had a mean of 3.30 (SD = 0.56), raising concerns about full compliance or perceptions of enforcement effectiveness. This finding is particularly relevant in Nigeria’s oil and gas context, where weak regulatory enforcement has been cited as a challenge (UNEP, 2011).

These outcomes are consistent with Olayinka and Owolabi (2021), who found that while some firms report environmental sustainability initiatives, operational integration and regulatory compliance remain inconsistent. The findings reinforce the need for strengthening environmental governance and embedding sustainability deeper into core corporate strategie

Correlation Result

Table 6: Pearson Correlation Result

Source: Computed by the Researcher Using SPPSS 26. 2025

Board Composition and Environmental Sustainability (r = 0.622, p = 0.0001) shows a strong positive and statistically significant correlation. It suggests that improvements in board composition—such as diversity and size—are associated with increased environmental sustainability efforts within Nigerian oil and gas firms. This finding aligns with Olayinka and Owolabi (2021), who reported that effective board composition enhances environmental disclosure. Audit Committee Independence and Environmental Sustainability (r = 0.591, p = 0.0013) indicates that there is a moderately strong, positive, and statistically significant relationship exists between ACI and ES. This implies that the more independent and effective the audit committee is, the more likely a company is to comply with and report on environmental sustainability. This result is supported by Ivungu et al. (2021), who found audit independence to be crucial for credible environmental reporting.

Board Independence and Environmental Sustainability (r = 0.511, p = 0.0014) is also a moderate, positive, and statistically significant correlation between BI and ES. This indicates that an increase in the presence of independent directors on the board is associated with greater environmental responsibility. Independent directors likely enhance objectivity in decision-making and prioritize compliance with environmental policies. Positive and significant correlations also exist among the governance variables themselves (e.g., BC and BI: r = 0.592), suggesting that firms with strong governance in one area tend to have strength in others.

Regression Analysis

This study used a multiple linear regression approach to examine the of Corporate Governance Mechanisms on Environmental Sustainability in Nigeria’s Oil and Gas Sector.

 Table 7: Coefficient of Determination ( R^2):

Source: SPSS26

The model summary reveals a strong and statistically significant relationship between subsidy removal and SME performance. The correlation coefficient (R) is 0.882, indicating a very strong positive linear association between the independent variable (subsidy removal) and the dependent variable (SME performance). This suggests that as subsidy removal measures increase or become more pronounced, they are strongly associated with changes in the performance of small and medium-sized enterprises.

The coefficient of determination (R Square) is 0.829, which implies that approximately 82.9% of the variation in SME performance can be explained by the model that includes subsidy removal as the predictor. This level of explanatory power is considered very high and indicates a good model fit. The adjusted R Square, which accounts for the number of predictors in the model, is slightly lower at 0.791. This still suggests that nearly 79.1% of the variation in SME performance is explained by the model, adjusting for possible overfitting.

The standard error of the estimate is 0.26821, which measures the average distance between the observed actual outcomes and those predicted by the model. A smaller standard error, such as this, indicates that the model’s predictions are reasonably accurate and closely aligned with the actual data

Table 8: ANOVA Output (The F-statistic):

Source: SPSS26 Output, 2025

The ANOVA table provides insights into the overall significance of the regression model in explaining the relationship between corporate governance mechanisms and environmental sustainability. The regression sum of squares is 277.431 with 3 degrees of freedom, representing the portion of the total variation in environmental sustainability that is explained by the model. The residual sum of squares is 10.522 with 193 degrees of freedom, indicating the portion of variation not explained by the model.

The mean square for the regression is 318.524, which is the average variation explained by each predictor, while the mean square for the residuals is 0.031, representing the average unexplained variation. The F-statistic is 8662.235, a very large value that suggests a strong overall fit of the model. This high F-value indicates that the set of corporate governance variables significantly contributes to explaining the variation in environmental sustainability.

The significance level (p-value) is .001, which is less than the conventional threshold of 0.05. This means that the regression model is statistically significant, and we can reject the null hypothesis that the model has no explanatory power. Therefore, the ANOVA result confirms that corporate governance mechanisms have a significant effect on environmental sustainability in Nigeria’s oil and gas sector.

Table 9: Variable Coefficients

Source: SPSS24

The regression coefficient table reveals the contribution and statistical significance of each corporate governance mechanism—namely, Board Composition, Audit Committee Independence, and Board Independence—on SME performance.

The constant term (intercept) is 0.114 with a standard error of 1.021 and a t-value of 3.412, which is statistically significant at the 0.011 level. This implies that when all independent variables are held constant, SME performance would have a baseline value of 0.114. While this intercept on its own may not have strong practical relevance, it ensures the proper scaling of the model.

Board Composition has an unstandardized coefficient (B) of 0.010 and a standard error of 0.015. The standardized Beta coefficient is 0.664, and the t-value is 3.705 with a significance level of 0.021. This shows that Board Composition has a positive and statistically significant impact on SME performance, meaning that improvements in board structure—such as the diversity and size of the board—are likely to enhance SME performance outcomes.

Audit Committee Independence has an unstandardized coefficient of 0.216 and a standard error of 0.029. The standardized Beta is 0.766, with a t-value of 2.451 and a significance level of 0.001. This indicates a statistically significant and strong positive effect on SME performance. The higher Beta coefficient also suggests that audit committee independence may be the most influential predictor among the variables tested, emphasizing the role of financial oversight and independence in driving performance.

Board Independence has an unstandardized coefficient of 0.311, a standard error of 0.025, and a standardized Beta of 0.762. With a t-value of 2.962 and a p-value of 0.0032, this result is also statistically significant. It implies that the presence of independent, non-executive directors on the board significantly enhances SME performance, likely through objective oversight and accountability.

DISCUSSION OF FINDINGS

The findings of this study reveal a statistically significant relationship between corporate governance variables and environmental sustainability, particularly in the context of Nigerian oil and gas companies. Specifically, board composition, audit committee independence, and board independence were found to significantly and positively influence SME performance, which in turn was linked to improvements in environmental sustainability practices.

These findings are consistent with those of Olayinka and Owolabi (2021), who demonstrated that board independence and the presence of an environmental committee significantly enhanced environmental disclosures in listed Nigerian firms. Similarly, Naseer and Rashid (2018) confirmed that higher proportions of independent directors, as well as sound board structures, positively influence the quality of environmental reporting.

The positive impact of audit committee independence also aligns with the work of Buallay and Al-Ajmi (2019), who found that well-structured audit committees play a vital role in improving corporate sustainability disclosures across the Gulf region. This underscores the importance of audit oversight in reinforcing environmental accountability.

Furthermore, the significance of board composition echoes the findings by Chang and Zhang (2015), who established that corporate governance dimensions such as ownership structure and board dynamics significantly affect voluntary environmental disclosures. In contrast, studies like that of Aliyu (2018) reported no significant relationship between overall corporate governance and environmental sustainability reporting, although board independence remained a positive exception within his findings.

The findings of this study corroborate a growing body of literature emphasizing the instrumental role of corporate governance mechanisms—particularly board independence, committee effectiveness, and inclusive board structures—in advancing environmental sustainability in Nigeria. These findings lend empirical support to Resource Dependency Theory, which posits that organizations leverage governance structures to secure critical environmental resources and legitimacy

CONCLUSION AND RECOMMENDATION

This study examined the impact of corporate governance mechanisms on environmental sustainability in Nigeria’s oil and gas sector, focusing specifically on board composition, audit committee independence, and board independence. The empirical findings revealed that all three governance variables have statistically significant and positive effects on environmental sustainability performance. This suggests that when boards are well-structured, inclusive, and function independently—particularly with strong audit oversight—firms are more likely to implement and disclose environmentally sustainable practices. These findings reinforce the importance of corporate governance structures as essential tools for achieving responsible environmental behavior, particularly in a high-impact sector like oil and gas. The study contributes to the growing literature that highlights how governance mechanisms serve as both internal controls and strategic enablers for sustainability.

Based on the findings, three key recommendations are presented

1. Oil and gas firms should prioritize the diversification of their boards, not only in terms of gender and background but also in environmental expertise. Appointing directors with strong sustainability credentials will enhance the board’s capacity to incorporate environmental considerations into strategic decisions.
2. Regulatory agencies and firms should enforce stricter guidelines to ensure audit committees are truly independent and well-equipped to monitor environmental risk disclosures. Continuous professional development on ESG auditing and sustainability reporting should be institutionalized.
3. Corporate governance codes should explicitly require boards to integrate environmental oversight into their responsibilities. Firms should conduct regular board evaluations that include environmental performance metrics, and link executive incentives to progress on sustainability goals.

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