When Shell sold its stake in a Nigerian oil field to a local company in 2021, The New York Times and The Washington Post covered the aftermath: The oil giant could claim progress on climate goals, while the site actually saw a jump in greenhouse gas emissions. Academic research has turned up many similar examples of greenwashing, in which corporations pledge to protect the environment while failing to take action—or even doing more harm.
Chicago Booth’s Hans B. Christensen expected to find more of the same while investigating whether companies committed to the World Bank Group’s Zero Routine Flaring by 2030 initiative, launched in 2015, had made progress on their vow to stop burning off excess gas, which releases dangerous pollutants and contributes to global warming.
Instead, Christensen and Booth PhD students Samuel Chang and Andrew McKinley find that, in this case, the skepticism seems unwarranted: In the three years after making the pledge, signatory companies reduced greenhouse gas emissions in Africa by nearly 57 million metric tons a year—the equivalent of taking 12 million cars off the road.
The findings suggest there could be some value to standardized, voluntary commitments in the absence of adequate government regulation, according to the researchers.
Chang, Christensen, and McKinley obtained data on the location, ownership, and transaction history of oil blocks—areas that companies lease for oil exploration and production—in North and West Africa, where most of the continent’s oil and gas extraction occurs. After identifying sites operated by companies that had committed to the World Bank initiative, they used satellite data to measure gas flaring in these areas, taking advantage of the fact that flares burn hotter than forest fires, volcanoes, and other sources.
Most of the pledges were made in 2015 and 2016. Analyzing data from 2012 to 2023, the researchers homed in on the three-year period after each operator signed onto the initiative. They find that companies reduced gas flaring by 41 percent in blocks where they operated continuously.
Oil companies in Africa that committed in 2015 to the World Bank’s Zero Routine Flaring initiative significantly cut emissions over the next three years, according to the research. Those emissions savings came from oil blocks they already owned, rather than ones they bought or sold.
Granted, flaring rose by nearly 167 percent on the sites the companies offloaded to nonsignatories. But while media reports about oil giants pawning off polluting assets to less scrupulous companies were not wrong, it was rare for the oil blocks in the study. Companies sold off only 8 percent of their holdings, and only 6 percent to those that hadn’t signed the pledge.
The researchers speculate that companies may have struggled to find buyers willing to pay an acceptable price. Since the market for oil fields is highly illiquid, corporations may have decided it would be cheaper and simpler to clean up their act than to sell assets at a steep discount.
Companies reduced gas flaring the most in countries with the weakest governmental regulations and poorest environmental records, the researchers find. “Most stakeholders don’t care where the flaring is happening—they just want companies to flare less,” Christensen says. “It’s probably cheapest to make improvements where the regulatory floor is lowest to begin with.” To him, this suggests that urging multinational corporations to improve environmental standards globally can be a way to overcome gaps in government action.
Chang, Christensen, and McKinley still see uniform government regulation as the most effective way to reduce emissions, however. Most other studies, primarily conducted in the United States and Europe, find little evidence that companies live up to public pledges to reduce environmental harm.
The researchers have no proof that the World Bank initiative, which was entirely voluntary and had no penalty for noncompliance, caused companies to reduce flaring—it’s possible they would have done so anyway. The data do indicate that companies changed their flaring behavior after committing to the pledge, which is a link that hadn’t been previously established in research, Chang emphasizes. McKinley says better technology for capturing excess gas may have made it easier for corporations to reduce flaring.
And, unlike many other types of social and environmental commitments, cutting gas flaring can be observed and measured, he says. “It’s a clear, well-defined metric, which isn’t true about something like treating your workforce well,” he points out.
The research suggests that as technological advances make it possible to track a greater array of activities, it could become easier to hold companies accountable for their promises. In the meantime, Christensen has become cautiously optimistic about the potential for companies to make a difference when they commit to standardized goals and face pressure from stakeholders to follow through.
Samuel Chang, Hans B. Christensen, and Andrew McKinley, “Filling the Governance Gap: Corporate Commitments and Environmental Externalities in the African Oil Sector,” Working paper, September 2024.
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