ENVIRONMENTAL, SOCIAL, AND GOVERNANCE LIABILITY IN NIGERIA'S ENERGY SECTOR: CAN THE COMPANY DIRECTORS BE HELD PERSONALLY ACCOUNTABLE FOR ENVIRONMENTAL HARM?1
Abstract
Nigeria's energy industry is at the intersection of massive economic aspirations and significant environmental threats. The Niger Delta has been subjected to decades of oil extraction, which have left it mired in some of the world's worst pollution crises, but the individual corporate directors have escaped liability for the devastation that their companies wreak on the environment. This article explores the possibility of personal liability of directors of energy companies for environmental damage and the extent to which such liability is allowed under Nigerian law, especially the emerging concept of Environmental, Social and Governance (ESG) liability. This article reviews the legal framework of the environmental responsibilities of directors in Nigeria using a critical analysis of the Companies and Allied Matters Act 2020, the Petroleum Industry Act 2021, the Climate Change Act 2021, the National Environmental Standards and Regulations Enforcement Agency Act 2007, the Environmental Impact Assessment Act 1992 and allied laws. It also explores the interplay between the doctrine of corporate personality, the doctrine of piercing the corporate veil and the principles of fiduciary laws in the context of new ESG duties. The article critically examines key domestic and transnational litigation between Shell and Niger Delta communities as a catalyst for rethinking directorial accountability. It finds that the personal ESG liability regime in Nigeria has been put in place, but it is structurally constrained by regulatory fragmentation, judicial weakness, and the culture of impunity. There is a need for significant reform, and it is long overdue.
Keywords: ESG; directors' duties; environmental liability; Nigeria; energy sector; Petroleum Industry Act 2021; corporate governance; Niger Delta.
1. Introduction
The Niger Delta is an area which haunts any serious scrutiny of corporate accountability in Africa. Sixty (60) years of oil extraction have brought huge wealth to the nation, but at the cost of polluted rivers, lost farmland and communities without viable livelihoods. In 2011, the United Nations Environment Programme (UNEP) released its landmark Environmental Assessment of Ogoniland, which reported that the concentration of benzene in groundwater was almost nine hundred times higher than the World Health Organisation (WHO) safety standards, an alarming figure that requires more than just regulatory action.2 But the directors who have given their approval to the operational decisions leading to such pollution have, almost without exception, escaped personal liability under the Nigerian legal system.
This debate has been altered by the global discussion on Environmental, Social and Governance (ESG) standards. Once considered a public relations issue, it is now being regarded as a legal obligation. Directors are increasingly being called upon, and even compelled in some jurisdictions, to see environmental damage not as an external issue, but as a governance failure for which they are personally responsible.
This change has not spared Nigeria. The Companies and Allied Matters Act 2020 (CAMA) and other legislative interventions in the last few years, in particular, form a cluster of interventions:3 the Petroleum Industry Act 2021 (PIA)4 and the Climate Change Act 2021 (CCA)5 have begun to recast the obligations of corporate directors in environmental terms. These are important changes. Nigerian law, for the first time, makes it clear that directors have a fiduciary duty to take into account the environmental consequences of their company's activities. The CCA requires private companies with 50 or more staff to cut emissions and designate climate change officers. The PIA includes provisions for host community development obligations and environmental remediation obligations of oil and gas licence holders.
But the disconnect between legislative aspirations and accountability is enormous. This article poses a simple question: Are directors of energy companies in Nigeria personally liable for environmental damage done by the companies? This article suggests that the answer lies in the legal instruments which now exist in embryonic form, but which are underdeveloped, inconsistently enforced and often circumvented by the structural constraints of Nigeria's regulatory and judicial systems.
The article continues with its section 2, which maps the environmental crisis in Nigeria's energy sector and thus properly situates the analysis of relevant issues. The theoretical connections between ESG and directors' liability are discussed in section 3. The statutory framework is analysed in detail in section 4. In section 5, the doctrine of corporate personality and its boundaries in the ESG context are discussed. In section 6, litigation, domestic and transnational, that have tested these questions in practice are reviewed and evaluated. Systemic enforcement issues are identified in section 7, while section 8 provides comparative information against other jurisdictions. The reform proposals are provided in section 9, followed with a summary and conclusion.
2. The Environmental Crisis in Nigeria's Energy Sector
Nigeria is Africa's largest oil producer.6 The Energy Sector, characterized by oil production, is responsible for more than 80 percent of the total energy consumption of the country and has traditionally contributed about 80 percent to government revenue and 95 percent to foreign exchange earnings.7 The ecological effects have been serious. Oil spillages have been noted in Niger Delta for decades; millions of barrels of crude oil are dumped into one of the richest deltas in the world through such practices dating back to the 1970s. The practice of gas flaring, which has been unlawful since 1984, poisons air, water, and the soil through its various health effects, including lung diseases and cancer.8 The most impacted communities are the indigenous peoples of Rivers, Bayelsa, Akwa Ibom and Delta States, who have been most affected by the damaged environment and have been receiving woefully small portions of the petroleum revenues. Loss of farmland, fishing grounds and potable water are consistently reported as immediate impacts of oil operations. The social damage has been compounded by intra-community conflict, often brought on by the divisive distribution of the oil compensation funds.9
The emission of greenhouse gases in Nigeria’s energy sector adds another layer to the problem. Greenhouse gases in Nigeria are estimated to be about 126.9 million metric tonnes in 2020, with the energy sector contributing around 60 percent to the national emissions.10 Gas flaring alone releases millions of tonnes of carbon dioxide and methane annually, making Nigeria one of the top gas-flaring nations globally. These emissions have impacts not just on the planet’s climate but also on those communities directly impacted by the flare sites, where increased levels of particulates, acid rain, and temperature disruption are experienced.
In this context, the failings in governance of companies in the energy industry are not an abstract concept; they represent real-life harms inflicted on real-life communities.
In light of this, the issue of director accountability has human rights implications beyond the mere academic.
3. ESG And Directors' Liability: The Theoretical Framework
3.1 The Nature of ESG Obligations
Perhaps, ESG can best be explained not as a philosophy, but rather as an aggregation of analytical frameworks - the environmental, the social, and the governance - which are designed to assess the nonfinancial aspects of corporate behaviour. Legally speaking, ESG is best explained as a risk management framework which transforms environmental problems, social conflicts, and poor governance into financial and reputational risks.11
The increasing focus on ESG in corporate law theory has seen an increasing number of discussions around whether the duties imposed by ESG are binding or aspirational. The dominant paradigm in mature jurisdictions, especially the UK, but increasingly also in continental jurisdictions, sees ESG issues becoming progressively incorporated into the existing legal framework. Fiduciary duties, disclosure duties, and duties of care in tort are among the avenues for the incorporation of ESG liabilities.12
In Nigeria, the source of ESG responsibilities is from no fewer than three separate legal bases: duties that are directly mandated by law through statutes; fiduciary duties that directors owe their companies; and tortious duties of care which may be owed to third parties. It is very important to appreciate the interactions between these three bases of law in order to understand directors' liability.
3.2 The Shift from Shareholder Primacy to Stakeholder Governance
Classical company law theory, rooted in the Salomon principle13 and the shareholder primacy model associated with Friedman,14 posit that the primary duty of directors was to maximise returns to shareholders. Environmental impacts were, according to this approach, viewed as externalities to be regulated rather than governed. This approach has been challenged in many ways globally. The 2019 declaration by the Business Roundtable on the purpose of corporations, the Companies Act 2006 of the UK on
enlightened shareholder value, as well as the increasing influence of institutional investors practicing ESG screening indicate the emergence of a new paradigm based on stakeholder governance.
The CAMA of 2020 in Nigeria has incorporated the same approach. Section 305(3) of CAMA makes it clear that directors must consider environmental impact as one of the factors that should be taken into consideration while conducting their operations in the community in which the business activities are carried out.15 Although this provision might seem to be quite insignificant by itself, in practice, it is the first statutory acknowledgment in the Nigerian companies’ legislation that environmental aspects are included in the fiduciary duties of a director. However, its implementation remains an issue not yet tested by courts.
4. The Statutory Framework For Environmental Liability In Nigeria's Energy Sector
4.1 The Constitution of the Federal Republic of Nigeria 1999
The 1999 Constitution16 provides the foundational legal context for environmental protection, though its direct enforceability in commercial litigation has historically been contested. Section 20 of the Constitution enumerates the protection and improvement of the environment as a fundamental objective of state policy, requiring government actors to protect the air, land, water, forest, and wildlife of Nigeria. Chapter II provisions of this nature are classified as Fundamental Objectives and Directive Principles of State Policy and have traditionally been treated as non-justiciable.17
However, sections 33 and 34, which guarantee the rights to life and human dignity respectively, have increasingly been invoked in environmental litigation. The argument, recognised in both domestic and transnational proceedings, is that environmental harm of sufficient severity can engage these fundamental rights provisions. The UK High Court's 2025 ruling in the Shell Niger Delta litigation acknowledged that "knowledge about the impact of environmental harm has moved on such that there is now a greater readiness to see polluting activities as capable of engaging the right to life."18 The direction of travel in Nigerian jurisprudence19 points toward recognising environmental harm as a potential human rights violation cognisable before Nigerian courts.
4.2 Companies and Allied Matters Act 2020
CAMA 2020 is the primary statute governing corporate formation, management, and directors' duties in Nigeria. It represents the most substantial reform of Nigeria's corporate legal landscape in over three decades.20 Several provisions carry particular significance for ESG liability.
Section 305(3) of CAMA introduces what may be characterised as an 'enlightened directorship' obligation, requiring directors, acting in furtherance of the company's business and interests, to have regard to the impact of the company's operations on the environment in the community where it operates. This is a duty based on consideration, and not outcome; directors are supposed to consider the environmental effects of their decision-making, but it does not mean they must always ensure that there is no environmental effect whatsoever. It provides the statutory grounds whereby directors approving decisions with environmental repercussions may be challenged when they have made little effort to consider these repercussions.
Section 316 of the CAMA enables the court to pierce the veil of the corporate entity, where the corporate veil is to be pierced for fraud, avoidance of legal obligation, or other situations of equity.21 The provision holds special significance in environmental law cases where the directors have made such corporate arrangements that would make them immune from any liabilities emanating from pollution or other regulatory violations.
Sections 672 and 673 of CAMA cover fraudulent and wrongful trading, respectively. Under section 672, where a company is being wound up, and it appears that business has been carried on with intent to defraud creditors or for any other fraudulent purpose, the court may declare that any persons knowingly a party to such fraud are personally responsible for the company's debts. Environmental obligations, including statutory clean-up liabilities, can constitute corporate obligations whose knowing avoidance through fraudulent means could engage this provision. Section 673 creates analogous liability for directors who allow a company to incur debts when they knew, or ought to have known, that there was no reasonable prospect of avoiding insolvent liquidation.
Section 674 empowers courts to assess damages against delinquent directors whose misfeasance, breach of fiduciary duty, or breach of trust has caused loss to the company, including loss arising from non-compliance with environmental obligations.
4.3 The Petroleum Industry Act 2021
The PIA 2021 is the most comprehensive overhaul of Nigeria's petroleum sector regulation since the Petroleum Act 1969.22 It consolidates and replaces approximately ten pieces of legislation, creates two new regulatory bodies, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and introduces substantive environmental and community obligations on licence holders.
From an ESG point of view, the most important clauses in the PIA include the mandatory Host Communities Development Trust (HCDT). All upstream petroleum licensees, who are called 'Settlors' in the Act, must set up a host communities development trust, with an annual contribution of three percent of the actual operating cost of the previous year.23 The consequences of non-compliance by the licensee will include the imposition of the ultimate penalty of license cancellation under the Act. The Act also provides for the social and environmental management plan, requiring operators to assess and address the environmental and social impacts of their operations.
However, the PIA has come under a lot of criticism from environmentalists and community groups alike. The three per cent threshold of contribution, against which the communities were pushing for ten per cent, is seen to be very inadequate considering the amount of environmental degradation caused by six decades of petroleum exploitation.24 Although flaring has been illegal since 1984, the Act makes no clear provision that sets a definite deadline for gas flaring. Instead, gas flaring is allowed to continue even as penalties collected from flaring activities are put into the Midstream Gas Infrastructure Fund.25
Decommissioning and abandonment are covered by sections 232 and 233 of the Petroleum Industry Act, requiring the operators to provide for such. Failure to meet this requirement can lead to regulatory punishment, and the directors of defaulting companies can be made personally liable under fraudulent or wrongful trading laws of CAMA where decommissioning is evaded due to insolvency.
4.4 The Climate Change Act 2021
The CCA 2021 marks a historic moment in the environmental governance of Nigeria; it is the first ever complete climate change legislation in West Africa.26 The Act provides a legal framework for achieving low greenhouse gas emissions and climate-resilient development, establishing the National Council on Climate Change and the National Climate Change Secretariat.
Sections 22 to 24 of the CCA , which are of direct relevance to ESG liability, impose obligations on both public and private entities. Any private entity with fifty or more employees is required to put in place measures to achieve the annual carbon emission reduction targets specified in the National Climate Change Action Plan and to designate a Climate Change Officer responsible for submitting annual performance reports to the National Climate Change Secretariat.27 Where a private entity fails to meet its targets, the Council is empowered to impose fines and penalties. These fines form part of the Climate Change Fund established under the Act.
The CCA is particularly significant for the energy sector, given that the energy sector accounts for approximately 60 per cent of Nigeria's total greenhouse gas emissions.28 Energy company directors who give approval to operational decisions that inevitably surpass emission targets, or who do not appoint a Climate Change Officer and report annually, may be subject to regulatory proceedings based on the CCA. While on its own, the CCA does not impose personal liabilities on directors distinct from corporate liabilities, breach of the obligations under the CCA could be considered a statutory offense that together with CAMA can form the grounds for a personal liability claim.
4.5 The Environmental Impact Assessment Act 1992
The Environmental Impact Assessment Act 1992 (EIA Act)29 mandates that any person, authority, corporate body, or government entity intending to undertake any activity likely to significantly affect the environment must first conduct an environmental impact assessment. Mandatory EIA projects fall into the following categories; namely, oil drilling, mining, manufacturing industries and large construction. Conducting these operations without an authorized EIA is against the law.
Under the EIA Act, there is great liability on the directors of the energy firms that approve the commencement of projects without the EIA. A project subsequently found to have commenced without a required EIA faces regulatory shutdown and compelled retrospective assessment. Directors who knowingly approve the unauthorised commencement could face regulatory action and, in appropriate circumstances, personal liability under CAMA's delinquent director provisions.
4.6 The NESREA Act 2007
The National Environmental Standards and Regulations Enforcement Agency (Establishment) Act 2007 (NESREA Act)30 replaced the Federal Environmental Protection Agency Act and established NESREA as Nigeria's primary federal environmental enforcement body. NESREA is empowered to enforce compliance with environmental laws, inspect business premises, levy fines, and institute criminal proceedings against companies and individual officers for environmental breaches.
Section 27 of the NESREA Act prohibits the unlawful discharge of hazardous substances into the environment. Section 7 confers on the Agency broad authority to ensure compliance with environmental laws, local and international, through monitoring and regulatory measures. Critically, NESREA's enforcement powers extend to 'individual officers', a formulation that, on its proper construction, encompasses company directors.31 A NESREA inspection that reveals non-compliance can result in operational shutdowns and, in serious cases, criminal liability for individual directors and officers.32
NESREA administers thirty-five National Environmental Regulations covering matters ranging from air quality, water quality, and effluent limitations to hazardous waste management and ozone protection. Energy sector companies are subject to several of these regulations, and non-compliance exposes both the company and its responsible officers to enforcement action.
4.7 The Harmful Waste (Special Criminal Provisions) Act
The Harmful Waste (Special Criminal Provisions) Act33 criminalises the purchase, sale, importation, transit, transportation, deposit, or storage of harmful waste. In the energy sector context, the definition of 'harmful waste' encompasses toxic effluents from petroleum processing and other hazardous by-products of extraction activities. The Act creates offences for officers and directors who knowingly participate in these activities, and its penalties include substantial terms of imprisonment. While the Act was originally prompted by the notorious 1988 Koko toxic waste affair, its provisions are broad enough to capture directors who approve or countenance the unlawful disposal of toxic by-products from energy operations.
4.8 The Oil Pipelines Act and Associated Regulations
The Oil Pipelines Act 1956 (as amended) governs the laying, operation, and maintenance of oil pipelines and creates obligations of compensation for surface damage. Under the Act, pipeline operators are required to compensate landowners and occupiers for any loss or damage caused by pipeline operations. These compensation obligations, while directed at the company rather than individual directors, become relevant to director liability where directors have failed to ensure compliance with pipeline maintenance obligations, resulting in oil spills.34
5. Corporate Personality, The Corporate Veil, And ESG Liability
The doctrine of separate corporate personality, established in Salomon v Salomon & Co Ltd.,35 and long since received into Nigerian company law, creates a fundamental structural impediment to director liability for corporate environmental harm. The corporation itself, being a legal entity, will take liability on its own shoulders. As officers of this entity, directors are, in theory, supposed to be protected from any personal liability through the concept of the corporate veil. There are a number of significant purposes served by this doctrine; one of them is the allocation of risks.
Piercing of the corporate veil has been acknowledged in Nigeria under certain circumstances. In FDB Financial Services Ltd v Adesola36 and in PFS Ltd v Jefia,37 Nigerian courts reiterated that the corporate veil can be lifted when the company is a vehicle for fraud or established to avoid legal obligations. Section 316 of CAMA 2020 puts this judicial discretion in writing. The key question for ESG liability is whether the systematic failure to uphold environmental duties, the deliberate and repeated continuation of gas flaring after the deadline, the approval of projects without EIA compliance or the failure to invest in host community trust can be considered the kind of mismanagement or failure of legal obligations that would justify piercing the veil.
The transnational litigation offers useful, although incomplete, analogies. The 2021 Dutch Appeal Court decision in the Shell Nigeria case found that the parent company could be liable for the actions of its Nigerian subsidiary, thereby finding that a parent company can have a duty to interfere in the behaviour of its subsidiary.38 In more recent times, it was in the judgment on the preliminary issues in June 2025, in the case of Alame and Others v Shell Plc, where the UK High Court ruled that Shell plc still had potential liability for historical oil pollution despite there being an independent Nigerian subsidiary of Shell.39
These cases, although adjudicated under the laws of England and the Netherlands and not the law of Nigeria, are important to note due to the implications which may be drawn from them regarding the stance of the judiciary with regard to corporate accountability in the context of transnational environmental damage cases. It is apparent that any mechanical approach to the use of the separate corporate personality doctrine will be increasingly met with disapproval by the courts when the facts show negligence and predictable harm to the communities.
6.1 Litigation and The Development of Environmental Accountability
6.1 Domestic Litigation: The Nigerian Courts
Nigerian courts have been considering environmental claims emanating from the activities of oil production for decades, but there is a lack of case law concerning liability on the part of directors. Leading cases on environmental law in Nigeria have usually been considered on the basis of negligence, nuisance, or statutory breach against companies.
The case of Ejama-Ebubu v Shell Petroleum Development Company of Nigeria Ltd.,40 adjudicated in the Nigerian Federal High Court, is illustrative of the broader pattern. The court determined that Shell had polluted the community of Ejama-Ebubu to a great extent through pipeline spills and awarded substantial compensation. But the judgment was not against any particular director, but against the company as such, which is characteristic of environmental litigations in Nigeria.
There has been no extensive litigation of the concept of ESG as a framework for personal director liability before Nigerian courts. There is no significant judicial interpretation of CAMA 2020, which is relatively new, especially section 305(3). This gap is a legal opportunity and a governance risk because it is not yet clear how much responsibility directors have in relation to the environment under CAMA.
6.2 Okpabi v Royal Dutch Shell Plc (UK Supreme Court)
The Okpabi litigation, which reached the UK Supreme Court in 2021,41 related to the issue of whether or not Royal Dutch Shell owed any duty of care towards the Nigerian community that suffered from the pollution generated by their subsidiary called Shell Petroleum Development Company of Nigeria Limited (SPDC). The judgment of the Supreme Court, which overturned the previous judgments of the Court of Appeal, indicated that there was a case for arguing that a parent company might have owed a duty of care to the parties affected by their subsidiaries' operations.
For the Nigerian ESG liability doctrine, Okpabi is significant for two reasons. First, it demonstrates that the corporate veil is not impenetrable where the group structure is used in a manner that concentrates actual governance control at the parent company level while dispersing legal liability to the subsidiary level. Second, it raises the question, directly analogous to domestic Nigerian corporate governance, of whether directors of a parent or holding company who exercise effective control over an operating subsidiary's environmental decisions can be personally implicated in liability arising from those decisions.
6.3 Alame and Others v Shell Plc (UK High Court, 2025)
The most significant recent development in this litigation landscape is the June 2025 preliminary issues judgment in Alame and Others v Shell Plc.,42 concerning claims brought by the Bille and Ogale communities in Ogoniland. The court ruled that Shell plc and its former subsidiary could be held legally responsible for legacy oil pollution, rejecting Shell's procedural attempts to restrict the scope of the upcoming full trial. The Court further found that oil pollution can engage the right to life under the Nigerian Constitution, and that the 'direction of travel' of the Nigerian Supreme Court pointed toward recognising fundamental human rights as relevant in environmental pollution cases.
Of special significance was the Court’s refusal to consider Shell’s statutes of limitation defense. The Court held that a continuing failure to remediate spills that have not been remediated may be considered a continuing violation and thus may create a new claim every time. This approach, if adopted by the Nigerian court system in domestic lawsuits, will greatly expand the period during which one may file environmental liability claims against directors. 43
6.4 The Dutch Court Ruling (2021)
The 2021 judgment of the Hague Court of Appeal in the litigation brought by Nigerian farmers against Royal Dutch Shell44 established that the parent company had breached its duty of care by failing to do enough in response to oil spills caused by its Nigerian subsidiary. The Court held that Royal Dutch Shell could not hide behind the corporate veil of its Nigerian subsidiary to escape responsibility for oil pollution in the Niger Delta. This was the first time a parent company had been held responsible for the acts of a foreign subsidiary in an environmental case before a Dutch court.
7. Systemic Enforcement Challenges
7.1 Regulatory Fragmentation
One of the most persistent structural impediments to effective ESG enforcement in Nigeria's energy sector is regulatory fragmentation. Environmental and ESG oversight is distributed across multiple bodies, NESREA, the NUPRC, the NMDPRA, the Securities and Exchange Commission, the Corporate Affairs Commission, the Financial Reporting Council, and sector-specific agencies, without a coherent coordination mechanism.45 As there is no single unified ESG regulator, there is a fragmentation in enforcement duties, many gaps in accountability, and firms can take advantage of the lack of clear jurisdictions to evade compliance.
Research consistently identifies weak enforcement mechanisms as a principal constraint on ESG integration in Nigeria's oil and gas sector.46 NESREA, despite its broad statutory mandate, faces resource constraints and has historically prioritised certain environmental categories, solid waste and wildlife over petroleum-sector pollution. The NUPRC, as the new upstream regulator under the PIA, has yet to develop a robust track record on ESG enforcement.
7.2 Judicial Capacity and Corruption
Nigerian courts, while capable of principled environmental adjudication, face challenges that impair effective ESG enforcement. Judicial docket backlogs, inadequate judicial training on complex environmental and ESG matters, and documented corruption in the lower courts all contribute to a justice system that struggles to provide timely and effective remedies for environmental harm. These systemic weaknesses explain, in part, why affected communities have increasingly sought redress in foreign jurisdictions, Dutch and English courts, rather than in Nigerian courts.47
7.3 Information Asymmetries and Corporate Opacity
Effective director liability requires access to information about corporate decision-making. Indeed, discussions in the boardroom of an energy firm, which include approval of business plans with environmental impact, are normally inaccessible by both community stakeholders and regulators. The ESG disclosure rules, although better, are inconsistent. In a study conducted in 2025, only less than 25 percent of the top 100 firms in Nigeria had independent verification of their ESG disclosures.48
The Financial Reporting Council of Nigeria Act mandates accurate corporate reporting and independent attestation of sustainability disclosures,49 but compliance with these obligations in the energy sector has been inconsistent.
7.4 The Impunity Culture in the Energy Sector
Perhaps the most intractable challenge is what may fairly be described as a culture of impunity in Nigeria's petroleum sector. For decades, oil companies, both multinational and indigenous, have operated with the assurance that regulatory enforcement is manageable, court processes are lengthy, and political connections can insulate management from serious consequences. This culture is not simply a product of individual bad faith but of structural incentives: the economic significance of the sector means that regulatory agencies and political actors have powerful reasons to accommodate industry preferences.
The transfer of most onshore oil assets from international oil companies to indigenous Nigerian operators following recent divestments has, in some respects, intensified this concern. Brookings Institution analysis has noted that, with domestic ownership of most onshore oil wells, the risk of non-compliance with host community and environmental obligations is high, particularly given that the Nigerian judiciary remains weak and court decisions are seldom enforced against well-connected domestic companies.50
8. Comparative Insights and International Standards
The development of director-level ESG liability in Nigeria must be understood against the backdrop of international trends that are reshaping the legal landscape globally.
8.1 The United Kingdom: Enlightened Shareholder Value and ESG
Section 172 of the UK Companies Act 2006 requires directors to act in the way they consider in good faith to be most likely to promote the success of the company for the benefit of its members as a whole, while having regard to, inter alia, the impact of the company's operations on the community and the environment. This provision, which introduced the 'enlightened shareholder value' model into UK statute, is the direct legislative ancestor of the environmental consideration requirement in section 305(3) of Nigeria's CAMA 2020.51 United Kingdom jurisprudence on section 172, while still developing in the ESG context, provides useful guidance on how analogous Nigerian provisions might be interpreted.
8.2 The Netherlands: ClientEarth and the Shell Climate Ruling
The Netherlands has been at the forefront of climate-related corporate accountability litigation. The 2021 District Court of The Hague ruling in Milieudefensie v Royal Dutch Shell52 ordered Shell to reduce its global CO2 emissions by 45 percent relative to 2019 levels by 2030. Though later appealed and revised, the ruling was nevertheless an unprecedented judicial intervention into corporate environmental governance, as it explicitly made climate responsibilities into legally binding duties of corporations.
8.3 The UN Guiding Principles on Business and Human Rights
The United Nations Guiding Principles on Business and Human Rights (UNGPs), approved by the UN Human Rights Council in 2011,53 set a standard for corporate responsibility regarding human rights, including environmental stewardship. Though there has yet to be a National Action Plan on Business and Human Rights implemented in Nigeria, the UNGPs have been recognized as persuasive precedent in Nigerian environmental litigation. For energy companies operating in Nigeria, especially those with international capital market exposure, UNGP compliance is becoming more expected, and a lack of such compliance poses both a reputational and legal risk.
8.4 The Equator Principles and IFC Performance Standards
The many organizations engaged in financing projects in Nigeria, particularly in the energy sector, have to meet the requirements of the Equator Principles and International Finance Corporation Performance Standards.54 These standards have environmental and social evaluation criteria that exceed the minimum regulatory criteria set out by Nigeria. The directors of these companies who fail to uphold their contractual obligations concerning the environment can face not only regulatory scrutiny but also events of default based on their loans due to the associated financial implications.
9. Reform Proposals
From the above analysis, one can note that there have been substantial efforts made by Nigerian law regarding ESG liability for energy sector directors; however, much work remains to be done.
9.1 Strengthening Statutory Director Liability
Section 305(3) of CAMA, in its current form, must be strengthened in order to make the duty more definite and actionable. As opposed to the obligation ‘to have regard to’ environmental impact, the law should make it obligatory for directors of corporations within the specified industries, such as oil production, electricity generation and mining, to undertake risk assessment regarding ESG criteria, formulate environmental management systems and submit annual environmental performance reports. In case of non-compliance with the above procedure, there should be imposed liability of directors regardless of any damage caused by the corporation.
9.2 Establishing Specialised ESG Courts
The creation of courts or judicial divisions specializing in environment and ESG issues, like the environmental courts that exist in South Africa, India, and Australia, will greatly improve the quality of local judgments in this field.55 The process of environmental cases in general jurisdiction courts is characterized by delays in adjudication, lack of technical expertise, and lack of precedent. The introduction of an ESG section within the Federal High Courts that employs trained judges in environmental law, together with technical assessors, will significantly enhance justice access for people affected by energy pollution.
9.3 Mandatory ESG Disclosure and Board Accountability
The Securities and Exchange Commission and the Financial Reporting Council should strengthen requirements for mandatory, independently verified ESG disclosure by listed energy companies. All public energy companies should be required to maintain a board-level ESG committee, publish annual ESG performance reports aligned with internationally recognised frameworks such as the Global Reporting Initiative or the Task Force on Climate-related Financial Disclosures, and submit these reports for independent attestation. Directors who approve materially misleading ESG disclosures should face civil and, in cases of intentional misrepresentation, criminal liability.
9.4 Amending the Climate Change Act
The Climate Change Act of 2021 should be amended to incorporate Nigeria's Nationally Determined Contribution targets of a 20 percent unconditional and 47 percent conditional reduction in greenhouse gas emissions by 2030.56 The Act should further introduce sector-specific emission reduction roadmaps for the energy sector, accompanied by clear director accountability provisions for companies that systematically exceed their allocated carbon budgets. The current formulation of fines for non-compliance should be escalated and accompanied by personal liability provisions for directors of persistently non-compliant companies.
9.5 Reinforcing Host Community Protections under the PIA
The three percent operating expenditure contribution to the Host Communities Development Trust should be re-examined in light of the true economic and environmental costs of petroleum extraction. The amendment to this legislation with increased contribution that should be used to improve the environment and healthcare and employment situation for these communities would give meaning to the community development ideals of the PIA. The directors of companies that do not contribute to the HCDT should have progressive penalties, which include disqualification from being directors of any company.
9.6 Ratifying and Implementing the National Action Plan on Business and Human Rights
Nigeria needs to formulate and adopt a National Action Plan on Business and Human Rights that will give a coherent framework to operationalize the UN Guiding Principles in Nigeria’s context. In the process, the plan must make it clear what the directors of energy companies must do, ensure a grievance process is in place, and see to it that there is remediation of environmental damage. The above would help to enhance Nigeria’s reputation internationally as a player in energy transition.
10. Conclusion
Whether or not directors of energy companies in Nigeria are personally liable for environmental damage is not a simple question. What this analysis shows is a legal regime in true transition, in which the pieces to set for personal liability are being put in place, while the institutional mechanisms to make them work are still underdeveloped.
The last ten years of reforms, the CAMA 2020, the PIA 2021, the CCA 2021 have provided a statutory framework for the Nigerian courts and regulators to seek accountability for directors at the ESG level for the first time. But the legislative progress should not be understated, including the fiduciary duty to consider environmental impact, the corporate veil provisions and the host community development requirements.
However, legislative advances that are not backed by institutional capacity result in aspirational law, not effective law. The courts still lack the capacity to handle complex environmental adjudication. Regulatory agencies have a disjointed structure and are poorly coordinated. The petroleum industry culture of impunity is still protecting individual decision makers from the impact of governance failure that has exacted devastating cost on the Niger Delta communities.
The trajectory of transnational litigation, from the Okpabi Case to the 2025 High Court ruling in Alame v Shell,57 demonstrates that international courts are prepared to hold energy companies and their parent structures accountable for environmental harm in the Niger Delta in ways that Nigerian courts have not consistently achieved. This is a situation that cannot be sustained. ESG accountability within Nigeria is not only a question of legal sophistication; it is an issue of justice that needs to be addressed by communities which have been bearing the brunt of the environmental impact of the nation’s oil wealth.
None of the measures suggested in this article, including stricter regulations on director liabilities, the establishment of ESG courts, the obligation of mandatory disclosures, tougher climate goals, enhanced corporate obligations of good faith towards communities, and a National Action Plan on Business and Human Rights, is either extreme or beyond the Nigerian legislative and regulatory capacity. What remains to be supplied is the political will to translate those ambitions into enforceable accountability.
Footnotes
1. Attah Akejelu, Associate, Cross-Departmental, S.P.A. Ajibade & Co., Abuja, Nigeria.
2. United Nations Environment Programme, Environmental Assessment of Ogoniland (UNEP 2011).
3. See, Companies and Allied Matters Act 2020.
4. See, Petroleum Industry Act 2021.
5. See, Climate Change Act 2021.
6. See, I. A. Adedokun, 'Environmental, Social, and Governance (ESG) Metrics and Nigeria's Energy Transition: Towards Legal Integration in the Oil and Gas Sector' (2025) 17(1) Journal of Sustainable Development Law and Policy 139, 141.
7. Brookings Institution, 'Nigeria's Petroleum Industry Act: Addressing Old Problems, Creating New Ones' (March 2022) available at ( https://www.brookings.edu/articles/nigerias-petroleum-industry-act-addressing-old-problems-creating-new-ones/) accessed 14 May 2026.
8. Health of Mother Earth Foundation, 'The Petroleum Industry Act Neglects Community Concerns and Strengthens Oil Companies' (September 2021) available at ( https://homef.org/2021/09/15/the-petroleum-industry-act-neglects-community-concerns-and-strengthens-oil-companies/) accessed 14 May 2026.
9. Fair Finance Nigeria, 'Oil Companies, ESG Compliance and the Financial Sector through the Eyes of Host Communities' (Fair Finance International, 2025) available at
(https://www.fairfinanceinternational.org/ff-international/news-overview/2025/oil-companies-esg-compliance-and-the-financial-sector-through-the-eyes-of-host-communities/) accessed 14 May 2026.
10. IUCN, 'A Review of Nigeria's 2021 Climate Change Act: Potential for Increased Climate Litigation' (June 2022) available at ( https://iucn.org/news/commission-environmental-economic-and-social-policy/202203/a-review-nigerias-2021-climate-change-act-potential-increased-climate-litigation) accessed at (https://iucn.org/news/commission-environmental-economic-and-social-policy/202203/a-review-nigerias-2021-climate-change-act-potential-increased-climate-litigation) accessed 14 May 2026.
11. Olisa Agbakoba Legal, 'Corporate Greenwashing in the ESG Era: When Sustainability Statements Become Legal Risk' (OAL, March 2026) available at ( https://oal.law/corporate-greenwashing-in-the-esg-era-when-sustainability-statements-become-legal-risk/) accessed 14 May 2026.
12. ICLG, 'Environmental, Social and Governance Laws and Regulations Report 2023: Nigeria' (ICLG 2023) available at ( https://iclg.com/practice-areas/environmental-social-and-governance-law/) accessed 14 May 2026.
13. See, Salomon v Salomon & Co Ltd [1897] AC 22 (HL).
14. Milton Friedman, 'The Social Responsibility of Business Is to Increase Its Profits' New York Times Magazine (13 September 1970) available at ( https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html) accessed 14 May 2026.
15. See, Companies and Allied Matters Act 2020, s 305(3).
16. Constitution of the Federal Republic of Nigeria 1999 (as amended).
17. Centre for Oil Pollution Watch v. N.N.P.C. (2019) 5 NWLR (Pt. 1666) 518 SC. Delivered on Friday, 20 July, 2018.
18. Alame and Others v Shell Plc [2025] EWHC (Preliminary Issues Judgment, 20 June 2025), per Mrs Justice May at para 326.
19. As noted by Mrs Justice May (Rt. Honourable Lady Justice Juliet May), Judge of the Court of Appeal of England and Wales and the Chair of the Sentencing Council.
20. See, Companies and Allied Matters Act 2020.
21. Section 316.
22. Chambers Expert Focus, 'Nigeria's Petroleum Industry Act' (Chambers 2021).
23. See, Petroleum Industry Act 2021, s 240.
24. Agbarakwe Ugochukwu H and Bredino Samson M, 'Nigerian Petroleum Industry Act 2021 & Host Communities Development: Issues & Challenges’ available at
( https://www.researchgate.net/publication/378219460_Nigerian_Petroleum_Industry_Act_2021_ Host_Communities_Development_Issues_Challenges) accessed 14 May 2026.
25. Health of Mother Earth Foundation (n7).
26. IUCN (n9).
27. See, Climate Change Act 2021, ss 22–24.
28. IUCN (n9).
29. See, Environmental Impact Assessment Act Cap E12 LFN 2004 (originally 1992).
30. See, National Environmental Standards and Regulations Enforcement Agency (Establishment) Act
2007.
31. NESREA Act 2007, s 7.
32. Goldsmiths LLP, 'Earth Day 2026: What Environmental Compliance Means for Nigerian Businesses' available at ( https://www.goldsmithsllp.com/earth-day-2026-what-environmental-compliance-means-for-nigerian-businesses/) accessed 14 May 2026.
33. See, Harmful Waste (Special Criminal Provisions) Act Cap H1 LFN 2004.
34. See, Oil Pipelines Act Cap O7 LFN 2004.
35. See, Salomon v Salomon & Co Ltd (n12).
36. See, FDB Financial Services Ltd v Adesola [2010] 14 NWLR (Pt 1214) 1.
37. See, PFS Ltd v Jefia [2019] LPELR-47432 (CA).
38. See, Milieudefensie and Others v Royal Dutch Shell Plc, Hague Court of Appeal (29 January 2021).
39. See, Alame and Others v Shell Plc [2025] EWHC (Preliminary Issues Judgment, 20 June 2025).
40. See, Ejama-Ebubu v Shell Petroleum Development Company of Nigeria Ltd (unreported, Federal High Court).
41. See, Okpabi v Royal Dutch Shell Plc [2021] UKSC 3.
42. See, Alame and Others v Shell Plc [2025] EWHC (Preliminary Issues Judgment, 20 June 2025).
43. M. Ejelonu and D. Akinsanya “Regulatory Guidelines Governing The 2025 Nigeria Petroleum Licensing Round” available at(https://www.mondaq.com/nigeria/oil-gas-electricity/1730428/regulatory-guidelines-governing-the-2025-nigeria-petroleum-licensing-round) accessed 15 September 2026.
44. See, Milieudefensie and Others v Royal Dutch Shell Plc (n35).
45. Adedokun (n5) 155.
46. Ibid 157.
47. Corporate Accountability Lab, 'Alame & Ors v Shell Plc: UK Court Rejects Shell's Attempt to Escape Liability for Nigerian Oil Pollution' available at
(https://corpaccountabilitylab.org/calblog/2025/8/12/alame-amp-ors-v-shell-plc-uk-court-rejects-shells-attempt-to-escape-liability-for-nigerian-oil-pollution) accessed 14 May 2026.
48. Teasoo Consulting, 'Are Nigerian Businesses Overlooking These ESG Risks?' available at
(https://teasooconsulting.com/15-are-nigerian-businesses-overlooking-these-esg-risks/) accessed 14 May 2026.
49. See, Financial Reporting Council of Nigeria Act (as amended), s 7(2)(f).
50. Brookings Institution (n6).
51. See, Companies Act 2006, s 172 (UK).
52. See, Milieudefensie v Royal Dutch Shell BV, District Court of The Hague (26 May 2021) ECLI: NL: RBDHA: 2021:5339.
53. UN Human Rights Council, 'Guiding Principles on Business and Human Rights' (UN Doc A/HRC/17/31, 2011).
54. Goldsmiths LLP (n29).
55. Adedokun (n5) 163.
56. Izoukumor Afedolor Noah, 'Nigeria's Climate Change Act, Conditional and Unconditional Nationally Determined Contributions, and the Principle of Common but Differentiated Responsibilities' (2025) 29(2) Journal of Environmental Law 1.
57. Supra (n18).
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