Institutional Constraints of the Rentier State and Delayed ESG Adoption: A Case Study of Saudi Aramco

This study conducts an in-depth analysis of the reasons for the delayed adoption of ESG (Environmental, Social and Governance) standards by Saudi Aramco, the world's largest en-ergy company, compared to global oil majors, from the perspective of Saudi Arabia's insti-tutional, cultural, and economical characteristics. In the context of strengthened global dis-closure standards, such as the Global Reporting Initiative (GRI) 11 and the Sustainability Accounting Standards Board (SASB), and increasing pressure for carbon neutrality, this re-search identifies Aramco's actions as path-dependent outcomes rooted in Saudi Arabia's na-tional structure and survival strategies, rather than mere technical delays.
The core theoretical framework of this study is based on Beblawi, H., & Luciani, G. (Eds.). (1987) "Rentier State Theory," which examines how the "allocation state" structure, where the state monopolizes and distributes oil rents, constrains the transparency of gov-ernance (G). Additionally, utilizing Scott's (2014) "Institutional Theory," this study analyzes the resistance and transformation that occur when Saudi Arabia's regulatory (absolute mon-archy), normative (Islamic ethics), and cognitive (national identity) elements interact with the Western ESG framework.

The key findings of this study are as follows: First, politically, the preservation of the Saudi royal family's power is absolutely dependent on Aramco's revenues, leading to a cul-ture of secrecy that treats corporate information as a "national security" asset, thereby con-flicting with ESG transparency. Second, economically, Aramco's "Last Man Standing" strat-egy, leveraging an ultra-low-cost production structure of $7.5 per barrel, prioritizes ex-tending the oil era over radical energy transition, which is a primary cause of the delay in Scope 3 disclosures. Third, socio-culturally, Islamic ethics such as "Maqasid al-Sharia" and national protection policies like 

"Saudization" and "IKTVA" prioritize nationally tailored social responsibility (S) over Western-style human rights or diversity metrics.
This study defines Aramco's ESG strategy as a product of "adaptive state capitalism" and quantitatively analyzes the reasons behind its low evaluations, such as the MSCI BB rating and a Sustainalytics score of 45.6 points (Severe Risk). Through these analyses, in-vestors and business partners of Saudi Aramco are advised to closely examine Saudi Ara-bia's institutional particularities, structural constraints, and the opportunity costs of strategic transitions to inform their investment strategies.