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Exploring the Effect of Enterprise Risk Management for ESG Risks Towards Green Growth

Research output: Contribution to Journal/MagazineJournal articlepeer-review

E-pub ahead of print
  • Syed Quaid Ali Shah
  • Fong-Woon Lai
  • Muhammad Kashif Shad
  • Salaheldin Hamad
  • Nejla Ould Daoud Ellili
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<mark>Journal publication date</mark>12/06/2024
<mark>Journal</mark>International Journal of Productivity and Performance Management
Publication StatusE-pub ahead of print
Early online date12/06/24
<mark>Original language</mark>English

Abstract

Purpose
Despite the growing emphasis on sustainability and the need to manage environmental, social, and governance (ESG) risks, the direct relationship between enterprise risk management (ERM) and green growth (GG) has not been investigated. This study seeks to fill this gap by examining the effect of ERM on the GG of oil and gas (O&G) companies in Malaysia.

Design/methodology/approach
The study used panel data regression models to analyze panel data from 2012 to 2021. For computing GG, we adapted the Organization for Economic Cooperation and Development’s (OECD) GG framework. ERM is computed using COSO and WBCSD guidelines for ESG-related risks. Weighted content analysis is used to measure ERM and GG

Findings
The findings derived from the content and descriptive statistics analyses indicate a consistent and ongoing rise in the adoption of ERM practices over time. However, some companies are still in the initial stages of incorporating ERM to address ESG risks. The study’s findings unequivocally establish a substantial and positive relationship between ERM and GG. ERM drives GG by significantly influencing its environmental and resource productivity dimensions. The study further reveals that the impact of ERM on economic opportunities and policy responses, as well as the natural asset base, is statistically significant, albeit with relatively lower coefficient values.

Practical implications
To enhance the legitimacy of organizations and foster positive stakeholder relationships, regulators, governments, and policymakers should actively promote the adoption of ERM standards that specifically address ESG risks, as outlined by COSO and WBCSD. This strategic alignment with risk management practices will ultimately contribute to improving green growth for organizations.

Originality/value
To the best of the authors' knowledge, this is the first study examining ERM’s effect on GG. The study adds to the existing literature by focusing on ERM’s role in a company’s GG. It clarifies ERM’s significant effect on diminishing emerging ESG risks and advancing GG