Integrating Role of Risk Function and ESG Practices: An Operational Perspective in Manufacturing Organizations

This study examines the operational perspective of the role of the risk function in the Environmental, Social, and Governance (ESG) in the Indian manufacturing organizations, with a focus on business processes. The study aims to identify ESG material issues embedded within key business processes – order-to-cash, scrap management, procure-to-pay, and human resources – and to explore the role of the risk function in addressing these issues. A mixed-methods approach was employed, integrating the thematic analysis of interview data alongside the descriptive analysis of survey data. Key findings highlight vendor compliance, carbon emission reductions, responsible customer practices, scrap disposal, and fair remuneration, training and development, workplace health and safety, diversity, and inclusion as ESG material issues. The risk function predominantly plays a strategic role, with operational ESG responsibilities distributed across respective departments. The findings also underscore the nascent stage of ESG risk management in Indian manufacturing organizations, particularly among smaller firms, due to challenges such as limited prioritization, cost-benefit constraints, and a reluctance to lead ESG initiatives.

While the use of convenience sampling and a focus on larger organizations may limit generalizability, the inclusion of both small and large firms provides diversity to the findings. This research contributes to the limited body of knowledge on ESG risk management by offering insights into its operational dimensions and the evolving role of the risk function. Recommendations for future research include expanding sample sizes and increasing the number of interviewees to enhance understanding and generalizability. This study provides a robust foundation for further research and practical guidance on ESG integration within key business processes in the manufacturing sector, while emphasizing the role of the risk function in the ESG journey.