Efficacy of Enterprise Risk Management in Enhancing Sustainability and Financial Performance in the Solar PV Industry: A Conceptual Framework
Abstract
As an alternative to fossil fuels, solar PV electricity can help mitigate global warming and improve the environment by lowering greenhouse gas emissions (GHG). More nations have developed programs to encourage the production and use of PV electricity, considering the potential of renewable energy for sustainable development. The government of Malaysia wants solar PV to be the primary source of renewable energy by 2030. To reduce global warming, renewable energy technology must be implemented more widely. However, the production of solar photovoltaic modules raises serious sustainability concerns. These concerns include using conflict minerals, toxicity, and limited supply or supply chain governance risks of rare materials. Even though solar energy projects are technically feasible, stakeholders still view the region’s initiatives as risky due to ongoing governance problems. Domains related to solar project deployment that involve installation, operation, and management are particularly susceptible to governance issues, such as a lack of accountability and transparency. Renewable energy investments upfront are risky and expensive. Risks in the solar PV value chain include subpar design and manufacturing decisions, inventory losses, quality problems during the execution process, and cultural and societal problems brought on by the absence of an effective risk management system. This study thus investigates how the implementation of ERM influences the company’s financial performance. Enterprise Risk Management (ERM) is a technique that regulates, and coordinates offset risks all over the firm to manage and integrate all risks holistically. As a result, this paper provides a conceptual and theoretical framework for how corporations use risk management to lower the cost of capital and improve sustainable development in the solar PV industry. The suggested theoretical and conceptual framework, supported by stakeholder and legitimacy theory, provides a foundation for empirically validating the entangled interaction between the relevant variables. It is advocated that measuring variables such as enterprise risk management, financial performance, and sustainability performance be based on previous research and frameworks and recommendations produced by major organizations. The purpose of this paper is to guide Malaysian solar PV companies in the implementation of sustainability and risk management.
Keywords: enterprise risk management, sustainability, solar PV, financial performance
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