Risk & Resilience Magazine sat down with Aravo’s Chief Technology Officer, Eric Hensley, to discuss how important board buy-in is for adopting ESG initiatives, and how ESG applications will help meet evolving risks in the future.
EH: As companies have moved up the maturity scale, they start with a risk domain that is most salient to their business. Then they will move out into other areas of risk that are important from a reputational point of view. ESG has become the most recent of this, moving up the maturity scale from reputational risk to likely a compliance risk in the near future.
EH: There are two key challenges- one is corporate buy-in. The need for ESG projects usually doesn’t come from board-level directives. Because of this, getting ahold of the appropriate resources can be difficult.
The other big challenge is in the provisioning of data. There isn’t a strong regulatory environment around ESG concerns so it’s hard to get data about how companies are managing this. If there’s no regulatory regime then standard measures don’t exist. This means that performance data also doesn’t exist. But we’re starting to see new regulations on the horizon that will hopefully change this.
EH: ESG programs are interesting from a risk point of view. It’s a business risk- a reputation risk to your business without question. But there’s an ethical component to ESG programs, and as such having strong visibility and commitment to ESG, and operating an ESG program at scale can have benefits beyond just mitigating reputation risk. It benefits employee morale and benefits the perception of your business’s ethical position in the world.
EH: I think that the public attention is incredibly strong on ESG issues right now. This is where all of the drive behind ESG as a risk domain is coming from, where the desire for a stronger regulatory regime is coming from, and where the idea of ESG as an area of reputational risk is coming from. That wasn’t the case as little as five years ago.
EH: We have a unique ability to combine years of best practices that we know from running responsible sourcing programs for our early adopter customers, with the extensive automation, and integration capabilities of our platform. The combination of direct assessments, data from providers and automation are what allows companies to run an ESG program at scale, a reputational risk-oriented program where the right answers aren’t necessarily cut and dry. Synthesizing this information along with providing automation tools in a capable platform allows you to codify the decision-making process and then automate and run your program at scale.
EH: As ESG becomes further codified from a regulatory point of view, the risk management process will become more standardized and the generalized quality of information and the outcomes of mitigating that risk will both improve. Because of that, you’ll be able to gain even greater automation benefits and manage risks at a greater scale in your business. ESG is just early right now, but we’ll see it evolve for sure.
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Eric Hensley is the Chief Technology Officer at Aravo Solutions, where he manages all products, product strategy, and technical delivery of their solutions. With a career in supply chain solutions, Eric joined Aravo in 2008 and has pushed for innovation in managing new risk domains. We sat down with Eric to discuss the importance of embracing ESG initiatives, how ESG management applications have evolved, and where Aravo’s solutions are heading to meet these needs.
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