Strategic Focus: Hidden ESG Risks In TPRM And Their Impact On Operational Resilience

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Executive Summary

Addressing ESG vulnerabilities in third-party networks is a strategic imperative for organizational resilience and competitiveness in today’s sustainability-focused business environment. Traditional third-party risk management (TPRM) frameworks often fail to account for ESG risks, leaving firms exposed to regulatory fines, reputational damage, operational disruptions and an erosion of stakeholder trust. As regulatory expectations and stakeholder scrutiny intensify, integrating ESG principles into TPRM has become essential for enhancing supply chain resilience, safeguarding brand equity and aligning with long-term sustainability goals. This report provides executives with a comprehensive guide to embedding ESG risk management into TPRM, emphasizing the criticality of this shift and exploring actionable solutions – such as advanced technologies and best practices – to navigate challenges and drive sustainable growth.

Table of contents

ESG vulnerabilities in third-party networks are a resilience imperative
Resilience loopholes widen without ESG-integrated management of third parties
Managing ESG risks within third-party risk management (TPRM) requires a tactical framework
Digital technologies enhance the incorporation of ESG risk management into TPRM

Table of figures

Figure 1. Managing ESG risks is increasingly important to firms’ success
Figure 2. The third-party network of an organization is critical to service delivery

About the authors

Elizabeth Babalola

Industry Analyst
Elizabeth is an Industry Analyst in the Verdantix Risk Management practice. Her current research agenda focuses on enterprise risk management, risk management information systems, organizational and strategic resilience, and global risk management trends. Prior to joining Verdantix, Elizabeth worked in corporate risk management roles across the financial and tech industries, where she gained hands-on experience of executing risk management strategies. She holds an MBA degree with a specialty in finance from the University of Lagos.

Katelyn Johnson

Senior Manager, Risk Management
Katelyn is the Senior Manager in the Verdantix Risk Management practice. Her current research agenda focuses on climate risk and its integration into risk management frameworks. Prior to joining Verdantix, Katelyn was a climate scientist at GNS Science in New Zealand. She has previously held roles in the energy industry, where she helped projects manage risk due to weather and ocean phenomena. Katelyn holds a PhD in Geology from Victoria University of Wellington and an MS in Earth Sciences from Ohio State University – both focusing on climate science – as well as a BS in Meteorology from Texas A&M University.

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