Industry 5.0 and ESG compliance: role of IT governance effectiveness and cyber governance

Abstract

This research examines the impact of Industry 5.0 practices on compliance with environmental, social and governance (ESG) standards within the Malaysian manufacturing sector. It emphasizes the mediating effect of IT governance effectiveness and the moderating influence of cyber governance. Data were gathered through a structured survey targeting organizational managers, and structural equation modeling was utilized for the analysis. The findings indicate that all practices associated with Industry 5.0, including big data analytics, the Internet of Things, blockchain, digital twins, artificial intelligence (AI) and advancements in 6G, significantly improve the effectiveness of IT governance. This effectiveness, which includes structural, process and relational aspects, in turn, positively influences compliance with ESG standards, highlighting its crucial role in integrating digital transformation with sustainability goals. Additionally, cyber governance serves as a positive moderator in the relationship between Industry 5.0 practices and IT governance effectiveness, implying that robust cybersecurity measures and oversight enhance the effects of technology adoption on governance results. From a theoretical standpoint, the study extends the literature on Industry 5.0 by linking advanced digital practices to ESG compliance through robust governance mechanisms. Practically, the results underscore the importance for manufacturing firms to invest in IT governance structures and cyber governance capabilities to fully leverage Industry 5.0 technologies for sustainable operations. Overall, the study provides a comprehensive framework for aligning technological innovation, governance and sustainability to support the transition toward responsible and resilient manufacturing in Malaysia.