High-performance Sustainable Work Practices for Corporate ESG Outcomes: Sustainable HRM Perspective

Abstract

Today, companies are inclined to contribute to sustainability by focusing on corporate sustainability (CS) strategies which lead to environment, social and governance (ESG) outcomes. In order to implement the CS strategies, companies have to design practices across domains such as finance, operations, marketing and human resources to facilitate the ESG outcomes. Using the sustainable HRM perspective, in this brief article, we introduce the role of high-performance sustainable work practices in implementing CS strategy to achieve ESG outcomes.

Keywords

Corporate sustainability ESG high-performance sustainable work practices HPSWP sustainable HRM

Sustainable HRM for Environment, Social and Governance Sustainability

In 2015, when the member countries agreed for 17 Sustainable Development Goals (SDGs) as Agenda 2030 set up by the United Nations General Assembly, it reflected the dire need for solidarity across nations required to achieve these 17 SDGs and its ensuing 169 targets. The role of businesses in contributing towards the sustainability agenda was put forth in Article 67 agreed to by all 193 UN Members, which states:

Private business activity, investment and innovation are major drivers of productivity, inclusive economic growth and job creation. We acknowledge the diversity of the private sector, ranging from micro enterprises to cooperatives to multinationals. We call on all businesses to apply their creativity and innovation to solving sustainable development challenges.

In alignment with UN SDG targets, global sustainability institutions such as Global Reporting Initiatives (GRI) for Sustainability and International Financial Reporting Standards (IFRS) Sustainability have set standards for businesses to voluntarily develop and implement corporate sustainability for shared value (i.e. organisation and stakeholders) creation. Corporate sustainability is about management approaches used by organisations in integrating and achieving economic, social/human and environmental outcomes for sustainability (UN Global Compact, 2014).¹ More than 600 corporations around the world have accepted environment, social and governance (ESG) sustainability standards as part of corporate sustainability to address the grand challenges of climate change, poverty, hunger, inequality and so forth as the need has been strongly felt and advocated by one and all.

Guided by the pressures from multiple stakeholders such as investors, customers, suppliers, government, NGOs, environmental activists and so forth, companies explicitly state their corporate sustainability strategy to achieve integrated ESG sustainability outcomes. However, the corporate sustainability strategies need to be driven by the company board overseeing an integrated management approach by different management functions of the company and not just by one dominant corporate sustainability or environment management division. This means that the corporate sustainability or environment management division of the company must develop an integrated management system, approaches and policies along with human resources (HR), finance, marketing, operations and research and development divisions to develop and implement corporate sustainability business strategy.

IFRS and GRI sustainability standards have one thing in common; namely, highlighting the importance of human capital in enhancing an organisation’s capabilities to mitigate sustainability-related risks and explore opportunities to enhance shared value for the company and stakeholders. This is where sustainable HRM can make strategic contributions to identify, develop and manage human capital to mitigate sustainability-related risks and innovate products/services, systems and practices to effectively implement corporate sustainability business strategies to enhance shared value.

Sustainable HRM is a new and emerging discipline within the HRM field, and it has evolved over the last two decades to shape alternative HRM strategies, systems and practices to facilitate companies to achieve their ESG sustainability purpose. ‘Sustainable HRM is designed to provide a sustainability-oriented vision of HRM systems, policies and practices to synthesize and achieve the competing and inconsistent financial, environmental and human/social well-being outcomes of corporate business strategy’ (Mariappanadar, 2019).

In this brief write-up, we propose the role of high-performance sustainable work practices (HPSWP) from the sustainable HRM perspective as a mechanism for managers to facilitate companies to implement corporate sustainability strategy and achieve holistic ESG outcomes.

High-performance Sustainable Work Practices

Aligning with the definition of corporate sustainability which focuses on multiple dimensions of ESG, the HPSWP is also positioned to be multidimensional. The characteristics of HPSWP (Mariappanadar, 2022) reflect the underlying motives of organisations in shaping employee work attitudes and behaviours to implement and achieve integrated ESG sustainability outcomes. The HPSWP extends the currently dominant motivation, skills and opportunity enhancing characteristics of high-performance work practices (HPWP) from the strategic HRM perspective. That is, the HPWP focus on managing human resources to just achieve financial/economic performance by disregarding the simultaneous negative impacts imposed by corporate activities on the environment and stakeholders (i.e. employees, their families and society). Hence, the characteristics of HPSWP will aid all professional managers including HR managers to design an evidence-based HRM system with bundle of internally aligned HR practices with sustainability characteristics to facilitate the required human capital to operationalise holistic or integrated corporate ESG sustainability business strategy.

The characteristics of HPSWP are stakeholder compassion, ethics of care for well-being, pro-environment and social consciousness which are explained below. ❖

HR practices need to inculcate stakeholder compassion, which means that employees in companies have to be compassionate about multiple stakeholders such as shareholders, customers, supply chain, employees, etc. This can be taken care of through employee selection, job design and performance management practices to shape employee sustainability behaviours.

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HR practices need to reflect ethics of care for well-being towards employees so that they are able to cope with the negative side effects of work pressures (e.g., stress, ill-health, diseases, alcoholism drug abuse, etc.) and handle the effects on family (e.g., strained family relations due to less family time and work–life imbalance). This would involve changes in job design so that it is more relational based.

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HR practices need to facilitate pro-environment features such as preserving and regenerating the natural environment to minimise the ecological footprint. This could be a part of various HR practices, such as selection, performance management, incentives, etc.

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HR practices need to promote social consciousness of employees by involving them in non-work–related activities and helping them interact with multiple stakeholders. This could be through job design and employee selection practices.

A scale which measures the sustainability characteristics of HR practices has been designed and recently validated by one of the authors and is available on request. The above four characteristics of HPSWP help HR managers to develop enhanced HR systems and practices to interact with corporate sustainability business strategy to help businesses achieve ESG outcomes. We next mention the action plan that companies can take to implement HPSWP.

HPSWP for Enhanced ESG Outcomes

HPSWP are designed to help businesses implement their ESG sustainability strategy; therefore, as a first step, the businesses would have to develop an integrated view on sustainability. This would involve assessing their current status on ESG sustainability maturity which will help the company to identify its strong areas as well as areas where there are gaps in sustainability. As the next step, the business would be required to develop and implement characteristics of HPSWP as an HR system with internally aligned bundle of HR practices to implement its ESG sustainability strategy. An indicative list of HPSWP characteristics for a bundle of integrated HR practices to achieve each of the ESG sustainability outcomes is explained.

Bundle of HPSWP for Environment Sustainability Outcome

The bundle of HPSWP with the pro-environment characteristics

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Providing green training that will focus on developing employee knowledge, skills and abilities to preserve ecosystem.

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Considering green competencies in employee recruitment and selection.

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Ensuring that green knowledge, skills and abilities used in their job tasks/roles to preserve ecosystem are evaluated in their performance management system.

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Providing organisational support to promote employee voluntary job/role behaviours to preserve ecosystem.

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Bundle of HPSWP for Social Sustainability Outcome

The bundle of HPSWP with the ethics of care for employee well-being characteristics

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Training to identify work-related factors (i.e., work overload, time demand, etc.) that negatively impact on employee occupational health.

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Introducing discussion of non-work–related activities (e.g., time for regular physical exercise, work–family balance, etc.) by supervisors during performance appraisal so as to improve employees’ well-being.

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Providing training to identify work-related factors (i.e., work overload, time demand, etc.) that increase work–family interferences among employees.

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Providing organisational support to re-design jobs and roles to provide opportunities for employees to regularly involve in non-work–related activities to improve well-being.

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Bundle of HPSWP for Governance Sustainability Outcome

The stakeholder compassion and social consciousness characteristics are explained for the bundle of HR practices that are relevant to achieve the governance sustainability outcome.

The bundle of HPSWP with the stakeholder compassion characteristics

Introducing employee training with focus on developing skills and attitudes to consider and manage stakeholder interests.

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Evaluating employee’s performance addressing tensions while working on tasks/roles relating to competing financial, social/human and environment outcome demands.

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Ensuring jobs and roles are designed to empower employees to make decisions to benefit both the organisation and stakeholders.

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Rewarding the efforts of employees when they build credible relationships with internal and external stakeholders in their jobs/roles.

The bundle of HPSWP with the social consciousness characteristics

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Considering competencies to form relationships with internal (employees) and external stakeholders (customers, supply chain, environmental groups) in employee selection.

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Facilitating jobs and roles which are designed to provide opportunities for employees to interact with stakeholders.

A Business Case Study for Implementing HPSWP to Enhance ESG Performance

To enhance ESG performance of an Indian company registered in the NSE (India), we used the HPSWP to help the company implement a corporate sustainability business strategy to gain improved ESG rating by Credit Rating Information Services of India Limited (CRISIL), a branch of S&P Global. We found that the company’s HR systems and practices focused more on the siloed approach to ESG performance. That is, the company’s current HR systems and practices focused primarily on the environmental aspect of ESG outcomes, and the focus on social and governance is limited. Hence, there is a major need for the company to develop and implement HR systems and practices with HPSWP characteristics (i.e., pro-environment, ethics of care for employee well-being, stakeholder compassion and social consciousness) to achieve integrated ESG outcomes and to improve their ESG ratings by CRISIL for long-term value for the company.

Takeaway for Managers

There is no ‘magic bullet’ to achieve integrated or holistic ESG sustainability outcomes for a company. However, it is a journey that managers must undertake by incorporating new developments such as HPSWP from the emerging sustainable HRM field in their professional practices. We explained in this brief write-up using a business case how companies can achieve integrated ESG sustainability outcomes. This is possible by using an internally aligned bundle of HR practices with the four HPSWP characteristics to implement its corporate sustainability business strategy for the shared value of the company and stakeholders.

Footnotes

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The authors received no financial support for the research, authorship and/or publication of this article.

Note

Bio-sketch

Upam Pushpak Makhecha is an Associate Professor in the area of organisational behavior and human resource management at IIM Tiruchirappalli and is passionate about sustainable human resource management.

Sugumar Mariappanadar, PhD, FCOP, MAPS, CAHR, Peter Faber Business School, Australian Catholic University, Australia, and Senior Sustainability Advisor, Insync and Board Benchmarking, Australia, is an internationally acclaimed sustainability and sustainable HRM scholar, credited with shaping innovative management approaches to embed sustainability programmes organisation wide. Sugumar Mariappanadar’s YouTube Channel on Sustainability and Sustainable HRM: https://www.youtube.com/channel/UCyxhZxTT3nC_S5itUKeeWgA

References

Mariappanadar

(2019). Sustainable human resource management: strategies, practices and challenges . Macmillan International Publisher.

Mariappanadar

(2022). High-performance sustainable work practices: Scale development and validation. Sustainability , 14(19), 12682.