Impact of corporate environmental performance on employee decisions and talent management

By Jovina Ang

SMU Office of Research – It is widely known that environmental sustainability is a top concern for millennials and Gen Z.

Many surveys, including one recently conducted by Deloitte, show that these generational groups, which today represent the two largest in the workforce, care so much about the environment and sustainability that many of them would decline joining non-environmentally friendly firms or even leave their jobs should there be any emerging environmental problems including greenwashing in their employing organisations.

Despite a myriad surveys highlighting environmental sustainability concerns of millennials and Gen Z, there is an apparent lack of research confirming the relationship between firms’ environmental and sustainability performance, and employee decisions.

There are inherent issues with using surveys to capture claims of what employees might do or react to environmentally sustainable issues. The self-reported nature of surveys is prone to individual biases. Surveys are also limited in scope as they do not capture the nuances behind the participants’ responses.

This is why Associate Professor of Accounting and Co-Director of the Master of Science in Accounting (Data & Analytics) Wang Rencheng wants to conduct a research study using archival data to examine the issue. He was recently awarded the Ministry of Education (MOE) Academic Research Fund (AcRF) Tier 2 grant for this purpose.

Professor Wang informed the Office of Research: “To date, no one has designed such a research study using archival data to determine the relation between firms’ environmental sustainability performance and employee decisions.”

“This insight will provide important data points because we believe that firms with poor corporate environmental performance face challenges in either attracting or retaining talent,” he continued.

“The costs of talent acquisition are also escalating. According to HR Singapore, talent acquisition costs are at least 50 percent to 60 percent of employee annual salary. It is predicted that the costs will continue to rise as the war for talent gets worse – which is why it is critical to not only confirm the concerns of these generational groups, but also to understand the relationship between employee concerns and their associated decisions,” he added.

“Uncovering these insights will help firms develop the right compensation and benefits strategy for the entire employee lifecycle whether this is to attract or retain talent with better compensation and benefits. Furthermore, these insights will help firms to manage their reputation in the labour market.

“And this research will clarify how the goals of Singapore Green Plan 2030 can be better aligned to Industry 4.0 Human Capital Initiative.”

The research

In this research, Professor Wang will be collaborating with his colleagues from SMU, Professor Zhang Liandong and Assistant Professor Kim Jungbae, and Professor Qian Cuili of Naveen Jindal School of Management at The University of Texas at Dallas.

The study will utilise archival data spanning over 10 years, concentrating primarily on the United States. The data includes employment history, job postings and employee feedback. The main focus is to examine how job seekers and employees view firms that are confronted with environmental sustainability challenges. 

This approach, which leverages real historical data, offers a more valid analysis compared to traditional surveys, as it captures the actual reactions by job seekers and employees rather than surveys which rely on self-reported data.

Moreover, the research team will extend the study to firms that face environmental sustainability issues – to assess whether the affected firms make efforts to alter their compensation and benefits strategy or to enhance their reputation management strategies. 

Such an investigation is essential to understand if and how firms adjust their human resources policies in response to environmental challenges. 

By analysing the factors mentioned above, the study aims to provide insights into the strategic decisions firms make to attract and retain talent amidst environmental sustainability crises. More importantly, these investigations will contribute valuable perspectives to the discourse on environmental sustainability and labour markets.

Professor Wang said: “I am very honoured to be given a grant to probe into this important HR (human resources) issue. And I can’t wait to conduct a comprehensive analysis and develop a model showing how a firm’s environmental performance affects employee decisions, as well as how it affects the firm’s workforce composition, talent acquisition and retention strategy, and its decisions on employee benefits and compensation.

Back to Research@SMU November 2024 Issue