Sustainability-oriented human resources practices and their impacts on financial performance: A study on european companies

This study examines the impact of the sustainable HR management (SHRM) practices on the organizations' financial performance by studying various dimensions of sustainable HR practices derived from Environmental, Social, and Governance (ESG) scores. Secondary data were retrieved from Thomson Reuters data base for five years spanning between 2015-2019. The data was collected for the public and private organizations having more than 100 employees over different European countries. To test the study hypothesis, return on assets (ROA) was used as a dependent variable to measure the financial performance of the organizations. The proposed five independent variables that could be affecting the financial performance were social pillar score, training hours score, workforce score, policy human rights score and women mangers. Generalized Least Square Method (GLS) method was employed to estimate the empirical panel models. All the independent variables showed a positive and significant relationship with the ROA between 5% and 1% level of significance. The findings suggest that in the study sample of organization, investing in social pillar score that measures the employees, customers and society's loyalty and trust towards organizations, and investing in employees' training and development is critical to affect the organizations' financial performance. Since the sample is from European countries where employees are educated and aware of their human rights and women participation at managerial level are normal, these factors are important but less strongly related with the organizations' financial performance.