Publication History
Submitted: September 01, 2023
Accepted: September 20, 2023
Published: October 01, 2023
Identification
D-0178
Citation
Rija Fatima & Shifa Hayat (2023). Ecological Management’s Effect on Employment Performance. Dinkum Journal of Economics and Managerial Innovations, 2(10):589-595.
Copyright
© 2023 DJEMI. All rights reserved
589-595
Ecological Management’s Effect on Employment PerformanceReview Article
Rija Fatima 1 *, Shifa Hayat 2
- University of Management and Technology, Lahore, Pakistan; Fatima_90@gmail.com
- University of Management and Technology, Lahore, Pakistan; haat35@gmail.com
* Correspondence: Fatima_90@gmail.com
Abstract: The European Union has set green economic growth and the green transition as top policy priorities. This study evaluates the impact of environmental management, specifically labour productivity, on the performance of the firm in this context. Despite the importance of this topic and the growing global need for environmental practices, there is still a dearth of empirical evidence on it. Consequently, in order to close this gap, we employ cross-sectional firm-level data to investigate the impact of several environmental variables on labour productivity. The Business Environment and Enterprise Survey’s sixth wave was used to collect these data (BEEPS VI). Ten EU nations are the subject of this investigation. According to the findings of the empirical analysis, companies that hire environmental managers and those that are subject to energy taxes or levies are both more productive than companies that do not; as a result, companies that have implemented or are subject to specific environmental practices benefit from higher labour productivity. Additionally, labour productivity is better in businesses that use renewable energy than in those that don’t. As a result, we were able to develop conclusions based on the results that have ramifications for managers and policy makers.
Keywords: ecological management, effects, job performance, employee
- INTRODUCTION
In recent years, the relationship between businesses and the environment has become a hotly debated topic. Whether companies that utilise ecologically friendly strategies are worse off than those that don’t and whether doing so keeps them from growing are the key grounds of dispute in this debate [1,2]. The limited studies that have been conducted on this subject, however, appear to have produced a wide range of results, some of which have discovered a positive correlation between a firm’s performance and green management practices. Well-crafted environmental legislation can encourage innovation, which lowers the overall cost of commodities or raises their value, according to Porter and van der Linde [3]. Consequently, innovations help companies make better use of a range of inputs, including labour, raw materials, and energy. As a result, there is a lot of debate about and interest in the relationship between businesses and the environment [1]. In this study, labour productivity has been used as a stand-in for business performance. This is an important way to assess this since some scholars believe that environmental management could improve people’s skills, health, and working conditions [4,5]. Furthermore, Lannelongue et al. [1] and Russo and Fouts [6] point out that human resources are linked to the benefits of green management methods. They contend that human capital and labour productivity are important determinants of how competitively those who invest in environmental issues will be. Additionally, Russo and Fouts [6] explore the strong case that environmental regulation enhances economic performance by promoting efficiency and innovation in the interaction. Additionally, Lannelongue et al. [1] discuss the significance of this factor and how labour productivity is becoming a more significant factor in determining competitiveness in global marketplaces and, consequently, a superb indicator of company success. This is due to increased globalisation and market rivalry for industrial goods. Because of the increasing threat posed by climate change, the slow progress being made in energy efficiency, and the growing share of renewable energy sources, environmental management has become more and more important in enterprises across Europe. We can therefore learn more about the benefits that businesses receive from implementing voluntary green management practices by carrying out this kind of research [7]. The European Union (EU) has established a number of objectives that need to be met, with benchmarks projected for 2030, 2040, and 2050. Achieving net zero greenhouse gas emissions by 2030, reducing greenhouse gas emissions from 1990 levels by at least 55%, and raising the share of renewable energy sources in energy consumption to 32% by 2030 are some of these objectives [7]. Therefore, it is expected that EU member states would begin imposing government rules to regulate enterprises’ green management practices in order to attain these goals. It will be fascinating to observe if voluntary management environmental efforts have a bigger or smaller impact on corporate performance than government laws. Therefore, it is essential that these companies understand the advantages or disadvantages of this for their performance. For these reasons, the effect of environmental management on worker productivity is a subject of great interest to the EU and the rest of the world. Therefore, we look at the potential that worker productivity, as measured by four environmental management strategies, influences the success of the company. We assess the assumptions using data from the World Bank’s Business Environment and Enterprise Performance Survey (BEEPS VI), which was gathered during the sixth cycle of the survey and spanned the years 2018–2020, using a sample of 4071 enterprises from 10 different European countries. By doing this, we will shed light on the connection between labour productivity and businesses that employ environmental managers. This will have consequences for both business management and policymakers in regards to the relationship between labour productivity and environmental taxes or levies. This study adds to our understanding of the ways in which corporate environmental management influences productivity in a number of ways. Firstly, there is a paucity of empirical evidence, particularly concerning non-core European countries. Despite the substantial literature on the impacts of CO2 emissions and governmental regulations on GDP growth and total factor productivity at the macro level, there is a paucity of study at the micro or business level. To provide a more thorough understanding of the current effects of environmental management on corporate performance, further empirical study is also needed. These findings can be used by managers and legislators to push companies to boost output while simultaneously enacting laws that promote sustainability and the green transition. Third, the focus of this study is the non-core EU nations of the Euro zone. Most empirical research is focused on OECD countries, particularly when it comes to macro issues. The EU’s primary goal for the next few decades, the green transition, is something that non-core member nations are also going through. The business environments in these countries are not as favorable to the growth of the green economy as those in the core EU member states.
- LITERATURE REVIEW
Concerns about environmental problems resulting from the current and recent levels of growth and wealth in the world are growing [8]. Concerns regarding the economy’s long-term viability for industry and society are also becoming more prevalent [9]. This is mostly because of the massive industrial expansion that the globe has witnessed recently, which has led to serious environmental issues like air and water pollution and global warming [10]. Most notably, because of cost-cutting measures and laxer government controls, China’s economic progress has resulted in significant environmental damage. As a result, this needs to be rectified, and businesses are making more and more decisions based on green investment, which is a growing indication of their social responsibility [11]. Thus, opinions on the subject are divided: some think that adopting eco-friendly methods will improve the environment, employees, and performance, while others think that doing so will slow down economic progress [1]. In addition to lessening environmental effects, recent research has demonstrated that green entrepreneurial orientation, or GEO, can play a critical role in generating improved financial performance [8]. This disagreement highlights why environmental challenges should be given top priority in research [1]. Many organisations are adopting green management strategies as a result of the growing environmental concerns. As a result, research on the connection between productivity and environmental management has expanded recently. The definition of environmental performance varies throughout the literature. Environmental management is defined by Ma et al. [4] as the actions that businesses do to enhance their environmental performance. Nonetheless, Sambasivan et al. [12] define it as the degree to which a company’s procedures and policies enhance resource efficiency and minimise waste and environmental risk; hence, it serves as an indicator of how well a company is doing in mitigating its adverse environmental effects. According to Delmas and Petkovic [2], a company’s participation in social courses typically enhances its reputation, which in turn has a good effect on employees’ attitudes towards work and ultimately boosts productivity. Additionally, workers may be more dedicated to companies that uphold high environmental standards, which could lead to greater organisational standards (such as increased training and interpersonal interactions), which would impact labour productivity. It seems that empirical studies had previously demonstrated the detrimental impact of green initiatives on business success. McGuire et al. [13] provided an illustration of this, pointing out that production is lost when labour suffers as a result of environmental controls. Nevertheless, a number of more recent research have also discovered a negative correlation between green management techniques and firm performance [1,4,14]. According to Lannelongue et al. [1], there is a negative correlation between worker productivity and environmental management in businesses with high capital intensity. Moreover, Ma et al. [4] discover a negative correlation between worker productivity and environmental management, but their analysis was restricted to Chinese listed businesses. But according to this literature, additional characteristics like capital intensity and quality management can moderate the association between labour productivity and environmental management, as found by Lannelongue et al. [1] and Ma et al. [4]. Specifically, Ma et al. [4] find that quality management can play a moderating role in this relationship and lessen the burden of environmental management on productivity, while Lannelongue et al. [1] posit that those firms with low capital intensity had shown the opposite effect, with a positive relationship between environmental management and labour productivity. Today’s businesses must take into account the adoption of green practices [15]. A more equitable approach to economic growth and environmental sustainability is being pushed by factors like resource constraint, consumer preferences, cultural pressures, and regulatory measures [16]. As a result, there is some evidence in the literature that adding environmental management to business practices can have a number of advantages, such as higher sales and a return on investment [17]. Nevertheless, there is a dearth of research indicating which particular environmental measures, such cutting back on emissions of pollutants, boosting energy efficiency, and utilising eco-friendly products, can contribute to improved company performance [17]. Furthermore, Lun [9] contends that GMP (green management practices) is a source of comparative advantage, which is the primary cause of enhanced company performance. This is due to the fact that implementing GMP pushes businesses to employ more advanced environmental tactics, which makes it possible to include outside stakeholders in day-to-day operations. Thus, rethinking current operating systems to lessen their negative effects on the environment offers an excellent chance to evaluate all facets of operations collaboratively, thereby minimising the transfer of environmental damage from one subsystem to another [9] and enhancing organisational effectiveness [18]. Thus, businesses should see higher labour productivity as a result of ongoing organisational and environmental improvements, and they can leverage these developments to further strengthen their competitive edge [9]. Furthermore, as noted by Delmas and Pekovic [2], implementing environmental practices is likely to result in positive organisational representation, which may in turn have a favourable effect on workers’ attitudes towards their jobs. According to Lannelongue et al. [1], there may be a positive correlation between employee productivity and improved human resource management and cost savings. Thus, this indicates that there may be a positive correlation between environmental practices and worker performance under certain conditions. Since the 1970s, the cost of environmental protection for enterprises has grown significantly, and this trend is predicted to continue. The competitive position of a company is therefore greatly impacted by cost-effective green management [9]. However, research on environmental management indicates that by utilising green management techniques, businesses can both improve their competitive positions and lessen the consequences of their environmental wrongdoings [9, 19]. This is accomplished by a company having a set of business procedures whereby they evaluate their effects on the environment, establish environmental objectives, carry out environmental operations, track goal achievement, and do a management review [9]. Several environmental management strategies are included in the sixth wave of the World Bank Business Environment and Enterprise Performance Survey (BEEPS VI, 2018–2020), which means they may be examined using the empirical model in this study. In 1975, 3M was among the first corporations to have a strategy for reducing their pollution levels. By taking this measure, they were able to collect and treat garbage after it was produced and then work to stop it from being produced in the first place. Employees and line workers participated in this project by looking for ways to reduce waste. By starting this effort, 3M was able to cut their overall pollution by more than 530,000 tonnes, or 50% less emissions overall. They continued by demonstrating the advantages of this course of action, pointing them that it would save $500 million in raw material, acquiescence, disposal, and liability expenses. Since 3M reaped these benefits, many businesses and analysts have come to embrace a “win-win” perspective on business and green management, with the argument that regulation and green management boost competitiveness by fostering innovation and increased efficiency [20]. According to the well-known Porter hypothesis [21], environmental regulations encourage businesses to take on innovative projects, which should increase their productivity and competitiveness [22]. Typically, the largest portion of all environmental levies is made up of energy taxes. Energy taxes present a productivity challenge for businesses. Profitability and cost effectiveness both rise with increased energy efficiency. Consequently, companies may be encouraged to increase their output, resulting in increased energy usage and decreased energy efficiency [23]. As a result, it’s unclear how energy taxes will affect business performance. Productivity increases are more likely to occur for businesses that adopt more innovative practices as a result of environmental regulations. Conversely, businesses that struggle with productivity issues may see a decline in energy efficiency, which could have a detrimental effect on output. The Porter hypothesis appears to have sector-specific impacts based on empirical evidence. According to Steinbrunner [22], energy and pollution tax rates have a favourable impact on productivity in industries that produce commodities that require a lot of energy, in sectors that are heavily dependent on energy, and in sectors that emit pollutants. Moreover, energy conservation rules have increased output in the equipment and metals industries, according to Fujii et al. [24]. The following hypothesis is developed in light of the fact that these industries predominate in our sample. According to Masri and Jaaron [25], employees across all areas of the organisation share common responsibility for maintaining a green organisational environment. This means that the implementation of green practices is not restricted to particular organisational apartments. Managers should therefore involve staff members at all levels in the process of preserving the environment. Additionally, according to Lannelongue et al. [1], companies that practise better environmental management have happier workers. They also mention that a pharmaceutical company discovered that a positive workplace culture increased labour productivity. This raises the question of whether environmental initiatives that lead to increased productivity also boost a company’s reputation. Moreover, Ma et al. [4] contend that environmental management can raise employee happiness, with an effective environmental management programme making staff members feel proud of their organisations and encouraging them to work more. Additionally, it is claimed that environmental management can lower labour costs because pollutants have the potential to be hazardous to workers’ health; hence, improved environmental performance can lower employee absenteeism and sick leave. Higher labour expenses may result from the necessity for new hires as a result of the sick leave and absenteeism [4]. Additionally, Masri and Jaaron [25] point out that employers should prioritise selecting workers who care about the environment and support it; to attract a talent pool that is becoming more conscious of environmental issues, employers should cultivate a positive reputation for environmental responsibility. Additionally, it should be a requirement of the hiring process for new employees to comprehend the organization’s green culture and uphold its environmental values. As a result, environmental criteria should be included in recruitment advertisements, and such procedures should include showcasing green accomplishments and outlining expectations for green employees. Furthermore, there is a debate concerning the need for rewards for workers who demonstrate a greater commitment to environmental practices. Some suggestions include compensating employees for avoiding harmful actions and encouraging eco-friendly activity. This could be accomplished by supporting staff members’ pro-environmental behaviours and imitating management’s dedication to environmental practices [25, 26]. Additionally, Masri and Jaaron [25] talk on how employee engagement will rise if management makes such promises and rewards available, since this will encourage workers to take an increased role in eco-initiatives and environmental responsibility. Furthermore, companies with rigid, top-heavy, and bureaucratic organisational structures may find it more difficult to implement changes than companies with flexible and lean organisational structures. This is according to Govindarajulu and Daily [27], who argue that organisational culture may either support or undermine employee motivation for environmental improvement. Consequently, a culture that may promote creativity and risk-taking and support environmental improvement initiatives through values, norms, attitudes, and behaviours must be a part of management’s commitments [27]. Employers utilise ISO 14001 [28] to provide environmental policy training to their staff, which encourages participation in environmental regulation. Additional training for staff members increases workplace engagement, which may boost labour productivity [1, 2]. Furthermore, businesses that have implemented widespread EMS practices report higher levels of information sharing, involvement in community relations initiatives, and use of the internet to access environmental information compared to businesses that have not adopted such practices widely. These findings are reported by Morrow and Rondinelli [29]. Additionally, Ma et al. [4] point out that some academics think environmental management can enhance employee satisfaction and working conditions and health, which will increase labour productivity. In light of the conversation above, the following theory was developed: In order to guarantee that risks, liabilities, and consequences are appropriately identified, reduced, and managed—and so guaranteeing the ability to lower risks associated with environmental compliance—environmental standards mandate the implementation of specific environmental practices and processes [2]. Practices including environmental performance targets, internal and external environmental audits, and staff training can help achieve this [2,18]. Delmas and Pekovic [2] also talk about the benefits of adopting environmental standards by businesses. Specifically, they highlight how adopting environmental practices creates new information gathering and environmental performance monitoring systems, which in turn spurs a redesign of the production process and boosts innovation and, ultimately, business efficiency. According to Delmas and Petkovic [2], companies that implemented environmental standards saw an average 16% rise in labour productivity. This suggests that adopting environmental standards has a beneficial impact on labour productivity. Many businesses are hesitant to implement environmental management techniques, despite the literature’s mention of the advantages for them. Many businesses are hesitant to adopt more aggressive and proactive approaches to these practices, according to Montabon et al. [30], because there doesn’t seem to be enough proof that pursuing these initiatives will result in more advantages than expenses. But we also have to take into account that their study was released in 2006, so it might not be as relevant now. The somewhat small number of ISO 14001 certificates that have been granted to US businesses demonstrates this reluctance [30]. When the ISO 14001 standard was published in 1996, it put further pressure on a few industries to utilise environmental management systems to address environmental performance. With the help of this new standard (ISO 14001), a single plant or organisation can develop or enhance its environmental policy, identify the environmentally friendly aspects of its operations, set environmental goals and develop programmes to achieve them, track their progress, address any shortcomings, and evaluate management systems to promote continuous improvement [29, 30]. Because ISO 14001 offers standardised guidelines for managing a company’s environmental impacts, many businesses have developed and implemented environmental management systems under this standard [29]. Effective company management these days includes the capacity to address environmental, social, and governance (ESG) challenges pro-actively. However, a large number of businesses withhold their ESG data. Consequently, an extra Green Economy module is included in enterprise surveys, like the sixth wave of the Business Environment and Enterprise Performance survey (BEEPS VI: 2018–2020), which is conducted by the World Bank Group and the EBRD. This module gathers data on the green management practices of businesses as well as other aspects of their behaviour related to climate change. These included inquiries about the company’s strategic goals regarding the environment and climate change, whether or not a manager is specifically hired to handle green management, whether or not energy and water usage is tracked, and lastly, whether or not the company has measurable environmental goals. Because we can use these secondary data to evaluate the relationship—if any—between green management and labour productivity, these surveys will be highly helpful for our research. Additionally, a number of businesses that have benefited from the application of ISO 14001 certification are examined by Morrow and Rondinelli [29]. One such business was ABB Automation, which at one of its facilities obtained ISO 14001 accreditation; this application allowed energy and hazardous waste management and disposal expenses to be reduced. The company’s dedication to environmental standards, which is maybe the most significant finding of all, also raised employee morale, according to ABB Automation, which may have improved labour productivity. Nonetheless, it is critical that businesses and governments carry out environmental management in an efficient manner. Strict environmental management may decrease efficiency because it limits businesses’ flexibility in addressing environmental challenges, according to Ma et al. [4]. As an illustration, consider the fact that environmental management typically necessitates substantial modifications to production structures, which forces businesses to alter their manufacturing procedures and employ ecologically friendly machinery and technology. Given that both developed and emerging economies have made the green transition a priority, the usage of renewable energy and its effect on business performance are crucial topics. The effect of renewable energy usage on economic growth has been the subject of various macroeconomic research. Relatively fewer research works concentrate on company performance. The productivity of a company can be increased via clean production technologies [31]. Additionally, clean production technologies could be less expensive than polluting ones, which helps businesses minimise costs [32]. Energy has lately been added to the conventional manufacturing function [33]. Reducing greenhouse gas emissions and reliance on non-renewable energy sources is indicated by the incorporation of energy, especially renewable energy, in the production function [33].
- CONCLUSION
The effects of various environmental management strategies on labour productivity are reported in this study. There is still much disagreement about whether these techniques improve or worsen firm performance, as was covered in the literature review and introduction. Nonetheless, our model discovered that implementing such environmental policies had a mostly favourable impact on business performance. It did this by utilising labour productivity as a measure of firm performance and a variety of independent and control factors. Consequently, it would seem from the research’s findings that there are management and policy implications as well. Because they demonstrate that environmental government interventions may genuinely boost corporate performance, these results have significant implications for future study and should be taken into consideration by governments, especially in high-emission nations. Governments should think about raising or maintaining their current energy taxes and levies in order to boost corporate productivity and lessen the detrimental effects that businesses have on the environment. Furthermore, businesses will become less dependent on non-renewable energy sources and increase productivity if they transition to using renewable energy sources sooner rather than later. Furthermore, given that some of the sample enterprises had an environmental manager on staff, it might be said that there was a voluntary positive association between worker productivity and firm performance. Nishitani et al. [37] point out that if there were benefits, it would be realistic to expect businesses to do environmental management voluntarily; hence, government regulation may not be necessary in the long term. This could have ramifications for government interventions. In terms of managerial ramifications, businesses ought to think about hiring an environmental manager. Such an employee would enhance the company’s performance while also lessening its environmental effect [5]. Additionally, as was previously covered in the methodology and discussion sections, workers under these managers may get access to possibilities for training, skill development, and career promotion, among other advantages. Additionally, managers ought to think about methods of boosting the usage of renewable energy in order to expedite their company’s green transformation and benefit from higher production.
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Publication History
Submitted: September 01, 2023
Accepted: September 20, 2023
Published: October 01, 2023
Identification
D-0178
Citation
Rija Fatima & Shifa Hayat (2023). Ecological Management’s Effect on Employment Performance. Dinkum Journal of Economics and Managerial Innovations, 2(10):589-595.
Copyright
© 2023 DJEMI. All rights reserved