Enhancing Business Performance through Green Human Resource Management Practices

in Malaysian Manufacturing Industries

Abstract

Purpose – Sustainability has come under public policy limelight. Organizations are investing to

minimize the impact of environmental degradation to build their image as an environmentally friendly

firm, which contributes to their business performance as well. Literature suggests that green

organizational indicators are found to be positively related to firm sustainable performance. More

specifically green human resource management (GHRM) practices strengthen the firm’s

environmental practices and enhance employee morale toward green practices. The paper aims to

investigate the impact of GHRM indicators on environmental performance (EP) and business

performance (BP).

Design/Methodology/Approach – The research employed SmartPLS 3 and follows a cross-

sectional research design. Data from 179 employees were collected using a convenience sampling

technique from the firms that adopted GHRM practices.

Findings – The research found a significant relationship of GHRM with EP and also reported the

significant relationship between EP and BP. Moreover, EP significantly mediates the relationship of

GHRM with BP.

Research Limitations – A relatively small sample size of employees was used that may suggest the

need for a diverse and more representative sample. The paper is based on data collected from the

Malaysian manufacturing industry – other economic sectors and Asian countries may offer different

results.
Practical Implications – The paper identifies the need for incorporating GHRM practices and

culture at the workplace to encourage positive green behavior in employees which will increase the

EP and BP of the firm.

Originality/Value – This paper reported the initial empirical findings after the March 7th incident on

EP of businesses in Malaysia, where businesses have initiated the adoption of GHRM practices.

Keywords: Green Human Resource Management, Environmental Performance, Business

Performance, Manufacturing Industry, Malaysia

1. Introduction

The manufacturing sector of Malaysia contributing 23% of GDP (Khan, Saufi, and Rasli, 2019). Due

to increasing societal concern in Malaysia especially after 7th March 2019 incident1 towards ecological

sustainability, organizations assume strategic importance to green practices for environmental

performance (EP) and to gain competitive advantage/ performance (Kleindorfer, Singhal, and

Wassenhove, 2005; Pagell and Gobeli, 2009; Porter and van der Linde, 1995; Sroufe, 2003; Yang et

al., 2010). On the other hand, previous research studies related to green practices and financial

performance of the business are often conflicting and ambiguous. Jime´nez and Lorente (2001)

suggested that EP can positively influence the results of the other operations objectives as long as it

is placed as a first objective together with quality. Russo and Fouts (1997) advice that EP could

backfire in certain situation when customers keep buying less environment friendly products in

specific circumstances/ economy. Miroshnychenko, Barontini and Testa (2017) concluded that

adoption of ISO 14001 appears to have a negative impact on financial performance. On the other

hand, Laosirihongthong, Adebanjo and Tan (2013) found the green practices lead to a positive

1
March 2019, news broke out about the industrial pollution in Sungai Kim Kim in Johore, which reportedly affected the health of almost 6,000 people (Gafoor,
2019; New Straits Times, 2019)
association with the three dimensions of performance - environmental, economic and intangible,

while, Namkung and Jang (2013) provided mixed results of green practices on firm performance.

Recently researchers have conducted studies to investigate the relationship between environmental

management and human resource management for enhancing EP (Ahmad, 2015; Bhutto 2016;

Jabbour and Jabbour, 2016; Jackson, Renwick, Jabbour, and Muller-Camen, 2011) and relationship

between EP and business performance (BP) (Yang, Hong and Modi, 2011). Subsequently, researchers

have found the connection between HR factors including green recruitment and selection, green

training, green performance evaluation, green reward systems, green empowerment, green

organizational culture management to enhance EP (Daily and Huang, 2001; Ferna´ndez, Junquera,

and Ordiz 2003; Madsen and Ulhoi, 2001).

Sustainable organizations keep focusing on how their operations affect the environment, nature of

effect from different organization activities and way out to protect environmental pollution and

degradation (Rondinelli and Berry, 2000). In this regard, organizations can prevent the environment

by adopting green human resource management (GHRM) practices which result in development of

environmentally responsible behavior among employees. The GHRM represents the paradigm of

“triple-bottom-line” since GHRM practices focus on social and economic balance (Yusoff, Ramayah,

Othman, 2015) and provide benefit to the organization (Wagner, 2013). Studies stressed the issue

among strategy makers related to compatibility of EP with competitive advantage (e.g. Gamble,

Peteraf and Thompson, 2014; Grimstad and Burgess, 2014; Marchi, Maria and Micelli, 2013; Rosen,

2001). The debate related to EP and economic viability is unclear, meanwhile, organizations identified

that environmental sustainability practices in manufacturing provide platform to acquire competitive

position (Montabon, Sroufe, and Narasimhan, 2007).

This study contributes to current literature by exploring the GHRM practices and its relationship with

EP and BP. For the purpose of this novel contribution, in the present study, EP explained the
relationship between GHRM practices and BP. Second, it is providing the evidence that Malaysian

manufacturing firms are involving in green practices, which is global and local of any organization to

show concern for the betterment of the general public and future environment by responding to calls

for social and environmental concern (i.e. 7th March 2019 incident). Therefore, it enrich the natural

resource base view (NRBV) literature by integrating an unique empirical model.

Accordingly, the first section of the paper describes the knowledge gap, objectives and contributions

of the study, next, we discussed the previous literature to provide understanding of how organizations

alter human resource management practices into GHRM practices which enhance EP and further lead

to BP. In third section, we discussed the design of the study, analytical approach and the methodology

adopted. In fourth section, we discuss the results of the empirical model and reported the statistical

results. In the end, we conclude the study with managerial and practical implications with future

guidelines and limitations.

1. Literature Review

2.1 Green Human Resource Management Practices

Firms are the main cause of environmental problems, they should, therefore, play a large part in

addressing environmental management issues (Bebbington 2001; Ragas, Tantay, Chua and Sunio,

2017)). Firms are being pressured by different sources to practice this trend as it will have an impact

on society (McGuire & Germaine, 2015). Therefore, firms already implemented eco-initiatives and

still trying to find new ways to resolve environmental management issues. GHRM is one of the

practices which emerge as a response to environmental degradation. The concept of GHRM refers

that the organization's preliminary focus is on its human resource operations for sustainable

development (Bhutto, 2016; Mandip, 2012).

GHRM practices along with the purpose of encouraging ecological utilization of resources to

emphasize environmental sustainability, create enhanced human resource behavior and obligation

toward environmental health (Gupta, 2018). The GHRM contributes to enhanced social and

economic well-being as well as develop behavior towards environmental concern. Strategic HRM

assumes that human resources are there to be consumed and exploited rather than developed and

maintained (Ehnert, 2009), and a wider GHRM practice would help place sustainability at the heart of

people management (Renwick, Redman, and Maguire, 2013). Research defined GHRM as the HRM

aspects of environmental management (Renwick, Redman, and Maguire, 2013). GHRM practices

brought great benefits to the organizational reputation, performance and were effective as they also

facilitate employees (Cherian and Jacob, 2012). Additionally, the concept of “Going Green” across

organizational functions was suggested for employees’ motivation towards the green world

(Chaudhary 2019; Longoni, Luzzini, & Guerci, 2018).

2. Theoretical Background

In this study, the theoretical lens of the natural resource-based view (NRBV) theory provides a

foundation to understand the association of environmental initiatives with organizational functions

and performance. Previously, researchers have adopted resource-based view (RBV) theory to support

the positive effects of HRM (Saridakis, Lai, & Cooper, 2017), while, the natural resource-based view

(NRBV), which is RBV extension, used to support positive effects of environmental initiatives

(Melkonyan et al., 2019) on firm performance. Also, Svensson et al. (2018) state that resource-based

view (RBV) theory widely utilized in research studies related to economic issues, while natural

resource-based view (NRBV) theory utilized to support studies based on environmental outcomes.

Additionally, RBV solely deals with performance phenomena, it suggests a dilemma for organizations

to involve in sustainability initiatives, if it provides market advantage (Miemczyk, Howard, and

Johnsen, 2016; Mani et al., 2016). On the other side, the NRBV provides understanding to gain a

competitive advantage in ways that sustain the earth's natural resources and ecosystems. Thus, NRBV

proposes a dynamic and interconnected view of strategies (Hart, 1995).

Therefore, NRBV theory was adopted to provide a theoretical foundation through which the link

between GHRM practices, environmental performance and business performance can be established.

The natural resource base view is a natural extension of RBV that specifically related to those

organizational resources and capabilities which provide a competitive advantage based on its

relationship with the natural environment (Hart, 1995; Jakhar, Rathore, & Mangla, 2018). Thus, NRBV

theory supports to establish sustainable strategies by defining the relationship between resources and

capabilities and strategic outcomes (Melkonyan et al., 2019). Hart and Dowell (2011) proposed that

the NRBV theory focuses on the contingent nature of resources and capabilities that allow researchers

to create a link between organization resource strategies and the environment. Though with variation

in choice of latent variables and methodology, previous empirical studies adopted NRBV theory to

provide a theoretical foundation to their studies (e.g. Chan, 2005; D’Agostini et al., 2017; Hart and

Dowell, 2011; Tate and Bals, 2018). Based on NRBV theory Chan (2005), found that environmental

initiatives create a competitive advantage for organizations. Additionally, Tale and Bals (2018) used

the NRBV of the firm to provide a theoretical foundation to explore sustainable development.

3.1 Green Recruitment & Selection and Environmental Performance

Green recruitment involves evaluating candidates’ environmental understanding, belief, and concern

(Renwick et al., 2013) and convey messages related to environmental criteria (Arulrajah, Opatha, and

Nawaratne, 2015). Therefore, the green recruitment process reveals recruits about the green

organization culture and environmental values (Jackson and Seo, 2010). Renwick, Redman, and

Maguire (2013) proposed that sustainable organizations need to concentrate on attracting and hiring
those candidates who have concern for the environment. Thus, organizations ought to upsurge their

recruitment through candidates who are aware of environmental concerns (Ehnert, 2009). Researchers

proposed that sustainable organizations need to create their image and position in public as an

environmentally friendly organization, to attract prospective candidates (Kapil, 2015a; Guerci et al.,

2016; Mani et al., 2018).

Further, researchers (Mandip, 2012; Renwick et al., 2013) claim that the green recruitment process

discusses what is expected from future green employees during job analysis, job description and job

specification which clarify green accomplishment and environmental concern of organizations.

Similarly, Razab, Udin, and Osman (2015) indicated that sustainable organizations need to emphasize

ecological questioning while interviewing potential candidates. Additionally, organizations ought to

enhance their endeavors toward preventing the environment by incorporating environment-friendly

job responsibility (Arulrajah et al., 2015) and create job positions which mainly concentrate on

environmental aspects of the organization (Opatha, 2013). Jabbour (2011) proposed that sustainable

organizations should give preference to environmentaly committed candidates, which may contribute

to the environmental performance of organizations. Thus, authors propose the following hypothesis

H1: There is a positive relationship between green recruitment & selection and environmental

performance.

3.2 Green Training & Development and Environmental Performance

Since 1990s, researchers have been focusing on theorizing human resources and environmental

sustainability (Hale 1995; Madsen and Ulhoi 2001; Venselaar, 1995). According to (Daily et al., 2007;

Brío, Junquera, and Ordiz, 2008; Jabbour, 2013), environmental training is one of the most crucial

factors to bring environmental management initiatives through HRM within the organization.
Environmental training and environmental management of organizations are closely linked with each

other as these two constructs develop and grow simultaneously (Teixeira, Jabbour, and Jabbour, 2012).

Opatha and Arulrajah (2014) proposed that environmental training brings the most significant

development among employees toward an environmental concern and create green practices culture

in the organization. Correspondingly, Sarkis, Gonzalez-Torre, and Adenso-Diaz (2010) state that

employees with appropriate environmental training can adopt EM practices in an organization.

Likewise, Arulrajah et al. (2015) have explained the importance of green training to develop knowledge

and abilities in employees for better environmental performance.

Daily, Bishop, and Massoud (2012) conducted empirical research to find the relationship between

environmental empowerment and environmental training on environmental performance. They found

that environmental training significantly influences the environmental performance. Hence, training

and development programs are important for employees to acquire knowledge and skills in

environmental management (Renwick et al., 2013; Prasad, 2013). Moreover, Zoogah (2011) proposed

that organizations should offer environmental problem-solving tasks and green assignments as a

crucial aspect of training and development for potential green managers (Wehrmeyer, 1996; Prasad,

2013). Thus, researchers articulate the following hypothesis

H2: There is a positive relationship between green training & development and environmental

performance.

3.3 Green Performance Management &Appraisal and Environmental Performance

Ahmad (2015) proposed that an organization can improve environmental performance through

performance management system (PMS), since PMS guide employees and measure their contribution

toward environmental performance. Hence, PMS surely contributes to the advancement of green
work overtime (Jackson, Renwick, Jabbour, and Muller-Camen 2011), and also protects EM works

(Epstein and Roy, 1997). Researchers claim that organizations need to monitor resource usage and

evaluate environmental initiatives to ensure sustainable environmental performance (Arulrajah et al.,

2015; Jackson and Seo, 2010). Hence, sustainable organizations have created standards for

environmental performance to appraise the green performance of their employees and evaluate

environmental performance (Marcus and Fremeth, 2009). HRM should create green work rating

criteria through building EM objectives, assessing EM behavior and evaluate the environmental

achievement of employees and consider this green work of employees into their performance and

appraisal records (Gupta, 2018; Kapil, 2015b; Renwick et al., 2013). Moreover, organizations should

provide feedback regularly about employee performance in achieving environmental goals to improve

their environmental performance (Arulrajah et al., 2015; Jackson et al., 2011). According to

Govindarajulu and Daily (2004), providing feedback on the green work performance of employees

play an important role in motivating and increasing their involvement in EM responsibilities. Hence,

the human resource department needs to design a performance appraisal system of employees by

integrating behavioral and technical skills related to environmental sustainability (Ahmad, 2015). Thus,

researchers hypothesize that;

H3: There is a positive relationship between green performance management & appraisal and

environmental performance.

3.4 Green Reward & Compensation and Environmental Performance

Organizations can improve and achieve environmental goals by compensating and rewarding

employees for green practices and their commitment towards the environment (Jabbour and Jabbour,

2016). Hence, green reward and compensation encourage environmental-friendly behavior in

employees and can improve environmental performance (Zoogah, 2011). According to Daily and
Huang (2001), HRM should design a reward system that reflects an organizational commitment to

environmental performance meanwhile emphasize and encourage environmental-friendly behavior in

employees. The organizational environment commitment leads to enhance workers' environment

commitment, transforms them into more environmentally responsible workers and encourages them

to take ecological initiatives (Renwick et al, 2013; Daily and Huang, 2001). Similarly, Calia, Guerrini,

and Castro (2009) proposed that employees should be rewarded based on green projects result within

the organizations to encourage environmental-friendly behavior among employees. Additionally,

green appreciation rewards should be provided at different levels of management within the

organization (Arulrajah et al., 2015). Green rewards provide recognition and appreciation to most

environmentally committed employees and middle management who motivate their subordinates

toward green performance (Kapil, 2015a; Arulrajah et al., 2015). Moreover, Ahmad (2015) proposed

that green rewards can also be used to bring green creativity and innovation by providing reward base

opportunities to employees for suggesting green work ideas related to their jobs. Thus, the author

proposes

H4: There is a positive relationship between green reward & compensation and environmental

performance.

3.5 Green Employee Empowerment & Participation and Environmental Performance

Ahmad (2015) proposed that HRM can motivate employees toward green initiatives and increase their

participation in environment-friendly projects by empowering them. In this regard, HRM invites

employees to formulate green work initiatives with top management, during the process employees

can negotiate and discuss openly with management by proposing new ideas and highlight untapped

issues (Liebowitz, 2010). The participation and empowerment mechanism creates a medium in a

workplace to get the voice and support of employees in shaping environmental objectives (Harvey,
Williams, and Probert 2013). Additionally, employee participation and empowerment promote

environment-oriented entrepreneurs within the organization (Sudin, 2011). As per Chen, Tang, Jin,

Li, and Paillé (2015) employee involvement in creating green strategies will enable them to acquire

knowledge about green products/services and improve their tacit knowledge to deal with identifying

environmental degradation sources. It also helps in handling emergencies and expanding preventive

solutions (Boiral and Paillé, 2012), further, it leads to enhanced environmental performance (Renwick

et al., 2013). Similarly, Rothenberg (2003) found that employee participation significantly contributes

to environmental performance. Govindarajulu and Daily (2004) proposed that empowerment induced

employees to get involved in environmental issues. The environmental-related issues are usually based

on team projects, and these complex issues required different sets of skills to implement effective

EMS solutions (Daily et al., 2007; Rothenberg, 2003; Neto and Jabbour, 2010). Moreover, employee

empowerment enhanced environment management practices and tacit knowledge especially when an

organization is dealing with team-based environmental concerns (Daily et al., 2007). Thus, researchers

formulated the following hypothesis:

H5: There is a positive relationship between empowerment & participation and environmental

performance.

3.6 Green Management of Organizational Culture and Environmental Performance

Researchers proposed that green organizational culture plays a crucial role to bring enhancement in

environmental performance (Gupta and Kumar, 2013). Green organization culture can be created

through GHRM along with adequate support of HRM (Jabbour and Santos, 2008). GHRM is a key

driver of green organizational culture and has more potential than just improving environmental

performance (Mishra, Sarkar, and Kiranmai, 2014). Green organizational culture holds that the
workforce at a different level of management understands and acknowledges the importance of

environmental value in the organization (Ahmad, 2015; Bhutto, 2016). Hence, organizations need to

communicate eco-friendly initiatives, practices and objectives continuously at all levels of management

(Ramus, 2001; Daily, et al. 2007; Govindarajulu and Daily, 2004). Additionally, upper management

needs to provide feedback about environmental performance to sustain environmental value, and

create sanction criteria for environmental violations (Renwick et al., 2008; Mandip; 2012) meanwhile

develop the workforce through ecological training and education (Ferna´ndez et al., 2003).

Furthermore, upper management should allow trial and error approach toward environmental

performance in making environmental improvements. This experimental empowerment enhances

employees' motivation (Daily and Huang 2001, Daily, et al., 2007; Govindarajulu and Daily, 2004),

and promote environmental performance innovation (Govindarajulu and Daily, 2004; Ramus, 2001;

Ramus and Steger, 2000). Researchers proposed that employee empowerment performs a key role in

forming green organizational culture, as empowerment assigns authority of decision making to

employees about environmental problems (Daily et al., 2012). Likewise, Gupta and Kumar (2013)

proposed that green organization culture’ formation need some intervention from HRM; firstly,

employees at all level should be invited to express their thought about environmental initiatives,

objectives, execution, and implementation. Secondly, organizations should include open channels of

communication in green initiatives to motivate employees toward green goals achievement and allow

managers to be informed of sustainable practices. Thus, researchers proposed the following

relationship:

H6: There is a positive relationship between green organizational culture and environmental

performance.
3.7 Environmental Performance and Business Performance

In economics view, organizations need to limit the investment in ecological activities to point where

marginal benefit meets the marginal cost. Several researchers proposed that organizations may

detriment their economic performance by investing beyond the legal and regulatory ecological

requirements (Christiansen and Haveman, 1981; Conrad and Morrison, 1989). In light of this

assumption, organizations have not got any benefit from implementing excessive environmental

prevention, hence improving business performance through green practices have drawn little attention

from researchers (Darnall, Henriques, and Sadorsky, 2008). However, many research studies

highlighted that organizations can enhance financial performance through environmental

performance (Darnall et al. 2008; Kollman and Prakash, 2001, O'Donohue and Torugsa, 2016).

During early 1990s, several companies have benefitted financially by adopting green practices such as

reduce wastage, material and energy consumption (Hart and Ahuja, 1996). Correspondingly,

organizations that proactively formulate environmental strategies get the advantage of premium price

and enhanced sales (Rivera, 2002) due to increased market legitimacy (Suchman, 1995) and social

endorsement (Meyer and Rowan, 1977; Scott, 2001).

The social endorsement provides an edge to sustainable organizations since environment-friendly

organizations can market their green practices as a unique selling point for their products/services,

hence can gain competitive advantage (Russo and Fouts, 1997; Rivera, 2002; Bansal and Hunter, 2003).

With continuous improvement in their environmental practices, organizations can generate a pool of

innovation which leads to sustained competitive advantage (Sharma and Vredenburg, 1998; Russo and

Fouts, 1997; Hart, 1995). Moreover, environmental performance such as decreased wastage, carbon

emission, energy use, and other waste management is positively linked with business performance

(Hart and Ahuja, 1996; King and Lenox, 2000). Similarly, Darnall, et al. (2008) also found that
ecological involvement provides financial benefits to organizations hence contribute to business

performance. Thus, researchers articulate the following hypothesis:

H7: There is a positive relationship between green environmental performance and business

performance.

Moreover, based on the literature review, researchers have identified challenges that have been faced

by organizations in adopting environment management across organizational functions (Pagell, &

Shevchenko, 2014; Young et al., 2015), meanwhile uncertain about maintaining economic

performance. Prior studies support that GHRM practices significantly influence environmental

performance through selecting environmentaly committed candidates (Jabbour 2011), employees

green training and development (Arulrajah et al., 2015), green performance management and appraisal

of employees (Ahmad 2015; Gupta, 2018), compensation and rewards for environmental practices

and commitment (Jabbour and Santos, 2008; Jabbour and Jabbour, 2016), empowering employees to

shape environmental objectives (Harvey, Williams, and Probert, 2013), and green organizational

culture (Gupta and Kumar, 2013). Accordingly, Renwick, et al. (2013) proposed that implementation

of effective GHRM practices substantially addresses the environmental concern of organizations.

Moreover, numerous research studies support that green employee outcomes are linked with

environmental performance (Longoni, et al., 2018), which leads to business performance of the

organizations (Darnall, et al., 2008). Certainly, hiring the environmentally committed employees

positively support environmental development and often attract talented employees based on the

organization’s environmental reputation (Linnenluecke and Griffiths, 2010). Additionally,

empowering employees in shaping environmental goals, encourage involvement in environmental

activities and potentially improve environmental performance (Longoni, et al., 2018), thus, lead toward

the business performance of organizations (Agyabeng-Mensah, Afum, & Ahenkorah, 2020).

Based on the literature review, researchers investigated the role of environmental performance as a

mediator between green recruitment & selection, green training & development, green performance

management & appraisal, green reward & compensation, green employee empowerment &

participation, green organizational culture, and business performance. Thus, the following hypothesis

is proposed.

H8: Environmental performance plays a role as a mediator between green recruitment & selection and

business performance.

H9: Environmental performance plays a role as a mediator between green training & development

and business performance.

H10: Environmental performance plays a role as a mediator between green performance management

& appraisal and business performance.

H11: Environmental performance plays a role as a mediator between green reward & compensation

and business performance.

H12: Environmental performance plays a role as a mediator between green empowerment &

participation and business performance.

H13: Environmental performance plays a role as a mediator between green organizational culture and

business performance.

3. Methodology

The construct and measures for GHRM, EP, and BP were obtained and adopted from existing

studies(Table 1). The self-administrated questionnaire consists of close-ended questions. In this study,

constructs including green recruitment and selection, green training and development, green

performance management and appraisal, green reward and compensation, green empowerment and

participation, green organizational culture, EP and BP are gauge with five, five, five, three, five, five,
four and six indicators, respectively. The items for all constructs were adopted from previous studies

and measure on 5-points Likert scale. Table 1 shows a summary of constructs.

Table 1: Summary of Constructs

Number of
Construct Study
Indicators

Demographic 3 -

Green Recruitment and Selection 5 Masri, and Jaaron, (2017)

Green Training and Development 5 Masri, and Jaaron, (2017)

Green Performance Management And

5 Masri, and Jaaron, (2017)
Appraisal

Green Reward and Compensation 3 Masri, and Jaaron, (2017)

Green Empowerment and Participation 5 Masri, and Jaaron, (2017)

Green Organizational Culture 5 Masri, and Jaaron, (2017)

Environmental Performance 4 Li, Ye, Sheu, and Yang, (2018);

Pucihar, Lenart, Borštnar,

Business Performance 6
Vidmar and Marolt, (2019).

As the organizations in Malaysia, that practice GHRM were limited, researchers had limited options

with six organizations that fall in this category from manufacturing industry for data collection. The

data analysis was performed on 179 out of 482 responses, remaining were discarded. The discarded

responses were due to the reasons such as incompleteness or more than one options were chosen in

the given items. For organization visit, questionnaire distribution, and collection, author’s colleagues

have assisted. In this study, a convenient sampling technique was used to get respondents. This is

because majority of the employees are on work shifts and makes it difficult for data collection. The
survey was administered to employee’s and responses were collected on GHRM, EP, and BP. The

demographic information of respondents is presented in table 2.

Independent t-test method was used to determine the non-response bias by using and comparing first

20 respondents and the last 20 respondents on all variables (i.e. Armstrong and Overton, 1977; Ghouri

and Mani, 2019). The results revealed that there was no significant difference between the early and

late respondents, suggesting no concern for non-response bias. Furthermore, we conducted Harman’s

single-factor test to assess the potential for common method bias (Dellana et al., 2019; Podsakoff et

al., 2003). All survey items were included in the study to determine if most of the variance in the model

was accounted for by one general factor. The result of variance explained by a single factor was 46.7,

which implies no issue of common method bias (Farouk et al., 2016; Saunila, Pekkola, and Ukko,

2014).

Table 2: Demographic Information

Variable Category Percentage %

Gender Male 73.6

Female 26.4

Age < 25 63.6

25-35 28.4

36-45 7.3

>45 0.7

Experience <5 61

5-10 31

10-15 5

>15 3
 4. Data Analysis and results

We used variance-based structural equation modeling or partial least square (PLS) using smartPLS 3,

to analise the collected data. PLS is well suited for studies in the theory building and testing (Hulland,

1999). According to Barclay, Thompson & Higgins, (1995) PLS can simultaneously test the

measurement model (relationships between items and their corresponding constructs) and the

structural model (relationships between constructs). We created a measurement model and a structural

model to assess the model fit. Additionally, we performed reliability, Cronbach's alpha, convergent

validity (AVE), discriminant validity (HTMT) (Chi, Kilduff, and Gargeya, 2009; Gefen, Straub, and

Boudreau, 2000) tests to ascertain the model fitness. Further, bootstrap analysis is performed to test

the statistical significance of the path Co-efficient after computing the path estimates in the structural

model (Park, Lee, and Chae, 2017; Hair et al., 2012).

Figure 1 present the conceptual model of the research study.

Green Recruitment
Green Training & & selection
Development

Green Reward and H1

Compensation H2

Green Performance H3
& Appraisal Environmental H7 to H13 Business
Performance Performance
H4
Green Employee
empowerment &
Participation
H5
Green organizational
culture

H6
 Figure 1: Conceptual Model

Table 3 shows the composite reliability, convergent validity, Cronbach's Alpha, discriminant validity

(HTMT). Reliability values of all constructs are greater than 0.70 implying that the construct scores

were reliable (Henseler et al., 2014; Suhartanto and Brien, 2018). The reliability values of all constructs

were between 0.72 to 0.913. Fornell & Larcker (1981) suggested that the AVE greater than 0.5

indicates that reflective constructs are unidimensional. The AVE value in the table shows the value

between 0.627 to 0.823, there by confirming the unidimensionality of all constructs. The Discriminant

Validity value ‘significantly’ smaller than 1 (i.e. cutoff value of 0.85), expresses the reflective construct

has the strongest relationships with its own indicators in comparison with than any other construct

(Henseler, Ringle & Sarstedt, 2015; Prakash et al., 2017). All five constructs’ HTMT values were < .85

cutoff value and fulfill the requirements of discriminant validity.

Table 3. Reliability and Validity Results

Composi
Converg Cronbac Discrimin
te
Construct ent h's ant
Reliabilit
Validity Alpha Validity
y

Green Recruitment and Selection 0.842 0.823 0.913 0.732

Green Training and Development 0.863 0.749 0.872 0.691

Green Performance Management And 0.921 0.654 0.921 0.765

Appraisal

Green Reward and Compensation 0.829 0.682 0.854 0.655

Green Empowerment and Participation 0.855 0.686 0.812 0.712

 Green Organizational Culture 0.911 0.627 0.883 0.761

Environmental Performance 0.871 0.733 0.807 0.795

Business Performance 0.854 0.687 0.728 0.801

The R-squared and Q-squared values of the endogenous latent variable for predictive accuracy

is shown in table 4. R-square of EP and BP is 0.832 and 0.298 respectively. R-square between the

value of 0.25, 0.50 and 0.75 shows the weak, moderate and strong association for the endogenous

variable (Hair, Ringle, and Sarstedt, 2012; Henseler et al., 2015). After R-square, Q-square is analyzed

for prediction of relevancy. A model that uses SEM analysis, Q2 values equal to zero or below the

zero show the weak prediction relevancy, values between the 0.35, 0.15 and 0.02 demonstrate that

exogenous construct has a large, medium and small prediction relevancy respectively the endogenous

latent construct. We have performed blind folding, and all the values are above zero which shows the

predictive relevancy. Table 4 is given below:

Table 4. Blindfolding and R2

Construct R2 Q2

EP 0.832 0.578

BP 0.298 0.167

The coefficient of determination, R2, is 0.298 for BP (DV). This means that the variables

including Green recruitment & selection, green training & development, green performance

management & appraisal, green reward & compensation, green employee empowerment &

participation, green organizational culture, and EP, explain 29.8 % of the variance in DV BP. The R-
square for mediator variable is 0.832, it means, Green recruitment & selection, green training &

development, green performance management & appraisal, green reward & compensation, green

employee empowerment & participation, and green organizational culture explain 83.2 % of the

variance of EP.

Results confirm the that Green recruitment & selection (β=0.072; t= 15.006; p=0.000), green

training & development (β=0.628; t= 5.021; p=0.000), green performance management & appraisal

(β=0.302; t= 10.037; p=0.000), green reward & compensation (β=0.252; t= 13.016; p=0.001), green

employee empowerment & participation (β=0.667; t= 11.039; p=0.002) and green organizational

culture (β=0.242; t= 8.032; p=0.000) have significant positive relationship with EP. Further the EP

(β=0.925; t= 8.038; p=0.000) have positive significant relationship with BP. Table 5 show the results

of path coefficient analysis.

Table 5: Path Coefficient (Direct Effect)

Standard T Statistics
Original Sample
Path Deviation (|O/STDE P-Values
Sample (O) Mean (M)
(STDEV) V|)

0.00
EP -> BP 0.925 0.927 6.022 8.038
0

11.03 0.00
GEP -> EP 0.667 1.678 17.073
9 2

0.00
GOC -> EP 0.242 0.648 7.672 8.032
0
 GPMA -> 10.03 0.00
0.302 0.621 8.113
EP 7 0

GRC_ -> 13.01 0.00

0.252 0.548 15.930
EP 6 1

15.00 0.00
GRS -> EP 0.072 0.370 12.959
6 0

0.00
GTD -> EP 0.628 2.141 29.496 5.021
0

5.1 Mediation Analysis

Mediation analysis reveal that EP play a role of mediation between proposed relationship. Our

statistical analysis confirm the mediating role of EP between Green recruitment & selection (t= 3.512;

p=0.002), green training & development (t= 4.845; p=0.000), green performance management &

appraisal (t= 2.960; p=0.003), green reward & compensation (t= 5.021; p=0.000), green employee

empowerment & participation (t= 2.792; p=0.001) and green organizational culture (t= 12.354;

p=0.000) and BP. Table 6 present the results of indirect effect. Hence, result support all proposed

hypotheses.
Table 6: Mediation results (Indirect Effect)

Original Sample Standard

T Statistics
Sample Mean Deviation P-Values
(|O/STDEV|)
(O) (M) (STDEV)

GEP -> EP -> BP 0.642 0.498 0.042 2.792 0.001

GOC->EP -> BP 0.297 0.623 0.044 12.354 0.000

GPMA -> EP -> BP 0.281 0.597 0.082 2.960 0.003

GRC -> EP -> BP 0.581 0.552 0.093 5.021 0.000

GRS -> EP -> BP 0.441 0.376 0.087 3.512 0.002

GTD -> EP -> BP 0.233 0.242 0.052 4.845 0.000

Table 7: Summary of Hypothesis

Hypotheses T-values P-values Decision

H1: There is a significant relationship between green

recruitment & selection and environmental 3.512 0.002 Supported

performance.

H2: There is a significant relationship between green

training & development and environmental 4.845 0.000 Supported

performance.
H3: There is a significant relationship between green

performance management & appraisal and 2.960 0.003 Supported

environmental performance.

H4: There is a significant relationship between green

reward & compensation and environmental 5.021 0.000 Supported

performance.

H5: There is a significant relationship between

empowerment & participation and environmental 11.039 0.002 Supported

performance.

H6: There is a significant relationship between green

8.032 0.000 Supported
organizational culture and environmental performance.

H7: There is a significant relationship between green

8.038 0.000 Supported
environmental performance and business performance.

H8: Environmental performance plays a role as

mediator between green recruitment & selection and 3.512 0.002 Supported

business performance.

H9: Environmental performance plays a role as

mediator between green training & development and 4.845 0.000 Supported

business performance.

H10: Environmental performance plays a role as

mediator between green performance management & 2.960 0.003 Supported

appraisal and business performance.

 H11: Environmental performance plays a role as

mediator between green reward & compensation and 5.021 0.000 Supported

business performance.

H12: Environmental performance plays a role as

mediator between green empowerment & participation 2.792 0.001 Supported

and business performance.

H13: Environmental performance plays a role as

mediator between green organizational culture and 12.354 0.000 Supported

business performance.

5. Discussion

The objective of the study was to investigate the novel relationship between GHRM practices, EP and

BP. Table 7 shows a summary of hypotheses and results. The decision column highlights either the

hypothesis was (1) supported; (2) not supported.

GHRM is one of the most prominent practice through which employee from initial stage of

recruitment can create a perception regarding environmental beliefs of organization and understand

the values that matters to organizations. The concept of green in HRM practices facilitate organization

in two unique ways. First, it reveals the organization’s belief and values toward environment from

initial stage through selecting environmentally oriented employees, thus, it form a psychological

agreement with employees from the beginning (Guerci et al., 2016; Renwick et al., 2013; Mandip,

2012). Second, it keep on reinforcing model practices that encourage green practice and continue to

convey organizations green values to existing employees which induce them to hold organizational
values and mission as well as contribute in long term environmental performance (Chen, et al., 2015).

In this study results revealed that green recruitment & selection, green training & development, green

performance management & appraisal, green reward & compensation, green employee empowerment

& participation, green organizational culture is positively related with EP. This research study showed

that employees perceive green organizational value when the organization integrates environmental

goals into the human resource practices. However, they ought to get knowledge and training to better

equip with eco-friendly behavior (e.g., Ramus, 2001; Govindarajulu & Daily, 2004; Ahmad, 2015)

which lead to contribute in environment performance. These findings are aligned with the results

acheived by Berchicci and King (2007) and Hart and Ahuja (1996).

Further, the results obtained in this study restore the lost centrality of the green human resource

practice by leveraging it as a key component for environmental and business strategy. Regarding

environmental performance and business performance, the results point out that the environmental

performance is positively linked with business performance of organizations. A possible explanation

for this phenomena could be the NRBV theory that claim that “constrained by and dependent upon

ecosystems, a firm’s strategy and competitive advantage will be rooted in capabilities that facilitate

environmentally sustainable economic activities” (Hart, 1995). These findings are in-line with previous

research studies (Ahmad, 2015; Darnall, et al. 2008; Gopal and Thakkar, 2012; Gupta 2018; Yusoff,

Ramayah, and Othman, 2015), these research studies investigate HRM practices along with the

purpose of encouraging ecological utilization of resources to emphasize environmental sustainability,

create enhanced human resource behavior and obligation toward environmental health.

Moreover, the unique finding of the study is the mediating role of EP between green recruitment &

selection, green training & development, green performance management & appraisal, green reward

& compensation, green employee empowerment & participation, green organizational culture, and

BP. It was found that EP mediates the relationship between green recruitment & selection, green
training & development, green performance management & appraisal, green reward & compensation,

green employee empowerment & participation, green organizational culture. The study provides

empirical evidence that GHRM practices enhanced EP, which leads to enhance BP. This study further

contributed in domain of natural resource base theory that Malaysian organizations are practicing and

involving in environment-friendly operations.

6. Conclusion

Green organizational practices emerged as one of the most pivotal phenomena of ecological

sustainability. It helps organizations to achieve environmental performance along with competitive

advantage in local and foreign markets. The best way to implement and achieve green practices in

organizations is through employees (Masri, and Jaaron, 2017), since, human resources are the

activators of all other processes and resources. Our research seeks to answer the question that how

the adaptation of GHRM and green culture leads to environmental performance which in return

increases the BP of the firm. Results indicated that GHRM enables the environmental behavior of the

employee, by proving them training on environmental awareness and link it with the rewards based

on environmental achievement (Arulrajah et al., 2015). These implications are important and help in

enhancing the environmental performance. Moreover, environmental performance significantly

intervenes in the relationship and increases BP (King and Lenox, 2000; Pucihar, et al., 2019), when

the organization has implemented green HRM and culture practices (Gupta and Kumar, 2013). The

study found that green culture is crucial for employees, and top management support is essential to

promote it to the bottom. It helps employees to focus on environmental management aspects of the

organizations, and enable them to know their specific green targets, goals, and responsibilities in the

organization. This study contributes to the literature on green HRM while proving the empirical
evidence that GHRM and green culture are the important enablers of environmental and BP hence

managers need to adopt the practices to levitate their business performance.

7. Implications to Practice

This study contributes significantly by providing new insight into the relationship between green

human resource management, environmental performance and business performance for managers.

Managers should involve in green practices to build trust and competitiveness globally. Human

resource plays a pivotal role to achieve the green and monetary goals of the organization. Green

practices motivate employees to perform better. Government awareness programs about the green

environment could also enhance the individual determination to perform better and adopt the green

organization. The model of the study provides guidance to managers for implementing most

substantial GHRM practices that effect the environmental performance by reducing energy, water,

emissions and wastage from facilities. Globally environmental performance has become one of the

critical issues in manufacturing sector, hence organizations are in need to enhance their environmental

sustainability (Küçükbay, & Sürücü, 2019), and organization can substantially enhance their green

production capabilities which are necessary to meet the ISO standard. Further managers to link

business performance strategies with environmental performance because higher environmental

performance can increase business performance in terms of profit growth, market share and net

income. Moreover, environmental performance can create a positive image of a firm into customers

mind which leads to gain customer loyalty. Additionally, the implementation of GHRM practices

present in this research support manufacturing organizations in building environmentally friendly

organization culture through defining green values, practices, initiatives, and rules.
8. Limitations and Future Directions

In this research, data was collected from limited organizations of manufacturing sector in Malaysia,

therefore the findings are limited to manufacturing sector of developing country, hence it is proposed

that future researchers can replicate the study in other sectors like food, logistic and service in other

developing and in developed countries. This study was based on a cross-sectional research design,

hence, an important step for further research is the collection and analysis of longitudinal data to rule

out alternative explanations. The implication of the given magnitude of the results, opinion, and

response of other stakeholders of sustainability may add pivotal findings. The same model could be

applied in other businesses and industries to concrete the results of GHRM on business performance.

Additionally, it is suggested to utilize other variable(s) in the current model to explore the role of

GHRM. Moreover, this study employed a single mediator in the model, it is proposed to use other

variables to find the association between independent and dependent variable(s). Lastly, in the

presence of environmental performance as a mediator, other variables possibly add up in

parallel/serial mediation approach in the same model.

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