The impact of workforce practices on firms’ sustainability performance: An empirical study of Canadian listed firms

Abstract

This study examines the impact of workforce practices on firms’ environmental and social performance. The mediating impact of firms’ financial performance and the moderating impact of firm age on workforce practices and environmental/social performance are also investigated. Data were collected through the Refinitiv database from a sample of 224 large, actively traded Canadian firms listed on the Toronto Stock Exchange (TSX). A linear regression model was used to test the effect of various workforce practices on firms’ environmental and social performance. The findings have important implications for the direct and indirect impacts of workforce practices on firms’ environmental and social performance. While the direct impact was found to be significant, firms’ financial performance was found to fully mediate the workforce-environment/social performance relationship. The findings also demonstrated that the impact of firm age on workforce practices and environmental/social performance via financial performance was significant. The study draws on the signaling theory to empirically investigate the contextual aspects that affect the association between various workforce practices and firms’ sustainability performance. The findings can be utilized by firms to select the right mix of practices to tailor workforce management and achieve better sustainability performance in their environmental and social initiatives.