Human Capital to Implement Corporate Sustainability Business Strategies for Common Good

Abstract

The International Financial Reporting Standards (IFRS, 2023) guidelines have indicated the importance of holistic organisational sustainability values (profit, people, and planet) and the required human capital to implement sustainability business strategies to achieve sustainable development goals (SDGs). This empirical research using the strategic choice and sustainable human resource management resource-based theories explores the role of high-performance sustainable work practices (HPSWPs) with sustainability characteristics to shape the required human capital to implement simultaneous environmental, social, and governance (ESG) corporate sustainability business strategies aligned with the organisational sustainability orientation of firms. A total of 203 senior managers from Australian companies participated in this study. The participants completed survey questionnaires, which encompass the holistic organisational sustainability orientation, corporate sustainability business strategy, and high-performance sustainable work practices. The mediation study findings revealed that the social consciousness, stakeholder compassion, ethics of care for wellbeing, and pro-environment characteristics of high-performance sustainable work practices fully mediate the implementation of ESG corporate sustainability business strategies that are aligned with the holistic organisational sustainability orientation. This exploratory research extends the operational strategic choice theory from the sustainable human resource management resource-based perspective in highlighting the role of high-performance sustainable work practices in implementing the choice of environmental, social, and governance (financial) business strategies. Furthermore, the practical implications include improving the quality of voluntary sustainability disclosure by companies in alignment with the IFRS guidelines on management approaches relating to human resource practices to shape the required human capital with sustainability characteristics for corporate sustainability. Future empirical research directions in operationalising simultaneous ESG corporate sustainability business strategies using high-performance sustainable work practices aligned with the holistic sustainability orientation of firms are discussed.

1. Introduction

Organisational sustainability values form the DNA of businesses for shaping environmental, social, and governance (ESG) business strategies and the required human capital with sustainability characteristics, for implementing those business strategies to achieve United Nations (UN) sustainability development goals (SDGs). In the UN 2030 Agenda for sustainable development context, corporate ESG sustainability is about the strategies and practices that companies use to address the global challenges of sustainability and to advance sustainability development for better profits, better people, and a better planet [1]. Research in the sustainability literature has mapped the relationship between corporate environmental, social, and governance (ESG) performances and the UN sustainable development goals (SDGs).

Corporate responsibility [2] is a term that includes corporate ESG sustainability and corporate social responsibility (CSR). These terms are used to reflect corporate commitments to responsible ESG business strategies and operating their business activities in an economically, socially, and environmentally sustainable manner due to pressure from various stakeholders, which includes governments, customers, investors, civil society, etc. [3]. There are studies in the literature that have used different ESG frameworks depending on the theories used to study the antecedents for corporate sustainability performance [4]. There are other studies that focused on ESG disclosures as the tools and methods to link corporate sustainability performance to the SDGs [5].

A systematic review of sustainability orientation on ESG sustainability performance revealed a summary of antecedents, outcomes, and contingencies for future sustainability research [6]. The review revealed that a set of studies explored the direct link between sustainability orientation and ESG sustainability performance outcomes [7,8]. Another set of studies used readily available ESG scores, which are based on sustainability disclosures, from the independent third-party ESG evaluation systems of Bloomberg, Morgan and Stanley Capital International, and Refinitive to study ESG performances of firms [9,10,11]. The review revealed that future studies must contribute to enhancing our understanding of the complexity of corporate ESG sustainability by studying the contingencies of operational activities (e.g., human resource—HR practices) in implementing ESG business strategies for sustainability performance. Furthermore, the published 2023 International Financial Reporting Standards (IFRS)—Sustainability Disclosure Standards (S1)—have indicated the importance of organisations disclosing the management approaches used to develop human capital for implementing corporate sustainability (CS) business strategy [12]. However, currently, there is no known empirical research in the literature that studied the role of human capital as the internal context of firms in implementing CS business strategies. Hence, the aim of this study is to address this gap in the sustainability literature to highlight the importance of human resource (HR) practices with sustainability characteristics to shape the required human capital for implementing CS business strategies.

The aim of this study is to initially empirically establish the direct link between the sustainability orientation of firms and CS business strategies. Sustainability orientation is about the organisational strategic orientation towards the integration of sustainable interests and practices into strategic, tactical, and operational activities [8]. Secondly, the mediator effect of high-performance sustainable work practices (HPSWPs) on the relationship between sustainability orientation and CS business strategies is explored. HPSWPs include various sustainability characteristics of the bundle of HR practices that have the potential to shape the required human capital to implement CS business strategies and enable organisations to achieve integrated environmental, social, and governance/finance sustainability outcomes [13]. This empirical research, the first of its kind internationally, is developed based on the strategic choice theory and the resource-based view with sustainable human resource management (HRM) perspective to understand the mediation effect of HPSWPs with sustainability characteristics on the relationship between the holistic sustainability orientation of firms and CS business strategies. Baron and Kenny [14] have indicated that the mediation methodology is effective for understanding the underlying process or transitionary mechanism of the study variables shown in Figure 1. The strategic choice theory highlights that the sustainability orientation of top management reflects “why” firms choose specific business strategies for strategic directions [15] and “how” firms adopt systems and practices to cope with the ESG pressures from stakeholders to implement business strategies [16].

The contributions of this study to the strategic choice theory are discussed in two stages: initially, in terms of “why” firms choose sustainability business strategies and, subsequently, in terms of “how” firms choose to operationalise the sustainability business strategy using HPSWPs with sustainability characteristics. Firstly, there are many studies in the literature that have explored “why” firms choose to initiate certain levels of sustainability efforts based on ESG performance outcomes [17]. There is another set of research studies in the sustainability literature that have theoretically explored the organisational priorities as the “why” question in embedding sustainability into business strategies [18]. However, currently, no known research exists in the literature that explored empirically the sustainability orientation of firms in terms of the “why” question in the choice of business strategies of firms. This study’s aim will initially extend the strategic choice theory in understanding the role of the sustainability orientation of firms in facilitating the choice of CS business strategies for the strategic direction of firms.

Secondly, in explaining this study’s contributions to the strategic choice theory of the “how” question, I discuss the firms’ choice in using resources such as the HPSWPs to operationalise or implement CS business strategies aligned with the sustainability orientation. The resource-based view of Hart and Dowell [19] highlights the role of strategic mindsets and actions of top management on internal resources/capabilities, such as systems and processes, that are used to operationalise the business strategies of a firm’s strategic choice. This study aims to explore the mediation effect of HPSWPs on the link between sustainability orientations and CS business strategies to extend our understanding of firms’ behaviour in operationalising the strategic choice theory with the sustainable HRM resource-based view. That is, HPSWPs from the sustainable HRM resource-based view [13,20] facilitate shaping the required human capital of firms with sustainability characteristics to implement CS business strategies aligned with the sustainability orientation. The sustainability characteristics of HPSWPs include bundles of HR practices (e.g., employee selection, training, etc.), which highlight the underlying organisational motivation shaping employee work attitudes and behaviours as intangible assets to implement CS business strategies [13].

2. Theoretical Background and Hypotheses

2.1. Corporate Sustainability Business Strategy

In the UN 2030 Agenda for sustainable development context, corporate sustainability is about the initiatives and actions that firms use to advance SDGs for a better planet, better people, and better organisations [1]. Corporate sustainability from the strategic management perspective highlights the integrated approach of the sustainability business strategy and processes (e.g., organisational systems, culture, and human capital) to enhance financial performance and simultaneously minimise or mitigate the negative impacts on key stakeholders for social and environmental sustainability performance of the company [3]. Based on these definitions, corporate sustainability is explored by some studies from the corporate sustainability performance perspective, which captures the firm’s ESG performance based on the ESG scores by independent third parties, such as Morgan and Stanley Capital International, Bloomberg, and others [10,11]. There are other studies that explored the antecedents of ESG sustainability performance of firms, for example, environmental business strategies [21], business strategic and operation orientations [22], institutional and stakeholder perspectives, and managerial cognition [16].

In exploring business strategies in the corporate sustainability literature, three typologies of business strategies for ESG performance effectiveness are discussed [23]: Firstly, the dominant “business as usual” paradigm, which explains the shareholder value management typology, which focuses on purely the economic/financial aspect. Secondly, the managing triple-bottom-line (i.e., economic/financial, social, and environmental) typology, which aims to balance or trade-off between the triple-bottom-line outcomes. Finally, the truly sustainable business typology, which focuses on integrated corporate sustainability outcomes. Furthermore, most studies in the sustainability literature have explored corporate sustainability and business strategy (e.g., differentiation, cost-oriented, and differentiation/cost strategy) as separate variables [24,25]. Reviews in the sustainability literature have revealed that there is a lack of empirical evidence for embedding corporate sustainability within business strategy to achieve ESG sustainability performance outcomes for the common good [26,27].

In this study, the definition of CS business strategies proposed by Mariappanadar, Sharma, and Makhecha [28] is used, which is about “an organisation’s strategic focus on environmental, social, and governance (ESG) goals to commit resources and actions to gain sustainability related competitive advantage to create value for organisations and stakeholders” (p. 139). This CS business strategy definition is based on the instrumental stakeholder theory [29,30], which captures the integration of corporate sustainability with business strategy to extend the strategic management and corporate sustainability literature. The instrumental stakeholder theory explains the approach to integrate stakeholders’ expectation management in business strategies to enhance ESG performance for shared value to firms and stakeholders.

Mariappanadar and colleagues [28] validated the CS business strategy scale using a multi-sample validation study. The CS business strategy scale has three dimensions, which include environmental, social, and governance sustainability business strategies based on the instrumental stakeholder theory. The environmental sustainability business strategy dimension highlights the organisation’s focus on setting emission targets beyond the regulatory requirements, promoting sustainable resources management, optimising input–process–outcomes of products and services, mitigating environmental risks, and reporting on environmental activities material to stakeholders. This environmental sustainability business strategy dimension is aligned with the proactive environmental strategies [21,31]. However, the other dimensions of the CS business strategy scale extend the generic business strategy with the integration of organisational commitments and actions with social and governance sustainability business strategies.

The social sustainability business strategy dimension indicates the organisation’s commitment to managing the harms of work to improve the health, safety, and family of employees, promoting human rights, diversity, and inclusion, preventing harassment and discrimination, and avoiding controversial, corrupt, or cartel activities. Finally, the governance sustainability business strategy dimension highlights the organisation’s pledge relating to incorporating corporate sustainability in its vision, the commitment of the board to the financial returns to investors, investing in human capital for sustainability, stakeholder engagement, and resources and processes for corporate sustainability.

2.2. Holistic Sustainability Orientation

Sustainability orientation is an organisational strategic orientation towards embedding financial, social, and environmental sustainability interests and practices into strategic and operational activities [8]. In the sustainability literature, sustainability orientation is considered under the umbrella term of strategic orientation, which highlights the strategic direction and objectives of a firm in response to the external operating environments and is facilitated by top managers [16]. That is, the sustainability orientation is the firm-level sustainability intent, priorities, and values with respect to financial, social, and environmental goals, which the top managers translate into business strategies in response to external stakeholders and regulatory pressures. The strategic choice theory proposes two types of sustainability orientations, which include the business strategy orientation and operation orientation to implement sustainability business strategy [22]. That is, the sustainability orientation, shaped based on the tension or paradox experienced by top management, facilitates top management to consider the choice of business strategy. Subsequently, the firm’s structure and practices for implementing the choice sustainability business strategy are transformed.

The paradox perspective in the sustainability orientation explores the inherent tension in organisational values in strategic directions to address the contradictory but complementary financial, social, and environmental sustainability goals [32]. The paradox perspective highlights that, when firms are faced with multiple paradoxical tensions, they choose to use either a siloed or trade-off or holistic sustainability orientation to address the contradictory but complementary sustainability goals [3]. The siloed approach focuses on the financial goal as the only priority in the sustainability orientation of the firm. The trade-off sustainability orientation represents the choice of a firm to favour financial goals over social and environmental goals in handling the tension between the contradictory sustainability goals [33]. The holistic sustainability orientation is based on the theory of the synthesis effect of sustainability performance outcomes [34], which reflects a firm’s value to maintain the tension/paradox while simultaneously giving importance to the contradictory but complementary financial, social, and environmental sustainability performance outcomes.

A review by Khizar and colleagues [6] revealed the link between sustainability orientation and sustainability performance based on top management perceptions. Furthermore, there are other studies in the literature that explored the moderation effect of knowledge management on the relationship between sustainability orientation and sustainability performance. There are studies that have theoretically explored the value of embedding sustainability orientation as an organisational priority in sustainability-integrated business strategies [19]. However, currently, there is no known empirical study in the literature that explores the link between holistic sustainability orientation and CS business strategies. Hence, testing the following hypothesis will contribute to the strategic choice theory to enhance the understanding of the role of the holistic sustainability orientation as organisational values in the choice of CS business strategies for the strategic direction of firms to achieve SDG goals.

Hypothesis 1: 

The holistic sustainability orientation of companies will have a significant positive relationship with each of the environmental, social, and governance dimensions of the CS business strategy.

2.3. Sustainable HRM System: Human Capital for ESG

In highlighting the emergence of sustainable HRM as a field, a recent review of sustainable HRM literature by Kramar [35] recognised that the term “sustainable HRM” was originally coined by Mariappanadar [36] in his publication in 2003. Many researchers have contributed to the development of the emerging sustainable HRM field since 2003 to advance the understanding of human capital to promote human resource (HR) strategies and practices for achieving integrated economic, social, and environmental sustainability outcomes for organisations [3]. The field of sustainable HRM provides various theories [34] to extend the resource-based view from the sustainable HRM perspective to help firms align their systems and practices to IFRS [12] guidelines for sustainability to mitigate sustainability-related (S1) and climate-related risks (S2). That is, the IFRS guidelines facilitate firms to voluntarily disclose in sustainability reporting how the proceeds of funding received from the financial markets are used in developing systems and processes, including the HR system and practices, to shape the required human capital to manage general sustainability-related and climate-related risks and opportunities to improve the firm’s long-term value.

The sustainable HRM system, from the integrationist perspective, highlights that the bundles of HR practices with sustainability characteristics are relevant to developing the required skilled workforce as human capital to implement CS business strategies. The integrationist perspective [37] explains that internally consistent bundles of HRM practices have mutually supportive characteristics to help firms achieve organisational performance outcomes. Hence, the sustainable HRM system is about the configurational or integrated effect of bundles of HRM practices with sustainability characteristics to achieve integrated corporate ESG sustainability outcomes [3].

2.4. High-Performance Sustainable Work Practices (HPSWPs)

Littig and Griebler [38] have indicated that HR practices, as related institutional arrangements, will facilitate firms to develop the required human capital for the effective implementation of CS business strategies. To understand how HR practices shape employees’ behaviours for sustainability performance, Chadwick and Dabu [39] indicated that the characteristics of HR practices act as a sense-creating device for employees. That is, employees use the characteristics of HR practices to develop meanings about who they are and what the firm expects them to do to achieve the strategic directions of the firm. Furthermore, the characteristics of HR practices highlight the underlying organisational motives that shape employee behaviours and attitudes at work to engage with corporate sustainability strategic directions [40].

Jackson and colleagues [41] highlighted the salient role of internal contexts, such as the characteristics of complementary HRM practices, and the external context (stakeholder pressure) in implementing business strategy. Furthermore, the theory of configurational perspective indicates that the integrated bundles of HR practices are much superior to the universalistic perspective of individual practices as internal resources for business strategies [42]. Mariappanadar [21] proposed sustainability characteristics of bundles of sustainable HRM practices as part of the sustainable HRM system (internal context) to facilitate employee behaviour and attitudes to implement CS business strategies in alignment with the external context (stakeholder pressures) of firms. Hence, the choice of a sustainable HRM system with bundles of HPSWPs as the internal institutional factors will shape a firm’s human capital (employee knowledge, skills, and experience) with the sustainability behaviour of employees to align with corporate business strategies [3,20].

HPSWPs [13] are the HR mechanisms that managers can use to facilitate employees’ sustainability behaviours to implement CS business strategies for enhancing holistic ESG performance to achieve SDG goals. The HPSWPs include four sets of internally aligned bundles of HR practices with sustainability characteristics that are relevant to implementing CS business strategies. The four sustainability characteristics of bundles of HPSWPs include stakeholder compassion, social consciousness, ethics of care for wellbeing, and pro-environment sustainability characteristics. The stakeholder compassion sustainability characteristics of HPSWPs highlight to employees the firm’s commitment to compassion for multiple stakeholders, such as shareholders, customers, supply chain, employees, etc. The bundle of HR practices of employee training, performance management, job design, and rewards must incorporate stakeholder compassion characteristics to facilitate employees’ sustainability behaviours for organisational financial performance as part of corporate sustainability outcomes. The social consciousness sustainability characteristics must be incorporated into a bundle of HR practices of job design and employee selection practices to motivate employees to become involved in interacting with multiple stakeholders. Furthermore, employees are expected to incorporate satisfying different stakeholders’ material expectations as their sustainability behaviours in alignment with organisational success to enhance the organisational financial performance of corporate sustainability.

The dimension of the ethics of care for wellbeing sustainability characteristics of the HPSWP scale includes employee training, relational job design, and performance management as a bundle of HR practices. The sustainability characteristics of this bundle of HPSWPs focus on creating awareness among employees and highlight how the firm is keen on proactively minimising the harm of work imposed on employees and their families to enhance the social aspect of corporate sustainability. The bundle of HR practices with pro-environment characteristics includes employee selection, training, performance evaluation, and organisational support practices. The sustainability characteristics of this bundle of HR practices facilitate motivation among employees to focus on the conservation, maintenance, and preservation of the natural environment to improve the environmental sustainability performance of corporate sustainability.

A study by Mariappanadar and Kramar [43] revealed that a bundle of a compressed working week, home-based work, and teleworking, as HR practices, have varied synthesis effects on organisational and stakeholder sustainability outcomes. Shou and colleagues [22] have explored the moderation effects of sustainable supply management practices on the link between the sustainability operation orientation and the triple bottom line to understand the strategic choice of a firm’s proactiveness to cope with environmental and social challenges. Similarly, a study in the environmental management literature used the strategic choice theory and resource-based view to highlight the strategic direction and motives of firms to adopt voluntary environmental management practices as the internal contextual factors to gain competitive advantage [16].

Makhecha and Mariappanadar [44] have theoretically indicated, using case studies, that the sustainability characteristics of the internally consistent bundles of HPSWPs will facilitate firms to develop and shape the required human capital to operationalise integrated CS business strategies. However, currently, there is no known empirical evidence in the literature to indicate the strategic choice of firms in adopting HPSWPs to operationalise CS business strategies. Hence, the following hypothesis is proposed to study the mediation effect of HPSWPs on the relationship between the holistic sustainability orientation and CS business strategies. The findings from Hypothesis 2 will extend the resource-based view with the sustainable HRM perspective to operationalise the strategic choice of CS business strategies.

Hypothesis 2: 

The dimensions of stakeholder compassion, social consciousness, ethics of care for wellbeing, and pro-environment sustainability characteristics of HPSWPs will mediate the relationship between holistic sustainability orientation and each of the environmental, social, and governance dimensions of the CS business strategy.

3. Materials and Methods

3.1. Sample and Data Collection

The study data collection was approved by the Ethics Committee of an Australian university. As discussed in the earlier section of this article, the study variables (holistic sustainability orientation, HPSWPs, and CS business strategies) are related to organisational-level factors. Hence, in this study, the top managers of Australian companies were approached to participate and respond to the survey related to the study variables. Senior managers of Australian companies were contacted using social media to raise interest in their respective companies regarding participating in this study. Senior managers from thirty-one companies agreed to participate in and circulate the study questionnaire to their work colleagues. Senior managers were chosen for the study based on the upper echelon theory [6,7,45], which underpins exploring the sustainability orientation and business strategy with respect to the firm’s conviction towards the SDGs from the perspective of the top management. The participating companies represent the finance and professional services (37 percent), transport and utilities (30 percent), mining and resources (18 percent), manufacturing (12 percent), and other industry sectors. The contact senior manager in each of these companies circulated emails from the researcher to their respective senior management colleagues with an information letter and encouraged voluntary participation during their own time.

The information letter included a URL to access a web-based questionnaire, which interested participants used to complete the questionnaire in two stages. After completing stage 1 of the questionnaire (i.e., antecedent study variables), participants were requested to take a break for one hour or more before completing Section 2 (i.e., relating to dependent variables) of the questionnaire. This was to temporally separate responses to antecedent and dependent study variables to reduce common method bias [46]. It took approximately 20 min to complete the questionnaire online. The final usable responses recorded in the online system were 203. The data collected were from companies operating in finance and professional services (N = 62 i.e., 31%), transport and utilities (N = 56 i.e., 28%), mining and resources (N = 37 i.e., 18%), and manufacturing (N = 37 i.e., 18%). Six percent of participants reported their current roles in their company as the board of directors, twenty-four percent as strategic leadership, and sixty-one percent as operational management. Sixty-one percent of participants were women. Thirty-seven and thirty-six percent of participants represent public limited and privately held Australian companies.

3.2. Measures

3.2.1. Holistic Sustainability Orientation

In the sustainability literature, the sustainability orientation of organisations is measured using different approaches. For example, Kuckertz and Wagner [7] studied the sustainability orientation of the top management using items from the integrated triple-bottom-line perspective, and DiVito and Bohnsack [47] used items from trade-offs between ecological and profit and social and profit perspectives. However, Roxas and Coetzer [48] studied the sustainability orientation of companies based on a set of items that captured the focus of firms in adopting and implementing environmental management practices. Hence, in this study, five items on the organisational sustainability orientation towards trade-offs and the holistic profit, people, and planet were developed. These items were developed based on the strategic orientation definition, “principles that direct and influence the activities of a firm and generate the behaviours intended to ensure the viability and performance of the firm” [49], p. 200. The sample item on the holistic sustainability orientation used in this study is a “firm’s strategic sustainability orientation to gain competitive advantage is by valuing—equally on profit, people, and planet”. The participants were required to respond to the scale items on a three-point Likert scale (not considered, desirable, and absolute priority).

Exploratory factor analysis (EFA) was used to analyse the data collected (IBM SPSS 29) to establish the factor structure of the new sustainability orientation scale by applying the principal axis factoring model with oblique rotation. Based on the EFA, the result revealed one distinct factor structure with loadings of items above 0.60 (see Appendix A). The eigenvalue for the one identified factor was 3.8, and the total variance explained by these factors was 67.1 percent. The sustainability orientation scale (α = 0.85) is named the holistic sustainability orientation scale based on the highest loading of three items on the integrated sustainability orientation on profit, people, and planet. A one-factor first-order model tested with CFA indicated a good fit (χ² (4, N = 203) = 22.99, TLI = 0.91, CFI = 96, RMSEA 0.04).

3.2.2. Corporate Sustainability Business Strategy

The CS business strategy scale [28] is an existing scale used to measure the participating company’s sustainability strategy on environmental, social, and governance goals (see Appendix B). The scale includes 15 items to measure environmental-, social-, and governance (ESG)-related business strategies. The study participants were requested to respond to the scale items on a four-point Likert scale (1—Not considered; 2—Desirable; 3—Highly desirable; 4—Absolute priority). There are 7 items in the environmental business strategy dimension (e.g., setting company targets on emissions into the air, water, or ground, which are beyond the regulatory requirements, α = 0.90).

An example of a 3-item social sustainability business strategy dimension (α = 0.83) is “promoting corporate citizenship to focus on the long-term commitment to social/human sustainability goals (i.e., human rights, harassment, discrimination, diversity, and inclusion, etc.)”. Finally, the governance business strategy dimension includes 5 items (e.g., a “commitment of company board to invest in education and training on human capital development for managing corporate sustainability issues”, α = 0.81). A three-factor first-order model tested with CFA indicated a moderate fit (χ² (69, N = 203) = 162.45, TLI = 0.90, CFI = 93, RMSEA 0.08).

3.2.3. High-Performance Sustainable Work Practices (HPSWPs)

The HPSWP scale is an existing scale [13] with 14 items, which were used to capture the four dimensions of the sustainability characteristics of human resource (HR) practices (see Appendix C). These dimensions of the sustainability characteristics of HR practices include social consciousness characteristics (three items; e.g., jobs and roles are designed to empower employees to make decisions to benefit both the organization and stakeholders, α = 0.82); stakeholder compassion characteristics (five items; e.g., employee training focus on developing skills and attitudes to consider and manage stakeholder interests, α = 0.84); the ethics of care for wellbeing characteristics (two items; e.g., training to identify work-related factors that increase work–family interferences among employees, α = 0.89); and pro-environment characteristics (four items; e.g., green training focuses on developing employee knowledge, skills, and abilities to preserve ecosystems, α = 0.91). The respondents from the company’s top management were requested to indicate the proportion of coverage of each of the listed work practices for full-time employees across different organisation functions or departments using a four-point rating scale (0—Not applicable; 1—Somewhat considerate—Less than 25%; 2—Considerate—26% to 75%; 3—Widely entrenched—More than 75%). A four-factor first-order model tested with CFA indicated a good fit (χ² (54, N = 203) = 231.03, TLI = 0.97, CFI = 96, RMSEA 0.05).

3.2.4. Control Variables

Industry types [50] and the top management role in a company [45] are the factors found to influence how managers perceive sustainability orientation for competitive advantage. Furthermore, the industry types play an important role for HPSWPs in implementing CS business strategies [3] to gain a competitive advantage. Hence, in this study, the type of industry and the current role/position of the respondents in the organisation were used as control variables and were entered into each of the regression analyses.

4. Results

4.1. Descriptive Statistics

Table 1. Means, standard deviations, and bivariate correlations for the research variables.

Variable	M	SD	1	2	3	4	5	6	7	8	9	10
1. Current role/position a	1.97	0.88
2. Type of industry b	3.79	1.22	0.05
3. Holistic sustainability orientation of firms (profit, people, and planet)	2.39	0.46	−0.13	−0.29 **
4. Social consciousness characteristics of HPSWP	2.16	0.55	−0.11	−0.14	0.28 **
5. Stakeholder compassion characteristics of HPSWP	2.22	0.49	−0.08	−0.02	0.32 **	0.59 **
6. Ethics of care for wellbeing characteristics of HPSWP	2.09	0.60	−0.28 **	−0.12	0.37 **	0.54 **	0.56 **
7. Pro-environment characteristics of HPSWP	1.65	0.82	−0.24 **	−0.09	0.53 **	0.54 **	0.43 **	0.42 **
8. Environmental sustainability business strategy	2.83	0.63	−0.13 *	−0.09	0.45 **	0.36 ***	0.39 **	0.43 **	0.59 **
9. Social sustainability business strategy	3.49	0.52	0.18 *	0.10	−0.16 *	0.05	0.19 **	0.22 **	−0.21 **	0.11
10. Governance sustainability business strategy	2.89	0.62	−0.16 *	−0.03	0.50 **	0.43 **	0.41 **	0.43 **	0.61 **	0.62 **	0.08

N = 203; * p < 0.05; ** p < 0.01; *** p < 0.001 ^a Current role/position—1. Board of Directors, 2. Strategic/Leadership, 3. Operational/Management, 4. Others (specify). ^b Type of industry: 1. Manufacturing, 2. Mining and Resources, 3. Transport and Utilities, 4. Finance and Professional services, 5. Others (specify).

shows the means, standard deviations for dimensions of the HPSWPs, and the dimensions of CS business strategy scales and bivariate correlations for all study variables. It was indicated by Tabachnick and Fidell [51] that any correlation coefficients above 0.70 may increase the likelihood of multicollinearity in a regression. However, in this study, none of the correlation coefficients were above the 0.70 threshold, indicating that all measures were appropriate for inclusion in the regression analyses. Also, variance inflation factors of regressions were below two, which showed that multicollinearity was not a major issue in this study.

4.2. Measurement Models

Podsakoff, MacKenzie, Lee, and Podsakoff [46] suggested procedural and statistical recommendations to be used to control for common method bias in this study. Firstly, from the procedural aspect, established measures were used in this study to eliminate item ambiguity and social desirability. Furthermore, the scale measurements for predictors (holistic sustainability orientation and HPSWPs) and criterion (CS business strategy) variables were separated psychologically by providing different instructions and collecting data in two stages. Secondly, a series of confirmatory factor analyses (CFAs) for statistical remedies were conducted by determining how the different models (

Table 2. Comparison of measurement model of the study.

Models	χ2 (df)	GFI	CFI	TLI	IFI	RMSEA	χ2 diff	dfdiff
Full measurement model, eight factors	760 (428)	0.90	0.95	0.93	0.94	0.05
Model A, seven factors (HSO and SC combined into a single factor)	907 (436)	0.82	0.92	0.90	0.90	0.07	132	11 ***
Model B, seven factors (HSO and StCom combined into a single factor)	897 (436)	0.82	0.90	0.93	0.91	0.06	141	11 ***
Model C, seven factors (HSO and ECW combined into a single factor)	901 (436)	0.76	0.84	0.90	0.89	0.08	129	11 ***
Model D, seven factors (HSO and PE combined into a single factor)	1002 (436)	0.82	0.92	0.94	0.92	0.05	122	11 ***
Model E, six factors (three CSBS dimensions combined into a single factor)	843 (443)	0.87	0.93	0.92	0.93	0.05	73	14 ***
Model F, five factors (four dimensions of HPSWPs combined into a single factor)	981 (448)	0.82	0.91	0.90	0.91	0.06	210	19 ***
Model G, five factors (CSBS dimensions and SC combined into a single factor)	829 (452)	0.85	0.93	0.94	0.93	0.05	58	21 ***
Model H, five factors (CSBS dimensions and StCom combined into a single factor)	1003 (452)	0.82	0.91	0.90	0.90	0.06	232	21 ***
Model I, five factors (CSBS dimensions and ECW combined into a single factor)	993 (452)	0.82	0.90	0.89	0.90	0.06	222	21 ***
Model J, five factors (CSBS dimensions and PE combined into a single factor)	1348 (452)	0.90	0.94	0.93	0.92	0.05	577	21 ***
Model K, four factors (HSO and four dimensions of HPSWPs are combined into a single factor)	1427 (456)	0.79	0.78	0.87	0.89	0.08	346	22 ***
Model L, one factor (all variables combined into a single factor)	2626 (462)	0.42	0.60	0.61	0.60	0.14	1246	28 ***

Notes: N = 203, *** p < 0.001; HSO—Holistic sustainability orientation of firm (profit, people, and planet). Characteristics of high-performance sustainable work practices (HPSWPs): SC—Social consciousness; StCom—Stakeholder compassion; ECW—Ethics of care for wellbeing; PE—Pro-environment. Corporate Sustainability Business Strategy (CSBS) dimensions: ES—Environmental sustainability; SS—Social sustainability; GS—Governance sustainability.

) fitted the data based on the six fit indices suggested by Hair, Black, Babin, and Anderson [52], including the chi-square goodness-of-fit statistic, RMSEA, GFI, CFI, and IFI.

Initially, in alignment with Hair and his colleague’s [52] suggestion, the CFA result for the full measurement model revealed that all items loaded onto their respective latent factors, according to the existing holistic sustainability orientation, HPSWPs, and CS business strategy scales used in this study. The full eight-factor model fits well with the data; χ² (428, N = 203) = 760.01, p < 0.001, (GFI = 0.90; RMSEA = 0.05; CFI = 0.95; IFI = 0.94). Harman’s single-factor test was performed to test for common method variance bias by allowing all variables to load to a single-factor CFA. The model indicated a poor fit; χ² (462, N = 203) = 2626.08, p < 0.001, (GFI = 0.42; RMSEA = 0.14; CFI = 0.60; IFI = 0.60); hence, a single factor did not explain the majority of variance in the data. A further analysis was conducted using multiple nested models (see Table 2) to compare with the full measurement model to ascertain that all variables in this study were distinct. The analysis of different nested models indicated that the full eight-factor model was the best fit for the data as well as being significantly different to the other nested models. Hence, the different nested model analysis findings revealed that all study variables were distinct, and it is appropriate to include them in further hypothesis testing analyses.

4.3. Test of Hypotheses

The study hypotheses were tested using different models, with the environmental, social, and governance CS business strategy dimensions as dependent variables. First, the relationship between the holistic sustainability orientation of firms (profit, people, and planet) and the environmental, social, and governance CS business strategy dimensions (H1) was tested separately using hierarchical multiple regression. In the hierarchical multiple regression, initially, the current role/position of the participants and the type of industry were introduced as the control variables in step 1 of the regression, and subsequently, the holistic sustainability orientation was introduced in step 2 of the regression. Finally, the PROCESS macro [53] with Model 4 was used in SPSS 30 to test mediation Hypothesis 2.

The mediation hypotheses were tested based on the three requirements outlined by Baron and Kenny [14]. To establish mediation, firstly, independent study variables must be correlated with dependent variables. The significant direct effect relationships between the holistic sustainability orientation of firms and each of the environmental, social, and governance CS business strategy dimensions from the hierarchical multiple regression were shown in the direct effect columns—2, 4, and 6 in

Table 3. Regression results for testing mediation effect of characteristics of HPSWP and holistic sustainability orientation on CS business strategies.

	CS Business Strategy
	Environmental Sustainability Strategy		Social Sustainability Strategy		Governance Sustainability Strategy
Predictor 1	Direct Effect Est. (SE) 2	Mediation Effect Est. (SE) 3	Direct Effect Est. (SE) 4	Mediation Effect Est. (SE) 5	Direct Effect Est. (SE) 6	Mediation Effect Est. (SE) 7
Holistic sustainability orientation of firms (profit, people, and planet)	0.61 *** (0.09)	0.67 * (0.32)	−0.13 ** (0.09)	−0.17 * (0.09)	0.70 *** (0.09)	0.58 *** (0.09)
Social consciousness characteristics of HPSWP		0.41 (0.26)		0.10 (0.07)		0.34 *** (0.07)
F	17.28	14.11	3.67	3.32	24.33	27.04
R2	0.21 ***	0.26 ***	0.05 **	0.06 *	0.27 ***	0.35 ***
Stakeholder compassion characteristics of HPSWP		0.0.36 *** (0.08)		0.29 *** (0.08)		0.37 *** (0.08)
F		18.90		6.54		25.36
R2		0.28 ***		0.12 ***		0.34 ***
Ethics of care for wellbeing characteristics of HPSWP		0.32 *** (0.07)		0.34 *** (0.06)		0.29 *** (0.07)
F		19.63		10.76		24.52
R2		0.28 ***		0.18 ***		0.33 ***
Pro-environment characteristics of HPSWP		0.39 *** (0.05)		−0.09 (05)		0.37 *** (0.05)
F		29.97		3.55		36.67
R2		0.38 ***		0.07 **		0.43 ***

N = 203; *** p < 0.001; ** p < 0.01; * p < 0.05.

. The results revealed a significant relationship between the holistic sustainability orientation of firms and environmental (Est. 0.61 p < 0.001; SE—0.09), governance (Est. 0.70 p < 0.001; SE—0.09), and social (Est. −0.13 p < 0.01; SE—0.09) CS business strategies. These significant relationship findings between independent and dependent study variables support Hypothesis 1 and satisfy the first requirement for mediation. The current role/position of participants and the type of industry as the control variables were not significantly related to each of the dependent variables, and hence, the results of control variables were not included in Table 3 for brevity.

To satisfy Baron and Kenny’s [14] second requirement, the independent variable (holistic sustainability orientation of firms) must be significantly correlated with the mediator variables (dimensions of HPSWPs), and the mediator variables must also be independently correlated with the dependent variables (dimensions of CS business strategy). To satisfy this requirement, Hypothesis 2 of the study was tested using Model 4 of the PROCESS macro in SPSS 30. Firstly, the results for the relationships between the holistic sustainability orientation of firms and each of the dimensions of HPSWPs are discussed. The results revealed significant positive relationships between the holistic sustainability orientation of firms as the independent variables and the corresponding dimensions of HPSWPs as the mediator variables (i.e., social consciousness characteristics = Est. 0.35 p < 0.001; SE—0.09; stakeholder compassion characteristics = Est. 0.34 p < 0.001; SE—0.08; ethics of care for wellbeing characteristics = Est. 0.44 p < 0.001; SE—0.09; pro-environment characteristics = Est. 0.92 p < 0.001; SE—0.11). Hence, the requirement of significant relationships between the independent variable and mediator variables is satisfied.

Secondly, the relationship between the dimensions of HPSWPs, as mediators, and each of the dimensions of CS business strategies as outcome variables for the holistic sustainability orientation of firms are shown in the mediation effect columns—3, 5, and 7 in Table 3, respectively. The results for the mediator effects of the dimensions of HPSWPs on each of the dimensions of CS business strategy as outcome variables for the holistic sustainability orientation of firms are discussed separately. The results revealed that there is a significant positive relationship only between the social consciousness characteristics of HPSWPs as a mediator and the governance sustainability business strategy as an outcome variable (see the mediation effect, column 7 in Table 3).

Similarly, significant positive relationships between each of the stakeholder compassion and ethics of care for wellbeing characteristics of HPSWPs, mediators, and the three dimensions of CS business strategies are shown in the mediation effect columns—3, 5, and 7 in Table 3, respectively. Finally, the results revealed that there is a significant positive relationship between the pro-environment characteristics of HPSWPs, as mediators, and the environmental and governance dimensions of CS business strategies, respectively, as outcome variables (see the mediation effect, column 7 in Table 3). These findings suggest that the two aspects of the second requirement for mediation by Baron and Kenny [14] have been satisfied in this study for all dimensions of HPSWPs as the mediator effects, except for the social consciousness and pro-environment characteristics, on each of the dimensions of CS business strategies, as outcome variables, for the holistic sustainability orientation of firms.

Finally, the mediation effect was tested using Model 4 with PROCESS analyses; the results revealed that the social consciousness characteristics of HPSWPs have significant positive indirect effects between the holistic sustainability orientation of firms and the governance CS business strategy (b = 0.12, Boot SE 0.04 [0.05, 0.20]). There is no significant indirect effect of the social consciousness characteristics of HPSWPs on the link between the holistic sustainability orientation of firms and each of the environmental and social CS business strategies. The stakeholder compassion characteristics dimension of HPSWPs has significant positive indirect effects between the holistic sustainability orientation of firms and the environmental CS business strategy (b = 0.12, Boot SE 0.04 [0.05, 0.21]), the social CS business strategy (b = 0.10, Boot SE 0.04 [0.03, 0.18]), and the governance CS business strategy (b = 0.12, Boot SE 0.04 [0.05, 0.21]).

The ethics of care for wellbeing characteristics dimension of HPSWPs has significant positive indirect effects between the holistic sustainability orientation of firms and each of the environmental CS business strategy (b = 0.14, Boot SE 0.05 [0.06, 0.25]), the social CS business strategy (b = 0.15, Boot SE 0.04 [0.07, 0.24]), and the governance CS business strategy (b = 0.13, Boot SE 0.04 [0.05, 0.22]). Finally, the pro-environment characteristics dimension of HPSWPs has significant positive indirect effects between the holistic sustainability orientation of firms and the environmental sustainability business strategy (b = 0.36, Boot SE 0.07 [0.23, 0.50]), and the governance sustainability business strategy (b = 0.34, Boot SE 0.07 [0.21, 0.49]). Hence, Hypothesis 2 is partially accepted.

5. Discussion

This study’s findings contribute to the empirical evidence for the strategic choice theoretical assumption of organisational sustainability orientations or priorities as the “why” in the choice of CS business strategies of firms. The findings on the direct effects between the holistic sustainability orientation and the dimensions of CS business strategies revealed significant positive relationships between the holistic sustainability orientation and each of the environmental, social, and governance CS business strategies. These findings support, firstly, the synthesis effect theory of sustainability [34] in highlighting the role of the holistic sustainability orientation, as the “why” firms choose the strategic direction of simultaneously addressing the governance (financial), environmental, and social CS business strategies.

Secondly, from the direct effect findings, it was revealed that the highest variance is explained by the holistic sustainability orientation in the governance CS business strategy, which is followed by the environmental and the social CS business strategies. This study’s findings suggest that, despite the holistic sustainability orientation, firms prioritise the simultaneous choice of governance, environmental, and social CS business strategies with varied importance while addressing the paradoxical tension [54] they encounter in implementing integrated CS business strategies. For example, research findings in the entrepreneurship and supply chain literature indicated that entrepreneurs’ orientation towards the balanced sustainability trade-off of economic and environmental priorities are linked to business strategies [48]. Hence, the empirical evidence from this study supports the trade-off perspective of the strategic choice theory [55] in highlighting that the holistic sustainability orientation facilitates the strategic choice of the financial over the environmental and the social CS business strategies [55].

The resource-based view from the strategic HRM perspective in the literature highlights that high-performance work practices are relevant to enhancing organisational financial performance [56]. For example, Chang and colleagues [57] revealed that high-performance work practices, from the strategic HRM resource-based perspective, helped organisations to translate corporate social performance-related strategies into financial performance. Similarly, there is evidence in the literature that the Ability–Motivation–Opportunity (AMO) characteristics [58] of strategic HRM practices have contributed to the organisational financial performance. However, the mediation findings from this exploratory study contribute to the strategic choice theory to understand the choice of sustainability characteristics of HPSWPs from the sustainable HRM resource-based view that is used to extend our understanding of “how” firms choose to operationalise CS business strategies. Hence, thirdly, the HPSWPs mediation findings contribute to extending the resource-based view with the sustainable HRM perspective to facilitate firms to simultaneously operationalise the strategic choice of all three complementary environmental, social, and governance (financial) CS business strategies and not just the financial business strategy from the strategic HRM perspective. Sustainable HRM, as an emerging discipline, advocates, from the resource-based view, for strategically developing and shaping human capital with the sustainability characteristics of HPSWPs to implement the strategic choice of simultaneous CS business strategies for competitive advantage [3].

Fourthly, the study findings from this exploratory research contribute to the sustainable HRM literature for corporate sustainability by providing empirical evidence for validating the theoretical assumptions published by Mariappanadar [13] on the relevance of sustainability characteristics of HPSWPs in operationalising the environmental, social, and governance CS business strategies. This study’s findings confirm that the bundle of practices of stakeholder compassion and social consciousness characteristics of HPSWPs are relevant for initiating the governance/financial CS business strategy. Similarly, this study’s findings concur with the theoretical assumptions that the bundle of integrated practices of social consciousness and pro-environment sustainability characteristics of HPSWPs are relevant for the social and environmental CS business strategies, respectively. Hence, this study’s findings extend the integrationist perspective [37] of the sustainable HRM system that internally consistent bundles of HPSWPs that have mutually supportive sustainability characteristics help firms to overcome the paradoxical tension in simultaneously implementing diverse, but complementary, environmental, social, and governance CS business strategies.

Finally, the mediation analyses revealed that stakeholder compassion and the ethics of care for wellbeing are the two sustainability characteristics of HPSWPs that are relevant in implementing simultaneously all three environmental, social, and governance CS business strategies that are aligned with the holistic sustainability orientation. However, the pro-environment characteristics of HPSWPs are relevant in initiating simultaneously two of the three CS business strategies (i.e., trade-off), which are the environmental and governance business strategies, into actions that are aligned with the holistic sustainability orientation. The dimension of the social consciousness characteristics of HPSWPs is effective in implementing just the governance CS business strategy (i.e., siloed), which is aligned with the holistic sustainability orientation of firms. Hence, these findings extend the operational strategic choice theory from the sustainable HRM resource-based perspective in highlighting the role of HPSWPs in understanding “how” firms can choose to operationalise the simultaneous, trade-off, and siloed strategic choices of environmental, social, and governance (financial) business strategies.

6. Limitation, Future Research, and Conclusions

This study is the first internationally to conduct exploratory mediation research on HPSWPs to implement the strategic choice of integrated CS business strategies aligned with firms’ holistic sustainability orientation, and it has strength but is limited by the cross-sectional data, which restricts causal interpretations. However, Rindfleisch and colleagues [59] have provided guidelines to overcome the common method bias of cross-sectional data and enhance causal inference in a way similar to longitudinal data. Hence, cross-sectional data were used in this study based on the guidelines, which include a combination of strong theory, careful survey design, and appropriate statistical tools, to draw causal inferences from the study variables. Furthermore, there are no statistically significant effects of company ownership and types of industry sectors as control variables on the study variables. This finding may be attributed to the markedly imbalanced group sizes of control variables, and hence, future research on the mediational effects of HPSWPs on the holistic sustainability orientation and CS business strategies with a multiple-group approach may be helpful [60]. Given cultural differences in the strategic choice of holistic sustainability orientation values and HPSWPs in implementing corporate sustainability business strategies, future research should test the generalizability of the study model across cultures.

The International Financial Reporting Standards (IFRS) [12]—Sustainability Disclosure Standards (S1)—have indicated the importance of firms disclosing the management approaches used to develop human capital for implementing integrated corporate sustainability (CS) business strategies to achieve SDGs. This is the first study to provide empirical evidence of management approaches relating to HR practices to develop the required human capital with HPSWPs and improve quality voluntary disclosure in alignment with the IFRS guidelines [12]. That is, the IFRS guidelines facilitate firms to voluntarily disclose sustainability reporting on how the proceeds of funding received from the financial markets are used in developing sustainable HRM systems and practices to shape the required human capital to manage general sustainability-related, and climate-related risks and opportunities. Hence, future research can explore the use of HPSWPs metrics as part of the management practices to improve the quality of human capital disclosure to avoid greenwashing in ESG sustainability reporting.

The research evidence from this study initially highlights that the firms’ choice of governance (including financial) business strategies as the top priority, followed by the environmental and the social CS business strategies, are in alignment with the holistic sustainability orientation. Future research can explore firms’ external institutional contexts for the various importance or sequences of choices of priority for CS business strategies, which are based on the trade-off or holistic sustainability orientation to achieve firms’ preferred SDGs. The trade-off sustainability orientation favours the financial goal of firms over the social and environmental goals in handling the tension between the contradictory sustainability goals [33]. However, the holistic sustainability orientation is based on the theory of the synthesis effect of sustainability performance outcomes [34,35], which reflects a firm’s intention to maintain the tension/paradox while simultaneously achieving the contradictory but complementary financial, social, and environmental sustainability performance outcomes. Finally, the HPSWPs [13], as a construct of sustainable HRM, opens a new opportunity for future research from the ESG-SDG perspective to explore the role of HPSPWs as the operational strategic choices of firms in translating CS business strategies into ESG performance for SDGs.

In conclusion, the present mediation study findings revealed that the mutually supported bundles of social consciousness, stakeholder compassion, ethics of care for wellbeing, and pro-environment sustainability characteristics of HPSWPs facilitate the simultaneous implementation of CS environmental, social, and governance business strategies that are aligned with the holistic sustainability orientation. This study’s findings support the synthesis effect theory of sustainability [34] and extend the strategic choice theory in highlighting the holistic sustainability orientation as the “why” for the choice of simultaneous and integrated priorities in CS business strategies rather than the profit maximization as the siloed logic [47]. This study’s findings extend the operational strategic choice theory from the sustainable HRM resource-based view by explaining “how” firms can operationalise the simultaneous, trade-off, and siloed strategic direction of environmental, social, and governance CS business strategies using the choice of sustainability characteristics of HPSWPs. Finally, this study provides empirical evidence of management approaches with the sustainability characteristics of HPSWPs that are used to develop the required human capital to simultaneously implement CS business strategies in alignment with the IFRS guidelines for voluntary sustainability disclosure to link ESG performance to the SDGs.