The Role of Environmental, Social and Governance Initiatives in Securing Employee Retention

Existing literature focusing on the impact of corporate sustainable responsibility (CSR) on employees can be broadly divided into two streams. One stream focuses on how CSR affects potential employees, suggesting that it contributes to increasing the attractiveness of a company by creating a good reputation for it. The other stream focuses on the impact of CSR on current employees, suggesting that CSR, including environmentally responsible behavior, positively influences corporate reputation and, in turn, employee commitment. The study empirically investigates the role of CSR in its three dimensions - environmental, social, and governance in retaining employees at an organizational level (i.e., employee turnover). This study uses a global firm-level dataset of 632 observations for 2005-2013 from Bloomberg Professional Service, regressing employee turnover on CSR activities in manufacturing, non-manufacturing, and energy and utilities industries. The results indicate that activities in the environmental dimension do not signifi-cantly affect the retention of employees. In the social dimension, CSR training has a significant effect on retaining employees in all industries, but is not robust in each of the three industries. In the governance dimension, few governance activities affect employee retention in the manufacturing and energy and utilities industries, although some governance policies (such as the percentage of women on the board of directors) reduce employee turnover rate in the non-manufacturing industry. This difference appears to be due to industry characteristics regarding the extent of fluidity of the labor market.