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ESG Disclosure and Employee Turnover. New Evidence from Listed European Companies

ESG Disclosure and Employee Turnover. New Evidence from Listed European Companies

Aziza Garsaa and Elisabeth Paulet

Volume : 77-4 (2022)

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Companies that fail to leverage the power of environmental, social and governance (ESG) disclosure risk losing the favour of investors, forfeiting their competitive advantage, and may also struggle to attract and retain customers and employees, according to a recent article in NACD Directorship magazine by Deloitte. The article discusses the need to provide ESG indicators alongside investment in social responsibility activities. A high level of social responsibility can make it easier to attract a high-quality workforce, while a good reputation may increase job satisfaction and decrease employee turnover. Companies are also realising that the costs of high employee turnover far exceed those of investing in social responsibility and responsible human resource management. Empirical studies suggest that ESG disclosure can positively affect employee behaviour, such as creativity, commitment, engagement, and volunteering, leading to reduced employee turnover.

However, there have been few empirical studies of ESG disclosure and how it affects employee behaviour. Here, data shows that ESG disclosure can reduce employee turnover by satisfying employee needs through strategic human resource management, since employees are central to sustainable HRM. The existing literature generally identifies two kinds of employee incentives: financial and non-financial. Empirical studies conclude that both negatively affect employee turnover, although financial incentives can help satisfy financial needs.

The study has important implications for companies seeking to reduce employee turnover, retain employees and achieve long-term sustainable growth. By leveraging the power of ESG disclosure, companies can benefit from a positive reputation, attract and retain a high-quality workforce, and ultimately improve their financial performance. It also highlights the need for further empirical research in this area to strengthen our understanding of how ESG disclosure can positively affect employee behaviour, job satisfaction and employee retention.

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