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Journal of Accounting & Organizational Change

Associations between organisations motivated workforce and environmental


performance
Kirsten Rae John Sands David Leslie Gadenne

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Kirsten Rae John Sands David Leslie Gadenne , (2015),"Associations between organisations
motivated workforce and environmental performance", Journal of Accounting & Organizational
Change, Vol. 11 Iss 3 pp. 384 - 405
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Michael Dobler, Kaouthar Lajili, Daniel Zghal, (2015),"Corporate environmental sustainability
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384

Associations between
organisations motivated
workforce and environmental
performance
Kirsten Rae

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Department of Accounting, Finance and Economics,


Griffith University, Southport, Australia

John Sands
Faculty of Business, Education, Law and Arts,
University of Southern Queensland, Toowoomba, Australia, and

David Leslie Gadenne


Department of Business, University of the Sunshine Coast,
Maroochydore, Australia
Abstract

Journal of Accounting &


Organizational Change
Vol. 11 No. 3, 2015
pp. 384-405
Emerald Group Publishing Limited
1832-5912
DOI 10.1108/JAOC-10-2013-0090

Purpose This study aims to investigate the association between a motivated and prepared
workforce and environmental performance.
Design/methodology/approach Self-administered surveys were used to collect data for the study
from 300 organisations operating in Australia. Confirmatory factor analyses were used to test the
robustness of the various measurement models, and structural equation modelling was used to test the
two propositions for this study.
Findings The results identify significant associations between affective commitment, employee
performance process and training and enhanced environmental performance, which is mediated
through the value-creating processes, work practices, process improvement and innovation process.
Also, there is a set of sequential associations between work practices and process improvement and well
as process improvement and innovation process.
Practical implications The study has identified specific management practices that enhance
environmental performance. The findings add to the body of knowledge because previous studies
focused on general conceptual rather than actual management practices. The implications for practice
are that organisations should enhance organisational affective commitment to their environmental
strategy, tailor employee performance processes and provide regular, specific training to employees to
improve processes that lead to better environmental performance.
Originality/value Results, mentioned in findings above, provide some specificity to
associations that had been illustrated and explained previously in an abstract or conceptual
framework. A framework of identified associations provides a basis for future research and for
practical application to assist with organisational environmental performance as part of a
corporate sustainability strategy.
Keywords Innovation, Human resource management, Human capital, Organisational commitment,
Environmental performance, Value-creating processes
Paper type Research paper

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Introduction
The role of environmental performance within organisations and its association with
financial performance have been widely debated in the literature (Schaltegger et al.,
2013) from two points of view (Schaltegger and Synnestvedt, 2002). The first of these
points of views argues that an organisations improved environmental performance is
achieved through extra costs for the organisation which leads to reduced profitability.
Conversely, the second point of view follows the argument that improved environmental
performance will produce cost savings and increase sales that lead to improved
economic performance. However, Schaltegger and Ldeke-Freund (2013) warn against a
business case for sustainability as an ad hoc measure and advocate business model
innovation for sustainability as an inherent, deeply integrated element of business
activities. Additionally, Mowen et al. (2011) maintain that environmental performance
is a separate outcome (to financial performance) for competitive advantage arising from
continuous improvement in the internal process of an organisation. They argue that the
core objectives of environmental performance are to minimise the use of new materials
through the maximisation of recycling opportunities, hazardous materials, energy
requirements in production, as well as the release of residues.
Further support for the second point of view is provided by Ambec and Lanoie (2008)
whose model demonstrates that environmental performance and financial performance
are separate outcomes that share, through the organisations innovation strategy, the
same opportunities to increase revenues (better access to certain markets, differentiated
products) and reduce costs (relating to material energy, services and capital). They
argue that an important outcome of adopting an innovation strategy is the development
of an innovation process that leads concurrently to improvements in both
environmental performance and financial performance as separate outcomes (as
opposed to a direct link between environmental performance and financial
performance). Their model is consistent with the Strategy Map that Kaplan and Norton
(2001) developed within their balanced scorecard framework to enhance an
organisations competitive positioning and strategy implementation. The strategy map
includes, within the learning and growth perspective, factors that are expected to
motivate a prepared workforce to develop and perform the value-creating processes
within the internal process perspective. These studies demonstrate that it is not
essential to investigate both environmental performance and financial performance in
the same study.
As organisations strive for a more sustainable future, it is becoming increasingly
important that they appropriately track and enhance their performance on
environmental goals. Performance in the area of an organisations environmental goals
may help organisations realise the benefits of developing and maintaining a green
performance agenda (Presley and Meade, 2010). Within this context, sustainability
practices would be expected to add value and enhance the long-term survival of
organisations (Jensen, 2001; Perrini and Tencati, 2006) through actions such as reducing
pollution, reducing energy consumption and being a good corporate citizen by
considering stakeholders needs. Models of corporate sustainability, which combine
economic prosperity, social responsibility and environmental protection, are consistent
with the corporate objective of long-term value creation, indicating a need to measure
environmental performance outcomes (Perrini and Tencati, 2006). Moreover,
organisations with staff that are motivated through their level of organisational

Motivated
workforce

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386

commitment and through human resource management and training are more likely to
achieve their environmental strategic goals (such as reducing pollution caused by the
organisations operations) as a separate outcome to financial performance.
Purpose and aims of the study
The purpose of the study is to investigate which dimensions of the strategy maps
learning and growth perspective components may be associated with the value-creating
processes (within the internal perspective) that may lead to enhanced organisational
environmental performance. During the past two to three decades, improvements in
technology have caused increased competition and globalisation of the market for most
organisations. This increased competition means that organisations need to respond to
such pressures by focussing on key factors that contribute to developing successful
organisational outcomes. In particular, there is an emphasis for organisations to focus
more detail on understanding how to develop processes that enhance long-term
sustainability and to consider the environmental impact of pollution that their
production processes emit. The need to understand how to develop such processes leads
to the question, Who will develop these processes and How will they be developed?
The learning and growth perspective of the balanced scorecard strategy map is
considered to be the foundational perspective (Kaplan and Norton, 1996a, 2001). As their
framework developed, Kaplan and Norton (2004a, 2004b) conceptualised the learning
and growth perspective as comprising intangible assets that constitute a relatively large
proportion of the overall intangible assets of the firm. They delineate the most
significant influence of these intangible assets as being Intellectual Capital. Much of
the research literature based on the intellectual capital model examined the direct
association between human capital and financial performance. For example, studies by
Hitt et al. (2001), Bassi et al. (2002) and Lopez (2003) found a positive association between
human capital and financial performance. If human capital is responsible for enhancing
an organisations financial performance, then human capital may also be able to
enhance an organisations performance in environmental outcomes. Consequently, it
seems plausible that the answer to the question Who will develop these processes may
be human capital. Human capital is posited as a key component of the learning and
growth perspective because people are the actors who develop and refine the processes
that enhance long-term sustainability. It seems likely that the process happens through
employees finding ways to improve the practices and procedures that they regularly
use, so that efficient processes are developed to effect organisational outcomes related to
long-term environmental performance and sustainability.
In previous research, a very limited number of indicators have been used to measure
the components of human capital. The construct of human capital is extensive by
nature, and failure to capture the scope of its components and their dimensions may
mean that measurement of human capital is underspecified. Consequently, the study
aims to examine in more depth how the dimensions of human capital may be associated
with the value-creating processes, leading to better environmental process outcomes.
The study contributes to the literature because the strategy maps by Kaplan and
Norton (2001, 2004a and 2004b) provide abstract illustrations about the associations
between human capital and organisations value-creating processes, including
environmental performance. The results may lead to further insights about factors that
influence environmental performance, and thus assist organisations to develop systems

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and procedures that enhance the components of human capital in areas that will
generate greater environmental performance and contribute to corporate sustainability.
The next section of the paper will review relevant literature that will lead to the
development of propositions. The third section will provide information about the
research method used in the study. Information is presented in the fourth section about
Instrument components and associated validity tests while the results are reported in
the fifth section. The sixth section provides a discussion of the results, while the seventh
section reflects on the implications of these results. In section eight, the limitations of the
study are acknowledged and future research opportunities are discussed in the final
section.
Literature review and proposition development
The model for the study follows the first two perspectives of the strategy map (the
learning and growth perspective and the internal perspective). It includes dimensions
related to the strategy maps learning and growth perspective such as organisational
commitment and human resource management factors. The strategy map indicates that
the learning and growth perspective should be designed to facilitate the development of
a motivated and prepared workforce, while the internal perspective is where the
value-creating processes are developed.
When an organisation has a motivated workforce that is prepared for achieving
organisational goals (such as environmental goals), the value-creating processes are
likely to provide the mechanism that will result in achievement of these environmental
goals. That is, a motivated and prepared workforce may seek ways to improve products
and processes as part of its value-creating processes within the strategy maps internal
perspective. These value-creating processes may become the key to organisations
achieving enhanced performance of their environmental outcomes.
Organisational commitment, value-creating processes and environmental performance
A greater degree of organisational commitment[1] is likely to result in employees
engaging in extra-role behaviours (Organ, 1988; Meyer et al., 1993; Pearce, 1993). These
extra-role behaviours provide some evidence of employees organisational commitment
and are associated with employees taking initiatives that lead to improvements in an
organisations value-creating processes. Kaplan and Norton conclude that such
commitment to the organisations strategy should lead to employees developing
enhancements for the value-creating processes within the internal perspective.
Employee stakeholders influence the way many businesses conduct their processes and
develop their policies and product offerings to demonstrate that they acknowledge the
need to respect the natural environment (Fraj-Andres et al., 2009; Neville and Menguc,
2006; Waddock Bodwell and Graves, 2002).
Banerjee et al. (2003) found evidence of a direct association between organisational
commitment by top management and environmental performance outcomes[2].
Management commitment is a critical factor for firms because managers perceptions
about stakeholders ecological concerns directly influence firms environmental
behaviour (Fraj-Andres et al., 2009). In addition, managers may be motivated to
convince stakeholders of their commitment to environmental issues because a firms
environmental performance enhances its reputation (Andersson et al., 2005).
Thus, the following proposition is suggested:

Motivated
workforce

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388

P1. There is a positive association between organisational commitment and


environmental performance that is mediated by the value-creating processes.
Human resource management, value-creating processes and environmental
performance
Kaplan and Norton (1996b) suggest that employees who are focused on organisational
goals provide a key resource for enhancing organisational success. Attracting and
retaining employees who are focused on organisational goals start within the employee
selection and training process. Govindarajulu and Daily (2004) assert that it is critical for
managers to train new employees regardless of their level, and educate existing staff
continuously about the organisations commitment to the environment, thereby
enhancing its ability to abide by environmental policy. This highlights the importance
of the employee selection and training process within strategic human resource
management practices, particularly for organisations that have sustainability goals
(Wilkinson et al., 2001; Boudreau and Ramstad, 2005). Such strategic human resource
management practices enable employees to be managed, trained and developed with a
focus on a sustainability strategy that improves environmental performance (Vickers,
2005; Eisenstat, 1996). For example, prior research suggests that employees are more
likely to involve themselves in enhancing the value-creating processes within the
internal perspective in organisations that actively support environmental issues, rather
than operational issues (Wehrmeyer, 1996).
Case study evidence suggests that organisations with clear procedures, programs,
mentoring and career development and a culture involving business sustainability
themes may lead to enhanced environmental performance (Colbert and Kurucz, 2007).
Also, well-designed reward systems may be helpful in motivating employees
performance in better environmental practices and reinforcing their commitment to be
environmentally responsible (Laabs, 1992; Patton and Daley, 1998).
Research has investigated how environmental impacts may be reduced through
continuous innovation in products and the internal processes used during manufacture
(Wilkinson et al., 2001). Human resource management is expected to play a crucial role
in stimulating such innovation in sustainable organisations[3]. Jabbour and Santos
(2008) propose that companies with high innovative performance have a greater ability
to improve their environmental performance. When operational production processes
are aligned with sustainability principles, with a focus on continuous improvement, the
organisation may be able to reduce resource consumption and waste as well as increase
recycling (Jabbour and Santos, 2008; Post and Altman, 1994). Consequently, the
organisation is able to achieve more efficient processes when their environmental aims
are to increase or maintain output value with reduced consumption of natural resources
(Busco et al., 2010).
Thus, one of the important challenges for human resource management is to attract,
retain and develop the talents needed for the survival of a company in a competitive
environment and search for managerial staff that embrace innovation to facilitate this
survival (Jabbour and Santos, 2008). Therefore, it is becoming increasingly important to
develop policies and practices that are aimed at achieving long term sustainable
performance and not just short-term financial performance alone.
Thus, the following proposition is suggested:

P2. There is a positive association between human resource management and


environmental performance that is mediated by the value-creating processes.

Motivated
workforce

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The posited associations are illustrated in Figure 1 below.


Research method
A questionnaire survey was developed for this study. Approximately, 2,000
manufacturing and non-manufacturing companies employing 250 or more staff[4] were
invited in 2010 to participate anonymously in this study because many of the large
organisations in these sectors use sophisticated multi-perspective performance
measurement systems (e.g. NRMA and Wesfarmers). Participants were provided with a
list of six environmental sustainability goals and asked to identify the goals actually
used by their companies. In total, 67 participants did not identify any of the CSR
sustainability goals as being adopted by their company. We therefore disregarded 67
responses, and received 300 useable responses, providing a final response rate of 19 per
cent. Table I provides participants descriptive statistics. A non-response bias test
(Oppenheim, 1966) revealed that there were no significant differences for variables of the
study between early and late respondents.
Reliability and construct validity of the latent variables were assessed by
exploratory factor analysis with an orthogonal Varimax rotated process. Items with a
loading of more than 0.45 were incorporated into the factor relevant to the appropriate
latent variables[5]. Significant results for the KaiserMeyerOlkin (KMO) values and
Bartletts test of sphericity were found for each factor[6].
In total, 12 factors with the largest single factor accounting for 26.6 per cent of the
variance were revealed using Harmans suggested one-factor test[7]. Thus, it appears
unlikely that common method bias has a significant influence on the results.

389

Instrument components and tests


The latent variables mentioned in the literature review and incorporated into the
conceptual model are operationalised using a number of existing constructs. These
sources are identified and the statistical reported in the following sub-sections.
Organisational Commitment measures
Organisational Commitment is a multi-dimensional construct, which incorporates
concepts about work-based attitudes or beliefs that reflect the extent to which an
individual identifies with, or feels an attachment to a particular organisation (Steers,
1977). Organisational Commitment involves the extent to which employees have shared

A Movated and Prepared


Workforce components of Learning
and Growth Perspecve

Internal Perspecve
(Value-creang process)
Innovaon Processes

Organisaonal commitment

P1

Human Resource Management


P2

Operaons Management Processes

P1

Labour pracces regulatory processes

P2

Environmental
Performance

Figure 1.
Model of the
association between
a motivated and
prepared workforce
and environmental
performance

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Age range
Time worked within the company
Employed in current position

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390

Table I.
Summary of
participants
demographic data

Years

Years

Average

24
0.33
0.25

70
42
34

47
8.25
4.64

No.*

(%)

Experience in company
Employed in company for more than 1 year
Employed in company for less than 1 year
Held current position for more than 1 year
Held current position for less than 1 year

283
13
273
23

95.6
4.4
92.2
7.8

Qualifications
Bachelors degree or above
TAFE
Other qualifications

212
26
56

72.1
8.8
19.0

Gender
Male
Female

223
71

75.9
24.1

Notes: * Not all respondents completed these questions; therefore, the totals will not equal 300
responses

values with the organisation, a desire to remain involved with the organisation and a
desire to exert willingly an effort on the organisations behalf (Mowday et al., 1982). It
has often been operationalised as a three-component model, as devised by Meyer and
Allen (1991), comprising affective, normative and continuance commitment (Smith and
Hall, 2008; Viator and Pasewark, 2005).
The measure of normative commitment is not used for the present study. The
decision to exclude normative commitment was based on two reasons. First, Randall
(1990) concluded that normative commitment may be highly correlated to both
attitudinal and affective commitment, and, consequently, the concept of normative
commitment is unclear. Second, researchers have concluded that due to this lack of
clarity, [] normative organisational commitment cannot be recommended for
hypothesis testing research [] (Morrow, 1993, p. 98). Thus, Meyer and Allens
two-component model (evaluating affective and continuance commitment) is used to
measure organisational commitment in the current study.
To measure commitment, each participant was asked to provide an indication of their
perceived level of organisational commitment using a seven-point Likert-type scale
anchored at both ends with 1 Strongly Disagree to 7 Strongly Agree. Each
participant responded to several items in the questionnaire concerning the two
dimensions of organisational commitment, affective and continuance commitment. The
organisational commitment items were placed in the survey without indicating to the
respondents which items related to each dimension. The results reveal that two factors
emerged following an orthogonal Varimax rotated factor analysis. Together, both
factors explain 53.95 per cent of the total variance. The KMO measure of sampling

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adequacy was 0.828, which is above 0.6, and Bartletts test of sphericity was significant,
confirming the suitability and validity of the data for factor analysis. The internal
reliability of the measure for both factors was also strong, with the Cronbachs alpha for
Affective Commitment being 0.818 and for Continuance Commitment being 0.797.
Consequently, two Organisational Commitment Measurement Models were
designed. The robustness of the Affective Commitment structural equation
measurement model is supported by the goodness-of-fit indices (CMIN/DF 1.698,
p 0.147, SRMR 0.0201, GFI 0.993, AGFI 0.962, NFI 0.991, CFI 0.996,
RMSEA 0.048) for Affective Commitment of the confirmatory factor analysis.
Similarly, the robustness of the Continuance Commitment structural equation
measurement model is supported by the goodness-of-fit indices (CMIN/DF 1.367,
p 0.224, SRMR 0.0219, GFI 0.991, AGFI 0.969, NFI 0.984, CFI 0.995,
RMSEA 0.035)[8].
Human resource management measures
Measures adopted for the current study to examine employee staffing, training and
motivation aspects of human capital were developed from prior studies. The measures
that were used to examine staffing, training and motivation come from the human
resource management and the high performance work practices literature. Huselid and
Becker (1996) as well as Delaney and Huselid (1996) developed measures to capture data
about human resource management practices. Their measures were derived from the
1991 National Organizations Survey, which is part of the General Social Survey,
conducted in the USA. Huselid and Becker (1996) conceptualise strategic human
resource management as being composed of two key elements. These are, first,
selecting, training and developing employee skills, as well as developing organisational
structures that enhance effective employee activities and, second, motivating employees
to work effectively. Huselid and Becker (1996) conceptualise such measures for
strategically managing human resources as being broadly representative of the high
performance work practices described by Levine (1995) and Pfeffer (1994).
However, the measures developed by Huselid and Becker (1996) and Delaney and
Huselid (1996) (derived from the 1991 National Organizations Survey) did not have
sufficient depth of questions for factor analysis, and were thus unsuitable for the
rigorous analysis undertaken in the current study. In contrast, Snell and Deans (1992)
questionnaire, based on human resource management literature and also the 1991
National Organizations Survey, provides a more comprehensive indication of factors
affecting the rationale for selecting the human capital within an organisation. For
example, Snell and Dean asked how extensive is the testing process for employee
selection, the verification process for assessing accuracy of applicants claims, the
extent of financial resources spent and, finally, the value placed on the staffing
process. In sum, Snell and Dean had nine items for performance appraisal and eight
items for equitable reward systems, which constitute the construct of Employee
Motivation. Consequently, the questionnaire developed by Snell and Dean (1992) was
adapted for the current study. This resulted in the inclusion of 16 items for measuring
staff selection and training as well as a total of 18 items for employee motivation.
Each participant was asked to rate their firms Human Resource Management, using
a seven-point Likert-type scale anchored at both ends with 1 To a very low extent to
7 To a great extent. Five factors emerged following a Principal Components

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orthogonal Varimax rotated factor analysis[9], accounting for 65.57 per cent of the total
variance. The KMO measure of sampling adequacy was 0.920, which is well above the
required level, and Bartletts test of sphericity was significant (p 0.001), confirming
the data are suitable and valid for factor analysis. The internal reliability measured for
these five factors was strong with Cronbachs alphas all greater than 0.7: Training was
0.913; Employee Performance Process was 0.884; Employee Selection Process was 0.851;
Pay, Promotion and Rewards was 0.783; and Bonus Schemes was 0.730.
Confirmatory factor analysis based on the Z-scores computed for the five factors was
then conducted to test the goodness-of-fit for the Human Resource Management
Measurement Model. The robustness of the structural equation measurement model is
illustrated by the goodness-of-fit indices (CMIN/DF 0.342, p 0.850, SRMR 0.0108,
GFI 0.998, AGFI 0.993, NFI 0.997, CFI 1.000, RMSEA 0.000).
Measures for value-creating processes within the internal perspective
The current study has adopted measures to examine the value-creating processes within
the internal perspective that have been identified by Kaplan and Norton (2001, 2004a).
There are four value-creating processes identified by Kaplan and Norton (2001):
operations management, innovation, regulatory and environmental and customer
management. The functions of the customer management process are important for
organisations, but they relate to customer selection, acquisition and retention (Kaplan
and Norton, 2004b). Therefore, the focus of the customer management process is on
promoting and selling organisations products not on implementation and actualisation
of environmental performance (Kaplan and Norton, 2004c). Consequently, the customer
management process is considered to be outside the scope of this study.
Performances in the remaining three processes within the internal perspectives are
captured for this study. For the operations management process, this study will capture
quality and cost efficiency performance measures. This latent variable will be called
process improvement for this study. While Kaplan and Norton (2001) recognise that
process improvement metrics are important, they explain that some organisations
mistakenly choose to focus only on such improvement measures and do not include
innovation activities. The innovation process comprises of activities such as research
and development, designing, developing and successfully launching new products or
services (Kaplan and Norton, 2004b), which will be the latent variables name adopted
for this study. Regulatory and environmental process relates to employee health and
safety as well as employment practices that improve organisations internal and
external environment. Factor analysis divided the items selected to measure the
regulatory and environmental process into two dimensions: work practices and
environmental performance. The work practices dimension is included in this section,
while the environmental performance is the dependent variable for this study and it will
be discussed in the next sub-section.
Fifteen items for performance of activities within each of the three value-creating
processes (process improvement, innovation process and work practices) have been
selected from prior studies (Kaplan and Norton, 1996a, 1996b; Hoque and James, 2000;
Iselin et al., 2008a, 2008b; 2011; Gadenne et al., 2012a, 2012b). Respondents were asked to
rate the performance of their organisation for each of these 15 items against their
industrys average, where 1 Significantly Below Average to 7 Significantly
Above Average and 4 Industry Average. Three factors emerged following a

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Principal Components orthogonal Varimax rotated factor analysis and accounted for
54.74 per cent of the total variance. The KMO measure of sampling adequacy was 0.886,
which is well above the required level, and Bartletts test of sphericity was significant
(p 0.001), confirming that the data are suitable and valid for factor analysis. The
internal reliability measured for these three factors was strong with Cronbachs alphas
all greater than 0.7 with innovation process (0.725), process improvement (0.711) and
work practices (0.806).
Confirmatory factor analyses were constructed for these three value-creating
processes. The process improvement measurement model produced goodness-of-fit
statistics that support the robustness of this model (CMIN/DF 1.201, p 0.306,
SRMR 0.0203, GFI 0.994, AGFI 0.973, NFI 0.983, CFI 0.997, RMSEA
0.026). Similarly, the innovation process measurement model produced goodness-of-fit
results that support the robustness of this model CMIN/DF 0.815, p 0.367, SRMR
0.0082, GFI 0.999, AGFI 0.986, NFI 0.997, CFI 1.000, RMSEA 0.000. Finally,
the goodness-of-fit results (CMIN/DF 1.032, p 0.356, SRMR 0.0107, GFI 0.997,
AGFI 0.980, NFI 0.995, CFI 1.000, RMSEA 0.010) for the work practices
process support the robustness of this measurement model.
Environmental performance measures within the internal perspective
The second dimension of regulatory and environmental process, which is the
environmental performance, is discussed in this section. Measures for environmental
performance have been used in prior studies (Gadenne et al., 2012a, 2012b). The items
within the latent variable Environmental Budget Allocation Performance (EBAP) in
Gadenne et al. (2012a) relate to budget allocation for environmental goals. However,
while Gadenne et al. (2012b) measured and analysed environmental performance in their
study they did not provide a list of the items used to operationalise this latent variable.
For the current study, the wording of the items used by Gadenne et al. (2012a) has been
adapted to identify the results of the environmental budgetary performance and not the
budgetary allocation related to environmental goals. Five items resulted:
(1) results for waste management;
(2) results for carbon trading;
(3) results for water conservation;
(4) results for greenhouse gas emissions; and
(5) estimate level of pollutions emitted after using pollution-control technology.
Participants were asked to rate the performance of their organisation for each of these
five items against their industrys average, where 1 Significantly Below Average to
7 Significantly Above Average and 4 Industry Average.
Reliability and construct validity of environmental performance was assessed by
exploratory factor analysis, with all five items loading more than 0.45 into the latent
variable. The three key significant results for the environmental performance factor
are:
(1) the factor score explains 56.86 per cent of the total variance;
(2) the KMO measure of sampling adequacy was 0.710; and
(3) the Bartletts test of sphericity was significant (p 0.001).

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The estimate for the Cronbachs alpha is 0.809, which indicates a strong level of internal
validity for the factor. The above set of results indicates that the data are suitable for
factor analysis.
A confirmatory factor analysis was constructed to establish the robustness of the
measurement model. The goodness-of-fit indices (CMIN/DF 1.405, p 0.245,
SRMR 0.0170, GFI 0.996, AGFI 0.972, NFI 0.995, CFI 0.997, RMSEA
0.026) support the robustness of this measurement model.

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Results
Figure 2 shows the significant paths for the structural equation model used to test P1
and P2 using Environmental Performance as the dependent variable. The structural
equation models goodness-of-fit results (CMIN/DF 0.923, p 0.496, SRMR 0.0307,
GFI 0.993, AGFI 0.976, NFI 0.989, CFI 1.000, RMSEA 0.000) support a
significant fit for the model.
Specifically, the expected structural path for P1 is a positive association between
organisational commitment and environmental performance that is mediated by the
three value-creating processes. Significant paths only exist for the association between
affective commitment and environmental performance, which is mediated by the three
value-creating processes: work practices, process improvement and innovation. The
first significant path represents an association between affective commitment and the
work practices process (CR 3.265; p 0.001). The second significant path is between
the work practices process and environmental performance (CR 2.070; p 0.038).
However, there are two additional mediating paths. First, the significant path
between the work practices process and process improvement (CR 16.596; p 0.001)
followed by the significant path between process improvement and environmental
performance (CR 2.732; p 0.006). Second, there are two further significant mediating
paths in additional to the work practices process to process improvement path. These
A Movated and Prepared Workforce
components ofLearning and Growth

Employee Performance
Process

Internal Perspecve
(Value-creang process)

Innovaon process
0.206, P = ***

0.126, P = 0.009

Figure 2.
Structural equation
model for the
association between
commitment and
human resource
management
practices and
environmental
performance

0.111, P = 0.032
0.556, P = ***

Training

0.199, P = ***

0.411, P = ***

Process improvement

0.210, P = 0.006

0.757, P = ***
0.146, P = 0.038

Aecve Commitment
0.178, P = 0.001

Notes:

Work pracces process

Significant association; *** = < 0.001

Environmental
performance

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paths are the process improvement and the innovation process (CR 11.518; p 0.001)
as well as between the innovation process and environmental performance (CR 3.474;
p 0.001). There are no significant paths reported for continuance commitment.
Therefore, the evidence provides partial support for P1.
Similarly, P2 posits the association between human resource management and
environmental performance, mediated by the three value-creating processes. Two of the
five dimensions of human resource management (training and employee performance
process) have significant paths. These paths represent an association between training
and environmental performance as well as between employee performance process and
environmental performance. Both of these associations are mediated by the three
value-creating processes: work practices, process improvement and innovation.
The association between training and environmental performance is mediated by
two paths. First, the significant path from training to work practices process (CR
7.506; p 0.001) followed by the second significant path between the work practices
process and environmental performance (CR 2.070; p 0.038). Two additional
mediating paths exist for the training and environmental performance; between work
practices process and process improvement (CR 16.596; p 0.001) followed by the
significant path between process improvement and environmental performance (CR
2.732; p 0.006). Also, two further significant mediating paths exist in addition to the
work practices process to process improvement path. These further paths are the
process improvement and the innovation process (CR 11.518; p 0.001), as well as
between the innovation process and environmental performance (CR 3.474; p
0.001).
Two mediating paths exist for the employee performance process and environmental
performance association. First, the significant path from employee performance process
to process improvement (CR 2.618; p 0.009) followed by the second significant path
between process improvement and environmental performance (CR 2.732; p 0.006).
An alternative mediating effect occurs through two additional mediating paths. First,
the significant path between process improvement and the innovation process (CR
11.518; p 0.001), and the second, between the innovation process and environmental
performance (CR 3.474; p 0.001).
There are no significant paths reported for the other three dimensions of human
resource management (Employee Selection Process, Pay, Promotion and Rewards or
Bonus Schemes). Additionally, there is a negative significant path between training and
process improvement. P2, therefore, receives only partial support from the results.
An alternate SEM model was designed to incorporate the direct association between
organisation commitment and environmental performance as well as between human
resource management and environmental performance. The results of this additional
analysis, which is beyond the scope of the propositions, support only one significant
path. That path represents the direct association between the employee performance
process dimension of human resource management and environmental performance
(CR 2.147; p 0.032).
Discussion
The results support a number of associations between specific components of human
capital within the learning and growth perspective and the value-creating processes
within the internal perspective. The following specific information, derived from the

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results of the study, adds to the body of knowledge because such specificity is not
provided in the strategy map models (Kaplan and Norton, 2001, 2004a and 2004b). First,
the significant paths produced in this study provide some specific information about
how organisational commitment, training and the employee performance process are
positively associated with the value-creating processes of the organisation and, thus,
may develop a motivated and prepared workforce. Second, the results provide some
information about the sequential nature of the associations between the organisations
value-creating processes. Also, the results support the existence of two dimensions for
the regulatory and environmental value-creating process of these strategy map models,
which for this study have been called work practices process and environmental
performance.
In particular, affective commitment is directly and positively associated with the
work practices process, which is one of the two dimensions of the regulatory and
environmental value-creating process. This association suggests that the senior
management, who participated in this study and have high affective commitment, is
positively committed to developing the appropriate processes to achieve effective work
practices. While training is directly and positively associated with the work practices
process, this dimension of human resource management is directly but negatively
associated with process improvement. However, the results support an indirect positive
association between training and process improvement that is mediated by the work
practices process adopted by organisations. These varying direct and indirect results
suggest that, while training may provide employees with the necessary knowledge and
skills to improve internal processes, the negative direct association between training
and process improvement implies there needs to be more than just training to achieve
process improvement. As the work practices process includes employee satisfaction,
this indirect path suggests the need for some hygiene factors (Herzberg et al., 1959) to be
present to develop a motivated and prepared workforce. Herzberg et al. (1959) suggested
that no dissatisfaction with work conditions is a hygiene factor that must be present
before a workforce is motivated. The work practices process includes workplace
relations and health and safety items. The employee performance process is directly and
positively associated with process improvement, which suggests that the need for
recognition and achievement as a motivational factor (Herzberg et al., 1959) is present
through the employee performance process.
While the strategy map model illustrated by Kaplan and Norton (2001) does include
an arrowhead within the internal perspective that implies some sequential associations
between the value-creating processes, there is no explicit discussion of these sequential
associations. The results of this study provide some evidence to support these
sequential associations. First, the successful implementation of desired work practices
(such as workplace relations and health and safety compliance that are associated with
employees satisfaction so that they remain with the organisation) has a direct and
positive association with process improvements. These findings are consistent with
prior results when it has been suggested that employees should be managed, trained and
developed to improve environmental performance (Vickers, 2005; Eisenstat, 1996).
Second, the sequential associations continue from work practices to process
improvements and from process improvements to the innovation process. These
associations may be explained through the motivation and lack of dissatisfaction
achieved through the presence of desired characteristics within organisations work

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practices, the effect of training, the commitment to the organisation and presence of the
employee performance process. The results are consistent with earlier findings that
employee stakeholders influence the way many businesses conduct their processes and
develop their policies and product offerings to demonstrate the need to respect the
natural environment (Fraj-Andres et al., 2009; Neville and Menguc, 2006; Waddock
Bodwell and Graves, 2002).
Finally, three significant direct paths exist between each of the value-creating
processes (work practices, process improvements and innovation process) and
environmental performance within the internal perspective. These three significant
paths of this study are consistent with empirical evidence that certain management
practices are more likely to lead to the development of appropriate internal processes
that enhance environmental performance outcomes (Egri and Herman, 2000; Laabs,
1992; Patton and Daley, 1998). The eight significant paths related to the testing of the
two propositions of this study have identified specific management practices that
enhance environmental performance and this adds to the body of knowledge.
Each of the structural paths is supported and the model is statistically robust.
Therefore, these results indicate that organisations can expect to achieve better
environmental performance when they adapt their human capital by:
developing greater affective commitment within their employees;
providing specific training; and
implementing effective employee performance processes.
The importance of implementing an effective employee performance process is further
supported by the results of the additional analysis that there is a significant direct and
positive path between the effective employee performance process and environmental
performance. Further, the results indicate that not only is there a sequential association
between value-adding processes but also all three enhanced processes directly
contribute to the improvement of an organisations environmental performance.
Implications
While prior research has empirically examined the relationship between human capital
and financial performance, very little research has examined how the components of
human capital are associated with environmental performance. As such, performance
measurement systems that include measurement of environmental performance may
help to improve our understanding of how such performance management systems can
affect corporate sustainability outcomes.
The findings of the current study partially support the propositions that there are
sequential associations between the human capital within the learning and growth
perspective and value-creating processes within the internal perspective, which may
contribute to environmental performance. That is, specific dimensions of human capital
may contribute to environmental performance through organisations value-creating
processes. This approach identifies and tests the significant dimensions of these
selected components within human capital and contributes to an understanding of
environmental performance. These findings provide evidence that has not been
considered in past research. The results of the current study reveal that organisations
may achieve greater environmental performance when they provide their human capital
with the opportunity to have appropriate training, to access an effective employee

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performance process and to have a sense of affective commitment to their organisation.


The results also support sequential associations between the value-creating processes
that may contribute to environmental performance.
Organisations may often need to develop strategies that motivate their employees to
improve, or perhaps even to develop, efficient and effective procedures. Such
development or improvement of procedures may ensure not only organisational
compliance with increasingly onerous regulatory requirements regarding
environmental performance but also keep pace with societal expectations. The results of
the current study indicate that organisations need to develop strategies that provide
their human capital with training and effective employee performance as well as
encourage organisational affective commitment. Specific training in any new
procedures may work to enhance organisations value-creating processes, which may
then translate into better performance in environmental criteria. The results also
suggest that affective organisational commitment positively motivates employees to
work hard to keep improving the efficiency, effectiveness or even the content of new
procedures, which is likely to enhance an organisations value-creating processes and
improve environmental performance. It is important to remember that these factors do
not stand alone, for example, effective commitment alone will not lead to improved
environmental performance. Rather, the combination of training and an effective
employee performance process, within an environment of affective organisational
commitment, can lead to improvements in the value-creating processes, including
enhanced environmental performance.
The implications of these improvements to environmental performance arising from
facilitating improvements in the employee performance process, training and affective
commitment that enhance organisations value-creating processes and improve
environmental performance are important for organisations facing substantial changes
in environmental regulation. For example, in Australia, many large companies in the
energy industries are caught by the NGER Act (2007), requiring organisations to reduce
greenhouse gas emissions. The introduction of a carbon tax in 2012, was much broader,
and it affected a greater number of organisations and consumers. Evidence from the
Australian Energy Market operator suggests that emissions from electricity
generation have fallen by about 8.6 per cent in the first six months of the year
(Australian Broadcasting Commission, 2013). The current Australian Government has
introduced the Clean Energy Legislation (Carbon Tax Repeal) Bill 2013, but this Bill has
been rejected by the Senate. Therefore, the extent of environmental legislation will be the
subject of ongoing debate (The Australian newspaper, 2014). The findings of the current
study bring to light some human capital factors that may enhance the organisations
value-creating processes and environmental performance and should be considered by
senior management during this time so that they can, at least, have the capacity to meet
the new required targets in a changing regulatory environment.
Limitations
Questionnaire survey techniques come with a set of limitations. First, the responses for
this study were largely sourced from managers such as the CEO, the financial controller
or chief accountant of a firm or the human resource manager. While these participants
may have a significant understanding of the organisational and balanced scorecard
factors considered for this study, the responses were based on their own perceptions.

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However, as a precautionary measure, an assessment of common method bias was


undertaken to determine whether respondents rated all constructs as essentially the
same. The results show that no evidence of common method bias.
Second, although the dataset was large, with only 300 useable responses
(representing a response rate of approximately 20 per cent), the generalisability of the
findings may be considered to be limited. However, the non-response bias tests found no
significant difference between early and late responses. Further, the response rate is
similar to those of other accounting studies (Hall, 2008; Baines and Langfield Smith,
2003; Moores and Yuen, 2001).
Third, other possible critical variables may need to be further considered. For
example, Kaplan and Norton (2004b) assert that the learning and growth perspective
comprises human capital, information capital and organisational capital within their
balanced scorecard model. The current study only examined the human capital
elements, rather than information or organisational capital. One reason for limiting the
components of learning and growth was that the number of items used to capture these
additional elements would be beyond the scope of a single study.
Future research opportunities
The current study examined the association between the variables for companies that
had established environmental goals, indicating a level of existing organisational
commitment to environmental performance. The current model may be adopted in
future studies to test whether the associations found in this studys model apply to both
companies that do and those that do not view environmental performance as important.
Further research may focus on models that include concurrent outcomes, as
suggested by Ambec and Lanoie (2008), to test whether environmental performance and
financial performance are separate outcomes, achieved directly and separately through
the firms innovation strategy. That is, the same opportunities to increase revenues
(better access to certain markets and differentiated products) and reduce costs (relating
to material energy, services and capital) may concurrently lead to separate
improvements in both environmental performance and financial performance. The use
of structural equation modelling would be the suggested statistical technique to
investigate the mediating effect of these organisational resources on the suggested
dual separate outcomes: environmental performance and financial performance.
Notes
1. Organisational commitment is defined within the Instrument Components And Tests
section under the heading Organisational Commitment Measures just below Table 1.
2. Their study did not use a sustainability balanced scorecard approach, and so no mediating
effects were identified within the scope of their study. Nevertheless, their study provides
evidence that, when management is influenced to consider environmental issues,
organisational environmental performance improves. Prior research has identified that these
influences include customers desire to influence organisations to take environmentally
responsible actions and, subsequently, managers desire to promote their environmentally
responsible actions to their stakeholders Banerjee et al. (2003).
3. Although there is much literature on the relationship between organisational characteristics
and innovative performance (emanating from the seminal work of Mintzberg, 1983), Laursen
and Foss (2003, p. 246) assert that investigations analysing how new human resource

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management practices and innovative performance relating to their internal processes are
few in number.
4. Prior management accounting studies have reported to have surveyed companies employing
200 or more employees (Hall, 2008; Lillis, 2002, 2010).

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5. Comrey and Lee (1992) suggest the following interpretation for factors loadings: higher than
0.70 are excellent; 0.60 and above are very good; 0.55 are good; 0.45 are fair; and 0.32 are poor.
The factor loading of 0.46 or greater was selected for two reasons: to enable comparisons with
prior studies (Robinson and Pearce, 1988) and to ensure this measure is considered a
conservative criterion as suggested by Kim and Mueller (1978). A factor loading of 0.46 or
greater has been used in prior research (Robinson and Pearce, 1988; Tang, 2008).
6. The two main assumptions underlying the suitability of data for factor analysis are adequacy of
sample size and factorability of the correlation matrix (Pallant, 2013). First, as the sample size for
this study consists of 300 cases, with 42 questionnaire items, this appears to be adequate using the
criterion of at least five cases per item (Tabachnick and Fidell, 2013; Gorsuch, 1983; Hatcher, 1994).
Second, the KMO values and Bartletts test of sphericity as reported for each factor show that in
each case the KMO index to be greater than the 0.6 threshold (as suggested by Tabachnick and
Fidell, 2013), and the Bartlett statistic to be significant.
7. If common method bias is present, one factor should emerge from an unrotated factor analysis
on the items included in a survey, and that factor should account for the majority of the
variance in the items (Podsakoff and Organ, 1986; Podsakoff et al., 2003). An unrotated factor
analysis revealed 12 factors with the largest single factor accounting for 26.6 per cent of the
variance, which compares favourably with Rutherford et al., 2007 who reported that their
largest single factor accounted for 32.7 per cent of variance.
8. The confirmatory factor analysis was conducted using structural equation modelling within
the AMOS statistical software programme. The list of robustness and goodness of fit indices
listed below will be applied to all SEM analysis in this study:
Non-significant probability (P) cannot reject the goodness-of-fit of the hypothesised model
(Byrne, 2001).
Ratio of 2 for CMIN/DF indicates a good-fitting model (Tabachnick and Fidell, 2013).
SRMR 0.05 represents a well-fitting model [Byrne, 2001].
Required value of 0.9 for each of the indices GFI and AGFI (Page and Meyer, 2000;
Tabachnick and Fidell, 2013).
Required value of between 0.9 (Tabachnick and Fidell, 2013) and 0.95 (Hu and Bentler,
1999) for each of the indices NFI and CFI.
RMSEA is one of the most informative criteria with 0.08 as the desired value of RMSEA
[Hu and Bentler, 1999; Tabachnick and Fidell, 2013].
9. Initially, seven factors emerged from this Varimax rotation factor analysis with an Eigenvalue of
1.0. However, several items cross-loaded (at levels above 0.46) and had to be removed, while other
items failed to load at sufficient levels (at 0.46), and were also removed. This treatment of items
would be considered appropriate by Tabachnick and Fidell (2013), who propose that a
cross-loading item is one that loads at 0.32 or higher on two or more factors. They suggest that
a cross-loading item should be dropped from the analysis, especially if there are several adequate
to strong loaders (0.50 or better) on each factor, as is the case for these data.

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About the authors
Kirsten Rae is a Lecturer in accounting in Griffith Business School at Griffith University, Nathan
campus. Kirsten has work experience in the government sector and private practice. She is a Sir
Samuel Griffith early career researcher who had her doctor of philosophy degree conferred in
2011. Her research interests include accounting education, corporate sustainability and
environmental management accounting, corporate governance, internal auditing and
management control systems. Kirsten Rae is the corresponding author and can be contacted at:
k.rae@griffith.edu.au
John Sands has experience in industry and academia, both in research and executive roles. He
combines this experience into his teaching and research. He has had over 30 publications in
high-ranked international and Australian journals and books. His areas of interest include
corporate sustainability based on sustainability balanced scorecard approach to performance
management, management accounting levers of control and organisational strategy, Shara1h law
compliance and social responsibility in the finance industry associations. He is a fellow of CPA
Australia and a member of The Institute of Certified Management Accountants and a fellow of the
Australian Institute of Management.
David Leslie Gadenne has had extensive academic and industry experience. Prior to his
appointment at USC in 2007, David was Professor of Accounting and Finance at CQU. His
teaching spans research methods, advanced statistics, company accounting and management
accounting. He received two ANBAR international citations of excellence awards for Highest
Quality Rating. His current research include the areas of voluntary administration, behavioural
accounting, human information processing, small business, financial distress, balanced scorecard
implementation incorporating social and environmental management accounting research.

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