IMPACTS OF ESG ON EMPLOYEE RETENTION DURING COVID-19 1
Impacts of ESG on Employee Retention During the COVID-
19 Pandemic: A Study of Employee Generational
Differences
Tyler Simmons, XXXXXXXXXX
BaoTram Tran, XXXXXXXXXX
Joley L. Luppi, XXXXXXXXXX
A Special Project Paper
Submitted in Partial Fulfillment of the
Course Requirements for BUS 581 – Graduate Special Project
Central Connecticut State University
New Britain, Connecticut
July 25, 2022
Faculty Advisor: Dr. C. Christopher Lee, School of Business
mailto: XXXXXXXXXX
mailto: XXXXXXXXXX
mailto: XXXXXXXXXX
IMPACTS OF ESG ON EMPLOYEE RETENTION DURING COVID-19 2
TABLE OF CONTENTS
Page
Abstract …………………………………………………………………… 3
Introduction …………………………………………………………………… 4
Literature Review ………………………………………………………………… 7
Research Methodology …………………………………………………………… 17
Results …………………………………………………………………………… 24
Discussion …………………………………………………………………………… 29
Conclusion …………………………………………………………………………… 34
References …………………………………………………………………………… 35
Appendix …………………………………………………………………………… 38
IMPACTS OF ESG ON EMPLOYEE RETENTION DURING COVID-19 3
Impacts of ESG on Employee Retention During the COVID-19 Pandemic: A Study of
Employee Generational Differences
Tyler Simmons, BaoTram Tran, and Joley L. Luppi
ABSTRACT
Purpose: The retention of quality talent serves to increase profitability, productivity, and
efficiency and sustain competitive advantages. As a result of the COVID-19 ‘Great Resignation’
and other retention challenges, business leaders continue to implement various strategies to
mitigate increased turnover and improve retention. This research examines environmental,
social, and corporate governance ESG and its ability to impact employee retention, as a whole
and by generation (Gen X versus Gen Z), through the strategic and targeted implementation of
usiness initiatives.
Design/methodology/approach: From a self-administered online questionnaire via Amazon
Mechanical Turk, 716 responses are used to test our hypotheses via multiple regression and
co
elation analysis.
Findings: Employee retention varies based on the type of ESG initiatives businesses adopt.
Social ESG has the highest impact on retention, followed by environmental ESG. Additionally,
employee generation affects which ESG should be prioritized. For Gen Y, social ESG has the
highest impact on retention, followed by environmental ESG. For Gen Z, environmental and then
social ESG influence retention.
Originality/value: This study is among the first to examine how different ESG initiatives
impact retention and employee generation moderates the connection.
Research limitations/implications: Due to time and resource constraints, this study used limited
sample data and one moderator and regression model. Future studies should increase the sample
size, moderators (such as job type, job location, firm size, etc.), and other analytical methods
(such as structural equation model, PLS-SEM, path analysis, factor analysis, etc.).
Practical implications: ESG initiatives can benefit businesses that are looking to strengthen
their retention outcomes and improve business-specific factors that lead to increased profitability
as well as employee satisfaction and engagement.
Social implications: These study results increase empirical evidence within management
literature and may contribute to promoting ESG initiatives in the business community.
Keywords:
Employee retention; Environmental, social, corporate governance; ESG; Employee generation;
Regression analysis
IMPACTS OF ESG ON EMPLOYEE RETENTION DURING COVID-19 4
CHAPTER 1
INTRODUCTION
As businesses aim to increase profitability, productivity, and efficiency in the modern
era, employee retention, or the ability for businesses to retain quality employees, represents a
significant, ongoing business investment in human capital with which businesses maintain a
vested interest. While employees may see high turnover rates during the COVID-19 ‘Great
Resignation’ and question their importance within the larger context of business operations, the
long-term employment of employees represents an important business resource that should not
e underestimated. To succeed in competitive markets, businesses must retain their employees in
order to help the business grow. According to Cloutier et al. (2015), long-term employee
etention has the potential to foster stability in the business environment, support the ongoing
development of business resources, and sustain profitability through both increasing the
likelihood of higher profits while reducing unnecessary expenditures related to high staff
turnover. Through long-term employee retention, a business can expect to maintain the
productivity levels and institutional knowledge present within its human resources to steadily
increase or sustain profitable business operations while avoiding the associated direct and
indirect impact of employee turnover, inclusive of
ain drain, increased expenses for recruiting
and training, and decreased interim productivity. Further, Singh et al XXXXXXXXXXemphasize that
employee retention is a competitive advantage. Retaining skilled employees has emerged as an
essential element for a sustained competitive advantage that never depreciates. As related to
some of the more indirect issues inherent in lower employee retention and increased employee
turnover, Basnyat et al XXXXXXXXXXhighlight the negative impact to employee morale, team
dynamics, and consumer experiences and perceived value, which may impact profitability as a
esult. Collectively, increasing employee retention and decreasing employee turnover are
essential requirements for long-term successful business operations.
To improve the likelihood of favorable results such as long-term employee retention,
usinesses have adopted Environmental, Social, and Corporate Governance (ESG) standards to
increase holistically favorable and socially conscious outcomes as well as promote appropriate
usiness behavior. These common ESG factors help a business to succeed. Environmental
strategies focus on the way that the business ensures safe environmental practices. Social strategies
focus on the relationships between the business and its connected social circle, inclusive of its
employees, supply chain, customers, and the greater community in which it operates. Finally,
Corporate Governance strategies focus on the effectiveness and efficiency of the leadership
structure of that business. In their assessment of the importance of ESG factors in modern business
dynamics, Zumente and Bistrova XXXXXXXXXXnote that businesses have begun to shift their focus toward
more long-term value creation and sustainability strategies. Businesses that em
ace the ESG
concept and incorporate its standards yield better environmental impact results, more favorable
societal perceptions, and higher overall expected returns for its owners. Additionally, the study by
Khan XXXXXXXXXXsuggests that, although ESG contains nonfinancial performance measures, new
corporate governance and ESG metrics could predict stock performance in global stock markets.
In this study, the corporate governance variables were identified as ownership dispersion,
shareholder orientation, and institutional strength. Favorable practices related to these variables
demonstrate the good corporate governance measures that are inherent in sustainable businesses
with efficient capital usage, preservation, and growth. Further, Ikram et al XXXXXXXXXXexplain that the
internal corporate responsibility activities of an organization increase employee commitment. In
IMPACTS OF ESG ON EMPLOYEE RETENTION DURING COVID-19 5
turn, this increased commitment results in higher employee retention. The adoption of favorable
ESG standards by a business is an essential factor in creating a business that attracts and retains
quality employees.
To explore some of the implications of employee retention on business operations, this
esearch intends to examine the extent to which Environmental, Social, and Corporate Governance
(ESG) factors affected employee retention in the workplace during the COVID-19 pandemic
period. Additionally, this research aims to consider the impact of ESG factors on employee
etention as related to any differences between two generations of employees, specifically Gen Y
and Gen Z. Based upon an analysis of collected data, this study intends to assess whether: (1)
favorable environmental ESG factors impact employee retention, (2) favorable social ESG factors
are positively related to employee retention, and (3) favorable corporate governance ESG factors
have a positive relation to higher employee retention.
A substantial amount of prior research exists concerning the intersection between positive
Environmental ESG factors and employee retention (Shetty & Gujarathi, 2013; Benn et al., 2015;
Likhitkar & Verma, 2017; Wagner, XXXXXXXXXXFurther, numerous studies have been conducted on the
positive relationship between Social ESG factors and employee retention (Bode et al., 2015;
Cycyota et al., 2016; Kuratko et al., 2017; Sanusi & Johl, XXXXXXXXXXFinally, a significant amount of
esearch has reported empirical evidence of the positive impact of Corporate Governance on
employee retention (Doh et al., 2011; Hirota et al., 2010; Vincent & Marmo, 2018; Wulf & Singh,
2011).
While the body of research that explores the individual impacts of Environmental, Social,
and Corporate Governance ESG factors on employee retention exists, there is a gap of
knowledge concerning the intersection of all three ESG factors and how they collectively affect
employee retention in the workplace. Furthermore, this gap in research extends to the study of
any differences of such ESG impacts between two generations, notably Gen Y and Gen Z
employees. At present, no literature has reported the generational differences of the impact of the
three ESG variables on employee retention in the workplace during the COVID-19 pandemic. As
such, this research seeks to fill this gap in knowledge and highlight the implications and
significance of this research focus for continued future research.
Due to the lack of available literature on this topic, the purpose of this research paper
focuses on creating an understanding of the connections between employee retention and ESG
factors. Specifically, this paper will examine whether positive ESG factors collectively contribute
to employee retention. Furthermore, through research conducted via an empirical study, this paper
intends to investigate the generational differences of the impacts of the three ESG factors on
employee retention in the workplace during the COVID-19 pandemic