The moderating effect of ‘Green’ HRM on the association between proactive environmental management and financial performance in small firms

Research has shown an association between proactive adoption of environmental management practices and firm performance; however little of this research, particularly in the small firm context, has examined the impact of human resources management (HRM) practices on that association. Using data drawn from a sample of 158 small firms in the Australian machinery and equipment-manufacturing sector, this article contributes an empirical test of the moderating effect of HRM on the association between proactive environmental management and firm financial performance. In so doing, we draw on the concept of ‘Green’ HRM; that is to say, practices aligned with environmental sustainability goals and which aim at developing employees’ abilities, motivation and commitment, and involvement in support of those goals at the firm level. The findings reveal that Green HRM positively moderates the association between proactive environmental management and financial performance, such that a high level of Green HRM increases the financial benefits of proactive environmental management compared with low levels of Green HRM. The findings show the added value that Green HRM provides when used as an enabler of proactive environmental management; this study should help allay concerns of small firms about the potential cost burden they may face from increasing governmental and social demands for environmental sustainability.