Green Human Resources Management and Its Impact on Supply Chain and Business Performance: An Empirical Study in Indonesia

Abstract

This study focuses on green human resources management (GHRM), which is currently a strategic issue in almost every service or manufacturing company, including courier service SMEs in Indonesia. This study intends to analyze the relationship between GHRM and supply chain organizational learning (SCOL), supply chain performance (SCP), and business performance (BP) still rarely studied. The population encompasses all courier service SMEs in the Special Province of Yogyakarta (DIY) and East Java, Indonesia. The study targets courier service SMEs that meet certain conditions; 130 SMEs responded from the target of 200 SMEs. Partial Least Square statistical technique is used. The results show that conventional HRM practices are increasingly being abandoned by courier companies in Indonesia, particularly in Special Province of Yogyakarta and East Java. Although GHRM has a negative and non-significant effect on BP, GHRM has a positive effect on SCOL and SCP. SCOL has a significant positive effect on SCP and BP. Furthermore, SCOL mediates the relationship between GHRM and SCP and SCOL mediates the relationship between GHRM and BP. Likewise, SCP has a positive effect on BP. In addition, SCP mediates the relationship between GHRM and BP. SCP also mediates the relationship between SCOL and BP.

1. Introduction

HRM has a big role for an organization’s success. Many organizations have fully realized that the human element in the organization will provide competitive advantage and contribute to organizational success. Currently, in the era of greening practices and behavior demands, all business operational processes (from input to output) must have environmentally-friendly business practices (Yong et al., 2019; Arqawi et al., 2019). The HRM concept can develop rapidly, not only by including the process of obtaining, training, assessing performance, providing compensation, maintaining employee relationship, health and safety, or dealing with justice issues (Schuler & Jackson, 1997; Delaney, & Husehild, 1996), but also by including greening aspects in every HR practice or green HRM (GHRM) (Tulsi & Ji, 2020; Dumont et al., 2017; Yong et al., 2019).

The GHRM demand is in line with the increasing demand for environmental preservation to improve organizational performance (Dumont et al., 2017; Yong et al., 2019; Tulsi & JI, 2020). Mehta and Chugan (2015) add that the company’s goal of implementing GHRM is for owners, managers, and employees to have a green environment-friendly oriented behavior. Husehild (1995) states that either jointly or individually HRM practice is able to reduce turnover and improves employee and organizational performance. HRM practice is also able to improve organizational learning (Alshammari, 2020; Theriou & Chatzoglou, 2008). More specifically, it turns out that GHRM increases SCOL and SCP (Alshammari, 2020; Roy et al., 2020; Parast, 2019; Yu, 2013).

The COVID-19 pandemic has enable several service industries especially courier companies increase sales turnover. In the new normal era, the demand for competition in similar industries is very high and requires flexible supply chain management (Willis et al., 2016). Several courier companies in Indonesia have experienced changes in business operations, especially from the service aspect (kontan.co.id, 2020) because there have been several changes in customer behavior, who previously transacted offline, now moving to online transactions. People prefer online services because they are faster, responsive, clean, environmentally friendly and reduce contact with other products or people. People demand for delivering domestic shipment has grown fast in Indonesia, especially in the Special Region of Yogyakarta (DIY) and East Java. The Special Province of Yogyakarta and East Java have tremendous potential and opportunities for courier business. These two provinces are known to have huge market potentials from business people, students, and household customers (tribunnews.com, 2020; surabaya. bisnis.com, 2020). This seems to have also been triggered by the government’s policy of implement physical distancing, large-scale social restrictions (PSBB), and new normal to community activity restrictions (PPKM) in a number of cities so that people inevitably refrain from meeting each other, preferring to stay at home, adopting clean and healthy lifestyle. GHRM associated with SCOL, SCP, and BP in the courier business in Indonesia is rarely studied, especially in courier SMEs in DIY and East Java. Given the research gap and the novelty of the topic, there is urgency for such a study.

2. Literature Review

2.1. Green HRM (GHRM), Supply Chain Organizational Learning (SCOL), Supply Chain Performance (SCP) and Business Performance (BP)

It is time for companies to start focusing on GHRM because it enables companies able to nurture environmentally friendly employees, encourage clean living habits, and preserve the environment in every activity in the company (Sheikh et al, 2019; Bendig et al., 2018). Likewise, in large, medium, and small companies, HR practice requires support and commitment from company leaders to emphasize the important role of organizational learning (Imran et al., 2016; Mufaqih et al., 2017). Organizational learning in companies will be able to continue grow and develop when the human resources strive to learn so that organizations move dynamically and innovatively even though it requires a long timeframe (Imran et al., 2016; Gorelick, 2005). When a company implements improved and efficient organizational learning, it means that the company can implement its HR practices successfully so that they have an impact on organizational performance (Jyoti et al., 2017; Raj & Srivastava, 2014; Theriou & Chatzoglou, 2007). This finding is reinforced by Alshammari’s (2020) that organizational learning and knowledge management are able to mediate HR practices and company business performance for managers in Saudi Arabia’s service sector.

More clearly, Yong et al. (2019) and Dumont et al. (2017) state that GHRM practices can be implemented through activities such as online recruitment, selection, and work distribution to employees. In addition, companies can do recycling, telecommuting, increasing the capabilities and competencies of employees through training, online video conferencing and innovating similar activities. Green HRM in this study focuses on recruiting and training employees related to greening orientation and behavior. This is important considering that the green principle must be understood from the start by employees (Cherian & Jacob, 2012). It is hoped that the GHRM practices jointly and individually will be able to run effectively and efficiently. Individual employees must have a high commitment to be oriented toward environmentally-friendly practices in each of their activities so that they are expected to have an impact on individual and business performance (Rohilla, 2017). Companies must continuously improve and develop the GHRM system with the aim to give employees a sense of green work environment (Yong et al., 2019), so that the work environment can be more conducive, clean, and comfortable (Yusoff, 2016). Acquah et al. (2020) also find that there is a synergy between green human resource management and green supply chain management that can create the highest value in operational performance, followed by market performance, environmental performance, financial performance, and social performance. This indicates that green HRM has a strong relationship pattern with GSCM and SCP so it can improve business sustainability (business, environmental, and social performance).

Azaadegan et al. (2019) prove that organizational learning in companies is closely related to SC management. Companies facing SC disruptions need to do SCOL in order to increase their SCP in a sustainable manner. This can be done by implementing single and double-loop learning based on organizational learning theory. This proves that the SCOL aspect becomes a strategic issue that cannot be underestimated when an organization wants to stay alive. In addition, Chung et al. (2015) state that, when doing business in developing countries, there must be an appropriate match between organizational learning and business networks so that it can produce higher strategic performance. This can be done by implementing organizational learning with two strategies, namely, exploratory learning and exploitative learning, so that SCP and BP are increasing. This also is in line with Roy et al. (2020), which recommends that organizational learning should be conducted from upstream to downstream activities in the company’s supply chain business processes by involving and empowering managers and employees in improving environmental quality systems and management in a sustainable manner. Yu (2013) emphasizes that there is a link between supply chain and organizational learning from the aspect of internal and external integration, which can have an impact on business performance. Parast (2019) also finds that, when there is a process of sharing information within the organization in the SCOL process, it would have an impact on SCP. Improvement in the SCOL process is a significant predictor of SCP.

H1: Green human resource management (GHRM) has a significant positive effect on business performance (BP).

H2: Green human resource management (GHRM) has a significant positive effect on supply chain organizational learning (SCOL).

H3: Supply chain organizational learning (SCOL) has a significant positive effect on supply chain performance (SCP).

H4: Supply chain organizational learning (SCOL) has a significant positive effect on business performance (BP).

H5: Supply chain organizational learning (SCOL) mediates the relationship between GHRM and SCP.

H6: Supply chain organizational learning (SCOL) mediates the relationship between GHRM and BP.

2.2. Green HRM, Supply Chain Performance (SC Performance) and Business Performance (BP)

GHRM has a relationship with SC management from upstream to downstream of a business process (Roy et al., 2020; Parast, 2019; Mwita, 2019; Yu, 2013). Sakka (2018) confirms that GHRM increase SCP. Some important aspects that need to be considered when a company wants to increase SCP are: (1) a pro-environment commitment in every work area of the organization, (2) an organizational culture that is responsible for the company’s commitment to being pro-environment, (3) there is a strong correlation between HRM, sustainability and green practices, and (4) managers must be aware of green business development and should have achievements for business sustainability.

More specifically, Menon (2012) emphasizes that work team training increases the success of supply chain integration so that SCP tends to increase. Likewise, the emphasis on flexible job description aspects improves SCP. This confirms that during the new normal era, adding job descriptions to employees, which are related to the green dimension can also be done by companies. Albahussain et al. (2016) find that HRM practices have an impact on the efficiency of SCP and BP. The results of this study reveal that HR practices affect the efficiency and effectiveness of SCP and subsequently of BP. The results also find that SCP could mediate HRM practices and BP in companies in Saudi Arabia. More specifically, Zaid et al. (2018) conducted a study on the most polluting companies related to the relationships pattern between internal and external green SCM, GHRM practices and business sustainability (economic, environmental, and social performance). The results conclude that GHRM and SC management have a positive effect on business sustainability. Likewise, it turns out that SC management is able to mediate GHRM on business sustainability, especially in the internal GSCM. Meanwhile, external GSCM is able to mediate the relationship between GHRM jointly practices and the environmental dimension of business sustainability. Companies tend not to be aware of the increasing economic and social dimensions of sustainable performance. This study provides recommendations on the importance of paying attention to green training programs.

H7: Green human resource management (GHRM) has a positive effect on supply chain performance.

H8: Supply chain performance (SCP) has positive effect on business performance (BP).

H9: Supply chain performance (SCP) mediates the relationship between green human resource management (GHRM) and business performance (BP).

H10: Supply chain performance (SCP) mediates the relationship between SCOL and business performance (BP).

3. Research Method

This study focuses on activities and practices of GHRM, which include recruitment and training functions. These two GHRM practices are very important since they have very crucial impact and will affect the next stages of HR practice, which will ultimately have an impact on organizational strategy and overall organizational performance (Tang et al., 2018; Schuler & Jackson, 1987; Delaney & Husehild, 1996). The population in this study is all courier service SMEs in the Special Province of Yogyakarta and East Java. The courier service industry is chosen because this industry is able to show very significant growth especially during the COVID 19 pandemic. It is triggered by policies and regulations set by the government, such as lockdown, PSBB (large-scale social restrictions) and community activity restrictions (PPKM). These situations and conditions force people to prefer online transaction. This opportunity is widely used by courier service SMEs to provide innovative and creative services.

The sample technique is selected purposively on the SME’s criteria, namely, under 10 employees, established less than 10 years, and has minimum net income of IDR 25 million per month. The questionnaires are distributed according to 200 owners and managers of courier service SMEs in Yogyakarta and East Java. After being identified and checked carefully, only 130 SMEs met these criteria for further processing. 7-point Likert scale is used, from 1-very strongly disagree to 7-very strongly agree applies to GHRM and SCOL. While answers to SCP and BP range from 1-very low 7-to very high. Respondents can compare SCP and BP with similar competitors in the last three years. The source of each variable adopted are: (1) GHRM from Yong et al. (2019); Zaid et al. (2018); (2) SCOL from Azadegan et al. (2019); Bendig et al. (2018); (3) SCP from Mufaqih et al. (2017); Hausman (2002); (4) BP from Mwita (2019; Prakash et al. (2017). Models and hypothesis testing use the PLS (Partial Least Square) technique.

4. Results

4.1. Respondent’s Description

The majority of courier service SMEs in this study have a number of employees between 2 to 5 people (95%), are owners and managers of SMEs (89%), are established between 2 and 7 years (92%), are women (53%); have a monthly income below IDR 25 million (75%).

4.2. Measurement Model

Measurement model with PLS is a stage where all items are tested for validity and reliability. Measurement model with PLS includes several prerequisites including convergent validity, construct validity and reliability, and discriminant validity.

Convergent validity can be analyzed through the value of each loading factor. The loading factor. The loading factor value describes the magnitude of the correlation between each measurement item (the indicator on the questionnaire) and the latent variable (its construct). An indicator item fulfills the convergent validity if the loading score on each path between the component (latent variable) and the manifest variable is ≥ 0.7.

Table 1 explains that all loading factor values on each indicator have a value of ≥ 0.7 so that all indicators in this study are valid.

Table 1: Loading Factors from Each Indicator

The next test is construct validity and reliability. Construct validity is the validity that shows the extent to which a model is able to measure the theory on which the model is built. The model has a good construct validity if the average variance extracted (AVE) value is ≥ 0.5. Furthermore, the reliability test is seen from Cronbach’s alpha value and composite reliability. A construct is reliable if it has a Cronbach’s alpha value ≥ 0.6 and a composite reliability value ≥ 0.7.

Table 2 explains that the AVE value for each variable has a good construct validity value, or the AVE value is greater than 0.5. Likewise with the reliability test, each variable has a value of Cronbach’s alpha ≥ 0.6 and a value of Composite reliability ≥ 0.7.

Table 2: Construct Validity Dan Reliability

Furthermore, discriminant validity is a test conducted to see that each indicator that builds up a latent variable must have a higher loading value compared to indicators for other latent variables. The results of discriminant validity can be seen in the cross-loading table shown in Table 3.

Table 3: Cross Loading

Table 3 explains that the value of each indicator in a construct is higher than other constructs and assembles in one construct so this study has good discriminant validity.

4.3. Structural Model Test

Structural model testing begins with the analysis of the coefficient determination to measure the ability of a model explains variations in the dependent variable. The results of the coefficient determination can be seen in Table 4.

Table 4: R Square

Table 4 shows that the BP variable can be explained by other variables in this study model of 83.1%. The SCOL variable can be explained by other variables in this study model for 52.6% and the SCP variable can be explained by other variables in this study model for 67.6%.

4.4. Path Analysis

The results of the path analysis in this study are shown in Figure 1 and Table 5.

Figure 1: Path Analysis

Table 5: Path Coefficient Dan Specific Indirect Effect

Note: * Significant < 5%.

Table 5 explains that all hypotheses in this study are accepted, except hypothesis 1. The details of each hypothesis test are as follows:

1. GHRM has negative and non-significant effect on BP, as seen from the negative original sample value, namely, –0.051 and the P value> 5%, namely, 0.518.

2. GHRM has positive and significant effect on SCOL as seen from the positive original value of the sample, namely, 0.725 and the P value < 5%, which is 0.000.

3. SCOL has positive and significant effect on SCP as seen from the positive original value of the sample, namely, 0.634 and the P Value < 5%, which is 0.000.

4. SCOL has positive and significant effect on BP as seen from the positive original value of the sample, namely, 0.247 and the P Value < 5%, namely 0.011.

5. SCOL positively and significantly mediates the relationship between GHRM and SCP as seen from the positive original sample value, namely, 0.460 and the P value < 5%, which is 0.000.

6. SCOL positively and significantly mediates the relationship between GHRM and BP as seen from the positive original sample value, namely, 0.179 and a P Value < 5%, namely 0.016.

7. GHRM has positive and significant effect on SCP as seen from the positive original sample value, namely, 0.237 and the P value < 5%, namely, 0.020.

8. SCP has positive and significant effect on BP as seen from the positive original value of the sample, namely, 0.738 and the P Value < 5%, which is 0.000.

9. SCP positively and significantly mediates the relationship between GHRM and BP as seen from the positive original sample value, namely, 0.175 and the P value < 5%, namely, 0.022.

10. SCP positively and significantly mediates the relationship between SCOL and BP as seen from the positive original sample value, namely, 0.468 and the P value < 5%, which is 0.000.

5. Discussion and Conclusion

The results conclude that all hypotheses are accepted, except the first hypothesis. GHRM has negative and nonsignificant effect on BP. It does not support previous study from Acquah et al. (2020); Yong et al. (2019); Zaid et al. (2018). It is also not in line with Husehild (1995) that HRM practice both individually and jointly has not been able to directly boost BP. It is reasonable considering that in this study, the GRHM practices only consider recruitment and training. As is known, the GHRM practices include many aspects, namely, performance appraisal, compensation, empowerment, and other practices. This indicates that, in the new normal era, supply chain management aspects must be a concern for courier service SMEs in DIY and East Java.

Study results prove that GHRM increases SCOL and SCP, which is in line with several previous studies (Alshammari, 2020; Roy et al., 2020; Parast, 2019; Yu, 2013). SCOL is able to mediate GHRM and SCP (Azaadegan et al., 2019; Chung et al., 2015; Roy et al., 2020; Parast, 2019). If the company from the start is able to implement good GHRM recruitment and training practices, the company must be able to increase SCOL accordingly although it will definitely require a long process and large cost (Imran et al., 2016; Gorelick, 2005). This is usually a consideration for companies like SMEs. Even so, it turns out that the results are believed to be able to increase SCP both in the short and long term. Courier service SMEs in DIY and East Java must be able to drive the SCOL process through orientation to work teams, SC systems, increasing skills, knowledge and new knowledge, communication and knowledge sharing of SC. This is very important since currently competition is not only applicable head to head competition between courier companies but also competing between SCs.

Mentzer et al. (2001); Lee and Whang (2000); Lambert and Cooper (2000) recommend that the current era of strategic decision-making does not only include managing a single business unit, but has to think in detail and strategically throughout the supply chain of products or services offered to customers. Sharing information between employees and SME leaders in discussing strategies and tactics that will be conducted is also an important and attractive aspect for courier SMEs when competing companies have implemented innovative product and service breakthroughs with both single and double-loop learning exploratively and exploitatively. It also must be in accordance with the situation and condition of the SME’s resources. It is ensured when SCOL is executed properly and strategically by courier service SMEs, SCP will increase continuously. The study results also prove that SCOL is able to increase BP. This is in line with Parast (2019; Yu, 2013). SCOL is also able to mediate GHRM and BP (Acquah et al. (2020); Alshammari (2020). So that the findings of this study reinforce the view that GHRM is not able to directly affect BP.

The study results also prove that SCP increases BP. SCP is able to mediate GHRM and BP. SCP mediates both SCOL and BP. This finding is in line with previous studies (Acquah et al., 2020; Azaadegan et al., 2019; (Jyoti, et al., 2017; Raj & Srivastava, 2014; Theriou & Chatzoglou, 2007). BP can be observed by evaluating financial and non-financial performance. It is undeniable that the courier service SMEs in DIY and East Java in the last three years have increased business performance especially during the COVID 19 pandemic. However, the interview results with several SME couriers conclude that they are currently also faced with competition, which is very tight from the service aspect. There are even several companies that have offered service packages based on environmentally-friendly technology and provide customer-driven services that are in accordance with customer needs by providing convenience and speed (Swa. co.id, 2020).

In the future, courier companies in DIY and East Java should offer products and services that are oriented toward ecological behavior in the future, which increase business sustainability in the long term. Business sustainability does not only cover business aspects, but also environmental and social aspects (Al Romeedy, 2019; Mousa & Othman, 2019; Yong et al., 2019; Arulrajah et al., 2015). In Indonesia, there are courier companies that make easier to deliver goods anywhere and anytime at the touch of a finger. Its service system will automatically search for the closest available courier in a few minutes. The goods are picked up at the agreed place with operating hours that are longer than the existing companies’ hours. The service is known for its same-day and next-day service, which operates every day until 21.00 at night. The goods sent are also covered by insurance if they are damaged or lost on the way.

In addition, customers can also track and trace goods along the way and find out exactly where they are located. Customers can also use cashless payments from deposits (kompasiana.com, 2021). This will increasingly become a threat to conventional courier companies when the packing of goods and services is guaranteed to be conducted in a clean and hygienic manner especially when they offer competitive rates. This awareness must be initiated from now on so that the Indonesian people live more prosperously and have a healthy and clean environment. New science and technology continue to emerge covering both the GHRM and SCOL aspects. All of which require companies to keep pace with new innovations and services (Mehta et al., 2021; Sijabat et al., 2021) so that they are expected to satisfy stakeholders and especially courier customers so they must be adapt the business environment quickly and responsively. Green technology has also become a demand in a modern era (Saifullah et al. 2017).

This study deliberately only focuses and limits GHRM to the aspects of recruitment and training so that it does not describe the joint GHRM in an ideal way. The courier service SMEs studied are only in two provinces in Indonesia so the research could not generalize the portrait of courier service SMEs in Indonesia. The sampling technique is limited by certain conditions with the perception of those who have different levels of education so the respondents who fill out the questionnaire that could be biased. This study should also consider other variables including the SC strategy and other business strategies in order to be able to apply the research model in accordance with the situation and condition of the company.