The contribution of the labour practices to organizational performance: The mediating role of social sustainability

Abstract

In the fiercely competitive global business environment, the attainment of excellence is contingent upon the efficient management of human resources and their alignment with sustainable development goals. This study examines the interplay between labour practices, social sustainability and organizational performance, with a focus on the often‐ignored perspectives of employees. Employees, often neglected as critical stakeholders, shape corporate values and strategy. The study uses a quantitative approach, having applied the partial least square method for the proposed research model. Questionnaire responses from 574 Portuguese employees reveal that labour practices (employee development, employee participation and equal opportunity) positively influence perceived social sustainability. Perceived social sustainability positively influences perceived organizational performance. The examined labour practices only exhibit a positive influence on perceived organizational performance when perceived social sustainability acts as a mediator. Companies must place a high priority on the perceptions of their employees to achieve social sustainability. This involves incorporating inclusive, participative and proactive policies regarding human resources policies, thereby leveraging the mutual advantages derived from labour practices. This demonstrates the pivotal role of social sustainability in companies' decision‐making processes, as it substantially contributes to enhancing organizational performance. This study emphasizes the importance of integrating social sustainability to maximize organizational performance, providing valuable insights for business leaders. The original model, social sustainability‐driven organizational performance, which is based on employees' perceptions, identifies labour practices as antecedents of social sustainability, and the influence of social sustainability, both directly and as a mediator, on organizational performance, is presented.