Mediating role of human capital in enhancing ESG practices in manufacturing for regional labour market development

. Improvement of human capital opportunities is as a paramount outcome resulting from the implementation of Environmental, Social, and Corporate Governance (ESG) practices. Article aims to examine the pivotal role played by human capital as an intermediary factor explaining the impacts of ESG practices within firms on the regional labour market. Research methodology employs the Partial Least Squares Structural Equation Modelling (PLS SEM) technique. This approach is founded on data collected from a survey of 362 employees affiliated with manufacturing companies situated in the industrially advanced Ural region of Russia. The findings unveiled that ESG practices do not have a significant direct influence on the social and cultural development of the region. Instead, they contribute to the development of human capital, thereby enhancing opportunities on the local labour market. This manifests through the creation of stable employment opportunities, engaging and diverse work environments, and an elevation in career prospects. The implications of these findings extend to the practical realm, offering insights for the formulation and execution of regional human capital management strategies within Russian enterprises. Additionally, these findings can inform the development of ESG practices that wield a positive influence on the local labour market, thereby fostering a more sustainable and prosperous future for the region.


Introduction
In the contemporary landscape, sustainable societal development is pursued through a multitude of distinct trajectories, operating both at local and global levels.These trajectories encompass the green economy, circular economy, and the realm of Environmental, Social, and Corporate Governance (ESG) [1][2][3].Focusing on the scope and nature of their activities, companies are increasingly aspiring to align their strategies with the global and national imperatives of sustainable development.This alignment is driven by their commitment to securing natural resources for the prosperity of future generations [4].Manufacturing companies, as they engage in the production process, have a substantial influence not only on the environment but also on the socio-institutional dimensions of the regions in which they operate.Key components of this institutional environment encompass the labour market, social capital, and the values intrinsic to the local community.These components evolve under the sway of direct or indirect investments made by enterprises in infrastructure, socially significant programs and projects, and the revenue they contribute through taxation [5].Consequently, ESG practices that are harmonious with the objectives of sustainable development play an instrumental role in reshaping the allocation of corporate resources.This reallocation is geared toward ensuring equitable access to opportunities for human capital development.These opportunities span a spectrum that provides quality education, healthcare, and the nurturing of a robust labour market.However, it is noteworthy that the mechanisms through which ESG practices exert influence on the regional activities of companies remain underexplored.In the contemporary discourse, considerable emphasis is placed on monetary performance indicators, with a particular focus on financial performance and the capacity to attract green investments [6].This prevailing trend indirectly underscores investors' anticipation that companies will increasingly embrace green values and show a disposition toward investments in manufacturing companies that are inherently committed to energy-efficient technologies, mitigating climate impact, and cultivating responsible supply chains [7].
The repercussions of the recent economic crises in both 2020 and 2022 have a direct connection with the developmental agenda covered by ESG practices.This connection extends beyond the realms of the green economy, including the human resources within companies and the opportunities within the labour market.The disruptions in global supply chains have posed threats to the welfare of employees and escalated the risks of dwindling household incomes, heightening inequality, and augmenting poverty levels.These developments run contrary to the objectives outlined in the 2030 Sustainable Development Goals [8].The concern at hand transcends short-term fluctuations in unemployment rates.Instead, it underscores the enduring consequences for the cultivation of competencies and the resilience of the education system.Furthermore, it pertains to the ability of enterprises to generate high-tech positions characterized by substantial added value and fair wages.Equally significant is the effort to mitigate the stress arising from the digital transformation of enterprises and its repercussions for the structure of the labour market [9].Given these exigent circumstances, the attention of researchers is steadfastly fixed upon the realm of human capital and the processes underpinning its accumulation, all in the pursuit of ensuring sustainable development [10,11].Human capital, in this context, is the stock of knowledge, skills, and capabilities of employees within enterprises.It also encompasses aspects related to health and well-being, all of which function as essential factors in the generation of added value.
Intensified sanctions pressure over the past two years has led to a notable shift in the ESGpractices of Russian manufacturing companies.They have, for practical purposes, ceased the publication of their reports on social and environmental responsibility.Furthermore, these companies have undertaken substantial revisions to their budgets, with a view towards aligning with the tenets of sustainable development.This period of sanctions has accentuated the imperative of adaptation, necessitating the restructuring of supply chains, the exploration of new technologies, and the judicious allocation of limited financial resources [12,13].The primary activities traditionally undertaken by Russian enterprises, such as charitable initiatives and the financing of regionally significant projects [14], are increasingly associated with risk, particularly concerning the preservation of long-term financial stability.Compounded by the considerable depreciation of the Russian rouble, operating costs continue to escalate.In the Russian regions, manufacturing companies assume a distinctive role owing to their capacity to directly fund projects aimed at the development of human capital [15][16][17].A substantial portion of their contributions impacts on qualitative shifts in the labour market.These shifts are manifest through the establishment of stable employment opportunities, the promotion of models entailing lifelong employment for the population, the provision of equitable wages, and the training of personnel in alignment with technological advancements.
The principal aim of this article is to investigate the role of human capital as a mediator, exploring the impact of ESG practices within companies on the regional labour market.To realize this objective, we present an approach that enables the evaluation of stakeholder sentiments toward various dimensions of ESG within Russian industrialized regions.Furthermore, we seek to examine the correlation between these sentiments and the subjective perceptions regarding the state of development of the local labour market.The deployment of stakeholder surveys emerges as a crucial methodology for addressing this issue and procuring the requisite assessments.
A comprehensive review of the literature underscores a growing interest in the realm of sustainable development, examined through a myriad of perspectives.Notably, the subject of the influence exerted by ESG practices on external stakeholders and the multifaceted dynamics characterizing the interface between businesses and the local community has garnered considerable relevance.In the endeavour to scrutinize the efficacy of ESG practices concerning external stakeholders, it becomes particularly imperative to unravel the mechanisms that elucidate the cause-and-effect relationships inherent in the domains of social and environmental responsibility, corporate governance, and the fluid dynamics manifest within labour and capital markets.Li et al. astutely observe that ESG ratings and performance wield a constructive influence on the behaviour of financial investors, engendering high expectations among stakeholders of companies.However, it is noteworthy that this pattern is contingent upon variables such as company size, the progress made in ensuring rights and freedoms, and regional development dynamics [18].Through the attraction of supplementary resources, companies augment their presence and impact within regions, thereby cultivating sustainable relationships with local authorities and the community.
ESG practices play a pivotal role in augmenting business transparency, a development that, in turn, enhances accountability to external stakeholders.This heightened transparency empowers businesses to formulate strategic objectives and benchmarks that are harmonious with the developmental goals of the local community.As Cavagnetto et al. contend, transparency assumes significant importance, particularly within the financial sector.It is through this transparency that stakeholders, notably shareholders, are equipped to track the allocation of corporate resources, thereby advancing the cause of sustainable development [19].The introduction of mechanisms for external monitoring and analysis stands as an instrumental avenue for aligning development indicators and their respective targets across various stakeholder groups.This becomes particularly salient in the context of developing nations [20].Consequently, the intensity of ESG practices serves as a favourable signal for investors, signifying relatively diminished risks associated with specific assets [21].In terms of the external environment, this risk mitigation unfolds through a reduction in the likelihood of penalties arising from environmental infringements, the sustenance of a reputation in the eyes of customers, current and prospective employees, and the capacity to attract responsible suppliers within international supply chains.
A particularly noteworthy dimension of analysis pertains to the impact of corporate social and environmental responsibility on the labour market, a realm that has seen limited direct research.The significance lies in the fact that the reduction of social risks attendant to the adoption of ESG practices confers substantial benefits upon employees and the labour market.This reduction, in essence, fosters the establishment of stable conditions and a robust organizational culture while concurrently emitting positive signals to providers of financial capital [22].Chernenko et al. note that in the context of technological modernization within companies, the labour market emerges as a particularly vulnerable institution.It stands at risk of bearing the burden of the consequences arising from structural unemployment, potentially resulting in ineffective investments in human capital [23].Social responsibility, notably, entails investments in employee education and retraining, thus equipping them to adapt to the waves of technological change and modernize a company's fixed assets in alignment with market trends.Concurrently, environmental responsibility opens avenues for the cultivation of green human capital, signifying knowledge concerning best practices for mitigating environmental risks and the creation of eco-friendly infrastructure and energy-efficient solutions [24].ESG practices invigorate investment in human capital, thereby bolstering the competitiveness of employees in the labour market [25].Furthermore, they generate elements of common human capital that can be harnessed by all companies.Over the long term, the development of the labour market inexorably results in an elevation of the socio-cultural fabric within regions.This progression is driven by enterprises' investments in social infrastructure, the cultivation of enduring bonds with local communities, the augmentation of social mobility, and the enhancement of individuals' satisfaction through both direct and indirect investments in human capital.Given the presence of sizable corporations in major cities that allocate substantial resources to sustain ESG practices for the nurturing of human capital [26], we suggest that urbanization amplifies the positive correlation between labour market development and the attainment of enduring socio-cultural effects within the local community.
Based on the literature review, we formulate the following hypotheses: Hypothesis 1. Practices of social (H 1.1) and environmental (H 1.2) responsibility have a positive effect on the human capital of manufacturing companies.
Hypothesis 2. Human capital has a positive effect on the development of the local labour market (H 2.1), social and cultural development of the region where manufacturing companies are present (H 2.2).
Hypothesis 3. Social responsibility has a positive effect on the development of the labour market (H 3.1), social and cultural development of the region where manufacturing companies are present (H 3.2).
Hypothesis 4. The development of the labour market has a positive effect on the social and cultural development of the region where manufacturing companies operate.
Hypothesis 5. Changes in the labour market in urbanized areas have a greater impact on the social and cultural development of the region.

Methods and data
Sustainability and ESG concerns and practices constitute latent theoretical constructs that are shaped by a significant number of observable phenomena and determinants that underpin the daily and strategic operations of enterprises.To investigate these intricate relationships, we have opted for a mixed-method approach, using qualitative and quantitative methodologies.This methodology is based on the measurement of variables through a sociological survey conducted among employees of enterprises.The design of the survey instrument was improved by an extensive review of the literature, which served as the foundation for developing variables that encapsulate the key dimensions of interest.These variables were subsequently subjected to exploratory factor analysis, a process conducted in the early stages of the study, which confirmed their significance [10].Therefore, this study aims to scrutinize the complex interplay between latent theoretical constructs, highlighting the causal relationships that cover effects flowing from ESG practices and their end results.These results include stimulation of the local labour market and socio-cultural development of the region.
The collected data was analysed using IBM SPSS Statistics.Initially, descriptive statistics and distribution parameters were computed to provide an overview of the data.Subsequently, SmartPLS version 4.0.9 was employed to estimate loadings and path coefficients.The analysis was carried out in two stages: first, the parameters of the measurement model were estimated, and then the coefficients within the structural model were determined.The choice of this particular methodology is driven by the nascent state of theory in the area under investigation.Additionally, statistical tests, such as the Kolmogorov-Smirnov test, skewness, and kurtosis analysis, indicated that the obtained data exhibited a distribution that deviated from normality.Consequently, the widely accepted common factor-based Structural Equation Modelling (SEM) method was deemed unsuitable for this dataset.It's worth noting that the total sample size exceeded 162 observations, satisfying the condition for structural modelling.
The survey targeted several industrial enterprises in the Ural region, with a focus on representatives from the oil and gas sector.The questionnaires were distributed via Google Forms, with all questions marked as mandatory.A total of 620 questionnaires were dispatched via email to employees, specialists, and company managers.Over the course of six months in 2023, 372 completed questionnaires were received, with 10 of them being excluded due to repetitive or monotonous answers to one or more questions.Consequently, the final sample, utilized for estimating model parameters, consisted of 362 respondents.Demographic characteristics of the employees from the participating enterprises are outlined in Table 1.The study involves respondents from two regions within the Ural Federal District, with an anticipation of minimal biases or distortions based on the gender or age of the participants.The research sample includes both men and women, predominantly under the age of 35, actively engaged in industrial enterprises.To derive the variables for the study, structured questionnaires are employed.These questionnaires present statements concerning the level of development of ESG practices and specific dimensions of regional development (pertaining to the labour market and sociocultural dimensions).Respondents were tasked with assessing these statements on a Likert scale ranging from 1 to 7, where 1 signified "I completely disagree", and 7 indicated "I completely agree".Participants were asked to express the extent to which they concurred that companies in their region of operation exhibited the effects outlined in the questionnaire in connection with the ESG agenda.

Results and discussion
The analysis commenced by examining the parameters of the measurement model, and it was found that the variables demonstrated robust internal consistency.All of these variables are interpreted as reflective, indicating that the explicit variables encompassed different facets of the latent variables, sharing their essence and exhibiting high correlations among themselves.A comprehensive list of all the explicit variables employed in the study is provided in Table 2.
The primary target variable, denoted as "HUMAN_CAPITAL", encapsulates the capacity of companies to establish conducive career prospects for individuals, ensure enduring social sustainability through stable employment opportunities, and foster the development of social infrastructure.It's noteworthy that for all the variables under investigation, the proportion of variance extracted exceeded 65%, representing a commendable outcome.Furthermore, the Cronbach's alpha values surpassed the threshold of 0,7, affirming the reliability of the measurements.
The results of the assessment of factor loadings are presented in Table 3, with any variables exhibiting factor loadings below 0.7 being excluded from the final analysis.Additionally, the Variance Inflation Factor (VIF) for all factors was scrutinized and found not to exceed the critical threshold of 5, indicating the absence of significant multicollinearity that could distort the study's results.In this study, the concept of social responsibility (SOCIAL_RESPONSIBILITY) is operationalized through a specific set of practices, namely, the implementation of programs aimed at preserving local communities.This aspect holds particular significance in the context of oil and gas regions.Additionally, it encompasses activities involving the coordination and support of events, festivals, and cultural exhibitions.
Environmental responsibility (ENVIRONMENTAL_RESPONSIBILITY) is construed through the lens of incorporating environmentally friendly equipment, renewable energy sources, and products and services that promote sustainable development values.
The development of the labour market (LABOR_MARKET_DEVELOPMENT) emerges as a crucial external consequence of practicing social and environmental responsibility, especially concerning human capital.The presence of companies in the labour market is contingent upon the implementation of targeted strategies and collaborative initiatives that encompass a comprehensive analysis of the external environment.This analysis includes an examination of the demographic landscape within the region, along with strategies to attract new employees from other areas.It also involves providing access to healthcare services, social security, and setting standards for the quality of life within the region.Furthermore, discriminant validity is examined by utilizing the Heterotrait-Monotrait (HTMT) ratio and Fornell-Larcker Criterion scores, as displayed in Table 4. Notably, all HTMT scores fell below the 0,9 threshold, and the diagonal scores surpassed the values associated with their corresponding competing factors.Consequently, the measurement model selected for the factors under consideration is deemed satisfactory, thereby paving the way for a comprehensive evaluation of the structural model.With the confirmation of the adequacy of the measurement model, the study proceeded to construct a structural model.Path coefficients and their significance are meticulously assessed through the bootstrapping method, employing 5000 iterations (as illustrated in Figure 1).Subsequently, conclusions are drawn regarding the hypotheses that are under scrutiny (as detailed in Table 5).The primary hypothesis, which posits that the social and environmental responsibility of manufacturing companies exerts a positive influence on the accumulation of human capital, has been substantiated and validated through the analysis of the data.The study's findings clearly indicate that practices focused on nurturing the local community and making necessary investments in social infrastructure, aimed at preserving the well-being of employees and their families, yield a positive impact on the accumulation and utilization of human capital.The substantial explained variance of approximately 67% underscores the robustness of these relationships, signifying a commendable outcome.In this context, it's apparent that environmental responsibility engenders the cultivation of "green human capital".This refers to the knowledge and competencies concerning effective environmental preservation and the capacity to develop products and provide services that bolster climate resilience within regions.These findings align with previous research in the field [24].Furthermore, the study underscores that social responsibility also have a significant influence on a company's human capital.This aligns with the logical inference that contemporary training programs often target the long-term enhancement of employee competitiveness within the context of technological modernization.Among the explicit variables, demographic policies adopted by companies and their ability to provide adequate support to families with young children assume prominent roles.In light of these results, it is evident that the first hypothesis has been conclusively accepted and validated.
The study reveals that human capital of manufacturing companies indeed exerts a positive impact on the labour market.The presence of a substantial pool of qualified employees in a region enhances competition for intellectual capital among workers, drives up wages, and facilitates the attraction of additional labour force from other regions.However, it's worth noting that human capital does not have a direct influence on the social and cultural development of regions, and several factors could explain this observation.Firstly, sociocultural development is a long-term process shaped by numerous institutional variables, including the labour market.The development of the labour market creates a conducive environment for cultural programs and events, serving as a catalyst for the accumulation of social capital in the region and the growth of relevant infrastructure.Secondly, human capital primarily manifests itself in addressing business-related challenges and only indirectly contributes to the advancement of socio-cultural development.It establishes a ground for promoting values within the realms of education and healthcare within the region.Thirdly, human capital within manufacturing enterprises leans more towards technological aspects of development.The derivative demand for a skilled and creative workforce arises as a result of the development of the regional labour market and additional investments in the arts, social security, and charitable activities.In light of these considerations, the study supports hypothesis 2.1, indicating that human capital significantly influences the labour market.However, it rejects hypothesis 2.2, which posits a direct impact of human capital on social and cultural development within regions.The study's results indicate that the social responsibility of companies does indeed have a positive but relatively weak effect on the labour market.It's noteworthy that the primary mechanism through which social responsibility influences the labour market is human capital.This explanation accounts for the variations observed among companies with varying levels of social responsibility.The indirect effect of social responsibility on the labour market, mediated by human capital accumulation, is estimated at 0,103 (calculated as 0,403 multiplied by 0,265), which represents a relatively weak influence.Consequently, hypothesis 3.1 is supported, while hypothesis 3.2, which posited a stronger direct impact of social responsibility on the labour market, is rejected.Moreover, the study underscores that the development of the labour market does indeed exert a positive influence on the sociocultural development of the region, a relationship that has been previously elucidated.As such, hypothesis 4 is substantiated.However, the research did not find a significant association between the status of an administrative centre or a large city and the degree of influence of the labour market on sociocultural development.This finding leads to the rejection of hypothesis 5.The lack of significant disparities in the influence of the labour market on sociocultural development between large cities and smaller towns may be attributed to the equal representation of manufacturing companies in both types of locations, along with consistent employee development policies implemented by companies across these areas, including those within corporate holdings.

Conclusion
This article examines the mechanism through which the environmental and social responsibility of Russian manufacturing companies influences the broader regional environment.The primary outcome of the study underscores that social and environmental responsibility indeed yields a positive impact on the human capital of employees.This, in turn, drives the development of the local labour market and fosters the generation of additional opportunities for the establishment of stable employment and consistent income.The sustainable growth of the labour market subsequently exerts a beneficial influence on the socio-cultural development of the region.However, it's important to note that neither human capital nor social responsibility demonstrates a statistically significant direct impact on this sociocultural development indicator.Moreover, this situation remains consistent across various urban areas, including large cities, medium-sized cities, and rural regions.This broad applicability enhances the relevance and generalizability of the study's results to a wider spectrum of stakeholders.
These findings emphasize the enduring importance of human capital as a pivotal productive factor in driving socio-economic development and enhancing the well-being of the population across diverse regions of Russia.Human capital's influence extends beyond the realm of manufacturing companies, as it shapes the institutional environment by fostering labour market development and creating sustainable employment opportunities.
The findings of this study offer valuable insights that companies can leverage to enhance their ESG strategies.While previous research has predominantly focused on the external financial impacts of social and environmental responsibility, this study uniquely emphasizes the importance of human capital accumulation and utilization, along with labour market development.In light of these results, companies are encouraged to intensify their efforts in the agenda of environmental and social responsibility, particularly with regard to accumulating and harnessing human capital.This approach serves as a means to foster knowledge and competencies, as well as create sustainable employment opportunities aligned with the long-term goals of economic growth in an era characterized by technological advancements and the imperative of climate security.It's important to acknowledge a limitation of this study, which is the utilization of a relatively small sample of respondents.However, it's worth noting that even with this sample size, the study is able to derive statistically significant estimates for the relationships under investigation.For future research, a promising avenue would be to delve into the development of specific environmental responsibility practices.This is especially relevant given the contemporary challenges to sustainable development goals related to climate stability.Such research could prove particularly insightful for large manufacturing companies that have a substantial impact on the natural resources of their regions.

Fig. 1 .
Fig. 1.The results of estimating the path coefficients in the structural model.The numbers on arrows show the standardized path coefficients, and the p-values in parenthesis.The circles indicate the indicators of the adjusted R 2 .Obtained by the author.

Table 1 .
Characteristics of study respondents, in percent.Percentages are based on the total number of respondents (N=362) and are calculated by the author based on the study's findings.

Table 2 .
Results of observable variable loadings assessment.Obtained by the author.

Table 3 .
Indicators of internal consistency of variables.Obtained by the author.

Table 4 .
HTMT and Fornell-Larcker Criterion for selected variables.Obtained by the author.

Table 5 .
Estimates of path coefficients for original sample (O), sample mean (M), standard deviations (STDEV), t-statistics (t) and p-values, results of testing hypotheses.Obtained by the author.