Human Resource Management and Future Skills Development for Sustainable SME Performance: Evidence from A Circular Economy Enterprise
DOI:
https://doi.org/10.59890/ijefbs.v4i5.44Keywords:
Circular Economy, Employee Engagement, Future Skills, Human Resource Management, Sustainable SMEAbstract
Despite extensive research on circular economy technologies, the role of human resource functions in enabling the operational sustainability of resource-constrained SMEs remains theoretically underspecified. This study investigates how formal HRM practices and digital skills training enhance workforce engagement and operational performance in resource-constrained circular SMEs in the Philippines. Using a qualitative action research design, we conducted in-depth interviews with six employees and managers at a bio-waste recycling SMEs in Bandung, Indonesia, implementing a 1.5-month HRM intervention with pre-post-performance tracking. Data triangulation included institutional document analysis, field observations and SWOT-based strategic planning. The empirical findings highlighted that employee disengagement stemmed from unmet foundational needs (wage instability, role ambiguity, and skill gaps) rather than environmental commitment deficits, validating Maslow's hierarchy in green SME contexts. The intervention increased the daily bio-waste processing capacity from 300 to 550 kg (83% improvement) and elevated workforce engagement through standardized procedures and digital skill development. HRM formalization mediates the transformation of technical capacity into operational performance by addressing foundational motivational deficits, thereby enhancing waste-to-energy efficiency and local economic sustainability. Our study contributes to enabling a circular economy in SMEs by validating that, in addition to environmental commitments, formal HRM is key to driving green enterprise performance. Future studies should explore long-term wage adjustments and quantitative productivity correlations across larger SME samples.
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