Pastures Green: Corporate Investments in Green Skills and Toxic Chemical Releases

Abstract

Firms face pressure to improve their environmental performance. However, in addition to making substantive investments that enhance environmental outcomes, firms may also engage in investments that are green but mostly symbolic and not effective in improving environmental performance. To examine whether the green skill investments firms make are effective in enhancing environmental performance, we analyse detailed job posting data from 2010 to 2020 and micro-level data on toxic chemical emissions from plants. We find that an increased demand for green skills is associated with subsequent reductions in toxic chemical releases at plants, especially toxins that are harmful to humans. Further analyses reveal that reductions in toxic releases are more pronounced when firms direct their investments in green skills towards local establishments rather than the headquarters. By integrating a resource-based view with concepts of market failure and organisational legitimacy, we show that investments in green skills can simultaneously serve legitimacy-seeking and substantive performance-improvement purposes.

Keywords: G32, J24, Q53, Q55 environmental risk, environmental risk management, green skills

JEL Classification: G32; J24; Q53; Q55