Are Chief Sustainability Officer Guardians of Environmental Justice? An Empirical Evaluation

This essay examines how appointing a Chief Sustainability Officer (CSO) can reduce misconduct in the form of environmental injustice. Environmental injustice stems from a lack of attention to environmental concerns like toxic releases by manufacturing facilities in low-income, non-white neighborhoods (underserved communities) compared to their counterparts in wealthy, white neighborhoods. This results in a disproportionate exposure of underserved communities to toxic chemicals and their adverse health effects. In this essay, we examine whether appointing a CSO, which shifts a firm’s attention structure towards sustainability issues, reduces such injustice.

To test whether CSOs reduce toxic releases and environmental injustice, we combine firm-level toxic chemical release data, with firm-level CSO appointments, and facility-neighborhood demographic information. The data spans 20 years and contains toxic release information for facilities of 172 firms that create a CSO role between 2000 and 2002, and 407 firms that did not. Using a difference-in-differences approach that accounts for the endogenous decision to appoint a CSO, we show that the appointment correlates with an almost 20% reduction in toxic releases. This reduction is primarily driven by facilities in underserved communities, which reduces environmental injustice. These findings are important because regulators have unsuccessfully tried to curb environmental injustice since the 1980s and we provide evidence on the effectiveness of a heretofore unexplored control mechanism: firm-governance decisions.