Environmental performance and plant closure

This study uses a sample of plant closings as the testing stage to examine the financial consequences of variant environmental performance records and stakeholder pressure levels. It compares 117 manufacturing facilities closing down between 1998 and 2000 to 351 facilities surviving through this period, along four measures of environmental performance. It shows that in the ten years prior to closure, closing facilities reduce their toxics emissions relatively more and incur somewhat stronger community and regulatory pressures than surviving ones. The results persist through alternative versions of the model and suggest that the environmental performance of closing facilities is at least as good as that of surviving ones. The mix of environmental practices of closing facilities differs from that of surviving ones with the former engaging in significantly less recycling of waste than the latter. Closing facilities focus more on end-of-pipe measures while surviving ones engage in more pro-active strategies, consistent with evidence in the literature of a positive relation between pro-active environmental practices and performance. Stakeholder pressures, in some cases (e.g., in pollution intensive industries), may be associated with unrecoverable costs to facilities, including closure, depending on the environmental management choices of the facilities.