Does Water Scarcity Affect Environmental Performance? Evidence from Manufacturing Facilities in Texas

It is well known that manufacturing operations can affect the environment, but hardly any research explores whether the natural environment shapes manufacturing operations. Specifically, we investigate whether water scarcity, which results from environmental conditions, influences manufacturing firms to lower their toxic releases to the environment. We created a dataset that spans 2000-2016 and includes details on the toxic emissions of 2,540 manufacturing facilities in Texas. Additionally, our dataset includes measures of the water scarcity experienced by these facilities. Our econometric analysis shows that manufacturing facilities reduce their toxic releases into the environment when they have experienced drought conditions in the previous year, and firms that experience more severe droughts reduce their releases more. We examine facilities that release toxics to water as well as facilities with no toxic releases to water. We find that the reduction in total releases (to all media) is driven mainly by those facilities that release toxic chemicals to water. Further investigation at a more granular level indicates that water scarcity compels manufacturing facilities to lower their toxic releases into media other than water (i.e., land or air). The impact of water scarcity on toxic releases to water is more nuanced. A full-sample analysis fails to link water scarcity to lower toxic releases to water, but a further breakdown shows that manufacturing facilities in counties with a higher incidence of drought lower their toxic releases to water. We contribute by highlighting the link between water scarcity and the environmental impact of manufacturing firms. Dr. Suresh Muthulingam, Professor of Supply Chain and Information Systems at the Smeal College of College of Business will give a presentation as part of Smeal's Center for the Business of Sustainability Research Seminar Series. The presentation, Does Water Scarcity Affect Environmental Performance? Evidence from Manufacturing Facilities in Texas, will take place on Friday, January 17 at 12:00pm in Room 217, Business Building. If you wish to partake in the luncheon portion of the seminar, please RSVP to Megan Nollman at mrn14@psu.edu by Monday, January 13th.