When I know your taste: Retail customers’ environmental preferences and firm pollution

• Main Author: YANG, Mengjie
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2024
• Subjects: Environmental preferences; ESG preferences; Retail customers; Stakeholders; Pollution shifting; ESG resource allocation; Accounting
• Online Access: https://ink.library.smu.edu.sg/etd_coll/588; https://ink.library.smu.edu.sg/context/etd_coll/article/1586/viewcontent/MengjieYang_Dissertation.pdf
• Institution: Singapore Management University

I examine whether and how firms incorporate retail customers’ environmental preferences into their pollution decisions. Leveraging the staggered revelations of firms’ environmental negative news and the granularity of household grocery shopping records, I quantify local customers’ heterogeneous environmental preferences based on the extent of product sales declines following the news events. In line with the conjecture that firms factor in rewards and penalties from customers and strategically reduce their pollution, I find a significant improvement in air quality near event firms’ facilities located in markets where local customers reveal the strongest environmental preferences. This effect is more pronounced when news events are more salient and when ex-ante information frictions between firms and customers are greater. Furthermore, I find no changes in firm-level pollution, and air quality significantly worsens in facilities located in markets where customers have weaker environmental preferences, corroborating firms’ pollution-shifting strategy. Overall, my findings shed light on retail customers’ role in firms’ environmental resource allocation.