The amount of pollution emitted by a facility dedicated to the production or extraction of resources does not depend solely on its location, sector or type of activity. This is what our team of environmental and financial economists discovered when analyzing how corporate characteristics influence polluting emissions.
Emission rates also vary depending on the specifics of the company that owns the facility, such as the number of patents it holds, its profitability and the number of employees, according to an analysis of corporate pollution data.
We found that industrial and mining facilities owned by profitable companies, with relatively few patents and fewer employees, tend to release larger proportions of their toxic waste into the environment, whether into the air, water or soil.
On the other hand, industrial sites belonging to unprofitable companies, with higher levels of innovation and more personnel, tend to better manage their toxic waste through environmentally responsible processes, such as non-toxic treatment, recycling or incineration for energy generation.
Laws require the publication of industrial pollution data
A 1986 federal law requires companies in certain industries that employ more than 10 people and that manufacture, use or process significant quantities of toxic or hazardous chemicals to report to the government the fate of those chemicals after they are finished using them.
The US Environmental Protection Agency (EPA) compiles this data in a database called the Toxic Release Inventory. This information includes details about the companies, their facilities, location, and how they manage their chemical waste. The goal is to not only inform the public about dangerous chemicals present in their communities, but also to encourage companies to adopt cleaner methods and manage their waste responsibly.
In 2023, U.S. companies reported releasing 1.5 billion kilograms of toxic chemicals into the environment, a 21% decrease from 2014. This reduction reflects better waste management, adoption of cleaner technologies and pollution prevention measures, and disclosure requirements motivate companies to reduce their emissions.
The 2023 emissions came from more than 21,600 industrial facilities in all 50 states and several US territories, including Puerto Rico, the Virgin Islands, Guam and American Samoa. One-fifth of the facilities that reported toxic emissions were in Texas, Ohio and California.
What types of companies release toxic pollution?
The most polluting sectors in the US are metal mining, chemical manufacturing, primary metals, natural gas processing and electrical services. Together, these industries accounted for 78% of the toxic chemicals released in 2023.
Previous research shows that the highest levels of emissions tend to come from facilities located in less populated, rural, economically disadvantaged or minority-majority communities.
However, geography and demographics do not fully explain the differences in emissions. Even within the same area, some facilities pollute less than others. Our research revealed that corporate characteristics—such as operating size, innovativeness, and financial strength—are key drivers.
In our analysis, we combined data reported to the EPA on chemical emissions with company financial information and geographic and demographic data by ZIP code. We find that corporate characteristics such as profitability, number of employees, and number of patents are more closely related to emissions than population density, percentage of minorities, or household income.
We looked at what proportion of its toxic chemical waste a facility released into the environment compared to what it treated, recycled or incinerated.
The average facility in our sample, which included 1,976 company facilities with available financial data, released about 39% of its toxic chemical waste into the air, water or soil, while the remaining 61% was managed through recycling, treatment or energy recovery, either on-site or off-site.
However, release rates vary by industry. For example:
Coal mines: 99% of chemicals released. Extraction and processing of natural gas: 81%. Electric generating companies: 25%. Electrical equipment manufacturers: less than 3%.
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The role of innovation
One corporate attribute we examined was innovation, as measured by patent families, which group together documents related to the same invention, even if they are filed in different countries. We found that the most innovative companies release less toxic waste into the environment.
Specifically, the facilities of the top 25% of companies in innovation released an average of 32.5% of their waste, eight percentage points less than the average of the rest of the facilities in the sample.
Our hypothesis is that innovation provides a competitive advantage that allows companies to adopt cleaner production technologies or invest in more responsible waste management methods, thereby reducing direct pollution.
Size and profitability also matter
We also analyze the size of the companies (number of employees) and their profitability to see how they relate to the pollution levels of their facilities. We found that the largest companies, those with more than 19,000 employees, have facilities that release an average of 31% of their toxic chemical waste into the environment.
On the other hand, the facilities of medium-sized companies, with between 1,000 and 19,000 workers, release an average of 45%. Those from smaller companies, with fewer than 1,000 employees, release an average of 42% of their toxic chemical waste into the environment.
Importantly, larger companies, which typically have multiple locations, typically have facilities that handle larger volumes of chemicals. Therefore, even if they release smaller amounts of their toxic waste into the environment, these can amount to larger amounts.
We also found that industrial facilities owned by profitable companies have higher average rates of releasing toxic chemicals into the environment than those owned by unprofitable companies.
Facilities owned by companies with positive net income, according to their income statements obtained from PitchBook, a company that compiles data on corporations, released an average of 40% of their waste containing toxic chemicals into the environment. Facilities owned by companies with negative net income released an average of 31% of their toxic chemical waste into the environment.
In our opinion, this indicates that companies with a strong financial situation are not necessarily more environmentally responsible. This could be evidence that profitable companies profit, in part, from polluting the environment rather than funding pollution prevention or cleanup.
Our analysis shows that geography and demographics alone do not fully explain the different pollution levels of industries and facilities. Corporate characteristics are also key factors in the management and disposal of toxic waste.
This article was originally published in The Conversation
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