Industrial waste management and climate externalities: Implications for corporate financing

Waste management constitutes a critical dimension of environmental sustainability, given its substantial contribution to climate change through CO₂ and other hazardous emissions. Despite increasing global attention on carbon emissions, industrial waste has received comparatively limited scholarly focus. This study examines the relationship between industrial waste generation and access to debt finance, focusing on the moderating effects of corporate social responsibility (CSR) strategy and environmental performance. Using a large international panel data of 16,499 observations over 2002–2021, the results provide consistent evidence that higher levels of waste generation significantly constrain firms' ability to secure debt financing. These findings highlight the materiality of waste as a factor influencing capital structure decisions and extend prior literature that has primarily focused on carbon emissions. The moderating analysis further reveals that firms pursuing CSR strategies and exhibiting superior environmental performance are more successful in alleviating creditors’ concerns, thereby mitigating the negative financial consequences of high waste intensity. The institutional approach further revealed divergent results across sectors, regions/contexts, and pre- and post-Paris treaty periods. Additional financial channel tests indicate that firm characteristics, including size, profitability, asset tangibility, and financial flexibility, condition creditor responses, with larger and more profitable firms demonstrating greater resilience in debt markets. These results are consistent with legitimacy theory, suggesting that proactive CSR engagement, enhanced sustainability disclosure, and comprehensive environmental practices serve as mechanisms through which firms reduce legitimacy risks and rebuild stakeholder trust. This evidence indicates that firms that fail to address industrial waste are likely to face increasing financing pressures, whereas proactive environmental strategies can enhance access to capital and strengthen alignment with global climate commitments.