When ESG Priorities Collide: Evidence from Paid Sick Leave Mandates

I show that improvements in one dimension of corporate ESG policy may come at the expense of another. In a difference-in-differences setting, I find that state-level paid sick leave mandates in the U.S. leads to better social performance, such as a narrower gen- der gap and higher employee satisfaction, but also worse environmental performance, evidenced by significant increases in pollution emission intensity and environmental violations at the firm level. This unintended negative impact on environmental perfor- mance is more pronounced for firms in high-pollution industries. My findings suggest that fulfilling ESG objectives not only imposes significant costs on the firm but also may not strategically complement each other.