Water efficiency and corporate carbon performance: the roles of CSR, regulation, and industry intensity

This study examines whether firm‐level water management efficiency is associated with corporate carbon emissions, and whether this association is moderated by corporate social responsibility (CSR) performance, environmental regulatory stringency, and industry water intensity. Using an international panel of 2318 firms across 22 countries (32,448 firm‐year observations) over 2010–2023, we estimate two‐way (firm and year) fixed‐effects regressions with standard errors clustered at the firm level. Water management efficiency is negatively and significantly associated with both total carbon emissions and carbon intensity. This association is significantly stronger among firms with above‐median CSR performance and, for total emissions, in highly water‐intensive industries. Environmental regulatory stringency strengthens this association for total emissions, but not for carbon intensity. Robustness checks using lagged specifications, system GMM, and two‐stage least squares (2SLS) yield consistent results. Overall, water management efficiency appears to function as an operational capability with decarbonization spillovers that are most pronounced where internal sustainability routines are mature, external regulatory oversight is strong, and water is operationally salient.