New generations of workers are increasingly conscious of the harmful consequences of business activities on the environment. Firms that fail to align with environment-related imperatives risk censure and stigmatization from current and future employees. Our study examines how elite corporate law firms’ ability to hire entry-level workers is affected when adding stigmatized (oil and gas) buyers to their portfolio. Our findings suggest that taking on stigmatized buyers can reduce the ability of firms to hire graduates from leading law schools. Thus, these elite firms are subject to negative demand-side externalities in the rookie labor market. However, firms can offset this negative hiring implication and deflect stigma-by-association by allowing workers to engage in more meaningful work (“stigma cleansing”) and by offering a greater range of services to non-stigmatized buyers (“stigma dilution”).
