Buying and Selling: Green Havens

As the global trade of eco-friendly products grows, new research shows companies aren’t chasing pollution havens — they’re seeking stricter environmental standards to back up their green claims.

There has been a rise in the global trade of “green products,” which are designed to reduce negative impacts on the environment by generating less pollution in production, reducing pollution through their use, or helping to clean up damage to the environment. A common example is electric vehicles, as opposed to the traditional gas-powered. But while they may promote environmental sustainability, not every green product represents an entirely green life cycle or implies no risk of pollution in the value chain.

Heather Berry, dean’s professor of strategy and international business, and Jasmina Chauvin, assistant professor of strategy, ethics, economics, and public policy, examined the relevance of the pollution haven effect — where companies shift their production to countries with weaker environmental standards to save money — in the decision-making process for sourcing green products.

Using trade data from 2002 to 2019 that covered global imports and exports for more than 5,000 different products, they found that green products are more likely to be sourced from countries with stricter environmental rules.

Here, Berry discusses how the growing popularity of green products is changing the conversation about the role of environmental standards in global trade.

BUYING

The production of green products represents the future.

Firms seek out green havens in their sourcing of green products, especially for consumer-facing products and when sourcing into countries with high customer engagement in environmentalism and a greater presence of nongovernmental organizations (NGOs). This aligns with prior research that suggests consumers expect a firm’s green claims about their products to be backed by sustainable sourcing practices rather than “greenwashing.” Holding companies accountable to their claims can be difficult when products involve components that have been sourced from multiple countries. However, there are NGOs and watchdog groups that help consumers become more knowledgeable about the environmental impact of firm operations. A greater demand for green products, as well as a more active and engaged civil society, helps hold firms accountable in their global sourcing and represents a response to the challenge of pollution havens.

SELLING

Strict environmental rules hurt a country’s ability to export.

Prior research on the pollution haven hypothesis has suggested that higher environmental standards hurt domestic exporters and lead to more offshoring of pollution-intensive industries. While this idea may generally explain the decision-making process behind the production location of traditional products, it holds less true for green products. Because green products represent less than 15% of all traded goods, their overall share in global sourcing is still relatively low. But their contribution to traded products is likely to grow as more countries adopt pollution reduction targets. Between 2002 to 2019, the top producers of green products were China, France, Germany, Italy, Japan, Mexico, the Netherlands, South Korea, the United Kingdom, and the United States, with China showing the highest growth.

This story was originally featured in the Georgetown Business Fall 2025 Magazine. Download the Georgetown Business Audio app to listen to the stories and other bonus content.