Sustainability signals and export risk: Eco‐label certification versus environmental disclosure

Abstract As firms approach the 2030 horizon, sustainability has become an increasingly important determinant of international trade outcomes, as global buyers and regulators demand credible evidence of environmentally responsible production. This study examines how eco‐label certification and environmental sustainability disclosure (ESD) relate to export sales, focusing on sustainability signals that may reduce trade‐related information asymmetry and buyer‐screening uncertainty. Using a dynamic panel generalized method of moments (GMM) approach on Pakistani listed textile firms, the findings show strong persistence in export sales, consistent with path dependence in foreign‐market participation. Eco‐label certification has a positive association with export sales, suggesting that third‐party verified sustainability credentials are linked to market access and lower regulatory, buyer‐screening, and reputational uncertainty. ESD is also positively associated with exports, but its association has a smaller coefficient than eco‐labeling's. This is consistent with verified sustainability certifications functioning as a stronger signal than voluntary disclosure in addressing trade‐related risks. Quantile regression analysis further shows that eco‐label certification is associated with export sales across the distribution, with a notably stronger association among firms at lower export quantiles, whereas the association for ESD is weaker and concentrated among higher‐export firms. Overall, the findings are consistent with verifiable sustainability practices showing a stronger association with export sales than voluntary disclosure in increasingly sustainability‐screened global markets. The study contributes to the literature on how environmental strategies relate to export outcomes under rising sustainability‐related trade pressures.