This brief is part of the Insights @ Center for Emerging Markets, a publication focused on cutting-edge ideas and advice for global leaders about emerging markets.
By Elizabeth M. Moore, Sheila M. Puffer and David Wesley (all Northeastern University), and Antonio García (Public University of Navarra)
In Short: This brief explores the institutional factors driving or hindering sustainability in the global construction industry. It draws on recent research indicating that home country corruption and high import tariffs significantly undermine a company's commitment to the United Nations (UN) Sustainable Development Goals (SDGs). These institutional pressures create uncertainty and increase the cost of sustainable technologies. However, robust intellectual property rights (IPR) protection can buffer firms against these challenges, enabling long term investment in responsible practices. For decision makers in emerging markets, this work suggests that fostering transparent governance, open trade, and strong innovation protection is vital to helping transition the high-impact construction sector toward a resilient, sustainable future.
The global construction industry is an economic powerhouse, contributing up to seven percent of global GDP and employing millions. However, this growth comes with a massive environmental price tag, as the sector accounts for nearly 40 percent of energy-related carbon dioxide emissions and consumes vast quantities of raw materials. Beyond environmental concerns, the industry faces severe social challenges, including high corruption risks and human rights issues within complex supply chains. For policymakers and managers in emerging markets, understanding the factors that encourage or block sustainable development is critical, as construction directly shapes the infrastructure of the future. Recent research by Moore, Puffer, Wesley, and García involving companies in the construction industry from across 31 countries from 2003 to 2022 demonstrates that a company's commitment to the United Nations Sustainable Development Goals (SDGs) is deeply influenced by national governance and trade policies.
In particular, the study identifies two primary institutional barriers to sustainability in the construction industry: corruption and trade tariffs. Perceived corruption in a firm's home country acts as a powerful deterrent because it creates uncertainty and erodes trust. In such environments, companies often prioritize short-term profits or navigating illicit demands over transparent, long-term sustainability commitments. In the construction industry, these risks are especially consequential because project-based work, complex multi-stakeholder relationships, and extensive global supply chains make consistent governance and sustainability practices harder to implement. The consequences of these governance failures are not just economic. For example, the collapse of thousands of buildings during the 2023 earthquakes in Turkey and Syria was linked to a lack of code enforcement and corrupt “construction amnesties,” resulting in thousands of deaths. Similarly, high import tariffs imposed by a firm's home country hinder sustainability by increasing the cost of imported green technologies and specialized materials. These formal trade barriers limit a firm's access to international innovation and discourage the cross-border collaboration necessary to meet complex climate targets.
However, the same research by Moore and colleagues also highlights a vital tool for overcoming these barriers: strong intellectual property rights (IPR) protection. Robust legal frameworks for protecting innovations act as a buffer, allowing companies to maintain their sustainability efforts even when facing corruption or high tariffs. When IPRs are strongly enforced, companies can rely on their unique technological advantages rather than illicit political connections to remain competitive. This enforcement encourages a more proactive strategic stance in which firms integrate SDGs into their core value propositions. Furthermore, strong IPR regimes complement open trade environments, significantly enhancing the positive effects of lower tariffs on a company's sustainability performance.
Managerial and Policy Implications
For decision makers in emerging markets, these findings suggest that a “one size fits all” approach to sustainability is ineffective. Policymakers should focus on creating an enabling environment by strengthening anti-corruption monitoring, making public procurement more transparent, and reducing trade barriers for sustainable construction materials and solutions. Simultaneously, reinforcing IPR frameworks can indirectly support sustainability by fostering an environment where innovation is protected and rewarded. For managers, the research underscores that internal corporate governance and ethics are essential prerequisites for any credible alignment with global norms. Companies must perform deep due diligence on partners, suppliers, and subcontractors, especially when operating in challenging institutional contexts. Because the construction industry is project-based, highly susceptible to corruption, and reliant on complex global supply chains, these governance and policy supports are especially important for enabling more consistent sustainability practices across projects and partners. Ultimately, the transition to a responsible and resilient construction industry depends on national policies on governance and trade that enable, rather than hinder, companies' efforts to pursue sustainability and align with the SDGs.
Original Work
Moore, E.M.; García, A.; Puffer, S.M.; Wesley, D. (2025). Political Factors Affecting Corporate Sustainability Decisions: The Impact of Tariffs and Corruption on Adoption of UN Global Compact Principles. Sustainability, 17(21), 9553.8. https://doi.org/10.3390/su17219553 Open access.
Contact
If you are interested in learning more about this work, contact
