According to the Porter hypothesis, strict environmental regulation increases business efficiency and innovation, improving competitiveness. The hypothesis was formulated by economist Michael Porter.

According to this hypothesis, strict environmental regulation, as long as it is efficient, encourages greater business investment in the research and use of cleaner technologies with the consequent benefit for the environment on the one hand and innovation and improvement of more efficient production processes on the other. The cost savings that can be achieved would be sufficient to more than offset the expenses incurred to comply with the new regulations as well as the costs of innovation, directly influencing greater competitiveness of the company.