Most governments acknowledge nowadays the strategic importance of the environmental goods and services industry (or eco-industry), in the new economy centered on knowledge, innovation and environmental protection. However, the underlying dynamics of this booming sector is still poorly understood. This presentation will first provide a brief outlook of the eco-industry, its scope, recent development and growth potential, in particular in Latin America. It will next show that the value this industry does and might further create relies essentially, from a public policy standpoint, on a Smithian innovation process, and from a management perspective, on a relational rather than transactional approach to customer-supplier relationships. Several implications for policymaking and business strategy will be discussed.