Trade and sustainability is converging
Trade policies are evolving to support wider environmental goals at both the international and national level. At the recent G7 summit, G7 leaders agreed (pdf),“on the need for the world’s leading democratic nations to unite behind a shared vision to ensure the multilateral trading system is reformed, […], to be free and fair for all, more sustainable, resilient and responsive to the needs of global citizens.”
Governments around the world are taking a number of different approaches to achieve these aims. For instance, the UK Government has eliminated tariffs on green products, including solar panels and wind turbines. The EU’s proposed new Carbon Border Adjustment Mechanism, expected by the end of 2022, will cover a number of products such as steel and concrete. Additionally, there are ongoing negotiations for an international Agreement on Climate Change, Trade and Sustainability (ACCTS).
Three steps to sustainable trade
Sustainable trade is an integral part of using the world’s resources responsibly and achieving net zero targets. To achieve a sustainable trade strategy, companies should consider the following steps:
1. Embed sustainability
Supply chain visibility is the key to understanding a company’s sustainability impact. Each organisation must be able to trace the source of every product and raw material, and confirm that extraction, manufacturing, transportation and working practices are sustainable. That’s not easy or cheap.
It means establishing standards that meet their own ambitions and satisfy relevant regulations – and ensuring that the sustainable procurement strategy vets every supplier. Businesses also need systems that monitor and measure their environmental impact, treatment of workers and support for communities where they source goods and services.
There are opportunities to benefit from sustainable incentive schemes. The UK Government is one of the world’s leading providers of export credit support for sustainable and green projects like renewable energy, biodiversity conservation, affordable housing and food security.
Businesses must also be prepared for how climate change will disrupt their supply chains and look to build resiliency. The sudden and global impact of the COVID-19 pandemic on global supply chains is a precursor of the many potential shocks facing businesses’ operations as a result of climate change. Shifting rain patterns, and extreme weather events including forest fires, flooding, and drought can threaten both availability of products and trading routes.