Report finds four-fifths of world trade ‘unsustainable’

Report finds four-fifths of world trade ‘unsustainable’

The Wake-up call for ESG difficulties in pursuance is getting more obvious as a report finds four-fifths of world trade ‘unsustainable’.  Here it is.

Wake-up call for ESG as report finds four-fifths of world trade ‘unsustainable’

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The overwhelming majority of global trade contributes negatively to the United Nations’ (UN) Sustainable Development Goals (SDGs), according to new research, which calls for better guidance for banks and corporates around what sustainable trade should look like.

Released this week by trade data and analytics provider Coriolis Technologies in partnership with MEP Saskia Bricmont and the Greens/European Free Alliance in the European Parliament, Measuring sustainability through trade maps countries’ export and import data against the 17 SDGs to identify negative and positive contributions.

It found that, on a scale of -1 to +1 where -1 means that all trade makes negative contributions, zero is neutral and +1 means that all trade makes positive contributions, world trade scores -0.58, with 80% of global trade by value being unsustainable.

A closer look at the numbers reveals some interesting findings. First, if the SDGs are broken down into their environmental, social and governance (ESG) elements, world trade scores -0.73 with regard to its environmental impact, and an almost entirely negative -0.91 for its social impact. However, when it comes to the ‘G’ in ESG – governance – global trade scores a positive 0.43.

“In other words, the world of trade and trade finance, alongside regulators, has put in place the governance structures to minimise economic risks in the form of employment, economic growth and provisions of basic health, but the price for the environment and for social equality and justice is overwhelmingly high,” the report says. It adds that trade policy can do “significantly more” to promote the basic human rights of trade as represented by the commitment to fair and open trade to promote sustainable cities and communities, responsible consumption, and to shore up the institutions of trade that help peace and justice.

Perhaps unsurprisingly, it is the most advanced economies that have the least sustainable trade, with the G20 nations accounting for some US$18.5tn in value terms in negative contributions to responsible consumption and production (SDG 12).

“These are economies where automotives, consumer electronics and machinery and components are routinely among the top five sectors for both imports and exports,” the report says.

However, while the poorest nations in the world score better, this is because imports are often for subsistence purposes rather than being aimed at luxury or consumption-based markets.

“If we are to meet the ambitious targets laid out at Cop26, we cannot afford to ignore the messages here – that the majority of world trade is unsustainable, and where it is not, it is a symptom of under-development,” the report says.

Defining what is and isn’t sustainable in global trade is a topic that policymakers, financiers and exporters alike have long tussled with. Unlike other asset classes, such as bonds, there are currently no standards that allow financial institutions to properly assess the entirety of the sustainability performance of trade finance transactions, leaving the industry open to accusations of greenwashing.

In its research, which it calls “an initial contribution to the process of creating an automated and consistent mechanism for measuring sustainability”, Coriolis Technologies has built on a methodology established by the UN Economic and Social Commission for Asia and the Pacific, which takes HS codes – the internationally standardised system of names and numbers to classify traded products – and compares them against the 17 SDGs.

For example, trade in tobacco negatively contributes to SDG 3 – good health and wellbeing – while trade in medicine would be a positive contributor. Because the methodology uses HS codes at six-digit level, it is able to distinguish between, for example, a diesel car (870332) and an electric car (870380) or, indeed, a hybrid car (870360), each of which have varying impacts on SDG 7 – clean and affordable energy, and SDG 12 – sustainable consumption.

The methodology isn’t without its shortcomings. For example, while specific goods may not in themselves be sustainable, they can often be used for purposes such as sustainable infrastructure. The same also applies in reverse when it comes to the trade of sustainable goods for non-sustainable purposes. What’s more, Coriolis Technologies adds that the scope to distinguish between resource utilisation for the same product in different countries is limited: “For example, a fruit such as a strawberry produced in the Middle East requires more water and energy to produce than in its indigenous environment,” the report says.

However, industry bodies and regulators are in wide agreement that the SDGs are an adequate taxonomy of reference to enable a comprehensive framework for sustainability, including the International Chamber of Commerce (ICC), which refers to them in its recent position paper on defining and setting common standards for sustainable trade and associated financing.

By providing a quick and simple measurement, Coriolis Technologies has laid bare the enormous amount of work ahead to make global trade more sustainable – but has also provided a call to action for policymakers.

“Since we know the sustainable development goals where the largest negative contributions are likely to be across world trade, we know the levers we should pull,” the report says, adding that too much of world trade contributes negatively to zero hunger, affordable and clean energy, clean water and sustainable cities.

“We also know the sectors which are to blame for the low scores of some countries: automotives, consumer electronics, machinery and components, plastics, iron and steel, and oil and gas. Oil and gas alone contributes some 10% to the value of EU trade, so if we can reduce our dependency on it, we can also reduce the negative contributions to the SDGs,” the report says, adding that the countries that have the worst scores all have automotives in their top five imports and/or exports. As a solution, it puts forward policy incentives towards the use of electric cars and clean energy in order to address the negative role that automotive and fossil fuel trade play at present.

Although Coriolis Technologies admits that the challenge of ensuring trade becomes a positive contributor to sustainable development is not an easy one to address, its development of a model to map out ESG weaknesses in trade should go some way to focusing minds as the trade and trade finance industry attempts to become more sustainable.

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Any plans to dim the Sun and cool the Earth . . .

Any plans to dim the Sun and cool the Earth . . .

Any plans to dim the Sun and cool the Earth must be led by those most affected by climate change by Elil Hoole, University of Cambridge and Shaun Fitzgerald, University of Cambridge otherwise it will be a matter of Climate Repair.

The developed countries of the “global north” are responsible for 92% of excess global emissions, according to a 2020 study in The Lancet Planetary Health. Yet it is the rest of the world – the “global south” – that disproportionately bears the brunt of climate change. Emergency measures to reflect more of the Sun could help temporarily avoid the worst impacts, but it must serve to improve the safety of those most affected.

Somewhere between 15% and 40% of CO₂ emissions will remain in the atmosphere longer than 1,000 years. Since so much climate change is already “locked in”, any strategy to tackle it based on emissions reduction alone, regardless of how quickly we reduce them, would still result in catastrophic ice losses in the Arctic and Antarctica leading to sea level rise, loss of low-lying countries and hundreds of millions of climate refugees. It would still mean global food and water shortages, massive flooding and wild fires, and a permanent loss of ecosystems. These devastating changes will continue to disproportionately impact the global south.

We believe the best way to avert major disaster is to develop and deploy temporary schemes which can partially shield some of the Earth from incoming solar radiation, at least until emissions reductions and carbon capture and storage can be scaled up.

There are two main approaches which have very different characteristics. The first involves releasing small reflective particles into the upper atmosphere, which would reflect sunlight back into space. Known as “stratospheric aerosol injection”, this process would cool the globe for several years or more, but it is controversial because of the potential for global and long-lasting unintended consequences.

The other approach, “marine cloud brightening”, involves ships generating sea spray. The water droplets evaporate and the resulting salt crystals get carried up into the air. This gives clouds something to form around, and helps cool the planet since the clouds formed by small salt crystals reflect more of the Sun’s energy.

As these particles are returned to the ocean in a matter of weeks, it is much easier to “turn off” cloud brightening if ever it was deemed necessary. Together with its potential to be deployed on a more regional basis, this makes it more likely to be acceptable to the public and policymakers.

Any plans to dim the Sun and cool the Earth . . .
There’s less dust at sea, so it’s harder for clouds to first form. anjan58 / flickr, CC BY-NC-SA

Real-world experiments

Most of what we understand about these technologies come from computer simulations known as climate models. There have been some real-world experiments, however. For instance China has injected particles in the atmosphere to try and seed new clouds and encourage precipitation in remote mountains, and has covered a glacier with cloth to prevent it melting. In Peru, authorities once painted a mountain white in order to reflect more heat and protect its glacier (darker colours are more absorbent). There are plans to protect Australia’s Great Barrier Reef with cloud brightening.

These initial steps give us valuable insights into the possibilities and limitations of these technologies. But further funding and research is needed to understand the limitations and risks.

Any plans to dim the Sun and cool the Earth . . .
Mountain landscape
China’s cloud seeding plans are aimed at saving glaciers in the remote Qilian Mountains. kidchen915, CC BY-NC-SA

There are technical questions to be addressed, but there are also critical social science issues – research will need to examine the contexts in which these kinds of technology develop, with a focus on dimensions of gender, ethics, justice, equity and sustainable development among communities most affected by climate change. Research collaborations and governance mechanisms must evolve to provide space for leadership from these communities, which will in turn strengthen global capacities to develop and deploy safe, inclusive technologies as an intermediate solution to climate change.

Potential to avert catastrophe

The cost of climate injustice cannot be easily quantified. However, communities least able to adapt, perhaps due to a lack of resources, pre-existing conflicts, or because they’re based in an area already prone to droughts or hurricanes, may well argue that no amount of climate change is safe. Technological advancements such as marine cloud brightening mean there is a potential pathway to avert catastrophe and this needs to be further developed.

If we place human life and global environmental security at the heart of our response, we must explore potential technologies that could save countless lives and stave off the worst impacts of climate change until mitigation policies catch up with reality. But crucially, decisions on how the research is undertaken and whether interventions should be deployed have to be led by (not just involve) those who will otherwise be most affected by climate change.

One possible way forward is to establish research centres in the global south. Exchange between centres could be co-hosted by an inter-governmental body such as the UN’s environment programme UNEP, together with civil society and academia. Something similar happened during the Green Revolution in the 1950s and 1960s when new agricultural technologies spread worldwide, and can be seen in humanitarian situations today.

Regional bodies, such as the African Union and the Association of Southeast Asian Nations, could get involved, though the question of who will actually deploy these technologies – which country’s navy or air force will spray the particles – should be decided by international agreement. Nations most affected by the effects of climate change (and least able to adapt) should play leadership roles in not just steering the research but overseeing who, how and when any deployment is made.

Elil Hoole, Research Associate, Centre for Climate Repair, University of Cambridge and Shaun Fitzgerald, Teaching Fellow in Engineering, University of Cambridge

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The Conversation

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