Is it possible to make trade more sustainable? Here are five things to keep an eye on.

Is it possible to make trade more sustainable? Here are five things to keep an eye on.
  • As a major economic driver, rade has a big impact on how we consume and treat the environment.
  • Importantly, many stakeholders are increasingly aware that trade may be used to take proactive environmental action in the direction of a climate-neutral and circular economy.
  • New trade efforts, a global treaty on plastic pollution, the inaugural World Circular Economy Forum in Africa, EU policy suggestions, and Stockholm+50, a global environment event, are five topics to watch this year that will be key to debates on making trade more sustainable.

Trade accounts for half of global GDP, making it a powerful economic force. That implies trade, which accounts for around two-thirds of all trade, has a significant impact on how we consume resources and our impact on the environment. Trade is also a key means of disseminating new technologies and services, which will be crucial in combating climate change and guaranteeing material circularity.

Longstanding worries about transportation emissions, emissions outsourcing, traded-commodity driven deforestation and supply chain connected environmental destruction, pollution, and trash dumping abroad, among others, have fueled debates on trade sustainability. Trade, on the other hand, has been a huge source of growth and wealth in recent decades, helping millions of people escape poverty.

Continued efforts to alleviate trade-related costs or unintended consequences are critical. This is true in terms of improving public-private collaboration as well as developing new trade policies. Instead of resolving an issue in one place and redirecting it elsewhere, discussion is critical to guarantee that the latter are targeted, handle trade-offs and risks, and have a systemic influence that crosses boundaries. Capacity building for developing countries and small businesses is also critical, as are nondiscriminatory policy approaches; otherwise, we would miss out on the great potential of trade for development.

However, many stakeholders are now aware that trade may be used to take proactive environmental action. Many value chains, for example, will need to be redesigned for the circular economy, necessitating new alliances. Wherever possible, governments will need to facilitate and incentivize reverse materials trade and the transfer to alternate materials.

With fresh initiatives and debates on the horizon, 2022 will be a pivotal year for the sustainable trade agenda. Here are five to consider:

1. New commercial efforts

In December 2021, a group of over 70 countries got together to start a trade and environmental sustainability alliance. The group will begin work on trade-related climate measures – that is, trade policies that are linked to climate action – trade in environmental goods and services, and trade and the circular economy in the coming months.

Another group of more than 60 governments has started talking about commerce and plastic pollution. Future work will include, among other things, increasing transparency and tracking trade trends in this area, as well as developing measures to boost trade in plastic alternatives and sustainable waste management technologies.

Negotiated outcomes in a Climate Change, Trade, and Sustainability Agreement may well inform these global initiatives in the future (ACCTS). The deal was initiated in 2019 by New Zealand, Costa Rica, Fiji, Iceland, Norway, and Switzerland. Experts predict that progress on several of the pillars will be made this year.

These discussions are important because firms frequently cite fragmented regulation, varying standards, and conflicting incentives as barriers to producing more sustainable, circular value chains. Government efforts to improve regulatory coherence, create policies based on international standards, lower obstacles to environmentally friendly goods and services, and facilitate circular commerce, among other things, could significantly aid in aligning the trading system with sustainability goals. It is not necessary to create a new trading system; rather, an enhanced one is required.

2. A global agreement to combat plastic pollution

Countries will work on establishing a negotiating committee for work on a worldwide treaty on plastic pollution at the UN Environment Assembly (28 February - 2 March 2022) in Nairobi, Kenya, with the goal of wrapping up discussions by 2023. The new agreement's specific legal form and scope are still being worked out. Many efforts to reduce the impact of plastics in our oceans and on land are already underway, but many of them are divided across themes and countries. Although stakeholder participation will be critical in this process, the new pact could send unambiguous signals to markets on this key environmental concern.

3. World Forum on the Circular Economy

Kigali will host Africa's first World Circular Economy Forum in October 2022, bringing together public and corporate partners with the goal of speeding Africa's just transition to a circular economy - a continent where many supply chains begin and end. With the recently formed African Circular Economy Alliance and a rising number of governments include circular economy in their climate goals and development plans, action on this front has quickened across the region. Circular business ideas are also gaining traction in the region.

The World Circular Economy Forum can emphasise the importance of moving towards circular solutions in both emerging and developed economies, as well as looking at natural resource management and trade from different viewpoints.

4. Policy recommendations

The EU is enacting new laws at the intersection of commerce and sustainability, some of which may stoke controversy.

The European Commission proposed legislation for a Carbon Border Adjustment Mechanism (CBAM) in July 2021, with the goal of preventing carbon leakage, which occurs when production shifts overseas due to a high carbon price at home. Imports of iron, steel, cement, fertilisers, aluminium, and energy would be subject to a cost of carbon connected with manufacturing under the current proposal. The European Parliament has expressed its opinion on the proposal's revisions, and a decision by the European Parliament's environment committee is due in April. The EU's negotiation partners will be keeping a close eye on the situation. A proposal for binding corporate due diligence on environmental and labour impacts in supplier chains is also being released by the European Commission.

In addition, based on its Circular Economy Action Plan, the EU Commission will develop a draught strategy for sustainable textiles and a sustainable products policy after initial consultations. Closing the loops throughout value chains and boosting traceability and transparency are the goals of these initiatives.

As a result, 2022 is a critical year for the EU taxonomy, which aims to scale sustainable investments and satisfy the EU's green deal goals. This summer, 'delegated acts' on environmental objectives, including circular economy and pollution control, are expected to be issued.

5. Stockholm at 50 years old

A global environmental gathering will be place in Stockholm, Sweden from June 2nd to 3rd, 2022, to commemorate the 1972 United Nations Conference on the Environment. Countries, businesses, and organisations will gather to debate how to address climate change, biodiversity loss, and pollution. The role of sustainable supply chains is critical in this, and how to best ensure continuous development prospects while minimising environmental damage is expected to be a major topic of discussion. For a sneak peek, tune in to a discussion on supply chain sustainability with senior business leaders and politicians on March 2, 2022.

These five changes are critical components of a broader discussion about how to improve trade. It won't be easy, but bringing in the perspectives of all stakeholders from different regions, sectors, and civil society is always important. While we wait to see how things play out, one thing is certain: it is encouraging to see so much focus on developing sustainable value chains that can lead to a circular and climate-neutral future.