New Zealand, the UK and Hong Kong are the top three most sustainable trading economies, according to the latest rankings produced by the Hinrich-Institute for Management Development (IMD) sustainable trade index.
Covering 30 economies, the index assesses “an economy’s readiness and capacity” to participate in global trade in a way that contributes to “economic growth, social capital development, and environmental protection”.
Economic scores are based on growth through trade, including the quality of trade infrastructure and how easy it is to carry out international trade, while societal factors include how an economy “encourages and supports the development of human capital” with measures such as education and labour standards, and the extent of its participation in practices that “influence public support for trade expansion”, such as modern slavery.
The environmental pillar evaluates how far an economy supports sustainable resources, measuring factors such as “national environmental standards, carbon emissions, and share of natural resources in exports”.
Overall, New Zealand comes out on top, as well as taking first place in the societal and environmental rankings. The UK, in second place, also ranks in the top five for each of the individual economic, societal and environmental pillars. Hong Kong and Singapore make the top five due to their strong economic performance, the report says, while Japan, in fourth place, scores highly for its political stability and avoidance of child labour.
Lower scores in one or two of the three areas drag down overall scores: the US, for example, scores well for economic growth but receives a far lower environmental score, leaving it in ninth place overall.
The lowest ranked economy overall is Russia, which also comes in last for its environmental efforts due to its high levels of carbon dioxide emissions and low participation in international climate change agreements. Myanmar places 28th overall, ranking last for societal and economic factors too.
The report notes that even the highest-ranked economies have “red flags in their policy management”. The top five countries in terms of societal factors – New Zealand, Canada, Australia, the UK and Japan – all have exposure to imports of goods made in countries that engage in modern slavery, while some economies that perform well in the environmental rankings still have poor ecological footprints and limited renewable energy.
Chuin Wei Yap, program director, international trade research at the Hinrich Foundation, says that the results show the need for businesses to know more about their supply chains. “The findings are a sobering indication of how the appetite of developed economies is driving forced labour, often more than we imagine,” he says.
“Global trade is in crisis. Political leverage has supplanted comparative advantage. These global developments are a reminder of why sustainable trade is more critical than ever before,” he adds.
The report also finds a connection between higher income and greater sustainability, but explains that when a country passes USD$50,000 GDP per capita, the trend reverses. Singapore, the US, Australia, Canada and Hong Kong all have higher GDP per capita than New Zealand or the UK, but are nonetheless ranked lower for overall sustainability.
“Globalisation and sustainability are at odds with each other,” says Arturo Bris, director of the IMD World Competitiveness Center. “Companies and countries have used global trade and sourcing in order to maximise financial returns, but we are now acutely aware that this compromises sustainability to the extent that energy is consumed and natural resources are depleted.”
A more negative view of global trade emerged in a report released earlier this year by trade data and analytics provider Coriolis Technologies, working with MEP Saskia Bricmont and the Greens/European Free Alliance in the European Parliament. It found that 80% of global trade was unsustainable when measured against the United Nations’ Sustainable Development Goals, with the most advanced economies responsible for the least sustainable trade.
In response, the International Chamber of Commerce (ICC) rejected the report’s findings and called for a more nuanced approach that better captured the complexity of trade. The ICC is developing a set of standards for sustainable trade and trade finance that will, it says, enable businesses and financial institutions to evaluate the sustainability of trade transactions.