The future of sustainable trade depends on economic growth and opposition to protectionist measures, according to a new report published by Commerzbank and Oxford Analytics.
Building on a previous report identifying five drivers of sustainable trade, the new study identifies two extreme scenarios in which sustainable trade would either be embraced or challenged, depending on the economic growth forecast. A positive outlook would bring more collaboration and support for sustainable trade, whereas a negative one would bring about an increase in protectionist measures, including subsidies and tariffs, which will be detrimental to fostering sustainability in trade.
Rüdiger Geis, head of product management, trade services and issues at Commerzbank, tells GTR that the more probable scenario will be a mix of both: “We think the world economy is going to pick up and more people will be in favour of sustainability, so we think it is more on the positive side than the negative one.”
Sustainable trade is defined in the report as “the business and activities of buying and selling commodities, goods and services that meet such environmental, social and economic criteria capable of benefiting all actors involved to foster global sustainable development”. For the bank, sustainability is defined in terms of a triple bottom line approach: people, profit and planet in a fair balance. “For most people, when they hear sustainability they only have in mind environmental issues, whereas we are talking about these pillars,” says Geis.
“The goal of the report is to make more people aware of that common understanding. If you want to attract people to do sustainable things, banks, organisations, corporates, want to make money, so you have to include all three things – what we are trying to say is that there must be a business case for sustainability because corporates, banks, all other organisations involved – it has to make sense to them to do it.”
A key element in fostering sustainable trade, according to the report, is the adoption of a cradle-to-cradle production cycle. The cradle-to-cradle thinking involves the creation of products whose parts can be re-utilised rather than trashed after use. “The whole world can think of how to re-assemble and how to re-use materials rather than throwing it away,” says Geis.
Geis highlights the importance of a reward system for those engaged in sustainability, such as offering cheaper rates or longer tenors for sustainable projects: “We should reward good behaviour rather than penalise those who do not do it in a sustainable way,” he says.
According to him, collaboration between different stakeholders such as corporates, banks and NGOs is also key. “With the bank environment initiatives/consumer goods forum approach we told everyone by 2020 we are not going to contribute to any net deforestation with five commodities: timber, beef, soy, palm oil, pulp and I think that’s quite positive. I think that’s effectively the way forward. More and more people have to come together and foster sustainable trade.”
The efforts of the multilateral banks, governments and corporates attending the UN Climate Conference in Paris over the next two weeks are expected to set new foundations for global co-operation in allocating financing to promote sustainability and fight climate change.
Other elements the report identifies as fostering sustainable trade are consumers’ and investors’ demands for sustainable products and processes and the establishment of a carbon trading scheme.
The full report is available here.