In a joint media release dated 11 October 2021, the governments of Australia and Singapore announced that they are working together to develop a 'Green Economy Agreement' (GEA) that will further accelerate both countries' transition towards a green and sustainable future'. 

The announcement preceded the 2021 United Nations Climate Change Conference (also known as COP26). On a similar theme, on the eve of the close of COP26, the International Chamber of Commerce (ICC) published a major report setting out 'proposals to tackle the longstanding challenge of defining and setting common standards for sustainable trade and associated financing'.

In the introduction to the report, entitled Standards for Sustainable Trade & Sustainable Trade Finance: A roadmap and vision for industry, policymakers and traders worldwide, ICC Secretary-General Mr John Denton observes that:

Not only do global supply chains account for up to 80% of the economy's carbon emissions, but they are responsible for the work and livelihoods of billions of people. As such, it is imperative that parties involved conduct business in a way that protects our plant and the people who live on it.

The report, which itself is described as the 'start of the journey', is designed to achieve alignment on the definition of sustainable trade and sustainable trade finance, to set standards, to 'bridge the gap in current standard frameworks for recognising and tracking sustainability in trade and trade finance' and to facilitate the development of actionable and practical recommendations. It covers both goods and services, is directed to both trading businesses and financial institutions, and is focused primarily on international trade, 'given where this is where the complexity and current lack of transparency is greatest'.

The report defines sustainable trade as:

. the import, export, or trade of goods and services which actively support the achievement of one or more UN Sustainable Development Goals (SDGs) without infringing on the achievement of any other SDGs'.

The 17 SDGs underpin the United Nations 2030 Agenda for Sustainable Development. They include goal 13 - to take urgent action to combat climate change and its impacts - and goal 17 - to strengthen the means of implementation and revitalize the global partnership for sustainable development. This final goal 'recognises multi-stakeholder partnerships as important vehicles [.] to support the achievement of the sustainable development goals in all countries'.

The report is a key step in the development of global partnerships through the promotion of a framework for global supply chains and associated financing. It assesses trade across five components:

  1. Goods/services.

  2. Sellers/origin.

  3. Buyers/destination.

  4. Transition/transportation.

  5. Purpose (defined as '[e]conomic activities being facilitated via the transaction').

The report recognises that sustainability across all five components is essential and proposes transparency through a reporting infographic and an 'overall descriptor or score that provides a high-level summary on the transaction's degree of sustainability' based on an ICC framework. The framework itself will 'focus on sustainability holistically', not only on environmental sustainability. It will extend to economic, human and social sustainability (including slavery, child labour, poor wages and unsafe working conditions, all of which can be substantial issues in global trade and supply chains).

The report recognises that sustainability is a long term goal and suggests an 'initial' and 'intermediate' state, advocating a roadmap for progression. In short:

  • The 'initial' state involves an assessment of whether the transaction 'does no significant harm' and whether the purpose of the transaction is 'actively sustainable'.

  • The 'intermediate' state requires greater complexity around environmental sustainability.

Importantly, the report notes that the intention is not to 'unnecessarily increase the overhead for businesses and financial institutions'; the development of a set of 'minimum standards to do no harm' is proposed to achieve this end. These standards will aim to be measurable, objective, in use (meaning current standards), representative (for example, of an SDG) and comprehensive. In addition, they are expected to be 'a living artefact, requiring frequent (at least annual) updating by the ICC to remain relevant'.

The proposals are necessarily preliminary and high level, and the report raises a number of questions, particularly around scope and methodology for future work, assessment standards and considerations for implementation. The ICC will seek feedback and engage in consultation, aiming to launch the framework in mid-2022.

The release of this report comes at a time of high awareness of climate change challenges and the need for significant and immediate change. It also comes on the heels of significant supply chain disruption and amidst serious and increasing focus on environmental and social governance. It represents a common theme in the call for global standards and is consistent with the Joint Vision Statement of the Australian and Singapore Governments (when announcing the GEA) to 'encourage the adoption of common standards and practices with high environmental integrity, while upholding a rules-based and open trading system'.

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