With international trade representing as much as 30% of all carbon emissions, enabling and accelerating sustainable trade and supply chains is critical to help the global economy deliver on the Paris Agreement. However, to date, there is no consensus definition on what constitutes sustainable trade or sustainable trade finance – nor a means of assessing transactions to determine whether they meet such practices.
Commenting on the launch of the Principles at COP28 in Dubai, ICC Secretary-General John W.H. Denton AO said: “Trade must transform itself into an engine for the implementation of the Paris Agreement and for sustainable development. It must also become a facilitator of sustainable practices across international, sectoral and enterprise levels.
“The growing interest in ESG provides a beacon of hope for change; yet this interest brings with it a greater demand for precision and clarity on what constitutes sustainable international trade and sustainable trade finance. We hope that the evolution of our Principles for Sustainable Trade will provide a platform to deliver on this imperative.”
Launched in 2022, ICC’s ‘Wave 1’ framework embarked on the journey to set the standards for sustainable trade and enable banks, businesses, governments, NGOs, and regulators to assess transactions in a standardised way, to determine where and to what extent they meet these standards.
The framework was initially focused on the textiles sector and piloted by over 30 leading trade banks and corporates to ensure it provided transparency on the right issues related to sustainable trade – and, critically, in a workable and replicable way.
Following the 2022 pilots, ICC has launched ‘Wave 2’ – an enhanced set of principles that brings together learnings from the pilot to increase its breadth and depth, as well as ensure it is sufficiently scalable to be applied to real-world transactions.
Key enhancements include:
- Expanding coverage from textiles to agriculture, energy and automotive sectors.
- Implementing a “graded score” so that one can articulate and compare the extent to which a trade transaction is sustainable.
- Refocusing the core assessment towards “Use of Proceeds” to increase alignment with existing sustainable finance frameworks.
- Adding a standardised means to assess the sustainability of how goods are transported.
- Enabling the use of approved taxonomies and third party ESG scores to assess transactions.
- Removing the need for any subjective judgement to increase the robustness of the framework and enable its automation going forward.
Raelene Martin, ICC Head of Sustainability, added: “We are enormously grateful to the banks and corporates that have engaged in the piloting of the Wave 1 framework over the past year. Thanks to the tremendous support of the industry and other key stakeholders, we have been able to significantly upgrade the sectoral coverage and precision of the Principles – setting us on a clear path to establishing a common standard for sustainability in global trade.”
Looking forward from COP28, ICC’s focus will be two-fold. Firstly, to continually improve the robustness and applicability of the framework. And, secondly, to further engage with banks, businesses, governments, NGOs, and regulators to converge on a single consensus view on what defines sustainable trade and trade finance – turning ICC’s Principles for Sustainable Trade into globally accepted and universally adopted standards.
Andrew Wilson, ICC Global Policy Director,
Raelene Martin, ICC Head of Sustainability,