ICC Standards for Sustainable Trade and Sustainable Trade Finance: Wave 1 Framework
With the goal of setting standards for sustainable trade, ICC published the Wave 1 Framework. The framework assesses both the environmental sustainability of a transaction, and how it supports socio-economically sustainable development. It is designed to advance two objectives: support business in meeting both the Paris Agreement objective of limiting global warming to 1.5°C above pre-industrial levels, and the UN Sustainable Development Goals.
What is the role of trade in advancing sustainable development?
Global trade is a vital engine of economic development, supporting the work and livelihoods of billions of people throughout the world. However, trade is also crucial to achieving the Sustainable Development Goals (SDGs), advancing broad-based and inclusive development, and helping to mitigate climate change.
To ensure that global trade supports sustainability in this way, there are many challenges to overcome. One major challenge is that while various standards for sustainable goods, suppliers and goods do exist, there is no commonly accepted way of measuring the sustainability of a global supply chain. Likewise, no standards have yet been adapted to define sustainable trade in a clear and robust way.
It is this gap in definitions that led ICC to work with the global trade community to define this first iteration of such a framework.
What has ICC done to define sustainable trade and sustainable trade finance?
To address this gap, ICC established a programme to set the standards for sustainable trade in a manner that is practical, comprehensive and sheds sufficient light on the sustainability of a transaction.
The programme aims to accelerate the role of global trade in helping companies to:
- support achieving the Paris Agreement objectives to limit the increase in global temperature to 1.5°C above pre-industrial levels,
- reach the SDGs, beyond climate and green objectives, and
- achieve greater understanding of sustainability considerations in global supply chains.
ICC has worked with stakeholders, including trade banks, corporates, technology players, sustainability experts and Boston Consulting Group to define a minimum viable, yet fully workable and implementable, framework that can be applied to the textiles industry as a first use case. The framework is intended to measure and assess the sustainability of a given trade transaction or trade finance portfolio.
What are the priorities for the Wave 1 Framework to ensure that global trade advances sustainability?
The aim is to create a graded framework for all transaction components across all industries, which can then be used to construct aggregate assessments across whole transactions.
In view of the long-term nature of the initiative, ICC will develop the framework in a series of waves, iterating from an initial minimum viable Wave 1 Framework right through to the target state.
Key priorities for the Wave 1 Framework are highlighted below:
- Anything described as sustainable in the framework must be sustainable – doing no significant harm is critical but is not sufficient in itself. ICC has defined its thresholds for sustainability without compromising on rigour.
- The framework should be simple and workable so that it can be applied by banks and corporates at a reasonable cost.
- The framework will make use of standards and information readily available to banks and corporates. It is not purely theoretical or conceptual and cannot be designed to use technology or data that does not yet exist.
- Given the range of standards that apply in various industries, the Wave 1 Framework focuses on the textile industry. This allows ICC to produce a list of standards that comprehensively covers the sector, before expanding more widely.
How will the framework be tested in the real world?
ICC has been bringing partners on board and has launched two pilots: one for banks and corporates, and one for technology partners. The objectives will be to test the framework by using real data in a real-world setting, understand how the implementation of the framework should best work in practice and identify potential improvements.
ICC will publish its findings from the pilot groups and set out how it will use these results to improve the framework. ICC will then continue to iterate the framework and provide the necessary practical support to promote its implementation.