ICC Aims to Stop the Complexity of International Trade

ICC (International Chamber of Commerce) has published a major report setting out proposals to tackle the challenges of defining common standards for sustainable trade and financing that comes with that.

The paper – developed in partnership with the Boston Consulting Group through a global consultation exercise involving over 200 banks and corporates – outlines the first-ever consisted to standardised framework the sustainability profile of trade transactions. Although the global market for which is currently valued at US$5 trillion annually, no standards currently exist to allow financial institutions to grade the sustainability performance of trade finance transactions.

The new report highlights that existing frameworks governing sustainable finance – which tend to solely focus on the intent of financial instruments – are not well-suited to deal with the hidden complexities of international trade. For example, a single trade transaction can involve as many as 20 different parties – involving different types of goods, services and raw materials crossing multiple jurisdictions and requiring different forms of transport.

Also, while specific goods may not in themselves be sustainable, they can often be used for purposes such as sustainable infrastructure. The same also applies in when it comes to the trade of sustainable goods for non-sustainable purposes. The proposed ICC framework seeks to break through this complexity
ICC Secretary-General John W.H. Denton AO did statement about the subject:

“We recognise the imperative to ensure that international trade is a trusted vector of economic, societal and environmental progress. But the difficulty of defining workable sustainability standards for cross-border commerce should not be underestimated. The proposed framework we are setting out today is intended to cut through the inherent complexity of global value chains – establishing a standard methodology for banks and corporates to reliably grade the economic, environmental and social performance of individual transactions.”
 
 Source: ICC