Is sustainability really at a tipping point?

92% of CEOs believe the integration of sustainability will be important to the future success of businesses – but only 48% say they are actually implementing sustainability into operations.

The lack of comprehensive solutions and global regulatory frameworks to standardise the incorporation of sustainability has resulted in a very slow implementation by businesses and governments.

Our research predicts that the adoption of sustainability practices at the beginning will start off slow, followed by a fast-paced acceleration as more companies adopt it.

3 Main
Drivers of Sustainability in Trade

While economic incentive for the adoption of sustainable practices is not yet fully formed, there has been increased pressure from three key sources:

Consumers

Consumers are increasingly demanding greener products and are now demanding greater transparency across the entire supply chain for sustainable products.

Investors

Sustainability issues are increasingly important to investors, with a view that there will be a reallocation of capital in the near future due to climate risk.

Governments

Increasing political pressure, due partially to sustained campaigning from major international organisations, has led the government to build sustainability into policy planning.

Technology Will Drive Sustainability in Trade

Technology significantly contributes to the transition to a green economy. Environmentally sound technologies (ESTs) are technologies that protect the environment, are less polluting, use resources in a more sustainable manner, recycle more of their wastes and products, and handle residual wastes in a more acceptable manner. DMCC’s Sustainable Trade Index measures growing trade in ESTs, and acts as a proxy to show the growing interest among businesses worldwide in moving towards sustainability.

The increase shown in the trade of ESTs reflects the growing need for businesses and institutions to make use of such technology to move their activities towards a more sustainable path.

View a Full Analysis of the Key EST Exporters and Importers

To Sustain Your Business, You Need A Sustainable Supply Chain

Companies that are looking to become more sustainable have realised that their supply chains have far greater environmental costs than their own operations. Greening supply chains have the potential to increase efficiency, reduce resource use and costs, improve access to new markets, and increase resilience and resistance to economic shocks.

A company’s supply chain produces, on average, 5.5 times as many greenhouse gas emissions as its own operations do

The Shift Towards the Circular Economy

A much more holistic way approach of sustainability in products across industries is the ‘circular economy’. Circular economy policies can have a global impact on trade. A shift to circular economy systems will primarily impact primary and secondary resource flows, and thus demand and trade in such resources.

Preferential Trade Agreements

There are clear indicators that sustainability will begin to shape future demand in the coming years, but the lack of global regulatory frameworks to standardise the incorporation of sustainability has resulted in piecemeal implementation by businesses and government. Future trade negotiations will have to include more discussion and enforcement of sustainability issues.

The Impact of COVID-19 on Sustainability

Positives

Reduction of Pollution

Since the pandemic, there has been an 8% reduction on CO2 emissions.

Better Living Conditions

Improved quality of life and adopting more of a healthy lifestyle due to reduction of pollution.

Driver for Sustainable Change

In Sustainable Investment - Shift in mindset towards concerns about public health and the environment.

Negatives

The Economic Hit from COVID-19

The biggest impact of COVID-19 is the economy of all countries. Restarting national economies will be a major struggle over the next years.

Promote Protectionist Trade Policies

Imposed restrictions on the export of medical supplies and food exports.

Recommendations

Business

  • Implement company-wide reviews and sustainability reporting plans, which, when conducted effectively, can have the dual benefits of improving sustainability within operations and becoming more cost efficient.
  • Issue guidelines on investment and corporate practices that are more in line with sustainability principles, encouraging other businesses to do the same.
  • Work on increasing supply chain resilience against the impact of climate change – if changes are not made, by 2050, between US$2.8 and US$4.7 trillion of GDP in Asia will be at risk due to climate change.
  • Set ambitious targets, make them public, be accountable, and work with competitors, NGOs, and authorities to achieve them.

Government

  • Incentivise the use of standardised sustainability reporting through policy change and new business incentives.
  • Drive a comprehensive review of sustainability efforts in global business and trade operations.
  • Build circular economy principles into government policy, both nationally and on trade issues.
  • Build sustainability into trade agreements negotiated on the bilateral, regional, and multilateral levels.

Download Your Future of Trade Report

Download Your Future of Trade Report