The International Chamber of Commerce (ICC) has unveiled a significant expansion to its guidelines on sustainable trade, including by extending them to all sectors for the first time.
The ICC’s Principles for Sustainable Trade (PST) programme aims to provide a framework for companies to score the environmental impacts of their trade activities, and assess how they align with the Paris Agreement and the UN’s Sustainable Development Goals.
Global trade is responsible for up to 30% of global greenhouse gas emissions, according to the World Trade Organization, but there is currently no internationally applied standard for what makes a transaction sustainable.
The first ICC pilot launched in 2022 and exclusively targeted the apparel and clothing sectors. Following generally positive feedback, the organisation expanded its second pilot to the energy, automotive and agriculture sectors, whilst simplifying the PST framework.
It is now set to launch a third pilot – known as wave three – on November 5, at the Cop29 summit in Azerbaijan.
As well as expanding the programme to cover all types of goods and services trade, wave three incorporates sustainable trade finance principles published by the ICC last month.
The ICC is also reworking some of the assessment criteria that were used in the previous pilot.
The programme assesses trade sustainability across four categories: use of proceeds, buyer, seller, and distribution. Each of these is then given a rating based on its environmental and socioeconomic impact, resulting in eight overall data points for a trade.
Buyer and seller assessments are unchanged, but the distribution assessment – which measures if the method of transporting goods is sustainable – has expanded to include energy transmission grids and pipelines.
The use of proceeds assessment now includes the ICC’s sustainable trade finance principles as a key component.
The ICC says it aims to expand the programme further in future, offering “simplified pathways for smaller businesses to engage with the principles” because many SMEs “lack the resources or infrastructure to collect sustainability data”.
It also hopes to enable “multi-tier assessments”, allowing companies to examine deep-tier supply chains, and to improve the level of automation in the assessment process.
Additionally, the ICC is currently developing principles for social trade finance, which it hopes to incorporate into the standard once finalised.
The growth of sustainable trade products, such as loans and supplier finance arrangements linked to green targets, has been hampered by difficulties defining sustainable trade.
Overall sustainability-linked finance shrunk by more than a quarter between 2022 and 2023, according to BBVA research, partially driven by a fear of greenwashing allegations.
The ICC is not the only body working on a solution to this problem.
The International Finance Corporation (IFC) and Asian Development Bank published a joint reference note on sustainable trade finance in June, which the IFC’s Nathalie Louat told GTR could allow exporters access to preferable financing rates if they aligned with the guidance.
