Quick Win No. 8
Green supply chains through capacity building and trade policy measures
Several international crises, from COVID-19 to the war in Ukraine, have laid bare the challenges of an interconnected global economy. Governments are increasingly taking action to make supply chains more resilient to vulnerabilities but also thinking through how to improve the sustainability of current production and consumption patterns. While many businesses have also been proactive in taking steps to “green” their supply chains, not all are equipped to make the shift. Governments can accelerate this green transformation through targeted capacity building that makes sustainable solutions more accessible and commercially viable. Trade and multilateral cooperation play critical roles in this endeavor.
Depending on where they are on their sustainability journey, businesses of all sizes face several challenges to “greening” their supply chains. For instance, some may not even know the carbon footprint of their supply chain, or the means to evaluate it. Others may have a better sense of this, but lack access to sustainable solutions, such as technology or know-how. Still others may not have the financial resources to pursue the goals they want.
Importantly, the main obstacle is not just a knowledge problem. For example, even upon understanding how its manufacturing, packaging, transportation, and distribution processes contribute to its carbon footprint, a retailer may not have ready access to sustainable solutions, such as sustainably sourced raw materials, warehousing powered by renewable energy, recyclable packaging, and/or carbon neutral shipping solutions. In some cases, such solutions might be available, but too cost prohibitive to take on or to pass through to consumers. This is where governments can step in. Not only can they provide analytical platforms for businesses to evaluate their carbon footprint and to understand the key levers for mitigating emissions, but also help them appropriately track their progress. For instance, public-private partnerships supporting capacity building initiatives such as UPS’s Green Exporters Program and the UPS-ICC SME360X tool can help small businesses assess and measure their footprint.
Governments can also support the adoption of sustainable solutions through trade policy measures. Businesses need a menu of options to help mitigate their carbon footprint. While there are a number of voluntary standards, the plethora of options can be challenging to navigate. Governments can advance work on good regulatory practice and the development of international standards that can improve transparency in the regulatory process and also enhance coordination on the creation of green standards. The WTO has a critical role to play here, such as through its committees on trade and environment and technical barriers to trade. Other initiatives, such as the Organisation for Economic Co-operation and Development’s network of economic regulators can support these efforts.
Moreover, making the business case for the use of environmental goods and services can be the most challenging part of the sustainability journey, largely due to the costs of the green transition. Here, governments should eliminate tariffs and quantitative restrictions to lower the cost of producing, transporting, and distributing environmental goods and services to enable their uptake and provide opportunities to take advantage of economies of scale. . Additionally, governments should aim to streamline and harmonize complex regulations such as taxation, certification standards, and credit schemes to ease additional barriers to the green transition. Governments have a major role to play in assisting businesses in their sustainability journeys. The promotion of public-private partnerships supporting capacity building initiatives and the support of sustainable solutions through international trade are two feasible avenues to green global supply chains and support a more sustainable future.
