The Importance Of Sustainable Trade

Trade, as a sector, would only account for 7% of GHG emissions; however, the impact from various industries that participate in trade plays a large role, because they account for nearly 30% of GHG emissions.

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In 2022, DP World Group partnered with Entrepreneur Middle East and Lucidity Insights to publish Innovations in International Trade, a special report analyzing innovations in international trade.

The report covers multiple features of international trade, from its evolution, to the role it plays in uplifting societies and economies, and its future developments. It also covers the role technology has played in international trade, and what is expected going forward, given the impact of the fourth industrial revolution.

Last but not least, sustainability is a global topic piquing interest across different industries, with international trade being a significant contributor to greenhouse gas (GHG) emissions. Accordingly, this report also briefly explores initiatives that the industry is taking to address the sustainability challenge.

Globally, GHG emissions have increased across each mode of transportation, with both shipping and road transportation accounting for over 80% of GHG emissions. Trade (movement of goods), as a sector, would only account for 7% of GHG emissions; however, the impact from various industries that participate in trade plays a large role, because they account for nearly 30% of GHG emissions. Thus, it is important that stakeholders focus on reducing emissions and adopt sustainable trade measures.

Adopting electrification in the next decade will substantially reduce carbon dioxide emissions as well as the number of vehicles on the road. In terms of road freight, the biggest reduction would be from last mile transportation. On the industry front, companies are doing their part for climate change by embracing alternative fuel sources, remanufacturing, material recycling, additive manufacturing, and generating power through renewables on-site. Other stakeholders in the value chain are playing a role, especially on the movement of goods, within maritime transportation, port operators, and those within land.

It is estimated that just one of the container ships, equal to the length of six football pitches, can produce the same amount of pollution as 50 million cars. Therefore, emissions from 15 such ships match those from all the cars in the world. The shipping industry is undergoing its own green revolution, and it is taking numerous measures which would lower emissions. These include initiatives such as switching of fuel, which produce fewer GHG, electrification, and slow steaming.

Ports mainly apply green port fees. Currently, there are 60 ports that use this incentive to offer ships with less pollution, an incentive to call at the port. Green port fees primarily look at indexes that focus more on the energy efficiency of the ship design. There's no green port fee scheme that considers actual GHG emissions from ships. Additionally, in theory, there's green procurement, where operators and other stakeholders dealing with the port are incentivized to adopt environmental criteria to get service contracts and green berth allocations, although these aren't as popular.

Now, land transportation cause higher emissions, and there are several steps being taken to address climate change. Using alternative fuel sources, electrification of freight/goods movement, improved capacity utilization, incorporating intermodal movements, and digitization are some of the key initiatives which the sub-sector requires. Big tech players are already focusing on climate tech, and ensuring that the industry focuses on sustainability. For instance, Amazon is electrifying its fleet, and, in collaboration with other firms, working to create ship-in-own-containers, while also developing a recyclable paper padded mailer to replace plastic mailers. The likes of Amazon, Google, and Microsoft have also announced focused funds to invest in climate tech startups that are centered on driving sustainability.

Paperless trade is another initiative which has been implemented by the industry. Paperless trade is the digitization of information required to support international trade. A recent survey by the United Nations showed an uptick in paperless trade and cross-border paperless trade. The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) estimates suggest that there are significant reductions in emissions due to digitalizing trade procedures. Fully digitalizing regulatory procedures around trade could have save up to 13 million tons, in Asia Pacific alone, which is equivalent to planting 439 million trees. ESCAP is one of the five regional commissions under the jurisdiction of the United Nations Economic and Social Council. The other regional commissions are for Africa, Latin America, the Caribbean, Western Asia, and Europe.

Check out our full report on Innovations in International Trade by clicking here.