A month ahead of the start of this year’s United Nations climate summit (“COP27”), the International Chamber of Commerce has launched a call to banks, corporates and technology companies to participate in piloting a ground-breaking framework to grade the sustainability profile of individual trade transactions.
Following an extensive global consultation exercise earlier this year on the initial recommendations set out in ICC’s white paper on “Standards for Sustainable Trade and Sustainable Trade Finance”, the organisation – in partnership with Boston Consulting Group – has worked to define an initial framework capable of being piloted today in high-volume transaction environments.
To this end, the “wave one” ICC Sustainable Trade Framework will work on the basis of a simple matrix to determine whether the different elements of a transaction are sustainable, drawing on readily available data and – to ensure the integrity of assessments – globally recognized sustainability standards. In this connection, ICC has taken the decision to temporarily exclude the assessment of transportation under the framework due to the current low maturity of shipping standards compared to those in other industries.
Raelene Martin, ICC’s Head of Sustainability said: “Given the urgency of ensuring that trade and associated financing can contribute actively to meeting global sustainability goals, we have placed an absolute emphasis in delivering an initial industry framework that is immediately workable – while, crucially, integrating robust and recognized sustainability standards. Simply put: our aim is to deliver a system capable of rewarding sustainable practices by companies across global value chains while eliminating risks of greenwashing.”
In order to focus resource in this first phase of the project, ICC has taken the decision to focus the piloting of the new Sustainable Trade Framework on the textile industry. As such, for the purposes of the “wave one” framework only textile-specific standards have been approved by ICC for measuring the relevant components of any given transaction.
ICC is now inviting applications from banks, corporates and technology providers to pilot the application of the framework for relevant transactions over an initial three-month period. These pilots will be used to gauge industry experience in assessing transactions under the framework in practice – the results of which will feed into its future elaboration and extension to other industries.
Ms Martin added: “We see it as a vital step to carefully test the framework in partnership with banks, corporates and fintechs to understand its utility and practicality in the real world. The findings of these pilots will feed directly into the elaboration of a broader framework which we hope will be capable of being applied across a wide range of sectors and industries.”
The businesses piloting the framework will be announced at a high-level event at COP27 in November – along with the publication of the full “wave one” Sustainable Trade Framework.
Download ICC Standards for Sustainable Trade & Sustainable Trade Finance: Update and Invitation to Pilot here.