Environmental Sustainability

On 9 August 2021, the United Nation’s Intergovernmental Panel on Climate Change delivered an updated assessment on the planet’s climate system. The report makes for sobering reading.  But more than that, it demands that we take meaningful action, urgently.

What does the report say?

The IPPC finds that:

  • “Human-induced climate change is already affecting many weather and climate extremes in every region across the globe”, and can now be observed from the extreme weather events we are experiencing, such as heatwaves, heavy precipitation, droughts, and tropical cyclones.
  • “Global warming of 1.5°C and 2°C will be exceeded during the 21st century unless deep reductions in carbon dioxide (CO2) and other greenhouse gas emissions occur in the coming decades”.
  • At 2 degrees Celcius, water levels will rise to half a metre over the 21st century and reach two metres by year 2300.  It may prove worse, because when the planet was as hot as it is today (125,000 years ago) global sea levels were 5-10 meters higher.
  • Methane (CH4) is another problematic greenhouse, which lingers as long as CO2, but is far more efficient at trapping heat, and is now at extremely high levels.
  • Nature’s ‘carbon sinks’, such as tropical forests, are no longer absorbing as much as they used to.  Collapses in so called “tipping points”, such as disintegration of ice sheets and drying of tropical rainforests, may usher dramatic changes.

Do trade activities impact on the environment?

Trade has both a positive and negative impact on the environment.  Studies suggest that there are three broad links between international trade and climate change.  These are through:

  • Scale effect – As trade increases, it is expected that economic activity increases, and therefore energy use, which lead to greater emissions.  Transportation of goods, a contributing factor to emissions, also falls under this category.
  • Composition effect – This suggests that open trade encourages economies to produce goods and services based on their comparative advantage.  It is presumed therefore that goods and services will be produced by the most efficient economy/firm, which lead to lower greenhouse gas emissions.
  • Technique effect – At the core of this is the view that global trade will facilitate the availability of new technologies and processes (including renewable energy sources) that help reduce emissions and/or make production less harmful to the environment.

What can individual exporters do to help address climate change?

While we wait and hope for governments to provide constructive leadership, there are actions that we, as businesses, could take to help reduce our impact on the environment and address climate change.  Such actions might include:

  • Auditing your ecological footprint – How much does your operation, including production and distribution, impact on the environment?  In looking at how much energy you consume, for example, you might discover ways to make your production processes more efficient and reduce costs.
  • Adopting new technologies – There are many alternative sources of inputs and new technologies out there that are more environmentally friendly.  For example, consider new fertilisers that do not contaminate water supply.  Consider input material that is renewable, recyclable and/or non-toxic.
  • Investing in environmental offsets – It is likely that our economic activity will have some kind of impact on the environment.  Perhaps, it’s time to think out of the box, and consider investments in projects that counterbalance our businesses’ negative environmental impacts, such as planting trees or support efforts to protect nature reserves.

The above may require some effort and possibly additional cost.  But apart from the good of the planet and humanity, think about the gains you make in your brand, including loyalty and interests from customers and investors.   Moreover, doing nothing may cost you further down the line, including in future carbon taxes imposed by foreign jurisdictions.

Environmental Sustainability