The Russia Ukraine crisis has forced us to look at alternatives for supplying mineral fuels and may help accelerate the ESG agenda across the world. However, using our ESG country indicator we can see exactly how World Trade is contributing negatively to the UN’s Sustainable Development Goals. In 2020 alone, there was nearly $40 trillion negatively contributed to Zero Hunger around the world, and another $18.5 trillion went into negatively contributing to Responsible Consumption and Production.
Welcome to the MultiLateral Data View. This week I want to focus on sustainability.
Mineral fuels, electrical products, machinery, cars, and gold are very important aspects of our global trade. But what’s happened over the last few weeks since the Russia-Ukraine crisis is that we’ve begun to look at alternatives for supplying mineral fuels.
Looking at a broader landscape and the consequences of not just recent sanctions and how we can’t trade in mineral fields anymore with Russia, but also, how this might help accelerate an ESG agenda across the world. In order to do that, we need regulation, which is is explained later in this article.
First of all, we need to look at how some of the sectors that were agreed upon in COP26 play out in trade terms. Let’s start with one of the most unattractive sectors in the world – brown coal. There are an awful lot of Brown coal fuels, and power stations in emerging economies, as well as in Russia, China and also Poland within the European Union. Its trade was increasing up to 2018 and then decreased again after 2020. As a proportion of total trade in mineral fuels, it’s relatively small, but it’s still one of the most polluting sectors in the whole mineral fuel and fossil fuel, product group.
Now another area that was talked about a lot at COP26 was the need to reduce methane emissions from cattle. To create some kind we can look at the meat trade around the world and see who the big exporters are. Netherlands, Germany, Brazil, USA, China, Thailand and Australia are the biggest. There’s a very heavy concentration of meat exports from Europe. What’s interesting as well is that you can see that the pattern of the meat trade is actually gone up really significantly over the last few years, partly because we’ve been locked down and buying takeaways and deliveries. Despite all of us thinking that we should be vegetarian, the meat trade is worth 218 billion USD. That’s big, but it’s still a drop in the ocean of the total size of world trade.
Another area that’s been of concern and been part of the regulatory framework for a long time is hardwood, tropical hardwood in particular. For some countries and sectors where there’s been significant regulation, there has also been a significant drop in the number of exports. But there are still two areas where there is a lot of tropical hardwood being traded around the world, even though there are regulations. Between 2018 and 2020, there’s been a drop overall in the trade of tropical hardwood. Then if you look at eucalyptus, another very sensitive and banned product, you can see that it’s been ticking up. These are all the sectors where trade is sensitive and highly regulated.
So what I’m giving you from this is a picture of world trade that is inherently unsustainable. We’ve seen our patterns of furniture consumption increase and you can see that we’re trading in order to optimize our consumer wishes and our consumer expenditure.
We can then examine what this looks like in global trade terms.
Looking at the whole of world trade against the UN’s Sustainable Development Goals, we can look at what contributes positively to the Sustainable Development Goals and what contributes negatively to the Sustainable Development Goals. We’ve created a ranking algorithm that goes from minus one through to plus one. So for example, if it says it’s plus one – Everything is positive, and if it’s minus one, everything is negative. This is almost like a doomsday dial.
What we’re seeing from World Trade is that in terms of its contributions to all Sustainable Development Goals, the picture is overwhelmingly negative with a score of -0.58. In 2020 alone, there was nearly $40 trillion that went into negatively contributing to zero hunger around the world, that’s more than the value of trade itself. Another $18.5 trillion went into negatively contributing to responsible consumption and production. These are huge numbers. It’s very easy to look at the numbers and say they’re important but we can’t do anything about it, but if you look at the patterns of world trade and look, for example, at the European Union, well you will see that their score is an absolutely massive -0.71. Intra European trade shows a similar situation. It’s not quite as bad at -0.68, but it’s still well below the world average. And it’s the same Sustainable Development Goals that are being negatively impacted.
You can see the reason why this is happening by looking at the EU27 and looking at the sectors that are being traded externally – machinery and components, automotive, electrical products, all have a massively negative impact on sustainable development goals. If you look at Intra EU trade, it’s the same picture as well – Automotive, machinery, electrical products, and mineral fuels.
In the end, we can see how unsustainable world trade is, and the need for policymakers to think very long and very hard, and to use trade patterns and the Sustainable Development Goals that we all know about and care about, as levers to shift policy through regulation.