The first phase of the ICC pilot will see the Sustainable Trade Framework applied to the textile industry.
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 recognised 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 recognised 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.”
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.
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.
At the end of last year a report was published which urged a revamp of financial systems to offer greater support to small businesses.
The report from the International Chamber of Commerce (ICC), in collaboration with Fung Business Intelligence and supported by McKinsey & Company outlined a vision for the global trade finance ecosystem. It aimed to raise awareness and address the challenges facing micro, small and medium-sized enterprises (MSME), particularly in the emerging markets, in accessing the trade finance needed to support their growth and the global recovery. According to the Asian Development Bank, the trade financing gap reached US$1.7 trillion in 2020, an increase to 10% of global goods traded, from 8% in 2018. MSMEs account for 40% of trade finance application.