Written by: Yann Duval, Sangwon Lim and Mahezabin Natasha, Article No. 84 [UNCTAD Transport and Trade Facilitation Newsletter N°93 - First Quarter 2022]
Garment factory in Bangladesh
The importance of digitalization and trade facilitation to reduce trade costs and make trade more efficient and inclusive has been discussed, time and again, at the national, regional and international levels. Although the “trade and environment” literature is extensive, the environmental impact of trade procedures has been largely overlooked until recently.
Trade and transport facilitation are important to make trade “climate-smart” (ESCAP, UNCTAD and UNEP, 2021). In addition, digitalizing trade procedures could reduce CO2 emissions equivalent to those captured by over a billion trees annually (Duval and Hardy, 2021) highlighting the need for more detailed and comprehensive environmental impact studies.
To further contribute to this emerging work, we build upon the UNNExT Business Process Analysis (BPA) for analysing trade procedures to assess their environmental impact. We applied this approach to the export process of ready-made garments (RMG) from Bangladesh. Results highlight that simplification and digitalization of trade procedures can bring significant environmental gains in terms of reducing paper use and associated greenhouse emissions as well as reducing waste and conserving water[i].
By going ‘paperless’, the environmental impacts of trade associated with the use of paper documents can be reduced per transaction. Besides efficiency gains, digitalized processes translate in reduced emissions, waste generation and water consumption in office premises, as well as in elimination of carbon emissions from courier services. Additional environmental benefits from using electronic documents can also accrue to ports, storage facilities, border crossings and other locations as supply chain visibility improves. Improvements in supply chain visibility in these areas will help identifying specific activities causing environmental impacts, which can be potentially saved.
The UNNExT Business Process Analysis (BPA) methodology allows systematically identifying import/export processes presented within the Buy-Ship-Pay model. Each paper-based activity within each process can then be analysed to quantify its environmental impact and estimate how these impacts may be reduced through the implementation paperless trade. The key steps are:
- Identifying the core business processes and the actors involved.
- Conducting a detailed survey to collect environmental impact data often missing from standard BPA studies (paper usage, distance travelled, electricity usage, water usage etc.) from all the actors involved in end-to-end trade processes.
- Calculating GHG emissions, waste generation and water usage for each trade process (e.g., preparing export documents, arrange transport, etc.) based on the survey data and the relevant emission factors for each activity.
Applying this methodology to the Bangladeshi RMG sector, we find that:
- The process of 'importing raw materials' alone accounts for 5-20 kg CO2e of GHG emission, 23-81 kg of waste generation and 8-19 thousand litres of water consumption per transaction.
- The aggregate amount of GHG emissions in the “as-is” trade processes is calculated at 16-54 kg CO2e per transaction. On average, one tree is required to offset the GHG emissions per transaction.
- The waste generation and water consumption (involving paper production and office usage) are estimated at 151-407 kg and 45-126 thousand litres, per transaction respectively.
These figures are calculated based on average emission factors from the literature,[ii] and can vary depending on paper production technology, as well as from office to office depending on office size and amenities, work culture, etc., reminding us of the importance for each firm and actor involved in trade transactions to develop and implement an environmental policy.
These transaction-level benefits suggest that fully digitalizing trade procedures offers great potential to minimize the environmental impact of trade. Despite applying conservative estimates to scale the results, we find that the potential environmental gains for the global RMG sector is equivalent to saving 7 to 23 million trees a year. Globally, 133 to 360 thousand garbage trucks’ worth of waste could be eliminated and an amount of water equivalent to operating 52 to 148 million residential clothes washers could be saved annually. Importantly, these figures are based on RMG trade volumes remaining constant, although trade facilitation measures generally increase trade.
This case study has helped us deepen our understanding of some of the environmental impacts of trade procedures, but also highlighted the difficulty in accurately measuring such impact and the wide variations that can be expected across countries and sectors. We hope that this exploratory research effort and the methodology proposed may encourage further work in this area. This will hopefully contribute to the development of automated systems that can track the environmental impact of procedures, possibly building upon those existing ones that already track time, costs and overall efficiency gains.
Contact the authors:
- Yann Duval | Chief, Trade Policy and Facilitation | ESCAP | firstname.lastname@example.org
- Sangwon Lim | Economic Affairs Officer | ESCAP | email@example.com
- Mahezabin Natasha | Consultant | ESCAP | firstname.lastname@example.org