Summary of the informal thematic session on green supply
chains for development: the case of small economies

communication from Guatemala, on behalf of the SVE group

The following communication, dated 10 October 2024, is being circulated at the request of the delegation of Guatemala, on behalf of the Group of Small, Vulnerable Economies (SVEs).

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This submission relates to the informal thematic session under the aegis of the CTD Dedicated Session on Small Economies titled "Green Supply Chains for Development: The Case of Small Economies" held on 16 July 2024.

Setting the Scene

1  Statement by Ambassador Matthew Wilson (Barbados)

1.1.  I am excited for today’s deep dive into the realities, the challenges and the opportunities for small economies and their small businesses to use green supply chains as developmental instruments. This session today is part of the continued rejuvenation of our work on small economies here at the WTO. A few weeks ago we had a session at the WTO Aid for Trade Review on SVEs and digital and now today we are addressing another component of the Ministerial mandated SVEs work programme. I understand that one of the outcomes of this session will be a Secretariat prepared key pointers from what we hear this afternoon and I think that kind of short form capturing of the main points is important. Thank you Taufiq and Harish for your commitment to SVEs.

1.2.  There are few countries more affected by the climate crisis than small economies, small island developing countries and LDCs. Historically, we have often been on the periphery of many of the ‘revolutions’. And we have to be intentional about ensuring we are not ‘policied out’ of the digital and the green revolutions. On the circular economy and investing in green technology and cleaner value chains it is not a matter of economics, it is a matter of survival. Building resilience and adaptation and mitigation demands access to supply chains that often do not originate in SVEs. This often means it is more challenging, and costly to access the components and the technology needed to invest in the circular economy.

1.3.  A few months ago, Barbados hosted, with UN Trade and Development, the first ever Global Supply Chain Forum. And the centrepiece of that forum was the importance of accessing resilient, predictable and transparent supply chains. SVEs and SIDS are some of the most trade open countries in the world. We are often policy takers and standard takers rather than policy makers and standards makers because of our small size and small markets. There will be no automaticity in bringing already broken supply chains to our shores. When there are disruptions as we have seen during the pandemic, or because of warfare and piracy we suffer the most in terms of increased cost and limited accessibility.

1.4.  We had a rich discussion at the Global Supply Chain Forum, but I want to focus quickly on 5 aspects of that Forum that are important for our discussion today. 

1)_        The first thing discussed was the need to enhance connectivity and accessibility through strategic investments in maritime and air transport infrastructure, and the development of efficient multimodal transport networks;

2)_        The second key highlight was the importance of strengthening resilience and sustainability understanding that ports and other critical transport infrastructure in SVEs are at high risk of climate change impacts. We saw this just recently with hurricane Beryl when our number one priority was getting the port in Barbados up and running after it was damaged as we could be cut off completely from supply chains;

3)_        Third, this can all only happen with mobilizing sustainable finance and investment including from new and innovative sources of finance. There needs to be a prioritization of funding and investment in transport and logistics sector. Hence there was a real call for endorsement of the Bridgetown Initiative which sets out a framework for reform of the International Financial architecture and seeks to ensure that developing countries, including SVEs, can access development funds, including grants, to finance their development priorities;

4)_        Fourth, we discussed a lot about the Decarbonization of shipping - the discussions very much advocated for the transition to green and sustainable technologies in transport, including maritime transport, promoting energy efficiency, and exploring and adopting alternative fuels for cleaner and more fuel-efficient vessels and ports; and

5)_        And fifth, the need to invest in MSMEs to help them to understand, embrace and invest in greener and cleaner ways of sourcing, producing and distributing their goods and services. 

1.5.  But it is not all gloom and doom. We must now begin to think how do we bring our small economies closer to these supply chains as suppliers! How we do we get into the production cycle of the components for the new green tech? How can some of our indigenous knowledge and materials be part of the green transition? From using goods such as Coconut husks, bamboo, seaweed commonly found in our countries for plastic substitutes, to using our highly educated and skilled populations to support new innovations in services, to use regional integration intelligently to create self-sufficient and self-catering regional supply chains including around organic goods and food. These are all elements that we need to consider intentionally going forward and I am keen to hear what this incredible group of panellists - who just incidentally happen to be four amazing women - will have to share with us.

2  Statement by Ana Libertad Guzmán Villeda (Guatemala)

2.1.  First, I would like to express my condolences for the losses and disruptions caused by Hurricane Beryl in our SVEs countries and hope for a speedy recovery. Excellencies, colleagues. Globalization has led to the creation of more complex supply chains around the world. Supply chain disruptions resulting from the pandemic and other global circumstances, continued to cause shortages of raw materials and intermediate goods. This disruption has highlighted the need to build resilience of supply chains to ensure stable production and export levels.

2.2.  This topic of particular interest to the SVEs group, responds to the need of developing resilient, accessible and open supply chains, and the capacity to integrate climate change adaptation policies to this matter. The demand to keep value chains functioning and ensure sufficient availability of and equitable access to goods, especially perishable goods, is therefore of eminent importance in times of crisis.

2.3.  The structure of supply chains and the enterprises involved at each stage vary significantly across products and geographies and we face a lot of risks across the various stages of supply chains, that’s why these conversations are important. Supply chains can be an engine of development and diversifying supply chains can lower the risk of a single country shocking global supply chains due to natural or other factors.

2.4.  Also, some suppliers in developing countries may struggle to cope with the growing amount of costly compliance measures, and financial and technical help is essential. So, the question of how our countries can anticipate risks and prepare for these disruptions remains valid. What we need from experts and relevant international organizations, like the ones we have today, is information to know how to implement and cope with the changes that affect supply chains, as well as ways to better insert ourselves into them.

2.5.  The literature indicates that value chains create opportunities for economic growth in developing countries. In countries that participate in the agri-food, textile or tourism supply chains, for example, reducing risk and non-tariff barriers would enable our countries to design and implement comprehensive strategies that address these key barriers.

2.6.  We would like to thank the participation of the WTO Secretariat, FAO, ITC and UNCTAD for the interesting discussion from different perspectives. This will help the SVEs members to identify the basis for public policies aimed at ensuring green supply chains.

presentations made during the session[1]

3  Presentation by WTO: Climate change and green supply chains - challenges and opportunities for small economies

3.1.  The WTO Secretariat presented findings from the World Trade Report 2022 and 2023, focusing on the relationship between climate change and international trade and leveraging trade to address environmental challenges. The presentation highlighted the following challenges and opportunities of small economies in green supply chains:

3.2.  Impact of climate change on economies: Climate change will profoundly affect all economies, with low-income small economies bearing disproportionately severe consequences. These impacts include rising temperatures, sea levels, and more frequent extreme weather events, which disrupt water, climate, and energy systems, as well as infrastructure, supply chains, and transportation. Low and lower-middle income economies are particularly susceptible to climate change due to higher temperatures negatively impacting export growth. Small economies (SVEs) face additional challenges such as lack of economic diversification, limited government revenues, and geographical constraints. Natural disasters in these regions lead to infrastructure destruction, export declines, increased import costs, and deteriorating trade balances, limiting their medium-term growth potential.

3.3.  Role of international trade in climate response: International trade plays a crucial role in climate response by enhancing preparedness and recovery from climate-induced shocks, helping economies adapt. Robust regulatory frameworks, solid infrastructure, and international cooperation are essential for effective trade in this context. Trade can also lower costs and accelerate the low‑carbon transition, as evidenced by significant cost declines in renewable energies due to global value chains.

3.4.  Government Policies and International Cooperation: Government policies and international cooperation are necessary for mitigating climate change and fostering a low-carbon transition. The WTO's Environmental Database shows an increase in trade-related environmental measures by its members, including technical regulations, support measures, and quantitative restrictions.

3.5.  Recommendations for Enhancing Trade and Climate Policy Coherence: To enhance the coherence of trade and climate policy, it is recommended to integrate trade and climate mitigation policies, recognizing trade policies as integral to climate mitigation efforts. Greater international cooperation is needed to reduce trade-related carbon emissions, along with improved systems for measuring and verifying carbon emissions. Implementing measures to reduce emissions in global transport networks is also crucial, as is ensuring that the decarbonization of supply chains does not lead to market fragmentation. Removing trade barriers for environmental goods can promote both trade and environmental benefits.

3.6.  Support for developing economies is essential: Small and low-income economies face challenges in meeting the costs of technical barriers, certification, and labelling necessary for decarbonizing trade. Aid-for-trade disbursements related to climate change have increased, with significant funds directed towards adaptation and mitigation projects in developing economies. These economies also have potential trade opportunities in renewable power and critical minerals for the green transition, requiring investment and capacity building.

4  Presentation by the FAO: Enabling green supply chains for small economies - Vulnerabilities and resilience in tropical fruits markets and trade

4.1.  Aggregate trade in the four major tropical fruits – the commodity cluster mango, mangosteen and guava; pineapples; avocados; and papayas – has been rising almost continuously over the past decade, to approximately USD 11 billion in 2023. Global trade in bananas generates an additional USD 8 to 9 billion per annum. Around 70% of exports originate in the Latin American and Caribbean region. In some exporting countries, revenue from trade in tropical fruit commodities can account for substantial shares of total agricultural GDP. Household surveys have further shown that earnings from trade in these commodities can account for up to 75% of smallholders’ income. Tropical fruits, which in some cases feature high returns per hectare, can be promising commodities for small economies seeking to diversify exports. However, fresh tropical fruits are particularly vulnerable to supply chain disruptions due to their short harvesting periods and – oftentimes high – perishability. On the demand side, since many tropical fruits are high value food items, consumption can be greatly sensitive to price and income changes.

4.2.  Measures to minimize the risk of supply chain disruptions as well as the impacts of shocks may involve producer support programmes; investments in infrastructure and cold chains; maintaining transport routes; and avoiding transient border measures. Export and import diversification can be ways of minimizing exposure to shocks in one location. Ensuring living smallholder incomes and access to nutrition requires efforts to ensure remunerative prices for producers; improving smallholders’ productivity and their bargaining power; and linking remote producing areas to markets. Investments in drying and processing facilities that can enable excess supply of fresh fruits to be processed and preserved for later marketing may further strengthen the resilience and sustainability of the industry. This may not only alleviate the potential losses associated with the high perishability of fresh fruits, but also improve farmers’ income opportunities through value addition.

4.3.  Strengthened international collaboration, particularly with regards to trade policy as well as enhanced data collection and information sharing on aspects such as product standards, the costs of sustainable production and the role of labour along the supply chain, are key to supporting transparency in global trade and to strengthening the preparedness of the global system to crises. To support evidence-based policy making and market transparency in tropical fruit markets, FAO submitted a proposal for improved granularity of the Harmonized System codes for tropical fruits to the World Customs Organization (WCO), which is on track to be implemented in the 2028 revision of the HS nomenclature.[2] Under this proposal, separate codes will enable data collection on mangoes, guavas and mangosteens as well as five other tropical fruits currently clustered in code 0810.90. An additional proposal on the separation of dried mangoes from their fresh equivalent has been submitted for review by the WCO in October 2024. The separation of other dried tropical fruits, importantly dried bananas and dried pineapples will be discussed for the 2033 review cycle.

5  Presentation by the ITC: Micro Small and Medium Sized Enterprises, a prerequisite for green supply chains

5.1.  Micro, Small and Medium Enterprises (MSMEs) are the ‘new front’ in the battle against climate change. This is the conclusion of a research paper from HSBC and the Boston Consulting Group (BCG), only a few years ago. Global supply chains account for as much as 80% of the world’s total carbon emissions. Scope 3 emissions, those that originate in the supply chain, represent the largest portion of emissions in most sectors. And according to BCG, MSMEs s represent as much as, and in some cases more than 90% of firms in any given supply chain. Therefore it is crucial to work with MSMEs to improve environmental performance to green supply chains. The same study finds that over USD 100 trillion of investment by 2050 is required to achieve Net-Zero in global supply chains, approximately half of which must target SMEs.

5.2.  Over the past decade, large companies have been setting ambitious sustainability targets to address global challenges. These tend to tackle direct emissions but are slower to tackle those from indirect sources. MSMEs bear much of the burden in helping large companies implement and meet sustainability goals across the supply chain. Green supply chains are not only about emissions but also, and crucially, about climate resilience and environmental sustainability – this is particularly pertinent for Small and Vulnerable Economies. Resilient MSMEs mean stronger and more resilient supply chains.

5.3.  One thing is clear, MSMEs want to comply, as improving product quality and reducing pollution increases product value. For Small businesses in vulnerable economies “greening” practices are not just necessary for mitigation – adaptive capacity has become a matter of survival while also building resilience in national economies.

5.4.  With the right support to harness opportunities from the green transition, SMEs can benefit from new market opportunities, often in premium markets. Increasing demand can drive innovation and value addition. Furthermore, a shift to green practices increases MSME resilience and ability to absorb exogenous shocks.

5.5.  Key Recommendations:

a._         Empower MSMEs to measure and monitor environmental footprint. The need for data and reporting is growing, but it’s costly and complex to untangle. Insights from ITC’s Resource Efficiency and Circular Production coaching show that data collection is one of the top three issues faced by companies working on environmental sustainability. The ITC Green Performance Toolkit empowers SMEs to establish baselines, benchmarks and improvement targets, enabling them to make informed decisions, produce ESG reports and prepare for standards compliance;

b._         Support for product design and value chain development are critical for MSMEs to be more resilient and competitive in green supply chains;

c._         Foster multistakeholder partnerships across the value chain, including with leading firms, to mobilise co-investments and maximise efficiencies within supply chains; and

d._         Facilitate collaboration between line ministries at the national level, and between the trade and climate communities at the international level.

5.6.  Background information on International Trade Centre support for Climate Action: In 2022 the International Trade Centre committed to deliver 100,000 climate actions – for small businesses and by small businesses – by 2025. ITC is integrating climate action into its strategic and operational priorities, mobilising the collective power of MSMEs to tackle the climate emergency, by providing them an improved enabling environment, new capacities, technologies and finance. Also mobilising partnerships and climate finance to support MSMES. In 2023 ITC achieved 18,500 climate actions through activities such as providing data, evidence and analyses on the exposure of countries and sectors to emerging trade related climate regulations, improving the climate competitiveness of small businesses through capacity building, and partnering across the value chain to facilitate access to sustainable finance, investment and green supply chains.

6  PResentation by UN Trade and development (UNCTAD): Green Supply Chains for SIDS - Outcomes of the UN Global Supply Chain Forum

6.1.  Context: The Red Sea and climate disruptions have resulted in an increase in CO2 emissions from shipping, at a time when they should be decreasing. Ships need to take longer routes around areas like South Africa, which increases travel distances and requires higher speeds to compensate. Container shipping freight rates stabilized in 2023 after the exceptionally high rates in 2021 and 2022. However, rates surged again in late 2023 and 2024 due to disruptions in the Red Sea and Panama Canal and vessel rerouting, reaching new peaks.

6.2.  Building resilience: In response, UN Trade and Development (UNCTAD), the Government of Barbados, and 103 partners convened over 1,000 policymakers, industry leaders, academia, and civil society to the first UN Global Supply Chain Forum. Intending to build resilience for future disruptions, a SIDS Ministerial dialogue resulted in the signing of the Ministerial Statement for Enhancing Transport and Logistics in Small Island Developing States.

6.3.  Greener and resilience Supply Chains: The increasing threat of climate change affects everyone, but small and vulnerable economies (SVEs) will be affected disproportionately, bringing new challenges to the public and private sectors. Investing in human capital is crucial for facilitating humanitarian relief, food security, and climate-smart trade. Capacity-building on data utilization and new digital tools can improve SVEs' competitiveness and commitment to decarbonization. Zero-carbon shipping poses a financial cost but also creates opportunities for SVEs as follows:

a._         Option 1: More countries, including SVEs, can now participate in the energy/fuel market by providing alternative fuels;

b._         Option 2: An "economic measure" to ensure competitiveness of alternative fuels. Invest in improved trade logistics with the generated funding; and

c._         Option 3: The maritime industry has a unique chance to lead the way by creating a single global framework, while other industries must navigate multiple national frameworks, which could lead to free riders and a lack of global enforcement.

6.4.  Digitalization: Digital corridors are necessary to interconnect the numerous digital solutions, such as single windows, which have been developed in recent years. Standards for interoperability and data exchange must be developed and applied. A digital ecosystem must also incorporate the need for Micro-Small-Medium-Sized Enterprises (MSMEs).

6.5.  Partnerships: Public-private partnerships must strengthen supply chain networks' adaptability by investing in infrastructure, diversifying production, leveraging technology, strengthening collaboration, prioritizing sustainability, and providing targeted support to vulnerable regions.

6.6.  The way forward: To prepare for upcoming challenges and disruption, SVEs must elaborate a strategy for:

a._         Complying with the proliferation of carbon border adjustment mechanisms;

b._         Creating added value at the national and regional levels; and

c._         Long-term logistics. Ambitious trade policy agendas and trade facilitation measures can also enhance global food security and ensure the provision of affordable, nutrient-rich foods to small economies' households.

6.7.  More inclusiveness in supply chains: Despite the advancements the supply chain industry has seen regarding gender equality, further measures must be taken: empowerment and mentorship programmes, capacity building, more transparent recruitment processes, and a promotion of women-led businesses. National solutions can be further enhanced by international conventions.

6.8.  Strong political will and Capacity Building: All stakeholders in the Global Forum, representatives from the public and private sectors, underscored that reforms could only be achieved with unwavering political will. Technical cooperation initiatives from various organizations play a vital role in building countries' capacity to address supply chain challenges. From facilitating Customs automation to implementing port reforms, these collaborative efforts empower countries to enhance trade facilitation, bolster resilience, and adopt sustainable practices.

6.9.  Finally, having an international discussion platform allows the quest for solutions to continue, to create synergies, and to forge partnerships. The next GSCF in 2026 will enable the international community to measure progress since the first edition.

7  Key Takeaways

7.1.  The international organizations mentioned a very significant common theme, which is the role of international cooperation and government policies to mitigate the effects of climate change. This includes political will and capacity building for our countries. For this, coordination between the public and private sectors is important in order to invest in infrastructure, diversification of production, technology adaptation, among others.

7.2.  Support through technical assistance from various international organizations is important for capacity building to address the challenges faced by supply chains. This facilitates coordination at all levels: between ministries, at the national level and the international climate-related communities.

7.3.  Platforms for discussion among countries, such as the WTO, allow solutions to be rethought, synergies to be created and alliances to be formed. In addition, the support of various international organizations for data collection, information sharing and support for standards compliance is vital. This information enables the development of evidence-based policies to strengthen the resilience and sustainability of supply chains.

7.4.  For our countries to properly insert themselves into supply chains, we must overcome the challenges we face in trade, in relation to the costs of technical barriers such as certifications and labelling. Capacity building and technical assistance on issues such as renewable energy and critical minerals for the green transition is essential.

7.5.  Also, the SVEs Members need to elaborate a strategy for long-term logistics, such as meeting the different requirements that are being requested by other countries and above all trying to create value in products at the national and regional level. Technical assistance can help in supporting product design and value chain development for more resilient and competitive green supply chains.

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