Organizations have traditionally considered followed a target market’s laws to be sufficient due diligence. However, as many companies now produce their products or source their services in one country, and then sell them to customers in another, they are increasingly under public scrutiny and face social risks to their reputation.

Social risk arises from negative perceptions of an organization’s impact on the community. The social risks of a venture depend on the specific issues associated with an organization’s operations, the industry sector and the geographic context. Risks typically include environmental pollution, hazards to human health, safety and security, and threats to a region’s biodiversity and cultural heritage.

Social risk is characterized by four components in combination: an issue, a stakeholder or group of stakeholders, a negative perception about an organization, and the means to do damage.

Want to learn more about how to analyze and plan to mitigate risks caused economic, social or political circumstances? Check out the FITTskills Risk Analysis and Management online workshop.

Social risk is characterized by the following components:

1. Issue: Societal and environmental issues are taking on heightened significance on a global level. The issue is specific to the organization, the target market and the planned ventures.

2. Stakeholder: For social risk, stakeholders are a broad group that includes any person or group who may have an interest in the issue. For instance, Nike now engages with environmental organizations, human rights groups, students, colleges, trade unions, socially responsible investor groups and academia, in additional to traditional stakeholders like shareholders, employees, customers, and suppliers.

3. Perception: Stakeholder perceptions are based on various information sources, including official news media, the Internet, word of mouth and the organization itself. Negative perceptions are more likely to arise in the absence of regular information or communication from the organization itself. Negative perceptions can be accurate or inaccurate; both can lead to challenges for the company.

4. Means: A stakeholder may possess a variety of means to affect organizational conduct. Small grassroots non-profit organizations may be able to mobilize large networks of allies very quickly.

Managing social risks through corporate social responsibility (CSR)

Management and mitigation of social risk factors are increasingly important for business success abroad. The costs of losing that social licence, both in terms of the organization’s share price and the bottom line, may be significant.

Ignoring social risk factors can lead to significant negative consequences to an organization’s reputation and operations. With no mitigation plan in place, these organizations have been subject to bad publicity, consumer boycotts and other negative outcomes. The advent of social media has had a large influence on how quickly these negative consequences can be realized and spread.

As organizations take advantage of global opportunities, there is a growing understanding that it makes good business sense to incorporate responsible business practices into investments and operations abroad; these practices also benefit the local economies and communities.

When organizations operate in an economically, socially and environmentally responsible manner, and they do so transparently, it helps them succeed. This is accomplished through encouraging shared values and social license with clients, customers and stakeholders.

In most cases, organizations can take steps to mitigate these risks. Some organizations have successfully mitigated these concerns through a range of activities classified as corporate social responsibility (CSR), which covers all of the voluntary actions a company can take to operate in an economic, social and environmentally sustainable manner.

Popular CSR steps include building closer relationships with local partners and stakeholders, increased transparency and public reporting, closer monitoring of suppliers and others in their supply chains, abiding by voluntary international standards for environmental emissions or labour rights, and ethically obtaining the rights to purchase or use any land.

Evaluating your business’s Triple Bottom Line

Social risk is also tied to the idea of Triple Bottom Line (TBL). TBL is an accounting framework that incorporates three dimensions of performance: social, environmental and financial. This differs from traditional reporting frameworks that focus exclusively on economic or budgetary performance. The TBL dimensions are also commonly called the three Ps: people, planet and profits.

The TBL, and its core value of sustainability, has gained traction in the business world due to accumulating anecdotal evidence of greater long term profitability. For example, reducing waste from packaging is good for the environment and it can also reduce costs. Among the companies that have adopted this approach are General Electric, Unilever, Proctor and Gamble, 3M and Cascade Engineering.

Over half of the global Fortune 500 companies and almost half of Standard & Poor’s (S&P’s) 100 companies now issue TBL reports. Investors incorporate these reports into their own measurements for valuing companies.

The post Identify, analyze and mitigate the social risks to your business appeared first on Trade Ready.

The triple bottom line, or 3BL, refers to three things: people, planet and profit. In the past companies were almost entirely profit-driven enterprises where every business decision was based on economic prosperity, often at the expense of either communities and/or the environment.

Now, however, there is an increasing focus on the social and environmental impact that businesses have on their stakeholders, local communities and the world around them. This new interest in how companies measure their ‘Social and Environmental Responsibilities’ (SER) reflects the many advantages they hold for the company.

How can being more socially and environmentally responsible help your company grow?

1. High morale and improved productivity

The feeling of self-worth and pride that taking a moral stance can bring to the company’s employees and stakeholders can have a positive impact on productivity and morale.

2. Reducing overhead costs

The company could actually save money. Take the environmental aspect, for example – businesses do not have to begin by thinking on a global scale or changing suppliers to minimize their environmental impact.

They could start by investing in energy-saving lightbulbs, reducing water wastage, going ‘paperless’ and recycling all waste products. These small decisions will save money while reducing environmental impact.

3. Build a committed group of core, repeat customers

Companies can gain a crucial advantage by leveraging their Corporate Social Responsibility (CSR). Responsible consumers are looking for companies that adopt 3BL strategies and are willing and ready to support them – even if it means paying higher prices than competing products.

With the right branding and promotional efforts, companies that implement sustainable practises can become known as ‘green’ and socially responsible, and use this as a competitive advantage in the industry.

The brand image should reflect the company’s values. By incorporating CSR policies into the business strategies, this brand image attracts a whole new segment of consumers, thus increasing profits and allowing the company to grow.

Consider that many businesses, from small to large, are now making sustainability fundamental to their businesses. Companies that fail to keep up with the trend may find they get left behind and are unable to compete in their industries.

4. Attract top talent to grow your company

Businesses that invest in their employees (through training schemes and employee benefit packages, for example), invest in their local communities, and sponsor charities will be more enjoyable places for people to work.

Not only does that make people happier (an end goal in itself) but it will also inspire loyalty and attract talented people to the company. This will in turn benefit the company financially.

There are no true downsides to adopting a 3BL approach to business.

A common misconception might be that by considering the other two factors (people and planet), the third factor (profit) might be diminished. But as we can see, not only is there a growing market for sustainable businesses, but by adopting CSR policies businesses can actually be even more profitable and competitive.

Championing social and environmental causes can both save and make money

By embracing 3BL as a core value, companies have proven themselves successful in their industries, thus covering the “profit” part of the equation, and they also address both social and environmental concerns.

This is possibly a consequence of the public interest.

It’s easier to touch your customers’ hearts when they can clearly see their purchase easing immediate suffering (such as the “buy one, donate one” policies).

This can be more impactful than the more abstract concept of saving the planet by reducing our carbon footprints, reducing waste and using bio-degradable materials.

By winning over dedicated customers, improving employee loyalty, attracting top talent, and reducing overhead costs, this strategy could be your ticket to success.

The only question left is: what steps will your business take next to move towards this goal?

The post 4 ways improving your business’s social and environmental responsibility can boost profits appeared first on Trade Ready.

Trade has become the target of much negative, inflated and even hysterical commentary in several parts of the world. This goes beyond the core constituency of anti-traders, many of whom are thoughtful commentators pointing out serious, dangerous and fundamentally wrong elements of the current global model of cross-border commerce. Others, well, they can stand as an example of free, if not particularly well informed, speech.

Let’s acknowledge that trade has some fundamental flaws. Sometimes it involves terrible life-threatening activities related to the trade in rare earth minerals, diamonds and precious metals. At times it can facilitate unconscionable injustice related to the distribution of wealth across global supply chains, from small producers at one end to global multinationals midstream, and wealthy consumer clients at the other end.

This is not a political statement, nor a comment on the darker side of market economics: it is simply the reality.

Anti-trade activities and anti-globalization advocates focus on these areas. They have clearly gotten to the core of an emerging issue among populations that feel (and are) disenfranchised. These members of the human family have not experienced anything close to proportional benefits from the growth of trade or the expansion of globalization. In fact, rather than “globalization” what we should more accurately call it is “internationalization”, since we are still far from globalized in most areas of endeavour.

If trade is indeed so terrible, why do we engage in it?

Let’s not get into the classical economics discussion about comparative and absolute advantage, or the related example of countries producing and trading in “guns and butter”. We’ll leave that for another time.

Can we agree that humanity has probably engaged in trade since the dawn of our collective existence, and that on an individual level, most of us have done some kind of trading at some stage?

I was never one to trade lunches at school, but there was something innately interesting about trading in hockey cards, stamps or other collectibles. I go back to the peak days of the Canada vs. Russia rivalry and of the Montreal Canadiens’ dynasty years, Cournoyer, Lafleur, the Mahovlich brothers and Larry “The Big Bird” Robinson and spent hours poring over stamp collections and negotiating with long-gone fervour to acquire a particularly interesting addition to either the card or the stamp collection.

Were these the seeds of an eventual career in trade? That might be a stretch, but going from my hockey card trading days to reading a memorable book called “Making Global Deals” by Jaswald Salacuse, it seems, was natural and in perfect alignment.

Anti-globalization sentiments hit home

I’ve been observing, with a combination of reactions I dare not describe, developments over the last few months in Europe, parts of Asia, the United States and elsewhere. This has led me to conclude that anti-globalization and anti-trade commentators have managed to do something exceedingly well that those of us on the other side of the debate have done miserably poorly, and that is to deliver their message with a focus on issues that grab you by the gut, or the heart, or some combination of the two.

These messages hit home so often because they are grounded in realities, some that are in absolute need of description, debate and deliberation. Realities such as the adverse impact of trade on the environment, natural resources, indigenous populations, child labour, animal cruelty, illicit trade in endangered species and a whole range of similar matters, even ‘trade’ in pharmaceuticals, provided to developing markets at costs that are impossible to defend on human terms.

Arguing in favour of trade based on statistics, objective measures of economic value-creation, increases in global wealth, or other similarly dispassionate foundations simply does not work.

These intellectually grounded, academically robust arguments do not bring to life the positive contributions of international commerce. For instance, the reality that trade contributes to international security and safety, that the engagement of developing economies in trade very literally feeds families, saves lives and raises the quality of life for tens of millions of people if not more, across the planet.

Trade is not just about commerce at all costs, it is not just about cost-cutting, or about finding new markets to sell into at attractive margins. Trade is also an engine of growth, a contributor to international development, and an important element of a growing effort to put financial and economic inclusiveness at the heart of international policy priorities.

Making connections with the very real benefits of trade

Many of the very issues raised by anti-trade activists and anti-globalization commentators are being improved, or at least mitigated, as a direct result of international engagement and trade.

Observe health and safety standards being applied in emerging markets, and anti-corruption measures positively impacting the full spectrum of economies from OECD economies to frontier markets because of trade deals and initiatives around corporate social responsibility and good global citizenship. We are also seeing an increase in responsibility from corporations for the actions and standards of their suppliers. All of the  point to improvements that cross borders, with benefits that reach around the globe.

These examples illustrate a few of the ways in which international commerce and engagement can be a channel for transmitting economic value, but also a channel for increasing safety and security, enhancing quality of life and advancing international development and reducing poverty.

Trade and international engagement are credited with pulling one billion people out of poverty.

Yes, the definition of poverty can be debated, and one can argue that more could have been done sooner – no question. However, it can be highly encouraging to observe very real signs of progress in the way nations, companies and people engage together.

Changing the way we do business globally

It is a source of energy and optimism to see that issues once seen to be at the fringes of priority are being brought sharply into focus, and are becoming the subject of serious dialogue, substantive policy and commercially compelling efforts to measure success through more than a set of financial statements.

The advent of the Internet, including the significant use of online trade platforms like eBay, Alibaba and the soon-to-be-developed e-World Trade Platform, have done a great deal to advance international engagement by small, even home-based businesses. These platforms have enabled the commercialization of local arts and crafts to an international market, and have enabled individuals, small businesses and communities to benefit from access to financial resources in order to pursue opportunities in international markets.

The global reach that can be experienced from one’s office or living room opens up unique culinary or cultural experiences, tremendous access to world-class education platforms – all enabling a new level of international engagement – and an interest in accessing and experiencing “things international” to a degree that was once impossible to imagine.

Trade, like most human activity, is imperfect. Happily, we have been making good progress in making trade and international engagement about much more than profitable commerce.

Social enterprise, good citizenship, the importance of inclusiveness are all becoming mainstream, and will contribute to addressing many of the issues we know need to be fixed in the global architecture for international trade, investment and engagement.

I (OK, we!) need to go back and think more about how to tell the story of trade and international engagement (and eventually, of finance) that will grab people by the gut or by the heart.

For now, I’ve got to go contribute to some planning for the 2017 edition of the World Trade Symposium to take place in London next June. This marks the second year of an event for which I am honoured to serve as a Board Member. We think a great deal about trade, finance, technology and inclusiveness, and ways we can put these things together to improve the lives of people around the world.  It is through such events and initiatives, and the important work for FITT and our community of members and CITP®|FIBP® designation holders, that the story of trade will ultimately be told in a balanced, thoughtful manner, to the continued benefit of many nations, businesses, families and individuals – even some of its most vocal opponents!

The post Trade is terrible – why do we do it? appeared first on Trade Ready.

The 20^th century’s first era of ‘globalization’ (roughly 1970-2010) was marked by major changes in global trade, consumption, manufacturing, supply chains, jobs and our daily lives. The world shrank rapidly due to free trade, mass media, technology, easier travel, improved supply chains, the emergence of Asian powers, and the dawn of the BRICS economies.

Thomas Friedman’s 2005 bestseller The World is Flat became the definitive text of, and shorthand for, Globalization 1.0. It gave context and a name to the sense many people and businesses in the US, Europe, and Asia had that an industrial revolution-sized change had taken place.

Perhaps nowhere were the effects of Globalization 2.0 felt more intensely, widely and definitively than in manufacturing.

Shifts in geography, technology, markets and consumer demand drove change in how companies approached their PLAN-MAKE-BUY-MOVE strategies for their products.

What is Globalization 2.0?

The megatrends that emerged from the first era of globalization have evolved to shape the Globalization 2.0 world. They dominate and influence almost every aspect of business and trade, including the way companies make, move and sell their products.

Megatrends:

1. The emergence of China as a global manufacturing, supply chain and consumer power
2. The emergence of the Internet and its evolution from something “we do” to “who we are,” as well as the emergence of e-commerce and its evolution to cross-border commerce
3. The emergence of fast supply chains that are cost-effective, tech-driven, and simultaneously global, regional, local and hyper-local
4. The emergence of new models in B2C and B2B product sales and distribution due major disruptions in domestic and global consumer demands, manufacturing models, retail disruption and environmental and social compliance demands

Whether you produce apparel, heavy equipment, computer chips or chocolate chips, these mega-trends are essential to understand and embrace for a few reasons.

Companies are, or soon will be, rethinking, reimagining, redeploying and digitizing their entire go-to-market strategy and all six mega-processes (plan, make, buy, move, distribute and sell) of their supply chain to meet the needs of a globalized and digitized world.

They are also resetting their entire MAKE IT-MOVE IT-SELL IT operations, where they consider what combination of Asia, North and South America, and a wildcard 4^th destination they will use to make and sell their products. They are rebuilding their global, regional, local and hyper-local supply chains to meet customer demands.

The following are four critical actions suppliers and manufacturers must take to ensure long term survival, growth and profitability in a 2.0 world.

Transition to strategic from transactional operations

You may think you have a long term strategy, but if you are like most manufacturers and suppliers, you still operate on a largely transactional basis.

You must transform your operations, philosophy, strategies and KPI’s to reflect a 2.0 world that uses technology, analytics, market assessments and big data to create a long term strategy mindset.

This sign-the-orders, make it fast and well, sign the next one, rinse-and-repeat mentality is not fit for a 2.0 world.

The first step you need to take is to conduct an end-to-end assessment of your “as-is” business model and your go-to market strategy. This will include a thorough analysis of your operations, technologies, level of digitization, personnel, policies, supply chains, component and raw material sourcing, customer relationships, compliance regimes, and the markets and customers you currently serve.

You should include internal and external primary and secondary research, competitive benchmarking, market, product and customer analysis, channel analysis and the impact of e-commerce for B2B and B2C on your business.

Use all of this to create your “to-be” model, strategies, tactics and sales effort. Prioritize adoption and implementation of required changes and begin implementation immediately – ideally within 3 days.

Fully embrace e-commerce and digitization

After conducting your “as-is” analysis, suppliers need to understand the impact that e-commerce and the digitization of all aspects of the commercial world will have on their current and future business.

E-commerce and cross-border e-commerce have changed the dynamics of retail, wholesale and B2B channel sales. Your customers are adjusting their strategies and operations to meet the demands of an e-commerce driven world, and this means that their relationships with suppliers are changing.

Your customers are shifting their mix of supplier countries, looking to consolidate, seeking more flexibility in capacity and minimum order quantities, and embracing numerous avenues for delivery.

Suppliers must adjust their operations, personnel, IT infrastructure, MOQs, packaging and supply chain capabilities to meet B2C and B2B customer demands placed on brands and retailers by e-commerce.

Customers are also reinventing their go-to-market operations and strategy by digitizing every aspect of their business, including:

• product development and engineering
• forecasting and replenishment
• choice of supplier and engagement with supplier
• warehouse and DC operations
• distribution
• logistics and sales

The smart supplier will have a strategy and operation capable of integrating seamlessly into customer’s digital transformation.

Meet (and exceed) new standards in social, environmental and compliance standards

The need for suppliers to meet social responsibility requirements in their operations, to move toward greener operations, and to comply with local and global regulatory regimes is not new.  All three movements have gained momentum over the last ten years, and many suppliers have differentiated themselves and increased business by being ahead of the curve on these.

However, social, environmental and regulatory compliance is still in the maturation stage and in the next ten years will reach full maturity.

This means that environmental compliance and innovation will be a must for suppliers.

The days of buyers moving from country to country to leverage more relaxed regulations will come to an end. The same goes for social compliance.

Younger, more socially conscious consumers are demanding that their favorite brands are green, clean, human rights advocates.  B2B customers face pressure and are being offered incentives to do the same. Along with social pressure, there will also be greater profits to be had in being not only compliant, but innovative.

Make ANY order size profitable

In a 2.0 world, the manner in which your clients plan, buy, receive, store and sell inventory has changed dramatically, and will continue to do so.

The new realities of a Globalization 2.0 world include a more global landscape for sourcing new markets, the ability to source from new locations in your country, the unwillingness of retailers and wholesalers to hold inventory, major advances in forecasting, replenishment and inventory visibility, and most importantly consumer and business preferences. Together these realities mean that capacity and MOQ flexibility is a must to stay competitive.

Manufacturers must be able to use technology, smart planning, and customer needs research to set up a system where fast ramp-ups and ramp-downs, meeting smaller micro-orders, and direct ship orders can be part of your offering.

Critical to this process is building long-term, focused strategic relationships with your customers and understanding where they are going, not where they are.  This is a key element of shifting from short-term, transactional thinking to 2.0 thinking.

Act now or risk getting left behind

Globalization 2.0 has shattered the traditional norms of the product lifecycle, from engineering to planning and production, all way to sales.

Manufacturers and suppliers can only survive by being proactive on strategy, technology, and “inside the four walls” operations. The alternative is watching others do it and get left behind in a Globalization 1.0 world, wondering what happened.

The post Change or die: 4 things suppliers must do to survive in a Globalization 2.0 world appeared first on Trade Ready.

The horrific events in Paris were very much in the hearts of participants, and even in that sadness there was a palpable sense of determination, particularly among several French delegates with whom I interacted over the summit weekend.

One gentleman, whose wife is a medical professional at a hospital near one of the hardest hit areas, reminded us that it was France that brought the aspiration of “Liberté, Egalité, Fraternité” to the world.

The heartfelt comments of IMF Managing Director Christine Lagarde on a panel at the B20 session were equally moving in their reminder of the value of even an expression of support and concern for friends and colleagues across France.

The words to inspire us all

The parallel tone of the event, and the privilege of being “in the room” at the B20 was brought sharply into focus for me in Frankfurt, just before leaving for Turkey. It transpired that a woman behind a cash register whom I spoke with briefly had just been to Antalya.

Her parting words, “do your best for the rest of us,” echoed in my mind several times over the next few days, even though I did not have the opportunity to express to this citizen approaching her retirement that my involvement was very narrow, peripheral and limited.

Her words should, however, resonate with those leaders in Antalya in the business community, and certainly in the political leadership, as well as various complementary streams of activity.

The privilege of true leadership should come with a compelling sense of duty to ‘do the best for the rest of us’ and a determination to deliver substantively, even on the toughest issues.

Today’s strong leadership is looking at the bigger picture

As an unabashedly proud Canadian, it was excellent to see our new Prime Minister make his international debut at the B20 session in Antalya, very warmly received by top business leaders and the heads of various international organizations who shared the podium with Prime Minister Trudeau.

It was good to hear Financial Stability Board Chair and Governor of the Bank of England Mark Carney (another fellow Canadian) speak with focus and authority on the efforts underway to assure long term stability in the global financial and economic system.

And from the perspective of the work of our Task Force, it was inspiring to hear Governor Carney specifically mention trade finance in his remarks.

Trade finance is an esoteric domain, the critical importance of which is increasingly appreciated in business and political circles today.

Business leaders, including the CEOs of Coca Cola, Nestlé, SEB Bank, Sabanci and numerous others, were in attendance, as were the heads of the IMF, the WTO, the OECD and the International Chamber of Commerce. One striking undercurrent in the formal remarks, and in the exchanges which followed, is a sense among even the most hard-core business leaders that we need to start thinking more, and more seriously, about the bigger picture.

Numerous interventions reflected notions around the social responsibility of business, the role of commerce in international development, poverty reduction and peace and security. Chief among them was the imperative for executives to think long-term, and to think strategically about issues like sustainability and climate change.

This discussion is crucial, even as some sectors struggle with post-crisis regulatory issues, inconsistent legal standards across borders and issues like skills gaps and labour mobility.

Critical role of international trade in economics and sustainability a common thread

A cynical view might suggest that such musings are shaped by the context, and by the high visibility of the B20/G20 event. However, the sincere non-verbal cues – of certain speakers in particular – were undeniable, and the global nature of the gathering ensures a wide range of perspectives, reference points and ideological leanings.

All of it was underpinning a far-reaching exchange of ideas, even for the business-focused stream of the B20.

Several senior business leaders advocated directly and energetically for ratification of the WTO Trade Facilitation Agreement, and WTO Director General Azevedo, also a promoter of the importance of trade financing (as shown in his remarks at the Conference for Financing and Development in Addis Ababa last July) invited business leaders to engage more directly with the WTO going forward.

The crucial role of trade in the creation of economic value, reflected in part by the growth of global GDP, was specifically addressed by OECD Secretary General Angel Gurria.

Financial and economic inclusion, as well as the importance of small business, were also recurring themes, addressed directly or through advocacy for the Trade Facilitation Agreement by delegates like Guler Sabanci, Chair, Sabanci Holdings and Sunil Bharti Mittal, Chairman and CEO, Bharti Group, and Vice Chair, International Chamber of Commerce.

The critical role of small business in underpinning economic growth was widely acknowledged, not only at the Antalya Summit, but in the year-long work of the various B20 Task Forces, and the reports and recommendations produced by each task force.

Turning ideas into action

The dialogue and deliberations of the B20 Summit touched on numerous important points, and reflected a high degree of alignment on several major business-related themes, even those with wider and more complex implications, and a focus on the tag line “Business Diplomacy at its Best”.

The Turkish Presidency explicitly sought to maintain continuity with the efforts of the B20 Australia summit in 2014, and directed task forces to focus on the generation of implementable ideas and implementation.

Even with this focus and alignment, it is understood that one of the objectives of the business stream – gaining the attention and support of the most senior political leadership of the G20 – is a very difficult task, given the many highly sensitive priorities vying for attention.

The channel is very narrow, and demands a short, focused message, even with the support of organizations like the International Chamber of Commerce and many others actively and strongly supporting such efforts.

While reaching the G20 is an important objective of the B20 (and other parallel) processes, in the end, the research, analysis and recommendations of a series of task forces with world-class chairs and knowledge partners, stands on its own merits.

The year-long work of task force members serves as an excellent global basis for the development, sharing and dissemination of transformational business policy and practices.

Preparations are already underway for the next G20 and B20 events under the Presidency of China in 2016, with the official handover completed in Antalya.

It is incumbent upon all of us, however, to ensure that the work completed over the past year becomes part of an iterative, evolving process and contributes meaningfully to doing “the best for the rest of us”.

What else does Alexander do?

Learn more about the intricacies of Trade Finance from one of the leading subject market experts on the topic. His critically acclaimed book Financing Trade and International Supply Chains will give you deeper insights into nature of trade finance at its core, and of the versatility of this discipline in enabling trade flows involving businesses of all sizes.

The post Reflections After the 2015 B20 Summit: “Do Your Best for the Rest of Us” appeared first on Trade Ready.

NGOs, once considered voices of the fringe and hardly worth a glimpse in the landscape of international trade and global business, are now very much at the centre of fundamental issues shaping the current reality of global business.

Historically in an adversarial relationship with other major players in the global business environment, the NGOs, which form part of what is collectively referred to as “civil society”, have garnered significant political currency as the issues they champion become higher profile and priority across the globe.

NGOs have gone from “fringe” to mainstream in the international trade and global business environment.

Reducing competitiveness or saving the planet?

Corporate social responsibility, anti-corruption measures, environmental issues, and questions of sustainability and transparency (in trade, export and project finance, for example) are all very central to the activities of NGOs.

The fair-trade movement, which seeks to direct a larger proportion of export revenues to the producers of goods in developing markets—as opposed to wholesalers and other intermediaries—is also gaining increasing support and becoming a characteristic of the global business environment.

Some argue that the efforts of NGOs—active in influencing the funding of large infrastructure projects based on the monitoring of local and environmental impacts, as well as advocating and promoting standards in the extractive industries—have the net effect of reducing competitiveness.

Others contend that nothing less than the long-term health of the planet is at stake.

At any rate, those who lead in these areas become market makers in new lines of business such as “green” products.

Environmental issues, from the all-encompassing climate change situation, to specific considerations about the environmental impact of long-range road transport, are at the core of political dialogue.

Sustainability has taken centre stage

These issues are also increasingly at the centre of calculations related to business and economics. Sustainability is a factor or requirement in every major endeavor.

The development of markets for trading carbon emissions represents a creative mix of NGO green-friendly efforts driven through mechanics and disciplines that closely mirror those present in leading stock-exchanges and securities markets around the world.

Carbon markets enable countries that generate high emissions to “purchase” carbon credits from nations that are low emitters, effectively imposing an economic cost on polluters and creating a windfall benefit for those whose emissions are below agreed levels.

Sophisticated trading and financing models have been developed (and continue to evolve) around carbon credits.

And these mechanisms are shifting from macro, country-to-country models down to the level of individual farms, businesses and consumers.

Several international institutions, including the European Bank for Reconstruction and Development (EBRD), are active supporters of carbon credit programs and investment vehicles, as indicated on the EBRD website.

Increasing customer demands for “greener” supply chains

Exercising stewardship in terms of sourcing practices to ensure the “greening” of supply chains (i.e. the design and management of eco-friendly supply chains) is now a matter of good business practice, and is increasingly an effective brand differentiator in the market, as consumer concerns over issues of sustainability and environment continue to evolve.

The global sourcing of wood products, for example, with increasing activity from China, Russia and other sources, is increasingly influenced by concerns related to the source of the woods used. This includes clear-cutting practices, the use of endangered woods, and increased interest in the use of reclaimed timber.

Automotive developments in hybrid technologies, the gradual shift to ethanol-based fuels and other crop-based inputs to chemical processes provide another illustration of the increasing demand for sustainable solutions and product offerings.

In many instances, NGOs have succeeded in raising the profile of important issues to the highest levels of government, and to the senior levels within multilateral institutions.

Many corporations and multinationals now have codes of ethical conduct and statements about CSR. Additionally, banks are acknowledging and adopting guidelines, such as the Equator Principles, meant to ensure that social and environmental issues are considered in assessing project finance.

Issues that were once considered “fringe” now drive global agendas and shape policy.

The international attempts to address global warming through the Kyoto Protocol are examples of the growing profile of NGO-promoted issues.

The specifics around corporate social responsibility, such as proactive attempts to address corrupt practices and promote ethical business standards, illustrate the scope and impact of NGOs. They also demonstrate the increasing political effectiveness and leverage of these organizations and their global networks.

What “fringe” issues do you see becoming mainstream in global business?

The post One time “Fringe” NGO’s have become a vital part of the global business environment appeared first on Trade Ready.