What is "The Trade Impact"?
The simplest questions often require the most complicated explanations. Should I purchase this product? Where does it come from? How and by whom was it made? What is it made of? Complete answers to these questions raise important lessons in the consequences of our actions.
The act of buying, whether it be consumer purchases or business sourcing and purchasing decisions, results in the direct and indirect support of a global value chain hidden far from sight - often behind a phone call, email or online purchase. These decisions, most often unknown to the decision-maker, have myriad direct and indirect consequences on the global marketplace and greater society.
This is The Trade Impact - the effect of international trade on global human rights. The Trade Impact may be positive or negative. Together we can optimize the positive impact.
Understanding The Trade Impact – The intersectionality of trade and human rights
The Trade Impact refers to the impact of international commerce on a broad set of human rights, including rights within the following five key categories:
1. Foundational Rights (freedom of conscience and self-determination; freedom from war and persecution; freedom from kidnap, murder, rape, forced labor)
2. Poverty and Standard of Living (access to food, water, housing, electricity; health and safety rights)
3. Gender and Tolerance (women’s rights; rights related to freedom from discrimination)
4. Labor (workers’ rights such as the right to safe working conditions)
5. Environmental (rights related to a safe, clean and healthy environment, such as those related to pollution of land, air and water)
Trade and human rights are closely related. The recognition of this relationship has modern roots dating back to the Atlantic Charter, a WWII-era Charter signed in the midst of war by US President Roosevelt and UK Prime Minister Churchill. This understanding has since been further promoted and supported by international organizations such as the World Trade Organization and United Nation entities.
For example, international trade is a primary driver in reducing global poverty and raising the standard of living. And of course, sourcing of raw materials, production of goods, and related transportation and distribution networks by nature result in at least some degradation of land, water and/or air. In fact, ample evidence exists supporting the intersectionality of trade and human rights within each of the aforementioned categories.
Given this connection between trade and human rights, and the notion that trade is the driving factor of all business, a human rights framework emphasizing the impact of international trade, while incorporating an interdisciplinary approach, may provide an unmatched guidepost within the promising yet chaotic world of social impact and stakeholder capitalism.
International trade as a guidepost within the promising world of social impact and stakeholder capitalism
Stakeholder capitalism is a corporate governance theory which seeks a balanced approach to profit and societal impact. Specifically, it provides that corporations should seek to provide value to all stakeholders, including investors, employees, consumers, and communities, rather than maintaining a primary focus on shareholder value.
Recent efforts to embrace stakeholder capitalism and work towards an accountable and transparent framework for corporate governance and social responsibility are commendable and important undertakings. The following developments are particularly notable:
On August 2019 the Business Roundtable issued a new Statement on the Purpose of a Corporation to guide corporate governance and corporate responsibility. The Statement emphasizes the need for corporations to consider the interests of all stakeholders including investors, employees, consumers, suppliers and broader communities.
Next, on December 2, 2019, the World Economic Forum published the “The Davos Manifesto 2020: The Universal Purpose of a Company in the Fourth Industrial Revolution.” The 2020 Manifesto provides, “The purpose of a company is to engage all its stakeholders in shared and sustained value creation.”
Finally, in September 2020, the Big Four accounting firms, in partnership with the World Economic Forum and the International Business Council, published a set of environmental, sustainability and governance reporting standards encouraging IBC members, made up of top multinational corporations, to adopt a core set of “Stakeholder Capitalism Metrics” and disclosures to track their contributions towards the UN’s Sustainable Development Goals on a consistent basis.
Much progress has been made with regards to human rights around the world, including the recent growth of our collective societal conscience, and the understanding that corporate goals should balance both profit and social impact. And yet, we can surely do better.
A close review of the state of human rights, particularly enabled by our connectedness, reveals much suffering and yet so much opportunity. There is much potential to help others in need - to have an impact on lives around the world. Let us work together to leverage our knowledge for good, with an emphasis on the quest for visible choices and an outcome of decision-making rooted in both reason and empathy.
Envision a transparent, socially conscious marketplace – for consumer and corporate decision-makers
Imagine you are on Amazon today, purchasing a notebook. Let's say you find three notebooks which are of your liking.
The likely choice is Notebook X at $5.00.
Next, imagine you had more information available. For instance, details on the labor practices at each factory where each particular notebook was produced:
The likely choice is Notebook Y or Z. (We are hoping for Z.)
This should be the future for consumer and corporate decision-makers - a heightened visibility to the consequences of our choices.
Of course, achieving such visibility will require creativity, resources and commitment to overcome substantial obstacles. Further, the choices are often nuanced and complicated - unable to be summed up properly in a few sentences. For example, what one may consider abhorrent labor conditions may in fact be the best choice available in a particular locality and perhaps provide life-saving economic support - thereby maintaining one or more household’s nourishment.
The Trade Impact Foundation is driven by the belief that through a complex and meaningful understanding of impactful trade, international trade with a positive human rights footprint, we can facilitate greater peace and societal progress.
We welcome you to join us in our mission towards facilitating impactful trade through research, collaboration and outreach efforts. We look forward to hearing your unique perspective and partnering with you as we work towards peace and progress.
This blog post is adapted from The Trade Impact Foundation inaugural white paper, The Corporate Impact.