International trade has long provided significant opportunities for economic diversification and development. However, global supply chains have also been associated with environmental degradation and human rights abuses. In response to the growing demand for more sustainable practices, countries worldwide are adopting mandatory sustainability-driven regulations. This new policy brief by TULIP Consulting and UNIDO explores the various costs associated with sustainability-driven regulations and identifies who bears these costs.
This policy brief categorizes the sustainability-driven regulation related costs into three main areas: compliance costs for businesses, costs for regulating countries’ trading partners, and costs associated with delaying implementation. For businesses, compliance costs are further divided into the need for changes in production methods and product design, and the costs of reporting and due diligence.
These costs are concerning for industrializing countries and small and medium sized enterprises due to resource constraints, underscoring the need for a more equitable distribution of the costs and benefits of sustainable trade.
Accordingly, this policy brief highlights mechanisms to support a fairer distribution of costs related to sustainability-driven regulations.
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