NZ gets top ranking on sustainable trade index

It’s the third consecutive time Aotearoa has ranked number one, and the sixth edition of the index. Which is great, but what does it mean?

Global trade has increased almost five times in dollar value (three times inflation-adjusted) in the last 20 years. This globalisation has driven huge changes in production patterns, labour force movement, transport, and consumption patterns. There's little doubt it's caused environmental and social damage. Trade done right can also be a force for good. It can allow efficiencies to emerge, support co-operation between nations, and lift people out of poverty. That's why it's important to highlight where it's done well.

The report looks at 72 indicators across three pillars - economic, societal, and environmental.

𝗦𝗼 𝘄𝗵𝗮𝘁 𝗱𝗼𝗲𝘀 𝘁𝗵𝗶𝘀 𝗿𝗮𝗻𝗸𝗶𝗻𝗴 𝘁𝗲𝗹𝗹 𝘂𝘀?

The economic pillar reads like a list of metrics for economic stability and open trade policies. It's broad ranging from technology infrastructure to a stable consumer price index. New Zealand comes in at seventh on the list. Given we are a nation that relies on trade, has taken a liberal approach to trade policy, has settings that support a high ease of doing business, and has a stable economy, the ranking seems low. The report doesn't release the results for each metric.

The societal pillar looks mostly at the health and well-being of the country's inhabitants - such as labour standards, life expectancy, and social mobility, with a few other metrics such as government response to human trafficking and modern slavery. New Zealand was second in 2023, this year we came first.

The environmental pillar is quite a range of metrics such as - levels of renewable energy, percentage of wastewater treated, and deforestation. We do worse than average when it comes to 'transfer emissions' - the exporting of products with high embodied emissions.

𝗪𝗵𝗮𝘁 𝗮𝗿𝗲 𝘁𝗵𝗲 𝘀𝗵𝗼𝗿𝘁𝗰𝗼𝗺𝗶𝗻𝗴𝘀 𝗼𝗳 𝘁𝗵𝗶𝘀 𝗶𝗻𝗱𝗲𝘅?

It covers North America, much of Asia, limited Latin America, no African countries, and no countries from continental Europe. Much of Europe's data would be held at the level of the EU and as a single market. This omission does overstate New Zealand’s position in the index. As an advanced, democratic, and wealthy nation, our comparator set should be similarly structured nations as a benchmark of success.

It's also not clear how the data sources are weighted. Are transfer emissions weighted as important as the percentage of wastewater treated? Some of these measures will have a greater weighting on the concept of sustainable trade than others.

Given the environmental overshoot of the earth's resources, all nations must live within planetary boundaries. For that reason I agree with the approach from the Climate Change Performance Index - the highest ranking to date is fourth to Denmark.

The index leaves the spaces at first, second, or third blank as they deem no countries perform well enough to warrant those places.

New Zealand ranks 34th.

Nick Swallow is a former New Zealand Trade and Enterprise (NZTE) Trade Commissioner to the UK and Ireland and has a Masters of Sustainability Leadership from the University of Cambridge, completing his dissertation on dairy farming in New Zealand. Nick is currently a director at KPMG working in sustainability, however the views expressed here are his own.