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Sustainable Value Chains: A Global Governance Challenge

Few countries are as closely integrated into the global economy as Germany, which benefits enormously from globalised value chains. Open markets, free trade, and global production offer opportunities not only for companies and people in industrialised countries, but also for developing countries and emerging economies. But only under one condition: global value chains must be sustainable as well as profitable.

Ensuring this is a corporate responsibility that confronts businesses that operate abroad with enormous challenges: poor working conditions, pollution, and environmental destruction, global warming, human rights violations, and corruption, to name just a few of these challenges. On the one hand, companies have an obligation towards their staff and their owners to secure and strengthen their international competitiveness. This is not always easy as they increasingly face competitors that not only enjoy lower energy and labour costs, but also operate under looser environmental and social standards. On the other hand, businesses must preserve the ethical principles of an “honourable merchant” when operating abroad if they want to realise a sustainable business model. Addressing these challenges requires continuous improvement in the management of global sustainability risks.

Politics also has a vital role to play in ensuring that global value chains create sustainable economic wealth. Rising environmental stress and global population growth require the global framework to adapt continuously. Trade agreements represent an opportunity to make trade and investment more sustainable. In sectoral initiatives like the Partnership for Sustainable Textiles, politics can join forces with business to tackle specific problems. A forceful global fight against corruption is also possible if states coordinate their actions effectively. The German government and German industry are working together on concepts for global protection of human rights. The implementation of the UN’s Sustainable Development Goals is a great opportunity to set a course for a more sustainable global economy.

In all these policy areas, BDI participates actively in shaping the future. We are convinced that globalisation and sustainability are not incompatible – if businesses increasingly master the challenges of sustainability management, and if politicians manage to create the right framework. Germany’s G20 Presidency in 2016/2017 represents a good opportunity. In the scope of the B20 process, BDI and its member organisations will work to make globalisation more sustainable and future-orientated.