• M74 Editorial Team

Going Green Through Globalization

By Matt Murray

The globalization of commerce has manifold benefits:

  • Greater profit margins for companies, due to access to international consumers

  • Optimization of business activities via cost-effective labor and materials

  • More efficient supply chains

  • Stronger asset utilization

  • The ability to recruit from a larger talent pool

One of the greatest yet discrete benefits of globalization is that it can help combat climate change. From the dissemination of green innovations and policies, to the establishment of renewable energy plants, an interconnected world is in a much better position to maintain delicate ecological balances. This is especially true in the midst of COVID-19, where the free flow of knowledge, technology, and supplies between nations can mitigate the transmission and impact of the virus.

New goods and services can be spread from nation to nation thanks to globalized markets. In countries with strict environmental protections, eco-friendly offerings are developed as a result. Companies in the renewable energy industry, for example, when generating their own products, often source technologies from firms around the globe, as developing everything themselves would be too costly and time consuming. The technologies available in the European market may be better than what’s available in the American market, for instance, as a result of stricter environmental regulations.

Globalization provides consumers with greater transparency regarding the products that they buy, as they can see how raw materials are sourced and used in the manufacturing process. Available information influences spending habits, and consumers nowadays tend to be sensitive to social concerns. Companies that do not act in socially responsible ways may lose their customers to competitors, and even face outright boycotts. This has happened to many fast fashion labels, which have come under fire for their extreme production quotas and working with negligent factories. As a result of such practices, in 2013, a garment factory with ties to many major brands in Rana Plaza (Dhaka, Bangladesh) collapsed, resulting in 1,134 deaths. Another example of malpractice that came to light in recent years was H&M’s fabrics being sourced from farmers that used toxic fertilizers and pesticides to meet their crop yields. As a result of this, and their lack of employee safety protocols, consumers rallied against H&M, and called for boycotts of their products.

In order to engage in international commerce, some countries require that potential partner nations weave environmental clauses into their joint agreements, such is the case with the USMCA between the United States (US), Mexico, and Canada. Such requirements force countries with lenient environmental regulations to tighten them, in order to benefit from trade with more responsibly-regulated countries. Accordingly, in this context, manufacturers can be compelled to cut down on their pollution outputs, and national markets may move away from fossil fuels and towards renewable energies (such as wind or solar). These provisions, however, can vary in their enforcement, and, in some cases, may merely be treated as suggestions.

The “carbon market” may be an effective tool for governments to minimize their country’s carbon footprint by setting limits on carbon emissions produced by businesses. Via a carbon market, a government gives “carbon credits” (totaling the maximum allowable carbon emissions of all firms) to businesses, which permits them to emit an allotted amount of carbon. Businesses that pollute heavily must either find ways to minimize their emissions, or buy additional carbon credits from more efficient, carbon-neutral firms. However, firms may just outsource their carbon-heavy processes, so that they appear to be minimizing emissions, while really just hiding their emissions elsewhere.

Since 2017, the US has leaned into deglobalization. Most notably, the Trump administration pulled out of the Paris Agreement (a 2016 agreement between almost every nation to combat climate change and adapt to it), claiming it was unfair to US workers and companies. Trump has also touted the use of fossil fuels over renewable energy, peeling back Obama-era policies that were established to gradually move the country away from oil and coal and toward more eco-friendly alternatives.

The US is not the only place facing anti-globalization sentiment. President Jair Bolsonaro of Brazil has also promoted nationalism. He claims that, while the economics of globalization could be good for Brazil, the “ideologies of globalism” infringe on the “Brazilian way of life.” For instance, Bolsonaro has been outspoken against foreign criticism of Brazil’s industrialization of the Amazon rainforest. “You have to understand that the Amazon is Brazil’s, not yours,” he told European journalists back in 2019. If, without globalization, countries regress in their fights against climate change (like the US and Brazil have), then deglobalization could be environmentally disastrous.

Aside from the harm that the reversal of environmental protections can cause, if countries deglobalize, then they will have to produce more goods domestically. This can expedite certain countries’ consumption of scarce natural resources, and further increase their carbon emissions. Countries that participate in free trade benefit from more efficient resource allocation, as firms within a specific country can focus on producing whatever provides that country with a comparative advantage.

Continuing the trend of deglobalization can (and more than likely will) wreak havoc on the planet and its delicate ecosystems, which are already in a dire state. When nations adopt isolationist mindsets, progress is slowed. Ideas and innovations propagate less globally. Environmental protections relax. Countries exhaust their resources, creating greater per-capita pollution in the process; and famine and disease are exacerbated as food, medicine, and accurate information become more difficult to acquire. In short, interconnected economies and societies are key to meeting today's environmental challengesbecause the environment is shared by us all.

Matt Murray is an intern at M74 and a student of International Business at Temple University in Philadelphia, Pennsylvania, as well as a Technical Support Specialist. He plans to work in the foreign trade sector upon graduation.

The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.