ESG criteria (environment, social, and governance) have gained global prominence as a set of guidelines for sustainable and socially responsible corporate practices. Despite its undeniable importance in promoting a more sustainable future, the debate is growing about how these criteria can be used as a justification for protectionist measures by countries or economic blocs.
ESG emerged as a set of standards aimed at assessing business operations from a sustainable and ethical perspective. Companies that adopt ESG practices commit to minimizing environmental impacts, promoting social equality, and maintaining transparent governance. These criteria have been widely adopted by investors, governments, and financial institutions as a benchmark for assessing long-term risks and performance.
However, as ESG standards become more established, concerns arise about their uneven application between countries, especially between developed and emerging economies. The lack of uniformity in criteria can create disguised trade barriers, resulting in a competitive disadvantage for companies from countries with greater capacity to adapt to ESG requirements.
To give an idea, a report from the World Trade Organization (WTO) revealed an increase in the growth of protectionist measures among G20 countries. This year, the value of trade covered by import restrictions in force was estimated at approximately US$ 2 trillion, representing 9.4% of global imports. Furthermore, the restrictions covered an estimated value of US$ 230.8 billion in merchandise exports in one year, representing 0.9% of global exports.
Countries can use ESG environmental criteria to justify the imposition of trade barriers, such as tariffs and import restrictions, citing environmental concerns. A recent example was the case of Carrefour's headquarters, which cited environmental issues to ban the import of Mercosur meat to its supermarkets in France. The use of environmental criteria may have been an excuse for larger economic issues occurring in France, mainly concerning local farmers who require significant subsidies to keep their respective businesses running. So, the question remains: is it an environmental issue or economic protectionism?
Developing countries often face difficulties in meeting ESG standards imposed by more advanced economies (this does not mean that these criteria are not essential for humanity). This could limit access to global markets if these countries do not make the necessary investments to meet the required environmental criteria. Raising the bar on ESG issues is very important, and developing countries should take this seriously.
Meanwhile, the use of environmental criteria as an excuse not to trade occurs as an economic and political tool to safeguard local production, especially when it cannot sustain itself alone but depends on high subsidies to survive. What demonstrates the existence of an artificial and unhealthy environment of economic niches in developed countries. Furthermore, if ESG criteria are perceived as tools of protectionism, their legitimacy may be questioned. This can further discourage the adoption of long-term sustainable practices.
To prevent the misuse of ESG as a protectionist tool, it is crucial to develop harmonized global standards. Institutions such as the World Trade Organization and the International Integrated Reporting Council can play a central role in creating universal criteria that consider the economic realities of different countries.
Although ESG criteria represent a significant advance in the pursuit of more sustainable and responsible development (or rather, the very survival of the planet), their use as a protectionist tool poses risks to global trade and the credibility of ESG practices. By addressing these challenges through harmonized global standards and promoting international dialogues, it is possible to mitigate negative impacts and ensure that ESG continues to be a positive force for the planet's future.
