MSMEs told: ramp up green compliance as circularity leads mega trade trends

Manufacturers, exporters and micro, small and medium enterprises (MSMEs) should start scaling up their green operations as climate change, circularity, and sustainability head the mega trends that increasingly impact trade worldwide, according to an industry expert.

Senen Perlada, executive vice president and chief operations officer of the Philippine Exporters Confederation, Inc. (PHILEXPORT), called on the government to help local businesses comply with environmental, social and governance (ESG) guidelines and the circular economy principle.

He said this is important as major markets, especially the European Union, have been increasingly implementing import policies requiring green compliance.

Compliance with green operations and adherence to the Sustainable Development Goals (SDG) will generate business opportunities for Philippine businesses, Perlada continued. He noted a study by the Boston Consulting Group showing that 20% of consumers are willing to pay a 10% premium on companies that practice ESG. Further, compliant companies will enjoy higher profitability, reduced regulatory threat, and the potential to attract better financing.

Perlada issued this call in a speech on November 22 at a Stratbase ADR Institute trade conference, where he enumerated some of the mega trends and concepts that local exporters must embrace in order to be future-ready to compete in global markets.

One of these trends is the global adoption of circular business models, a direction the Philippines must follow as it can create economic, social and environmental opportunities for companies prepared for this shift. In a circular economy, there is market preference for recycled and renewable materials so as to maximize product lifespans and promote recycling.

“This creates a market that prefers secondary materials and only turns to non-renewable, primary materials when no alternatives are available; in turn, prompting the widespread normalization of circular models,” said Perlada.

Another significant trend is the rise of a circular bioeconomy, an economic model that is powered by nature and that contributes to efforts to mitigate climate change while also providing materials to satisfy society’s needs for food, feed products, and energy.

Perlada said that in a circular bioeconomy, “biological resources are recovered and reused wherever possible” and safely returned to nature once they can no longer be reintroduced into the economy.

A third major trend is the development of goods and services designed to meet the needs of the communities while leaving no one behind. Perlada said that in the coming years, businesses, governments and multistakeholder platforms are going to heighten collaboration on the protection of human rights throughout global supply chains and the eradication of forced and child labor, modern slavery, and human trafficking.

Another notable future development is the exponential improvement of material collection and recovery. This will mean the consistent enforcement of laws against pollution and environmental waste and the imposition of taxes on landfills, effectively strengthening the case for reusing, recycling and composting. Perlada said solutions such as take-back schemes and reverse logistics will become business as usual, and the collection of used products, materials and packaging, and their reintroduction into the manufacturing cycle, will be strongly pursued.

At the same time, ending the system of having waste flow into the environment is another significant trend. Waste systems will be transformed and cross-sector collaboration, investment and standardization will drive enhanced stewardship of materials and products such as plastics, electronics, textiles, construction materials, automotive components and household goods at different stages of their life cycle and value chain, said Perlada.

The sixth leading trend is the embracing among consumers of consumption that is circular, regenerative and socially responsible.

“Consumer behavior shifts toward circular models of consumption as awareness grows of increasing resource scarcity and the environmental impacts of waste. Circular and sharing models become more available, affordable, practical and desirable across a broad range of products and services. Consumers come to value access more than ownership and increasingly accept repaired, refurbished and second-hand products,” Perlada forecasts.

In his talk, he also stressed the need for local MSMEs to start preparing for the requirements of Republic Act No. 11898 or the Extended Producer Responsibility. Moreover, domestic businesses need to be aware of the growing momentum for carbon labeling in the country’s major export markets as carbon labels have begun to appear on food and consumer packaged goods.

“These global developments are a reminder of why sustainable trade is more critical than ever before, and in line with that, our national effort to develop and promote exports that balances economic gains with the need to strengthen social, and environmental stewardship,” Perlada said.

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