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September 22, 2022

September 29, 2022

Greening HMRC’s customs system: sustainable procurement, supply chains and data

Implementing more sustainable trading and supply chains has become a key priority for modern businesses and governments. And new policies like Germany’s Supply Chain Act have begun to formalise legal requirements for international trading actors. But little work has been done to-date to develop government customs and documentation systems that properly capture, record and monitor this data. This new trend, known as ‘green customs’, presents a major opportunity for the UK Government as it scopes out a vision for a new UK Single Trade Window. In the second article of our Single Trade Window blog series, we take a look at how the UK could make this a reality.

The World Customs Organisation (WCO) Green Customs Global Conference concluded that in the future the role of customs in pursuing environmental and trade policies will be paramount. 

This is despite the nascency of green customs: the 2022 Wise Persons Group’s remark that while green customs has clear future importance to the sector, there is a lack of existing guidance or best practices  on implementing this approach. Still, the WCO, the European Union and the UK Government have all committed to transforming the trade supply chain with green customs as part of their sustainability strategies. 

PUBLIC’s extensive work on sustainability and procurement yields inspiration for how this up-and-coming major policy field will play out in practice. Below, we outline initial steps in staking out the green customs sector. All these steps would enable the implementation of green customs by allowing sustainable goods and services to be traded in a sustainable way.

‘What’ and ‘how’: 3 pathways to sustainable international trade

A first step to green customs is better understanding and measuring what we trade - ensuring we trade more sustainable goods, products and services. In the vision of a new UK Single Trade Window, this would be a single view of the sustainability credentials of what is being traded, across the entire supply chain. This would be underpinned by a common classification and environmental ‘ecolabeling’ system, which would allow authorities to understand and report the sustainability of products. However, there are currently multiple different standards and product 'ecolabels' between different geographical areas, sectors, and even products and services categories. These standards and 'ecolabels' are hardly transferable from one jurisdiction to another, imposing invisible barriers on green imports and exports. 

Ecolabels and product certifications can also create barriers for SMEs, and can often be used inappropriately. Policymakers should consider designing appropriate alternative ways they can meet sustainability requirements without necessarily being certified with an ecolabel. By doing so, governments will avoid creating unnecessary compliance barriers for SME-traded products and services, setting the foundation of a truly inclusive green customs policy.

In addition, we suggest building on the recently adopted EU Sustainable Product Regulation proposal to enable tracking of sustainable goods and services across the entire supply chain. It is also worth considering solutions to technical difficulties relating to data access, quality and interoperability. 

Similarly, understanding and measuring how we trade - trading in a sustainable way -  is key to making green customs a reality. This can start with HMRC building sustainability profiles for relevant trading stakeholders (in the same way that they could for products, as above). These stakeholders may include traders, including importers and exporters, and intermediary stakeholders such as logistics providers, insurance companies, and legal advisors. The considerations in these profiles could involve sustainability compliance, energy efficiency, health and safety matters, transparency, and more.

Looking ahead, integrating the above into a centralised ‘green registration system’  and embedding it into the UK Single Trade Window is the key to reaching sustainability goals in international trade. The green registration system will be a one-stop repository to submit and access all data relating to sustainable trading. The system needs to be simple, adaptable to up-to-date sustainable requirements, and user-friendly for all relevant stakeholders. 

Beyond customs declaration processes at the border, it is important to explore how we can enable sustainable trading throughout the whole supply chain, leveraging new technologies in sustainable chain tracking and visibility. This would require future technical discovery through a sustainable lens into supply chain data and service design work. Eventually, green customs processes need to be designed to best meet stakeholder needs.

Learning lessons from the sustainable procurement movement

A promising potential entry point for the UK Government when designing a green customs approach is to study how UK authorities are developing technical approaches to sustainable public procurement. There are close overlaps between sustainable procurement and green customs, such as the common usage of ecolabels, the existence of sustainability standards, and the presence of similar challenges. In addition, government procurement is the first step to introducing technology useful to building green customs infrastructure. 

Hence, drawing on our experience in sustainable procurement, we recommend that HMRC, DIT, DCMS, and FCDO take the following steps to introduce green customs:

  • Develop a concept of ‘sustainability’ in customs that covers environmental, social and economic objectives for trading actors;
  • Develop common data standards for capturing sustainability data across these dimensions of sustainability - via an Open Sustainability Data Standard;
  • Develop a clear and standardised customs ecolabel approach for different product categories, building from existing classification systems, and making appropriate provisions for interoperability with international systems;
  • Pilot technical approaches to a centralised ‘green registration’ system for trading entities, built into a ‘organisation profile’ for trading actors and businesses;
  • Pilot technical approaches to a centralised supply chain tracking system for the data access, sharing, and visualisation of trade goods and services throughout the whole lifecycle of  supply chains, including origin;
  • Conduct a discovery to identify how UK authorities can use sustainability data from the Single Trade Window to inform broader decision-making and policy across the UK’s Net Zero and economic sustainability efforts;
  • Work to foster a standardised green customs approach through the creation of a single toolkit and set of common processes.

These initial steps will open room for government departments such as HMRC to develop further regulatory frameworks, establish supervision, and provide service delivery procedures as it begins the transition to the full implementation of green customs. 

Finally, the collaboration between government bodies and private businesses is key to successfully implement green customs in trade. For example, HMRC could establish a body similar to the Council for Sustainable Business under DEFRA. Such a body would help businesses and other customs bodies with sustainable procurement strategies for digital trade whilst providing guidance and tools assisting them throughout the procurement process. 

We believe setting out on the three pathways to green customs and accompanying execution with the steps outlined above would greatly assist the green customs transition.

Get in touch 

PUBLIC works at the intersection of technology and the biggest policy programmes. With digital trade becoming one of the UK's key technology frontiers, our work has never been more relevant. If you are working on policy and innovation for digital trade, green customs, or sustainable procurement, we’d love to hear from you. Get in touch with Zixuan (zixuan@public.io), Leyre (leyre@public.io), and Johnny (johnny@public.io) to see how we can help. 

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Authors

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Zixuan Fu

Associate

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Johnny Hugill

Lead, Procurement & Business Systems

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