The green industrial revolution

VIENNA - Manufacturing industries present society with a dilemma. A healthy manufacturing sector helps an economy to grow, thereby raising living standards - an especially important goal for developing countries. But, as factories try to meet ever-growing consumer demand, they deplete the world’s natural resources and pollute the environment. For some, the world now faces a stark choice between rising prosperity and a cleaner, more sustainable environment. In fact, with new technology and fresh thinking, policy makers can strike a durable balance between these competing interests.

In developed countries, consumers are increasingly recognizing that, while their material well-being may be higher than ever, their quality of life suffers if the environment is damaged. For poorer countries, such concerns are dismissed as a rich-world luxury. Industrial expansion is the best way to eradicate poverty, and must surely trump environmental concerns.

No government, rich or poor, can ignore the imperative to encourage economic growth. The manufacturing sector creates jobs, makes affordable products for cash-strapped consumers, produces vital tax revenue that can be used to support social goals, and brings in foreign currency in the form of export revenue. In short, a well-run manufacturing sector spreads wealth across society.

However, trying to satisfy the seemingly endless material demands of consumers at all levels of the economic pyramid has placed an unmanageable burden on the natural world. Resources are being consumed more quickly than the planet can replace them. The manufacturing sector is particularly voracious, devouring over half of all raw materials, around 30 percent of the world’s energy, and 20 percent of its water. In the process, it produces too much waste for our fragile ecosystems to absorb.

Now, public opinion is starting to turn against what is increasingly perceived as plunder on a global scale. Policy makers may not be able to compel citizens to ration their consumption. But governments can encourage manufacturers to change how they operate, so that they use fewer resources and eliminate unnecessary waste. Technological innovation and recyclable inputs can make a huge difference to the way the world produces and consumes. Like the dramatic changes once wrought by mass production, there is similar potential in the development and application of 3-D printing, biotechnology, nanotechnology, and other resource-efficient technologies. And management thinkers from the late C. K. Prahalad to Jaideep Prabhu have shown how industry can be reconfigured to produce high-quality products cheaply and cleanly.

Indeed, these technologies and management ideas amount to something of a new industrial revolution - though one that will be very different from the Industrial Revolution that made Great Britain the dominant world power in the nineteenth century and helped it build a global empire. The current transformation will be more democratic, spreading through global supply chains and modern communications to all countries that are integrated into the global economy. And it will be characterized by partnerships between government, the private sector, and civil society.

Our challenge, and our historic opportunity, is to recognize this potential and find ways for diverse groups to collaborate and realize it. A Green Industry Conference held recently in Guangzhou, China - following similar events in Manila in 2009 and Tokyo in 2011 - provides a template for this kind of broad cooperation. Delegates shared best practices, discussed ways to accelerate change in a range of sectors, and sought innovative solutions to old management problems.

No one need be left out of this revolution. Even countries with abundant natural resources do not have to fear the shift to a greener world. By adopting new economic models, their large but finite reserves will not be rendered useless; they will simply last longer. At the same time, countries facing shortages will gain greatly from being able to reduce their own resource needs.

Businesses, too, have been quick to adopt new practices. Many now routinely monitor and report on their environmental impact. Some are even starting to organize around new industrial concepts such as the “circular economy,” which focuses on reducing waste through multiple rounds of recycling.

This revolution may have been borne out of necessity; but, with ingenuity and cooperation, it will prove to be profitable, over the long run, for countries, manufacturers, and consumers worldwide.

Copyright: Project Syndicate, 2013.

*The author is director general of the United Nations Industrial Development Organization.

By Li Yong