Helmut Forstner
The most commonly accepted definitions or views of sustainable development leave at least two facts, relating to industry, beyond a doubt. First, industrial production, more precisely the manufacturing side, is one source contributing to environmental problems, but one that appears to be decreasing in relative size and significance. Second, industry at the same time represents a major and increasingly important economic and technological component of the envisaged solution to the sustainability problem at large.
The latter observation builds mainly on two facts and one projection: .
Thus, industry plays a prominent role in sustainable development, and this role is usually reflected in attempts at quantitative assessment of the process. This holds also for the driving force-state-response (DSR) framework of indicators of sustainable development which is taken here as the major point of reference, as well as a source of inspiration. Generally, it appears that industry contributes to each one of the four substantive areas of that framework - social, economic, environmental and institutional - so that an 'industry component' can be identified in many of the indicators from these areas. To summarize the role of industry from the main perspectives of sustainable development, the industrialization process is a driving force behind much of modernization in the social sphere, growth and structural change in the economic sphere and degradation, as well as remedy in the environmental sphere. The following discussion expands on industry issues of sustainable development along the same lines.
There is little doubt that in large portions of the manufacturing industry the replacement of the old 'Fordist' model of mass production by alternative approaches has had social repercussions. New forms of high-volume industrial production have led to a decline in the effective demand for labour in a number of industries. However, at global levels, industry remains a major factor in employment generation mainly for three reasons: (a) depending on the stage of industrial development, the direct contribution of manufacturing to employment growth is largely positive, particularly in developing countries; (b) through its close linkages both with agriculture and with services, the manufacturing sector indirectly contributes to employment generation in the other two sectors; (c) positive employment effects with high local significance stem from the growth of small and medium scale industrial enterprises, as well as from informal manufacturing activities.
Aside from its role in employment generation - and consequently in income generation and the alleviation of poverty - industry, in the realm of social development, is considered the most important agent of modernization. External social effects of industrialization have to do with the mode of production generally, the role of science and technology in society and with education and the formation of a skilled labour force.
Several of the social aspects of sustainability could be measured in an industry-specific way by detailing some of the indicators of the DSR framework. Three examples can illustrate this point. First, among the driving-force variables the economy-wide rate of unemployment could usefully be supplemented, e.g. by a measure of industry's employment contribution like the share of manufacturing employment in the total labour force. Second, industry versions of gender-related 'state' indicators would be the ratio of average female to male wages in manufacturing and the corresponding female-male ratio of industrial employment. Third, the socially relevant response indicators could be proxy measures of industry's expenditure on human-capital formation and on worker health and safety.
The significance of economic growth for sustainability is undisputed under any view of the concept. Likewise, the role of industry as an indispensable component in the growth process is a proven fact of economic life. The importance of industry goes beyond its direct contribution to the increase in output and includes its indirect growth effects, which can be traced to linkages with agriculture and services. Finally, a whole new set of economic growth models (labelled as models of endogenous growth) assigns a pivotal role to the manufacturing industries. The emphasis on the significance of knowledge, which is 'produced' endogenously and yields increasing returns in the production of goods, underlines the key position of manufacturing as the sector where such processes are typically at work.
More specifically, industry is central to the production of man-made capital and the formation of human capital. As a consequence, global sustain ability depends on manufacturing activities where technology is continually being improved and, in the spirit of endogenous-growth theory, significant contributions to increases in the 'stock' of human capital are being made. A number of quantitative indicators are geared to make approximate measurements of some of the above economic elements in sustainable development.
Among the economic indicators of the driving-force type, three are of particular interest from the point of view of industry. First, economy-wide net investment contains industrial-capital formation which is an important element in the accumulation of man-made capital. Second, the degree of openness of an economy (and thus of its integration in the international economy) as measured by the ratio of trade volume over GDP, is particularly relevant to the manufacturing sector and its potential for export growth. Third, capital-goods imports (which are part of trade in manufacturing) provide some indication of a country's potential to build the man-made-capital basis for sustainability.
The so-called state indicators are even more closely related to industrial issues. Here the central variable appears to be the share of GDP due to value added in manufacturing which clearly serves a dual function as an indicator of sustainable development. On the one hand, this share is a structural measure of industrial advancement which (for the reasons stated previously) is crucial from a sustainability point of view: The share indicates the extent to which an economy has succeeded in building the industrial production basis for sustainable development. On the other hand, the same share can be interpreted as an environmental indicator of the structural type. Here the reading contains both a positive and a negative element. By comparing an agriculture oriented economy, structural change towards higher manufacturing shares in production usually indicates a reduced drain on natural resources. However, depending on the sub-sectoral structure of manufacturing, higher shares of GDP could also mean the relatively large consumption of energy and mineral resources as well as high levels of pollution. Arguments analogous to those stated for the productive sector hold for the external sector, represented by the share of manufactured goods in total merchandise exports.
Environmental considerations relating to sustainable industrial development cover, comparatively, the broadest range of issues. They can be grouped under the two headings of natural-resource consumption and sources of pollution, both defined in the most general terms possible. Although, from a sustainability point of view, it is the nature of final consumption which eventually determines both depletion of natural resources and the environmental load of pollution, industry plays the part of a mediator by way of transforming resources into final goods through production processes. Both the volume of production and certain properties of the underlying transformation processes are important determinants of environmental sustainability. The latter of these two determinants, circumscribed by production technology, represents industry's response to environmental demands for both conservation of natural resources and the reduction of pollution. However, such a responsive action by industry requires incentives which various government policy measures figure prominently.
Environment-oriented indicators of industrial sustainability are of three broad types. The first two types are about measuring the environmental impact of industrial production, and actually represent two different components of impact measures. One set of variables is structural in nature. Depending on the sub-sectoral composition of the manufacturing sector, its 'contribution' to environmental problems will vary among countries and over time. These variables are mainly subject to economic determinants and describe much of the 'transmission' of economic developments to the environmental sphere. A second set of indicators is technological, measuring typical levels of resource use or pollution 'output' in the various industrial sub-sectors. Finally, a third type of indicators reflects policy or technology response particularly relevant to industry.
The environmental indicators of the first 'structural' type include driving-force variables such as the shares of natural-resource intensive industries, energy- intensive industries, and pollution-intensive industries in manufacturing production. Although there may be problems with defining such industries in a general fashion -and, as a consequence, measurement may be less precise than expected - such structural variables are eminently important for an assessment of the links between economic processes and their environmental consequences. At the country level, the sub-sectoral structure of the manufacturing industry is determined by economic factors which shape the international location of industrial productive capacities. Knowledge about these forces and the structural patterns they produce is crucial for assessing the environmental consequences of industrial growth for a given country or region.
Another element in such assessment is essentially technological and can be quantified by means of industry-specific indicators of a technical/technological nature. Examples of such indicators are numerous. In the DSR framework the industrial components of 'driving force' indicators such as energy and water consumption, emissions of greenhouse gases, sulphur oxides and nitrogen oxides, the discharge of critical pollutants into water, as well as generation of industrial waste (including that of a hazardous nature) illustrate the approach. A particular advantage of such industry specific-indicators arises from the possibility of fine tuning the assessment of environmental impact by taking into account industry-specific, as well as technology-specific details in the measurement.
Finally, industry-relevant indicators of the response type are found in variables that either reflect government policy, or industry response to such policy, or other incentives. Examples for the first group are indications of the existence of sustainable industrial development strategies or of more specific environmental policy measures with an industrial focus. The second group is represented by the industry component in environmental protection expenditure and environmentally motivated expenditure in industrial research and development.
In conclusion, the DSR framework of indicators of sustainable development reflects to a considerable extent the role of industry in sustainability. A number of indicators included in that framework directly represent industrial aspects whereas others contain industrial components that invite the construction of industry- specific sub-indicators. Thus, the quantitative monitoring of developments that determine sustainability of industry is not merely a theoretical possibility, but a practical option based on data that are already available or expected to become available in the not-too-distant future.