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E/CN.17/1998/4 |
Economic and Social Council
Distr. GENERAL
20 April-1 May 1998
ORIGINAL: ENGLISH
Economic and Social Council
Commission on Sustainable Development
Sixth session
20 April-1 May 1998
Industry and sustainable development *
(* The present report was prepared by the Department of Economic and Social
Affairs of the United Nations Secretariat in accordance with arrangements
agreed to by the Inter-agency Committee on Sustainable Development (IACSD).
It is based on contributions from the International Labour Organization, the
United Nations Environment Programme and the United Nations Industrial
Development Organization, with comments provided by members of IACSD. More
detailed information is contained in addendums 1, 2 and 3 to the report.)
Report of the Secretary-General
Contents
Paragraphs Page
I. Introduction . . . . . . . . . . . . . . . . . . 1-3 2
II. Industry and economic development. . . . . . . . 4-23 2
A. Role of industry in development strategies . 4-10 2
B. Economic policy challenges for government
and industry . . . . . . . . . . . . . . . . 11-18 3
C. Economic policy challenges for the
international community. . . . . . . . . . . 19-23 4
III. Industry and social development. . . . . . . . . 24-42 5
A. Role of industry in social progress . . . . 24-31 5
B. Social policy challenges for government
and industry. . . . . . . . . . . . . . . . 32-38 7
C. Social policy challenges for the
international community . . . . . . . . . . 39-42 8
IV. Industry and environmental protection. . . . . . 43-66 8
A. Impact of industry on the environment . . . 43-45 8
B. Environmental policy challenges for
government and industry . . . . . . . . . . 46-58 9
C. Environmental policy challenges for the
international community . . . . . . . . . . 59-66 11
I. Introduction
1. Industry and its impact on economic and social
development and the environment has been at the centre of
the debate on sustainable development since the term
"sustainable development" was brought into common use
by the Brundtland Commission in 1987. There is now a
consensus among policy makers that in order to achieve
sustainable development, Governments and non-state actors
need to make greater efforts to integrate economic, social
and environmental goals into industrial policy and decision-making.
2. Section II will describe industry's role in promoting
economic growth and the structural transformation of
economies. Section III will then show how social
development is affected by industry, in particular through
its impact on employment generation and poverty
alleviation. Finally, Section IV will discuss the impact of
industrial activities on the environment and the policy
challenges facing Governments, industry and civil society.
3. It is hoped that focusing on the relationship between
industry and sustainable development will add value to the
outcome of previous sessions of the Commission for
Sustainable Development in various ways. First, many
issues previously discussed under the headings of a variety
of chapters of Agenda 21 will be addressed with a greater
emphasis on industry than before, including such sub-sectors
as iron and steel, pulp and paper, cement and
chemicals. Second, some complementarities and conflicts
between economic, social and environmental goals of
sustainable development will be revisited. Third, the main
national and international policy challenges with respect
to industry as a result of recent international events, such
as the special session of the General Assembly to review
the implementation of Agenda 21 (1997), the World
Summit for Social Development (1995), the Fourth World
Conference on Women (1995) and the completion of the
Uruguay Round of multilateral trade negotiations (1994)
will be addressed. Fourth, the effectiveness of a number of
recent national and international policy changes in
promoting sustainable development will be assessed. Fifth,
the involvement of industry in policy formulation and
standard setting, both at the national and international
levels, will be discussed. Finally, industry's support of
sustainable development goals through voluntary measures
will be assessed.
II. Industry and economic development
A. Role of industry in development strategies
4. Sustainable industrial policy is at the heart of
development strategies, and encompasses a variety of
interrelated economic, social and environmental objectives,
such as (a) the encouragement of an open, competitive
economy through the adoption of appropriate industrial and
trade policies, including the progressive liberalization of
international and regional trade, within a stable enabling
economic and social environment; (b) the creation of
productive employment, particularly long-term
employment, in order to provide sustained increases in
household income and social development; and (c)
protection of the natural environment through the efficient
use of renewable and non-renewable resources.
5. Industry plays a crucial role in technological
innovations and research and development activities that
are crucial for economic and social development of any
country. In the countries of the European Union (EU), for
example, industry provides more than 50 per cent of the
total national financial resources for research and
development activities, and its share in gross domestic
expenditures on those activities is more than 60 per cent.
Consequently, industry plays a major role in the
development and diffusion of environmentally friendly
technologies which constitute a key element of sustainable
development.
6. In response to the development strategies that
countries have pursued over the years and various other
changes (consumption patterns, technological progress,
international division of labour and the role of transnational
corporations (TNCs)), significant shifts in the structure and
location of industrial production have taken place. For the
world as a whole, when economic activity is grouped under
three broad sectors primary, industry and services 1/ the
most startling change has been the rapid growth in the
service sector, which increased its share in world gross
domestic product (GDP) from 53 per cent in 1980 to 63 per
cent in 1995. That growth has been at the expense of the
shares of both the primary and industrial sectors: the share
of the manufacturing sector in world GDP fell from 23 per
cent in 1980 to 21 per cent in 1995. Nevertheless, for many
developing countries the extractive industries still remain
important.
7. Important patterns can be observed when these overall
trends are disaggregated by major country groups. In
countries, where trends have been much stronger,
manufacturing value-added share of GDP has fallen to
below 20 per cent in many large and medium-sized
countries. On the other hand, in a large number of
developing countries manufacturing value-added shares of
GDP have been rising in the course of economic
development, and that trend can be expected to continue.
However, in many other developing countries where
manufacturing activity has reached a relatively high share
of GDP, growth in the service sector is exceeding that of
the manufacturing sector and has resulted in a fall in the
share of manufacturing value added as experienced by the
developed countries.
8. As a result of the more rapid rate of growth of
manufacturing in developing countries relative to the
developed countries, the share of developing countries in
world manufacturing value added has risen from 12.9 per
cent in 1980 to 20.9 per cent in 1995, and is expected to
reach about 25 per cent in 2000. 2/ Some of the changes in
regional shares of world GDP are due to the stimulus
provided by trade liberalization and the increasingly
globalized nature of world production. Nonetheless,
concerns in some quarters of a wholesale displacement of
manufacturing activity from developed to developing
countries may be exaggerated. In fact, the share of
manufactures imported from developing countries in the
apparent consumption of manufactures of the EU, Japan,
the United States of America and Canada was only 4.7 per
cent in 1994, having increased from 2.5 per cent in 1980. 3/
In some subsectors, of course, penetration of developed
country markets has been large. For example, imports from
developing countries in the apparent consumption of
apparel of the EU, Japan, the United States and Canada
increased from 13.7 per cent in 1980 to 35.3 per cent in
1994. 4/ It remains true that developing countries continue
to incur a deficit in their trade in manufactured goods with
their developed country trading partners.
9. Considerable environmental pressures (air and water
pollution, soil erosion and contamination, for example) are
associated with some of the branches of industry mentioned
above. The intensity of these environmental pressures can
be expected to increase with higher per capita levels of
production. For example, taking only the urban population
in the more industrialized developing countries, estimates
of per capita output and use in several industry branches,
such as iron and steel, cement, and use of industrial
chemicals, show that they are approaching levels similar
to those in developed countries. 5/ Thus, in the absence of
more rapid introduction of environmentally sound
technologies, populations in the urbanized areas of these
developing countries could potentially be exposed to levels
of industrial pollution as high as those to which citizens in
developed countries were exposed not so very long ago.
10. An improved understanding of these trends and their
projected evolution in the future can facilitate the design
and implementation of better policies to achieve sustainable
development by shedding light on some important
questions. Is the world economy, for example, becoming
more energy and material-intensive or less so? Are those
branches of industry traditionally associated with a wide
range of environmental and pollution problems (mining,
pulp and paper, cement, iron and steel, energy and
transport, chemical production and use) reducing their
environmental impacts through improved policies or
moving to countries with lower environmental standards?
What are the social costs of industrialization, such as
urbanization in developing countries? Can providers of
business services, such as the banking and insurance
industries, be an increasingly constructive force for change?
Examining some of the more salient trends in economic
structure in the past 15 years and assessing future trends
might provide a useful background against which to
consider such questions, and it will therefore be important
to continue work in this area.
B. Economic policy challenges for
government and industry
11. In order to achieve the objectives of sustainable
development, both national Governments and industry face
a number of major challenges. Governments need to
integrate economic, social and environmental concerns in
their policy development and to promote economic growth
and international competitiveness of industry through
macroeconomic and other policies. Furthermore, they need
to implement policies that promote domestic
entrepreneurship and help attract foreign direct investment
(FDI) and technologies. Moreover, it is crucial to develop
a national technology strategy. In addition, Governments
need to undertake capacity-building to be able to promote
partnerships with industry and enhance the dialogue with
all major groups in society. Governments in both developed
and developing countries need to continue their dialogue
with industry on creating an enabling policy environment
for industrial development.
12. In general, policy reforms for sustainable growth are
necessary to provide the framework within which industrial
development can take place in a manner that is conducive
to both social development and environmental protection.
For example, eco-efficient technologies can contribute to
industrial competitiveness (by reducing production costs,
and improving product quantity and quality), improve the
social aspects of the working environment and sometimes
generate employment. Improved human resources can also
contribute to improvements in productivity and provide the
skills needed for environmental management.
13. A major policy area is the maintenance of a stable
macroeconomic environment. In addition to
macroeconomic reforms, countries should also pay
attention to reforms at the meso-economic and
microeconomic levels in order to improve the overall or
systemic competitiveness of the economy. Although
microeconomic policy reforms would operate at the level
of the firm, meso-economic reforms would target the
environment (factor markets and physical and institutional
infrastructure) in which the firm operates. In order to
promote competitiveness and productivity increases, due
attention should be given to public investment in human
capital and technology.
14. For developing countries and economies in transition,
FDI is often an important source of capital, new
technologies, organization and management methods and
access to markets. Experience has shown that there are
strong complementarities between domestic and foreign
investment, including backward and forward linkages, that
can be promoted, such as through the establishment of joint
ventures and other arrangements. In order to attract and
retain FDI, a stable policy environment is necessary to
ensure confidence among both domestic entrepreneurs and
foreign investors in the economy. Developing countries
looking for technology inflows should also turn to FDI from
other developing countries since such technology transfers
may enable both parties to better exploit their regional
comparative advantages through regional cooperation.
Through technological progress, developing countries can
expand their opportunities for employment creation in
higher skill categories and support services. Firms in some
of the more advanced developing countries have gained
access to key technologies and other strategic assets by
undertaking direct investments in industrialized countries.
15. A well developed skill and knowledge base is
necessary for a successful domestic technology strategy and
the absorption of imported technologies. Domestic
technological capabilities should also be strengthened
through greater cooperation between industry and domestic
research and development activities. This may take the
form, for example, of government support to stimulate
productive links between the business and academic
communities. Moreover, by promoting environmentally
friendly technologies, economies can promote both
technological upgrading and environmental sustainability
at the same time.
16. In order to stimulate domestic private enterprise and
boost economy-wide competitiveness, policy reforms
should aim to create an enabling policy environment, inter
alia, through improvements in infrastructure and education,
encouragement of research and development, facilitation
of exports and liberalization of domestic markets.
Experience in a number of countries, such as the Republic
of Korea and Malaysia, show that when reforms are
undertaken to deregulate and liberalize markets, there are
potentially positive benefits in the form of innovation,
diffusion of technology and more efficient use of resources.
In many developing countries and countries in transition,
the development of small and medium-size enterprises
(SMEs) is often hampered by inadequate financing and lack
of industrial support services. Given the importance of the
informal sector in many developing countries, it is crucial
that policy reforms address this source of entrepreneurial
potential.
17. Another major challenge for Governments is to ensure
that their economic and industrial policies are gender
neutral. For example, privatization policies can affect the
economic status of women and men in different ways. In
many developing countries and in the economies in
transition, wage and employment conditions for women are
better in the public sector, where the gender gap in wages
is narrower than in the private sector. In addition, women
in the public sector enjoy more fringe benefits and better
access to social security than women employed elsewhere.
18. As active government involvement in production has
declined, the role of the private sector has expanded,
including in such areas as investment in human capital and
technology development. As a result, effective sustainable
development policies are increasingly the outcome of
dialogue and partnerships between government, business
and other major players in society, such as organizations
of employers and workers.
C. Economic policy challenges for the
international community
19. The challenges facing the international community
with regard to industrial and economic development are
daunting. There is an urgent need to deal with the issues
raised by globalization and the related problems of
international trade and investment. Although some
developing countries have been able to take advantage of
the opportunities created by the increased globalization of
markets, most developing countries, in particular the least
developed countries, have not been able to strengthen their
industries through expanded trade and increased FDI to
diversify their industries. Therefore, the international
community needs to focus its work on assisting developing
countries in strengthening their ability to face competition
in global markets to reap the benefits of the Uruguay Round
of multilateral trade negotiations. In addition, it will be
desirable to support regional trade arrangements and
discuss issues related to investment-related international
treaties.
20. The international community has an important role
to play in helping developing countries and economies in
transition to strengthen the ability of their manufacturing
sectors to face competition in global markets. In particular,
multilateral and bilateral assistance is needed to support the
design of strategies and policies to foster international
competitiveness, build domestic capacities and stimulate
the development of individual industrial activities. Such
international action to overcome the impediments to
industrial development in Africa, for example, is
exemplified by the United Nations System-wide Special
Initiative for Africa. In addition, the regional commissions
should be encouraged to review the various aspects of
sustainable industrial development, taking into account the
specific feature of the industrial development of their
member States and the region as a whole.
21. The Uruguay Round agreements and the
establishment of the World Trade Organization provide the
promise of an expansion of international trade within a
more open global environment. This development will
significantly affect the pace of industrialization in
developing countries, particularly countries that will derive
improved access to developed country markets. However,
most African and some Caribbean countries may suffer
initial losses with the erosion of existing preference
margins, and special consideration will need to be given to
those countries to ensure that they do not bear the burden
of adjustment to the new global trading system.
22. Within the global trading system, initiatives to extend
regional integration and associations among developing
countries, such as free trade areas or customs unions, can
contribute significantly to export growth. The Association
of Southeast Asian Nations (ASEAN) Free Trade Area and
the Asia Pacific Economic Cooperation are good examples
of successful regional economic arrangements in Asia. A
number of European economies in transition have
negotiated agreements with individual European countries
and the EU, and those arrangements will present them with
important opportunities to develop trade and investment
ties. However, in those transitional economies the creation
of a business climate that will encourage domestic
producers to meet foreign competition remains a major
challenge for policy makers.
23. Many developing countries rely on FDI as a source
of technology and capital, and there is therefore need for
the international community to promote a more conducive
and stable environment for flows of investment. By the
beginning of 1997, there were over 1,300 bilateral
investment agreements, of which a growing number were
treaties between developing countries. There has also been
a proliferation of regional and other initiatives that address
the establishment of international rules relating to foreign
investment, including, for example, the North American
Free Trade Agreement, the Energy Charter Treaty and the
work of the Asia-Pacific Economic Cooperation Council
on investment. In view of the proliferation of such
investment-related treaties and initiatives, the effort of the
Organisation for Economic Cooperation and Development
(OECD) to negotiate a multilateral agreement on
investment and a similar initiative by ASEAN are welcome.
III. Industry and social development
A. Role of industry in social progress
24. Social development goals are an integral part of the
sustainable development strategies discussed in Section II
above. The primary force driving economic development
has been industrialization, which in turn has the potential
for promoting, directly and indirectly, a variety of social
objectives, such as employment creation, poverty
alleviation, gender equality, and greater access to education
and health care. There is a mutually reinforcing relationship
between social and industrial development. In most cases,
countries that have not been successful in promoting
industrial development have not achieved sustained
progress towards attaining social goals. On the other hand,
countries that have not invested enough in social
development, such as education and health care, tend to
lack the basis for long-term competitiveness and
profitability of industry.
25. One of the major contributions of industry to social
development is the creation of productive employment. The
change in industrial structure, as discussed in Section II
above, had a significant impact on employment, particularly
in developing countries. Indeed, between 1965 and 1990,
the share of employment in the industrial sector in
developing countries increased from 11 to 14 per cent.
However, this picture masks the divergence of experience
among developing countries. In general, although the newly
industrializing Asian economies have experienced
significant growth in the share of industrial employment,
sub-Saharan Africa has seen only a minimal increase in
such employment. During the same period, in developed
countries the share of employment in the industrial sector
declined from 37 to 26 per cent, reflecting the sharp shift
in employment from industry to the modern services sector.
A consistent trend, that cuts across all countries, however,
is that the services sector is an increasingly important
source of employment.
26. Changes in the pattern of industrial employment in
both developed and developing countries have been
associated with variations in real wages and in the skill
levels required in manufacturing. In the case of some low-
income developing countries in South and South-East Asia,
for instance, real wages have declined in the formal
manufacturing sector. At the same time, in other developing
countries with higher rates of employment creation in
industry, real wages have tended to increase. In
higher-income countries, average real wages have generally not
fallen and there has tended to be labour saving
technological changes in industry and employment
reduction, especially for unskilled workers. As for
middle-income countries, real wages have risen, but because they
have begun diversifying their export capacity into new
more technology-intensive product areas, they have found
that fewer but more highly skilled workers are required.
27. The contribution that industry can make to the
alleviation of poverty through employment creation has
been amply demonstrated. Over the course of the last 20
years, some developing countries, particularly in East Asia,
have been able to reduce the incidence of poverty (share of
population subsisting on less than $1 per day) by a
significant amount. In a number of countries, including
China, Indonesia, the Republic of Korea and Malaysia, the
incidence of poverty was reduced by 70 to 80 per cent. On
the other hand, in sub-Saharan Africa, where
industrialization has yet to establish itself, the number of
poor people actually increased in the late 1980s and early
1990s.
28. Improved access to education and health care in
developing countries has, in general, been associated with
the pace of industrialization. In the rapidly growing
developing countries in East Asia, for instance, industrial
growth was either preceded or accompanied by expanding
access to education, first through universal access to
primary education, then by expanding access to secondary
education. There have also been significant improvements
in access to health care in developing countries over the
past three decades, and on average about 80 per cent of the
population now have access to health care. However, that
picture conceals poor progress in some regions: in sub-Saharan countries, for
example, only about half of the
population have access to these services.
29. Industrial development and structural change have
also contributed to an increase in the labour force
participation of women in both developed and developing
countries through an expansion of employment
opportunities in general. In the industrialized countries,
much of the increase in female employment has been in
services, the fastest growing sector. In developing
countries, on the other hand, manufacturing employment
provided significant increases in job opportunities for
women, particularly in developing countries that
experienced rapid expansion in export-oriented
manufacturing activities. While these gains from increased
access to labour markets in developing countries are of
great importance for enhancing gender equality, women in
these countries still tend to receive a lower-than-average
wage rate.
30. The above-mentioned positive social effects of
industrialization go hand in hand with a number of negative
ones. For example, industrial development, under certain
political, social and economic conditions, can be associated
with negative effects, such as the exploitation of child and
bonded labour, deterioration in working conditions, job
insecurity, informalization of employment and a weakening
of trade unions. Furthermore, intense competition caused
by increasing globalization can make corporations cut back
expenditures on social protection or dilute their contractual
obligations to their workforce. It is, however, unclear
whether increasing globalization per se actually contributes
to these conditions. At the national level, industrial
production by SMEs in the informal sector can also have
significant negative impacts upon the achievement of social
objectives. In the absence of adequate regulation and
oversight of manufacturing and employment practices, such
enterprises can harbour unsafe working conditions, abuse
of worker rights, exploitation of female and child labour,
and lack of social protection. Such negative outcomes are
by no means limited to developing countries, as
demonstrated by the development of "third world" labour
conditions and small "sweatshops" employing vulnerable
groups, among which a disproportionate number are
women, in industrialized countries.
31. In dealing with the problems of industrialization,
social policy has not always been gender neutral. Women
usually receive less education and training than men,
especially in developing countries, and can face declining
employment opportunities. This may have negative
impacts, inter alia, on poverty reduction, since it is well
known than women constitute the majority among the
poorest of the population and their economic development
is crucial for raising their well-being.
B. Social policy challenges for government
and industry
32. The overriding policy challenge for government and
industry is to promote the positive impacts while limiting
or eliminating the negative impacts of industrial activities
on social development. As far as Governments are
concerned, the major policy challenges that they face are
to develop human resources, alleviate poverty, improve
social security, reduce gender disparities and protect core
labour standards (freedom of association, collective
bargaining, elimination of child labour exploitation and
elimination of gender discrimination). To that end,
Governments need to expand and intensify cooperation with
industry, trade unions and other groups of civil society. The
major challenge facing industry is to contribute to social
development objectives through greater compliance with
core labour standards, more corporate social initiatives,
attention to human resource development and worker
welfare. To a large extent, such challenges facing industry
can be best addressed through better dialogue with trade
unions and Governments, particularly in support of the
Government's efforts through an expansion of voluntary
initiatives.
33. In order to promote human development through
improved access to education, Governments in developing
countries should give priority to ensuring universal access
to basic education and expanding access to secondary
education. Industry and civil society should work with
Governments to strengthen secondary, vocational and
advanced education and ensure that they meet the
developmental needs of society and the economy.
Governments and civil society should also address the
problem of rapidly expanding labour forces, especially
youth labour, by expanding reproductive health/family
planning services where unmet needs exist.
34. Employment creation plays a pivotal role in the
alleviation of poverty and government efforts to stimulate
employment growth must encompass both the formal and
informal sectors. Since the informal sector is an important
source of employment in developing countries,
Governments should ensure that the policy and regulatory
environment supports SMEs by removing barriers to market
access. Bureaucratic obstacles to formalization should be
reduced and access to information, training and credit
should be facilitated. Industrial development policies
should include efforts to facilitate and promote linkages
between informal and formal sector enterprises, including,
where relevant, TNCs. With regard to trade-related
employment policies, Governments should endeavour to
ensure that the benefits from international trade and trade
agreements are widely shared. Adjustment assistance to
communities and retraining programmes for workers are
required to optimize the net employment creation potential
of trade liberalization.
35. There is increasing concern about the limited
coverage of existing social security programmes in
developing countries and about the deteriorating quality of
employment. To deal with these problems, Governments
should cooperate with industry, trade unions and other
concerned organizations of civil society in expanding,
strengthening and ensuring the sustainability of social
security arrangements. Furthermore, since employment-based
arrangements with contributions from employers and
employees are a central component of social security
systems in most countries, Governments should ensure that
the benefits of such systems are secure and portable
between employers. Moreover, Governments, in
cooperation with industry, should ensure that social security
coverage is as broad as possible and where feasible based
on mandatory worker and employer participation. With
regard to the quality of employment, increased efforts are
needed by Governments, in cooperation with industry and
civil society, to ensure universal compliance by industry
of core labour standards. The lessons and examples of good
practices by industry should be disseminated, and
incentives to encourage better working conditions should
be provided. At the same time, there should be efforts to
extend the protection of core labour standards to informal
enterprises as well.
36. In view of persistent gender disparities in such areas
as income, employment, education and health,
Governments, industry, trade unions and other
organizations of civil society, in particular women's
organizations, should work together towards the elimination
of discrimination against women in employment, education,
property ownership and access to credit, and to ensure that
women have effective equal access to economic
opportunities and social participation.
37. Governments should encourage the wider dispersion
of voluntary initiatives on the part of industry in both the
formal and informal sectors. To a large extent, these
voluntary initiatives reflect a change in the way in which
business perceives its social responsibilities. The "corporate
responsibility" movement is already making strong
headway in corporate headquarters in OECD countries,
where firms are finding that by providing better health and
safety conditions, shorter working hours and more
consultative forms of management, they can improve the
economic performance of their companies in many
dimensions.
38. Companies are also re-evaluating the concept of
corporate ethics, and such issues as combating corruption
are becoming part of company business principles and have
been part of international negotiations. A number of
corporations in developed countries have also included
human rights in their business principles and codes of
ethics. However, in general, businesses should not be
expected to perform tasks that other parts of society have
been unable to deal with. It is therefore necessary to
understand what companies must do (comply with laws and
ensure safe working conditions), what they may do (invest
in community projects, develop employee training
programmes, promote the use of local personnel for
technical and managerial jobs and contribute to public
debate) and what they cannot do (interfere with political
and legal processes). Monitoring and enforcement are
called for in the first case, enabling frameworks and
partnership schemes are necessary in the second, and a clear
understanding of the limitations and boundaries of action
is required in the third.
C. Social policy challenges for the
international community
39. Among the central concerns of the international
community should be the growing international income
disparities and the risk that some countries and groups
might fall deeper into poverty and exclusion. The World
Summit for Social Development has provided perhaps the
strongest basis for international cooperation in this regard.
Policies should build on countries' commitments expressed
in the Copenhagen Declaration on Social Development,
which includes the expansion of productive employment
and the reduction of unemployment for those able to work,
as well as the enhancement of social protection and
reduction of the vulnerability of the poorest groups.
40. Concerted action for implementation of the 20:20
Initiative will make a significant contribution to social
development, particularly among the poorer developing
countries. The 20:20 Initiative, endorsed by the World
Summit for Social Development and reaffirmed in the Oslo
Consensus in 1996, calls for Governments and aid donors
to allocate 20 per cent of their budgets to basic social
services.
41. The international community should continue to
encourage the observance of core labour standards and
other standards related to working conditions. Technical
assistance by international agencies is required to help
firms in low- income countries, as well as small enterprises
in all regions, to attain the required standards without
undercutting their competitive position in the global
economy.
42. Finally, the follow-up to the Fourth World Conference
on Women will be of great importance. The Conference
reaffirmed the advances made at the United Nations
Conference on Environment and Development, and
emphasized the need to mainstream a gender perspective
into the development agenda. The discussion of gender
must permeate the discussion on the relationship between
industry and sustainable development, and must be one of
the criteria used to evaluate policy formulation and for
standard-setting at both the national and international
levels.
IV. Industry and environmental protection
A. Impact of industry on the environment
43. As the role of industry in economic development has
expanded, there has been a corresponding increase in the
impact of industrial activities on the environment. Harmful
emissions and waste are generated by all industry sectors,
and can have global, regional or local impacts. At the local
level, industrial emissions contribute to urban air pollution
and the contamination of soils and rivers. Impacts at the
regional level include acid rain, water contamination and
coastal zone contamination. The main global impacts are
climate change, ozone layer depletion and the loss of
biodiversity.
44. Given the current global distribution of industrial
production (see sect. II above), the bulk of industry-related
global environmental problems emanate from industrialized
countries. For example, the developed countries and
economies in transition in 1994 accounted for about 64 per
cent of global carbon dioxide emissions from industrial
activity, and had per capita emissions roughly 6.5 times that
in developing countries.6 However, with further industrial
development in developing countries and economies in
transition, environmental pressures associated with
industrial processes increasingly pose risks to ecosystems
and human health at the national level, as mentioned in
section II above.
45. More recently, concerns about the sustainability of
current industrial development patterns and the trade-off
between economic growth and environmental protection
have been moderated by a more optimistic view that
environmental sustainability and industrial development
need not always be at odds with one another. In particular,
given appropriate technology, institutions, policies and
systems of incentives, industrial development and
environmental protection can to some extent be
complementary objectives. Coping with the environmental
impacts of industry poses important policy challenges to
the international community, Governments and industry.
B. Environmental policy challenges for
government and industry
46. The overriding task facing Governments is to
maximize the positive influence of industrial activities on
economic and social development while minimizing the
impact of the production and consumption of manufactured
goods on the natural environment. Therefore, Governments
will need to address the further integration of
environmental and industrial policies, with emphasis on the
preventive approach in their environmental policies. To that
end, Governments will need to review their regulatory
policies and systems of economic incentives and
disincentives. There is also a need for Governments to
undertake other action, such as capacity-building and
environmental data collection that support the
environmental protection efforts of industry and civil
society. Industry, for its part, faces the challenges of
reorienting corporate philosophy, practice and ethics in
order to promote sustainable development, particularly
through better environmental management and by
establishing closer partnerships with government and civil
society.
47. Governments need to adopt an integrated policy
approach and regulatory framework that sets clear
environmental goals and objectives for business and
industry. This requires the development of strategic
environmental policies at the national and subnational
levels to ensure an integrated approach that includes the
setting of environmental goals and objectives, the
implementation of regulations and market
incentives/restrictions, the monitoring of policies and
corrective action. The environmental performance in
industry can be improved by a judicious mix of instruments,
including incentives as well as direct regulation, that
facilitate innovation and complement economic policies.
Most countries still rely heavily on the traditional methods
of command and control based on emission and effluent
standards, penalties and fines. Those methods need to be
supplemented by economic instruments, such as taxes and
pollution charges and the elimination of subsidies for
resource use, which can lead to better resource management
and sustainable development because they provide
incentives for pollution control and the internalization of
environmental costs. The use of emission trading schemes
as an alternative to other economic instruments has received
increasing attention and should be further explored.
However, such schemes may have limited applicability in
developing countries because viable markets for tradable
emission permits are not easily established.
48. With regard to the setting of environmental goals, the
discussion on factor 4 and factor 10 has added a new
dimension to the ongoing debate by establishing targets for
material and energy efficiency improvements to be
achieved within set time-frames in developed countries. 7/
The recommended target is that factor 4 is to be achieved
between 2020 to 2030 and factor 10 by 2050. Many experts
believe that current production technology is capable of
achieving improvements of the order of at least factor 4 by
the year 2020-2030. These or similar efforts may be
necessary to achieve the greenhouse gas emission reduction
targets agreed upon at Kyoto. Otherwise, a disproportionate
burden would fall on progress in decarbonizing energy.
Such issues will be considered by the Commission in 2001,
when energy and transport will be on its agenda.
49. Governments can promote the shift to eco-efficient
industries through a variety of national measures. For
example, green procurement policies and eco-labelling
programmes may enlarge the market for greener products.
Monitoring the environmental performance of industry is
an ongoing challenge in most countries, in particular as
budgets for enforcement programmes are declining. This
ultimately requires the development of national indicators
with which to benchmark the effectiveness of national
environmental policy plans and indicators with which to
measure industry environmental performance. Alternative
national accounts that measure the total use of natural
resources is one example of such needed indicators. In
addition, regular assessments of emissions and the
implementation of policies are required to guide rational
and effective decision-making for environmental policy
formulation, implementation and evaluation.
50. Although government regulations have directed
industry's initial response to environmental issues, there
is now a growing trend among a variety of stakeholders to
hold companies accountable and responsible for the
environmental impacts of their operations and products
throughout their entire life cycle. Industry, primarily
through industry associations, has responded to these
growing demands by developing voluntary codes of
conduct, charters and codes of good practice. Agenda 21
endorsed this voluntary approach, and encouraged business
and industry to use such codes to promote best
environmental practice.
51. A major challenge for industry is to improve its access
to appropriate information, expertise and know-how to
improve its environmental performance. In order for
environmental management standards to be most effective,
Governments must be aware of their role in ensuring that
the proper infrastructure for successful operation of these
standards is in place. Several countries are taking a
proactive approach to establishing an environmental
management system (EMS), and are promoting their
implementation at the national level through the
development of national standards based on ISO 14000 or
the European Management and Audit Schemes (EMAS) and
by providing training and incentives to businesses,
particularly SMEs, which choose to implement an EMS.
Governments and industry must work together to develop
policies to ensure that conformance with standards is not
too costly or difficult to achieve for companies in
developing countries or SMEs. In particular, due
consideration should be given to the relevance of EMS for
SMEs, which do not have basic management systems in
place, as well as the need for third-party certification, which
may be costly for them. Reasonable training and
certification costs and the creation of a scheme for
multilateral recognition of certification are necessary to
ensure that such standards do not act as non-tariff trade
barriers.
52. As far as policy challenges with regard to subsectors
of industry are concerned, each of these subsectors faces
a specific set of key environmental issues and has therefore
responded in different ways. For example, the chemical
industry was one of the earliest subsectors to devote its
efforts to environmental stewardship. It developed an
industry-wide code, entitled "Responsible care", to promote
broad-based performance improvement, reduction of risk
and establishment of best management practice. In addition
to "Responsible care", the various national and regional
chemical associations have also developed and
implemented programmes of their own.
53. In the case of the iron and steel subsector, it is
important to note that both demand for and production of
steel is rising, particularly in developing countries. To
promote best practice in environmental management, a
policy guideline was adopted by the International Iron and
Steel Institute, whose members represent 70 per cent of
world production. One of the unique features of the steel
industry is the open exchange of technology. As a result,
some of the most efficient and cleanest steel-making plants
are located in developing countries. A major challenge,
however, is the need to upgrade performance in the former
centralized planned economies since it is in those countries
that the worst performance can be seen today.
54. Alongside steel, cement is an essential input to all
construction programmes. The two most important
environmental issues for this sector are energy use and
emissions to the atmosphere. The development of
programmes for energy efficiency and alternative energy
sources are key challenges for the cement industry.
Regarding the latter, programmes using wastes as energy
sources have allowed enterprises in this sector not only to
better their own performance but also to help other sectors
to solve their own problems by providing them with a
means for safe disposal of wastes. Technological
developments have also strongly reduced atmospheric
emissions from the cement sector. However, much of the
progress has so far been concentrated in the OECD
countries and should be extended to all countries.
55. With regard to the paper and pulp subsector, corporate
initiatives have also been encouraging. In Canada, for
example, the joint industry-government accelerated
reduction/elimination of toxic substances programme is a
voluntary commitment by pulp and paper producers to cut
overall toxic air and water emissions by 44 per cent from
1988 levels. There are plans to cut emissions by a further
51 per cent by the year 2000. Moreover, there have been
successful corporate initiatives in many countries to extend
recycling. Since the early 1970s, leading pulp and paper
mills have reduced their environmental impacts, such as by
recycling effluent water to achieve close-cycle bleaching
and using substitutes for chlorine gas in their bleaching
process. However, the major challenge for this industry is
to develop best practice in the forest sector.
56. With respect to the mining industry, industry
initiatives have become more visible. At the international
level, the International Council on Metals and the
Environment has an environmental charter that sets product
and environmental stewardship as goals for the industry.
There have also been important industry initiatives at the
national level. For instance, the experience of Canada with
the Mine Environment Neutral Drainage programme to
reduce acid mine drainage and the Whitehorse Mining
Initiative Accord, which provided a strategic vision for the
mining industry, has illustrated valuable avenues for
cooperation between industry, government and civil
society. Given the global presence of mining activities and
their potential environmental impacts, the major challenges
for this industry are therefore to promote best practices and
renewal of mining areas, as well as to pursue greater
cooperative efforts with Governments and civil society to
protect the habitat and livelihood of indigenous people.
57. Such subsectors as banking and insurance can make
an indirect contribution to sustainable development by
virtue of the influence they have on all industry sectors.
First, banks are making efforts to include environmental
risk assessment to credit procedures, while insurance
companies are evaluating environmental performance in
their determination of premium levels. Second, with respect
to investment banks are promoting a greater recognition of
environmental investment opportunities. More recently,
investment funds and banks have begun to evaluate
companies on a range of non-financial criteria, including
environmental performance.
58. Although voluntary initiatives of all subsectors of
industry have been a valuable tool in protecting the
environment, some stakeholders and government officials
still remain sceptical of the extent of their contribution.
Effective monitoring and follow-up programmes are key
factors for demonstrating that such codes of conduct have
amounted to anything more than merely words on paper.
The increasing number of corporate environmental reports
have been a positive contribution, especially when they
include specific goals and an evaluation of progress made
by the companies in reaching these goals, or have an
element of third-party verification. In addition, in order to
facilitate the assessment of progress made throughout a
sector or country a common set of indicators and metrics
will need to be developed to allow for comparability and
aggregation of data.
C. Environmental policy challenges for the
international community
59. The international community must deal with pollution
problems that have transboundary and global impacts, and
must support the efforts of developing countries to improve
environmental sustainability at the national level. In
particular, policy coordination at the international level is
needed to address global environmental problems, issues
related to the trade of hazardous wastes, and possible
negative impacts of eco-labelling schemes and EMS on
trade. International, regional and multilateral environmental
agreements to mitigate global environmental problems need
to be effectively translated into practical programmes for
implementation by industry. Of particular importance to
business and industry are the Montreal Protocol on
Substances that Deplete the Ozone Layer, the United
Nations Framework Convention on Climate Change
(including the recent Kyoto Protocol), the Convention on
Biological Diversity, the Basel Convention on the Control
of Transboundary Movements of Hazardous Wastes, the
Economic Commission for Europe Convention on Long-Range
Transboundary Air Pollution and the recommendations of
the Intergovernmental Forum on Forests.
60. The potential boost for world manufacturing from
liberalization of world trade raises fresh concerns about the
global linkages between economic growth and
environmental sustainability. Much depends on whether the
changes in trade levels will generate outcomes that will
enhance or harm the environment. This presents a major
challenge for the international community to help
developing countries to progressively raise environmental
standards, and to facilitate their adoption of production
technologies that reduce environmental pressures while at
the same time allowing them to be competitive in
international markets. In addition, the international
community should further address the issue of improved
surveillance of trade in hazardous wastes. Such wastes have
been shipped routinely, although usually illegally, in spite
of the Basel Convention, from industrialized to low-wage
countries for disposal or recycling. The fourth Conference
of Parties to the Basel Convention, scheduled for 23 to 27
February 1998, is expected to decide which wastes will be
covered by a ban on exports of hazardous wastes from
OECD to non-OECD countries. More emphasis should
perhaps be given in future to risk management for those
hazardous wastes not subject to an outright ban.
61. There is a need to widely disseminate information
about eco-efficient technologies and management tools to
Governments and industry. A number of international
programmes have been set up to increase worldwide
awareness of the preventive environmental protection
strategy embodied in cleaner eco-efficient production, and
to help government and industry develop programmes and
activities that will expand the adoption of cleaner
production know-how and management approaches. There
may also be a need to reach international agreement on
environmental standards for pollution-intensive industries
in which competitiveness issues hamper approaches at the
national level, especially in developing countries.
62. Increasing international concerns about the risks of
using hazardous chemicals has led to the establishment of
the International Code of Conduct on the Distribution and
Use of Pesticides, and the London Guidelines for the
Exchange of Information on Chemicals in International
Trade, which address this issue. In 1989, a procedure to
help control the import of unwanted chemicals was added
under the name of prior informed consent; at a final
negotiating session provisionally scheduled for March
1998, that procedure may be made mandatory in
international trade in certain dangerous chemicals and
pesticides. An active participation by all Governments in
such programmes is necessary in order to ensure that full
benefits are achieved.
63. International attention has also been focused on the
issue of persistent organic pollutants (POPs) chemical
substances that persist in the environment and
bioaccumulate through the food web, possibly posing a risk
to the environment and adverse effects to human health.
Recently, evidence of long-range transport of these
substances has led to an international negotiation to reduce
and eliminate their release. The Intergovernmental Forum
on Chemical Safety has found sufficient scientific evidence
to demonstrate the need for international action on 12
specified POPs. That process has been a good example that
cooperation between Governments, specialized United
Nations agencies and industry can achieve solutions. All
groups involved should endeavour to finalize the work in
these negotiations so that effective procedures can be
established. It is notable that the Economic Commission for
Europe protocol on POPs is expected to be finalized in June
1998.
64. There is a need for international conventions on the
environment to include information "clearing house"
functions with the aim of providing practical advice and
know-how to industry in order that they meet the
obligations set out in the conventions.
65. With regard to international agreements on
investment, consideration should be given to if and how
environmental objectives may be addressed.
66. Finally, the international community will also have
to strengthen development cooperation to make industrial
development more environmentally sustainable, concerning
which financial support and measures to accelerate the
transfer of environmentally sound technology will be of
prime importance.
Notes
1 The primary sector includes agriculture, forestry and
fishing; the industrial sector comprises mining and
quarrying, manufacturing, utilities and construction; the
services sector includes banking and insurance, wholesale
and retail trade, real estate, other business services,
restaurants and hotels, travel, education, health and
government services.
2 Taken from United Nations Industrial Development
Organization, International Yearbook of Industrial Statistics
(Vienna, 1997); figures include China.
3 Apparent consumption refers to gross domestic output less
exports plus imports.
4 Computed from UNCTAD, Handbook of International
Trade and Development Statistics (Geneva, 1995).
5 Estimates by the Division for Sustainable Development of
the United Nations Secretariat.
6 Per capita ratios derived from data in World Economic and
Social Survey, 1997 (United Nations publication, Sales
No. E.97.II.C.1), p. 201.
7 Factor four refers to the potential to quadruple global
resource productivity by halving resource use and doubling
productive capacity. See von Weizs„cker, Lovins and
Hunter, Factor Four: Doubling Wealth, Halving Resource
Use (London, Earthscan Publications, 1997).
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Date last posted: 8 December 1999 15:15:30
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