Industry Matters for Sustainable Development
Background Paper for the UNIDO Side Event on
Sustainable Industrial Development on 8 May 2007 at the
Commission for Sustainable Development (CSD-15)
Research and Statistics Branch
This document can be found at https://www.unido.org/doc/65592
This paper has been prepared by Ralph Luken, UNIDO Consultant, in collaboration with
Nobuya Haraguchi, UNIDO Industrial Development Officer.
The designations employed, descriptions and classifications of countries, and the
presentation of the material in this document do not imply the expression of any opinion
whatsoever on the part of the Secretariat of the United Nations Industrial Development
Organization (UNIDO) concerning the legal status of any country, territory, city or area
or of its authorities, or concerning the delimitation of its frontiers or boundaries, or its
economic system or degree of development. The responsibility for opinions expressed
rests solely with the authors, and publication does not constitute an endorsement by
UNIDO of the opinions expressed. The views expressed in this document do not
necessarily reflect the views of the Secretariat of the United Nations Industrial
Development Organization. Terms such as "developed, "industrialised" and
"developing" are intended for statistical convenience and do not necessarily express a
judgment. Any indication of, or reference to, a country, institution or other legal entity
does not constitute an endorsement. This document has not been formally edited.
Industry provides a typical example of a sectoral aspect of sustainable development that
cuts across economic, social and environmental dimensions. Unfortunately, the
predominant systems of indicators designed to monitor trends in sustainable
development, the Indicators of Sustainable Development and the Environmental
Sustainability Index, provide virtually no data on the role of the industrial sector.
However a few industry-specific indicators are available in global databases and can be
interpreted from a sustainability perspective to illustrate trends in industry’s role in
achieving sustainable development. These trends show a significant improvement in
industry’s positive economic and social contributions to sustainable development but one
of declining importance compared to other sectors in most country groups. Taking only
the data available for energy use and carbon dioxide emissions into account, industry has
had an increased negative environmental impact, particularly in developing and least
developed countries that have failed to decouple industrial growth and energy
use. The results found would need to be tested with stronger and broader data and with
more rigorous analysis to be confident that this is a generalisable conclusion. Integration
of industrial development and environmental policies by national governments is seen as
an important way forward for enhancing the positive contribution of industry to
sustainable development and reducing its negative impact, yet few developing countries
have succeeded in making significant advances in policy integration since the Earth
Summit. One strategy that national governments could pursue to correct this situation is
to create an expanded set of environmental and social indicators for monitoring the role
of industry in sustainable development, encouraging greater participation by the
industrial sector in the sustainable development planning process, and modifying
industrial policies and programmes to reconcile industrial development and
ABBREVIATIONS: CSD-Commission on Sustainable Development; ESI-environmental
sustainability index; GDP-gross domestic product; ISD-indicators of sustainable
development; ILO-International Labour Organization; MVA-manufacturing value added;
NCPC-national cleaner production centres; NSDS-national sustainable development
strategy; NIE-Newly industrialized economies; SPI-sustainable production initiative;
UNEP-United Nations Environment Programme; UNIDO-United Nations Industrial
NOTE: Unless otherwise indicated, ‘industry’ refers to the manufacturing sector and
includes all sub sectors listed under the major division D (or in earlier classifications as
major division 3) of the International Standard Industrial Classification of all Economic
TABLE OF CONTENTS
THE ROLE OF INDUSTRY IN SUSTAINABLE DEVELOPMENT…………………...1
ILLUSTRATIVE TRENDS IN INDUSTRY’S ROLE IN SUSTAINABLE
DEVELOPING COUNTRIES’ EFFORTS TO INTEGRATE INDUSTRIAL AND
CHALLENGES FACED IN INTEGRATION EFFORTS………………………………13
MEASURES TO BE TAKEN BY NATIONAL GOVERNMENTS……………………18
In the 1980s, a new concept—that of sustainable development—entered the
debate on development and the environment. i In retrospect, it can be said that the concept
not only helped to forge a compromise between the demands for economic growth on the
one hand and for environmental protection and conservation on the other, but also
stimulated the exchange of views on development in general. Reflecting a steadily
broadening discussion on sustainability, the literature on the subject has become vast,
almost to the point of intractability. If any addition to the many descriptions, statements
and analyses is to be justified, it has to offer at least some new views or interpretations.
This background paper on industry and sustainable development, written for
CSD-15, consists of five sections. Section One describes the role of industry in
sustainable development. Section Two assesses, based on the limited data available,
industry’s positive contribution to and its negative impact on sustainable development.
Section Three documents the efforts that selected developing countries are making to
integrate industrial and environmental policies and programmes with the aim of
enhancing industry’s positive contribution to and reducing its negative impact on
sustainable development. Section Four characterizes the major challenges to the
integration of industrial development and environmental objectives. Section Five presents
a set of short- and intermediate-term measures that could be taken by national
governments to enhance industry’s positive contribution to and reduce its negative impact
on sustainable development.
1. THE ROLE OF INDUSTRY IN SUSTAINABLE DEVELOPMENT
Industry provides a typical example of a sectoral aspect of sustainable
development along with such other sectors as agriculture, construction, etc. Industrial
issues figure prominently in the sustainability debate, cutting across economic, social and
Economic development is frequently dependent on industrial development, both
with respect to the industrial sector’s pivotal contribution to economic growth and—even
more conspicuously—with regard to the structural transformation of an economy. The
importance of the latter is underlined by the fact that economic development is largely
thought of as being synonymous with industrialization. Industry acted as a dynamic force
in accelerating the pace of economic growth during the first and second industrial
revolutions. As a result, a number of countries emerged as new industrialized economies,
bearing testimony to what (Kaldor, 1967) observed some time ago: “the greater the
overall rate of growth, the greater is the excess of the rate of growth of industrial
production over the rate of growth of the economy as a whole”.
Although social development appears to be less closely linked to industry, it too is
strongly impacted by industrial development. Often, industrialization is seen as a motor
ehind many of the processes usually termed “social transformation” and
"modernization”. More specifically, there are thought to be at least four ways in which
industry can help to achieve the goals of social development:
(i) Industry’s substantial contribution to economic growth helps to create a large portion
of the resources needed to fund social development programmes.
(ii) The creation of employment and, with it, the generation of income take place in the
industrial sector directly. Employment in turn is indirectly fostered in many cases in the
agriculture or service sectors through the linkages of these sectors to industry.
(iii) Industry contributes to poverty reduction by providing employment with higher
wages than does agriculture, and offers opportunities for promotion with the concomitant
(iv) Industry promotes various aspects of social integration through its general thrust
towards modernization and makes a specific contribution in some cases to the integration
of women through productive employment.
Industry impacts on the environment are felt acutely in relation to both the
production and consumption of manufactured goods. While most problems arising from
the consequences for the environment of the consumption of industrial products are an
economy-wide concern, the environmental effects of industrial production fall within the
purview of the industrial sector alone. Here the key to solving many of the problems lies
in technology. Since environmental problems caused by industrial production are due to
so-called external effects—outside the realm of the market mechanism—corrective
policy measures are needed to reduce or eliminate them. In most cases, the response of
industry to such policies is of a technological nature and usually does not have a
significant impact on competitiveness. ii Hence, industrial technology and its continuous
innovative change—if properly shaped by market and policy incentives—makes an
important contribution to solving the environmental sustainability problem.
2. ILLUSTRATIVE TRENDS IN INDUSTRY’S ROLE IN
When it comes to illustrating trends in the sector-specific role of industry
enumerated above, there is a need for quantitative indicators. This is particularly so
because of the claims made above that the industrial sector makes a major contribution to
economic development and impacts on all three dimensions of sustainable development:
economic, social and environmental.
Initially UNIDO turned to two of the more prominent efforts underway to build
and apply systems of indicators of sustainability in development to illustrate trends in the
role of industry in sustainable development. There efforts are the Indicators of
Sustainable Development (ISD), an initiative of the Commission on Sustainable
Development (CSD), and the Environmental Sustainability Index (ESI), an initiative of
Columbia University. iii To be suitable, these systems would have had to meet the
following criteria: (i) include globally comparable indicators in order that there could be
a cross-country comparison; (ii) measure all three dimensions of sustainability—
economic, social and environmental; and (iii) provide sufficient data about the industrial
(manufacturing) sector in developing countries. Unfortunately, neither system nor any
other system of indicators reviewed was found to meet all three criteria.
The one system that meets the first two criteria is CSD-ISD. However, as CSD-
ISD is designed for national use, the indicator values may not be comparable because of
national differences in definitions and methods. For the same reason, data on CSD-ISD
are not collected globally and the actual availability of data varies across countries and
indicators. Furthermore, CSD-ISD offers minimal encouragement for the use of sectoral
indicators except in the case of energy use (UNDESA, 2001 and 2007). The second
system with potential to meet the criteria, ESI, is a global assessment of environmental
change. ESI covers 142 countries on the basis of a set of 20 core indicators, each of
which combines from two to eight variables, for a total of 68 underlying variables.
Unfortunately, ESI has virtually no industry-relevant indicators for developing countries
(CIESIN, 2005). A third quasi-system, the report “Trends in Sustainable Development”,
is mentioned here, not because it is comparable to such fully fledged indicator system as
CDS-ISD but because it has a section on industrial development. However, the
presentation is limited to a description of various economic indicators of industrial
performance. It lacks any explicit information on the social (employment) and
environmental dimensions of sustainable development (UNDESA, 2006).
Given the limitations and complexities of these current indicators, UNIDO’s review
of trends was not able to draw on either CSD-ISD or ESI to characterize industry’s role.
Instead, it has relied almost exclusively on globally available, but limited, data from
international organizations, including the International Energy Agency (IEA),
International Labour Organization (ILO), World Bank, United Nations Environment
Programme (UNEP) and United Nations Industrial Development Organization (UNIDO).
These globally available data consist of the following:
• Economic indicators: manufacturing value added (MVA), MVA as a percentage
of gross domestic product (GDP) and MVA per capita (in most cases for 1990 and
2005); these basic data have been integrated by UNIDO’s Competitive Industrial
Performance index (UNIDO, 2004), which combines several economic variables
into one aggregate measure (available for 1980, 1990 and 2000).
• Social indicators: manufacturing labour force as a percentage of total labour
force, percentage of females in the manufacturing labour force and percentage
change in the numbers of employees in the manufacturing sector (available for
1990/1995 and 2000/2004 in most cases).
• Environmental indicators: energy use, water use, organic water effluent measured
as biological oxygen demand and carbon dioxide (1990 and approximately
2000/2004). Only the energy use data and the associated estimates of carbon
dioxide emissions are systematically collected and vetted by an international
organization (IEA, 2006a). The data on organic water effluent are only estimates
based on a combination of pollutant/engineering coefficients and manufacturing
employment (World Bank, 2007). The data on water use are only total freshwater
withdrawals reported by approximately 150 countries for various years in the
1990s. Water withdrawals are then allocated to three sectors (agriculture,
domestic and industry) based on a 1987 formula. (FAO, 2007).
In a recent paper for UNIDO, the indicators for all the countries for which the
above data were reported (except for obvious outliers) were summarized for six country
groups: developed, transition, newly industrialized economies, China, and other
developing and least developed countries (Luken and Castellanos, 2006). These
groupings are those defined for the purposes of this background paper, but for the most
part are consistent with the groupings used by the United Nations, which are based on the
composition of selected economic and social statistics (UN STAT, 2005).
The remainder of this section will use industry-specific indicators, interpreted from
a sustainability point of view, to illustrate trends in industry’s role in sustainable
development as described in Section 1 above. Again, a distinction between the economic,
social and environmental dimensions will be drawn, using one trend for each dimension:
MVA for the economic, employment for the social and energy use for the environmental
dimension. In spite of the importance of the environmental dimension in monitoring
sustainability impacts, none of the other environmental parameters identified above could
be used in this paper. Carbon dioxide emission data, while available, were not used
because their addition would add little information on trends as they are closely
correlated with energy use. Water pollutant effluent and water withdrawal data for
industry were not used because they are not based on data collected in the field for these
The trends in the economic contribution of industry to sustainable development are
described in Table 1, which presents the per capita MVA and average share of MVA in
GDP as general indicators of industrial development from an economic perspective. The
broad groups for which data are presented exhibit three different paths of industrial
development. The first is that of the vigorous growth of industry relative to population
growth and an increased share of MVA in GDP. Examples of such impressive
strengthening of the industrial base of sustainable development are NIEs of Asia and
China. The second is that of moderate industrial growth per capita, which, nevertheless,
suffices to bring a visible increase in per capita levels of industrial output and only a
small decline in the share of MVA in GDP. Developed market economies in their
aggregate, the majority of other developing countries and least developed countries have
followed this path during the recent past. The third is characterized by low industrial
growth and even by decline in the level of industrial development of some countries,
relative to population growth, sometimes owing to a contraction of industrial output. The
case in point is the transition economies, which experienced a sharp fall in industrial
production in the 1990s and only showed some recovery in the 2000s, as well as a large
decline in the share of MVA in GDP.
Table 1. Manufacturing Value Added, 1990 and 2005
4,300 5,600 31 18.3 17.8
600 700 18 24.1 22.5
1,750 3,300 87 22.7 27.1
China (1/1) 100 480 372 29.3 39.4
470 590 24 13.7 13.3
70 90 27 9.5 9.0
*The first number for each country group is that of countries for which there was acceptable data (obvious
outliers excluded) to estimate average MVA per capita and average share of MNA in GDP and the second
number is that of countries in the country group.
Note: Newly industrialized economies are defined for this paper to include Hong Kong SAR; Indonesia;
Malaysia; Republic of Korea; Singapore; Taiwan, Province of China; and Thailand.
Source: UNIDO (2007a).
As previously mentioned, an illustrative trend in industry’s contribution to
the social component of sustainable development is the change in employment levels.
Table 2 summarizes trends in the direct contribution of the manufacturing sector to
employment by the six broad country groups referred to above, for the period 1990 to
approximately 2004. Three different patterns emerge from these data. In the first —
characteristic of NIEs—not only is the manufacturing sector a positive force in
employment but also the relative share of manufacturing in total employment continues
to rise in most countries. The second—exemplified by other developing countries and
least developed countries—is an increase in manufacturing employment in absolute terms
tempered by a decline in the relative share of manufacturing in total employment in many
countries. The third—exemplified by developed market economies, transition economies
and China—is no growth or a decline in manufacturing employment in absolute and
relative terms. iv Such negative effects on employment can be traced back to a long-term
trend of relative decline in the manufacturing sector in the most advanced countries,
whereas in transition economies and China the negative effects are due to significant
industrial restructuring and closure of state-owned enterprises. Data in Table 2, it should
be stressed, account merely for industry’s direct contribution to employment rather than
any indirect employment effects on other sectors of the economy.
Table 2.Employment in Manufacturing, 1990-1991and approximately 2004
(10 3 )
Per cent of
Developed market economies
(22/25)* 60,300 60,400 1 20 17 2/22
Transition economies (8/22) 10,700 9,200 -15 21 19 2/8
Newly industrialized economies
(7/7) 19,800 26,000 31 14 15 3/7
China (1/1) 86,200 83,100 -4 13 11 -
Other developing countries (29/92) 29,800 37, 300 25 13 12 8/29
Least developed countries (6/47) 340 450 32 - - -
*The first number for each country group is that of countries for which there was acceptable data (obvious
outliers excluded) to estimate total employment and the second number is that of countries in the country
group. All data available from ILO and UNIDO were used for the estimates in the table.
Note: Newly industrialized economies are defined for this paper to include Hong Kong SAR; Indonesia;
Malaysia; Republic of Korea; Singapore; Taiwan, Province of China; and Thailand.
Source: ILO (2007), Column 2B for all groups except least developed countries, for which there were no
ILO data. Data for least developed countries is taken from UNIDO (2007a).
Measuring energy use and energy intensity (as well as the closely related CO 2
intensity) of manufacturing captures one of the trends in the negative impacts of
industrial production on the environmental dimension of sustainable development. The
data in Table 3 paint a fairly optimistic picture of trends between 1990 and 2004 in this
important feature of the industry-environment relationship. For all six-country groups
energy use in the manufacturing sector as a share of total energy use declined and for four
of the country groups, energy intensity was reduced. In the case of energy, there are four
different paths among the six country groups. The first is a significant reduction in energy
intensity (relative decoupling) and a decline in total energy use (absolute decoupling), as
exhibited by transition economies. In this case, the average increase in MVA for the
group was 65 per cent, with significant negative and positive increases among the seven
countries of this group. The second is a significant reduction in energy intensity (relative
decoupling) and a large absolute increase in total energy use, as exhibited by NIEs and
China. In both groups, there was a radical change in the structural composition of the
manufacturing sector and, in the case of China, extensive closure of state-owned
enterprises. In both, there was also a significant increase in MVA, by almost 90 per cent
for NIEs and some 400 per cent for China. The third is a moderate reduction in energy
intensity (relative decoupling) and only a small increase in energy use, as exhibited by
developed market economies. The fourth is an increase in energy intensity (no
decoupling) and a large absolute increase in energy use as exhibited by other developing
countries and least developed countries.
Table 3. Energy Use in Manufacturing, 1990 and 2004
energy use in
as a share of
1995 US$ MVA)
CO 2 intensity
1995 US$ MVA)
1990 2004 1990 2004 1990 2004
0.4 27 24 0.24 0.20 0.5*10 -3 0.34*10 -3
-2.7 37 27 1.36 0.55 3.0*10 -3 1.4*10 -3
Newly industrialized economies (7/7/7/7) 7.8 25 24 0.24 0.21 0.6*10 -3 0.54*10 -3
China (1/1/1/1) 4.6 50 40 2.1 0.73 8.0*10 -3 2.5*10 -3
3.5 27 24 0.72 0.78 1.7*10 -3 1.8*10 -3
8.8 18 10 0.76 1.30 1.7*10 -3 1.9*10 -3
*The first number for each country group is that of countries for which there was acceptable data (obvious
outliers excluded) to estimate average annual growth and share of energy use. The second is that of
countries for which there was acceptable MVA data (obvious outliers excluded) to estimate energy
intensity. The third number is that of countries for which there was acceptable CO 2 data (obvious outliers
excluded) to estimate CO 2 intensity. The fourth number is the number of countries in the country group.
Note: (1) Newly industrialized economies are defined for this paper to include Hong Kong SAR; Indonesia;
Malaysia; Republic of Korea; Singapore; Taiwan, Province of China; and Thailand. (2) The decline rather
than the anticipated increase in CO 2 intensity in other developing countries occurs because there are
different countries used to estimate energy intensity and CO 2 intensity. If the same countries were used for
both calculations then CO 2 intensity would have increased between 1990 and 2004.
Sources: IEA (2006a) for energy, IEA (2006b) for CO 2 and UNIDO (2006) for MVA.
This optimistic trend in the reduction of industry’s negative impact on the
environmental dimension of sustainable development is offset to some extent by the
differences in energy intensity still remaining in 2004 among these groups. Energy
intensity was almost four times higher in developing countries than in developed market
economics and NIEs, and more than three times higher in China than in these two
groups. v In summary, illustrative trends in industry’s positive economic and social
contributions to sustainable development show a significant gain but one of declining
importance compared to other sectors in most country groups and its negative
environmental impact, taking only the data available for energy use and CO 2 emissions,
show an increased detrimental effect, particularly in the case of other developing and
least developed countries that failed to decouple industrial growth and energy use.
Industry’s economic contribution, measured in terms of MVA per capita, increased
absolutely in all six country groups but, in relative terms, measured as the share of MVA
in GDP, it increased in only two (NIEs and China) of the six country groups between
1990 and 2005. Its social contribution, measured in terms of employment, increased
absolutely in terms of the number of employees in three of the six country groups (NIEs,
other developing countries and least developed countries) but, in relative terms,
manufacturing as a share of total employment increased in only one country groups
(NIEs) between 1990 and about 2004. Its environmental impact, measured in terms of
energy use, increased absolutely in five of the six country groups (not in transition
economies), which is a negative impact, and in relative terms, its impact, measured in
terms of energy intensity, increased in two of the six country groups (other developing
and least developing countries), also a negative impact, between 1990 and 2004.
3. DEVELOPING COUNTRIES’ EFFORTS TO INTEGRATE
INDUSTRIAL AND ENVIRONMENTAL POLICIES
As part of its preparatory activities for the World Summit on Sustainable
Development in 2001, UNIDO requested national experts in 15 developing countries to
assess the extent of the integration of industrial and environmental policies undertaken to
enhance the role of industry in sustainable development vi and, as part of its preparatory
activities for CSD 14 (2006), it requested national experts in six developing countries to
carry out similar assessments. vii This section draws on these assessments, as well as a
report of a UNIDO technical cooperation project on policy integration for sustainable
development in China (Yang, 2004), to describe developing countries’ efforts to achieve
such an integration of industrial and environmental policies in order to enhance the role
of industry in sustainable development.
Framework for assessment
The UNIDO review of national government efforts to integrate industrial
development and environmental policies started with a survey of the literature on
sustainable development integration efforts in developed and developing countries. The
objective of the survey was to find an appropriate analytical framework for characterizing
the extent of integration of these two sets of policies. Policy integration was defined as
both efforts to insert environmental considerations into industrial development policies
and programmes and industrial development considerations into environmental policies
and programmes. In other words, integration was defined as a two-way street. viii
The review identified four assessments of the sustainable development efforts of
developed countries, Dalal-Clayton (1996), Wallace (1996), Lafferty and Meadowcroft
(2000) and Steurer and Martinuzzi (2005) as well as several assessments of the
sustainable development efforts of developing countries—Angel and Rock (2001), Dalal-
Clayton et al. (2002), OECD/UNDP (2002), UNDESA (2002a) and UNDESA (2002b),
Luken and Hesp (2004), Rock and Angel (2005) and Volkery et al (2006). Only one of
these assessments contained an analytical framework for characterizing the extent of
policy integration (Luken and Hesp, 2003), and only three described industry-related
issues and offered some insights into or examples of the integration of industrial
development and environmental policies (Wallace, 1996; Luken and Hesp, 2003; and
Rock and Angel, 2005). However, only Luken and Hesp (2003) describe policy
integration as it would affect all three dimensions of sustainable development (economic,
social and environmental). For this reason, the following section draws on Luken and
Hesp (2003) and Luken (2006).
UNIDO proposed that the national experts characterize the degree to which
countries have aligned the two policy domains, industrial development ix and
environmental x , by identifying specific examples of three, increasingly demanding, levels
of policy integration: coordination, cooperation and coherence (Figure 1). xi Each
subsequent level is thought to have greater potential for identifying and balancing the
impacts of the two policy domains, which are inherently independent of each other, on
Figure 1. Levels of policy integration
Source: Luken and Hesp (2003)
The most basic level of policy integration for sustainable development is a
requirement, often specified in legislation, for coordination between the two policy
domains. On the one hand, industrial development policy can be coordinated with
environmental policy to minimize or prevent the negative impact of industrial activity on
environmentally sensitive geographic locations and to accelerate the adoption of
environmentally sound technology. On the other hand, environmental policy can be
coordinated with industrial development policy to address the former’s impact on
industrial competitiveness and employment and to encourage utilization of advanced
process technologies, rather than pollution control equipment, for complying with
Cooperative programmes and projects between industry extension services of the
two policy domains constitute the second, and more advanced type, of policy integration
for sustainable development. One example is an extension service for small and medium
enterprises (SMEs), supported by industrial development policy, which provides advice
on least-cost solutions for environmental compliance. Another is an environmental
covenant programme, an instrument of environmental policy that assigns first priority for
negotiated agreements on environmental compliance schedules to sub-sectors encouraged
by industrial development policy.
The third and most advanced type of policy integration for sustainable
development is coherence among policies, i.e., holistic national visions for development.
“Coherence brings together the cumulative value-added from the contributions of
different policy communities” (OECD/UNDP, 2002:281). Such a shared vision, which no
country has yet put forward for industry, should be part of a national sustainable
development strategy (NSDS). xii That part of the strategy for industry would draw upon a
reasonable set of internally consistent coordination and cooperative measures between the
two policy domains in support of a shared vision. It would encourage synergies between
them in order to enhance the impacts of the two domains on the three dimensions
(environmental, economic and social) of sustainable development. More specifically, it
would harness the potential of industrial development policies to achieve environmental
objectives and of environmental policies to make the minimum intrusion on industrial
competitiveness within the constraint of respecting environmental norms xiii .
The bolder lines in Figure 1 trace the usual path of policy integration. The
integration path normally starts with coordination measures that, in turn, encourage
cooperative programmes and projects. Participants in cooperative programmes often
come to realize that policy convergence leads to greater benefits than stand-alone
initiatives. However, the path is not always as direct as the one suggested by the straight
lines; rather, it is usually a series of small and irregular measures. Moreover, the two
policy domains can include cooperative programmes and projects without any explicit
coordination and can call directly for more coherence without joint programmes and
projects. However, significant integration is achieved only when there is a dense set of
coordination and cooperative measures that are supportive of a shared vision. This degree
of policy integration is seen as an indicator of the commitment of governments to
enhance the positive socio-economic impacts of industrial development and reduce the
potentially negative environmental ones. xiv
Policies and programmes
This sub-section briefly describes some of the industrial development and
environmental policies and associated programmes that 12 of the 21 country reports
requested by UNIDO (those with more in-depth analyses) identified as having the
potential to enhance the role of industry in sustainable development, i.e., to affect at least
two and, possibly, all three dimensions of sustainable development. These policies and
programmes are classified in Table 4 as efforts to achieve coordination, cooperation or
Table 4. Examples of coordination, cooperation and coherence efforts in 12 developing
Country Coordination Cooperation Coherence
Brazilian agency for
NCPC; National policy on
industry, technology and
Cleaner production centre,
national innovation system
NCPC; centre for
technology transfer; hightech
Industrial park location
Program for pollution
control, evaluation and
programme for industry;
production centres for oil
and gas and leather
programme for industrial
Approach to the
and tenth NESD
Turkey Ministry of
location of industrial
estates established by
Ministry of Industry
Zimbabwe Municipal by-laws;
Water Act for
Note: Abbreviations spelled out in the text
Sources: various country reports
research programme for
cleaner technology in
export oriented subsectors
NCPC and related projects
2005) and ninth
The country reports described specific coordination efforts between industrial
ministries and associations and environmental ministries. For example, Zimbabwe’s new
Water Act, approved in 1999, aims to harmonize environmental protection and economic
growth. However, the degree of effectiveness of these measures should be questioned
because there appears to be in some countries insufficient coordination between
ministries, and limited awareness of sustainability issues among government
A number of country reports identified two similar types of cooperative
programmes. One is cleaner production/pollution prevention centres, which assist plants
in identifying changes in production processes that reduce pollutants and, in many
instances, improve productivity. These programmes exist in most of the countries
surveyed, with seven of the 12 hosting UNIDO-UNEP National Cleaner Production
Centres (NCPCs). The other type is industrial extension services, whose primary mission
is to enhance plant-level productivity. This type of programme operates in all of the
countries surveyed. In a limited number of countries these have a mandate to provide
technical advice on resource use and on pollution prevention and control issues as well as
the standard array of production issues. The National Programme for Industrial
Upgrading in Tunisia appears to be the most comprehensive of this type among the 12
countries. Industrial extension services in Chile, China and Turkey offer technical
assistance that includes an environmental component.
National experts in only four countries identified ongoing efforts that could be
classified as steps towards policy coherence in support of sustainable development. The
industrial development policies of China put forward in the tenth and eleventh five-year
plans (2000-2005/2006-2010) include measures that support environmental goals, and the
environmental policies include industrial restructuring as a complement to traditional
environmental management measures. xvi India’s eleventh five-year plan explicitly calls
for integration of development planning and environmental concerns. Thailand’s eighth
(1997-2001) and ninth (2002-2006) National Economic and Social Development (NESD)
plans called for integration of different polices relating to sustainable development and its
tenth (2007-2011) emphasizes the concept of sustainable development. Turkey’s eighth
five-year development plan (2001-05) combined industrial development and
environmental policies in a complementary effort to meet common objectives, but this
was implemented to only a limited extent, and its ninth plan (2007-13) calls for an
integrated technology and environmental strategy. However, in none of the countries is
there a reasonably complete set of measures to ensure the internally consistent
cooperation and coordination needed to support an emerging national vision for
In conclusion, these 12 countries did not make substantial advances in the 1990s
in the policy integration needed to enhance the role of industry in sustainable
development. Based on the information in the country reports, they undertook only
limited efforts to coordinate the two policy domains and to implement cooperative
programmes. Moreover, only four of the 12 countries made tentative efforts to find
convergence among policies in support of sustainable development, and none appear to
have undertaken the difficult task of tracing back, in a comprehensive way, all of the
coordination and cooperative measures needed to support a coherent vision of sustainable
development. These findings about limited success with policy integration are
unsurprising as they are consistent with other surveys on the same topic for both
developed and developing countries (Lafferty and Meadowcraft, 2000 and Volkery et al,
2006, respectively). xvii
4. CHALLENGES FACED IN INTEGRATION EFFORTS
This section reflects on the challenges that developing countries face in their
efforts to integrate industrial development and environmental policies and programmes in
support of sustainable development. An attempt is made to qualitatively assess the extent
to which policy integration has been implemented.
Carley and Christie (2000) and others argue that the most common reason for the
failure to effectively pursue sustainable development is that governments do not carry out
their basic role of supporting the process of designing and implementing sustainable
development strategies. xviii The process of sustainable development strategy formulation
(appropriate policies and programmes) must precede a strategy and be formulated in
scientific and economic terms; the strategy is only known at the end of the process.
According to Carley and Christie, as well as some of the authors of the 21 national
reports prepared for UNIDO, there is a lack of awareness of and know-how about
sustainability issues within ministries and government think tanks and little coordination
among them. Moreover, they do not realize that policies for sustainable development
need not only clear long-term objectives but also short- and medium-term measures to
encourage coordination and cooperation among the relevant participants.
More specifically, government support for the process of sustainable development
planning for the manufacturing sector requires enhancing institutional arrangements that
• generation of data on the positive socio-economic and negative environmental
impacts of the manufacturing sector, in order to measure progress or the lack of it
towards sustainable development goals and dissemination of that information;
• participation of the industry in the preparation of sustainable development plans,
in particular, a nationally shared vision for advancement of the industrial sector;
• integration of policies using a sufficient number of coordinative and cooperative
measures supportive of a shared vision.
The remainder of this section describes the extent to which the institutional arrangements
in the 21 countries are actually supporting the three tasks of information generation,
participation of industry and integration of policies.
Generation and dissemination of information
An assessment of the extent to which the 21 countries fulfilled the first
institutional arrangement involved reviewing their effort to generate and disseminate
information on a regular basis about industry’s role in sustainable development. The most
obvious information they need to generate is data on the positive impacts of industry on
socio-economic development, on the potential negative employment impacts from
technology upgrading and on the negative impacts on the environment. The basic
economic indicators are various aspects of MVA. Those of social impacts are various
aspects of employment, both positive and negative, and poverty reduction. Those of
environmental impacts are pollutant loadings and resource utilization.
A limited range of data on the economic dimension and to a lesser extent on the
social dimension of sustainable development are usually collected frequently and are
reasonably current in the 21 countries surveyed. However, the only available data on the
environmental dimension in most of the 21 countries are on energy use and carbon
What is missing are data collected at source on industrial discharge of
conventional water and air pollutants and use of water. A review of the 21 country
assessments showed that some countries have fragmented environmental data collected at
source for one point in time. Most others, if data were available at all from an
environmental ministry, have only engineering estimates [available from the World Bank
(Wheeler et al. 1995) and the World Health Organization]. xix Only four of the 21
countries—Brazil, China, Egypt and Turkey—have systematically collected industrial
pollutant data at source. The data for Brazil are collected by state environmental
protection agencies, which use different monitoring protocols. Thus there is no national
database in spite of the excellent work done by the state agencies, particularly Sao Paulo
State. The data for China are the most complete and comprehensive, reflecting a
combined effort of the World Bank and the State Environmental Protection Agency of
China. Unfortunately, the data are not solely for the manufacturing sector but for the
industrial sector as a whole, which includes mining and quarrying and utilities as well as
manufacturing. The data for Egypt are based on international emission factors corrected
by point-source measurements. These data are the basis of a snapshot inventory of
industrial pollutant loadings by sub-sector for 2002. Finally, the data for Turkey are atsource
discharge data for two points in time. For 1992, the State Institute of Statistics
collected data for the entire country but for 2000 it collected data only for three major
water basins that accounted for some 60 per cent of the national industrial output.
Unfortunately, there is no international organization systematically collecting and
vetting pollutant-release and water withdrawal data for the manufacturing sector, as is the
case with energy use. The United Nations Environment Programme focuses its efforts on
environmental quality (ambient conditions) data and not its precursors, pollutant releases
that affect environmental quality (UNEP, 2006).
In addition, the authors of the 21 reports looked specifically for efforts to
disseminate industrial pollutant data to the public. Given the general lack of data,
described above, it is unsurprising that only a few of the 21 countries disclose industrial
pollutant data to the public. The early pioneer in this field among the 21 countries was
Indonesia. With assistance from the World Bank, it established the Program for Pollution
Control, Evaluation and Rating (PROPER) in 1995 (World Bank, 2000). There are now
programmes in the Philippines and Viet Nam, with planning efforts underway in China
Industry’s participation in sustainable development planning
An assessment of the extent to which the 21 countries met the second institutional
arrangement required reviewing the extent of the formal participation of the industrial
sector in sustainable development planning. For the purpose of this paper, formal
participation was defined in terms of three activities. The first activity was the
designation of a recognizable organizational focal point for formulating an NSDS or its
equivalent. xx The second was the explicit participation of representatives of the
manufacturing sector in the formulation of an NSDS. Explicit participation required both
a horizontal dimension embracing national chambers of commerce and industry and
sectoral associations and a vertical dimension embracing provincial/state chambers and
associations. The third activity was reporting on the impact of the manufacturing sector
on all three dimensions of sustainable development in either an NSDS or its equivalent,
together with submission of a country profiles to CSD.
Focal point for preparing and monitoring of an NSDS
In most countries, the appropriate focal points for preparing and monitoring an
NSDS or its equivalent are organizational arrangements recognized by national
governments. These are usually relatively independent national councils for sustainable
development or units primarily within environmental ministries but also within national
planning agencies. All of the 21 countries surveyed had national councils, many of them
working closely with the Earth Council. xxi
Participation of industry in the formulation of an NSDS
National experts in the 21 countries characterized the extent of industry
participation in the formulation of NSDSs or their equivalents. They rated participation at
one of five levels: (a) no industry participation, (b) industry participation but not
meaningful, (c) meaningful industry participation, (d) meaningful industry participation
and ownership and (e) meaningful industry participation, ownership and specific followup
(Table 5). In 11 of the 21 countries, there was no meaningful participation (categories
a and b). In the other ten, the national experts stated that there was meaningful
participation (categories c and d).
Reporting on the contribution of the manufacturing sector
An assessment of the extent to which the 21 countries met the third institutional
arrangement required reviewing the country profiles submitted to CSD at the time of the
World Summit on Sustainable Development (2002) to determine the extent of reporting
on the manufacturing sector. Only token attention was paid to the manufacturing sector,
based on a page count of the submitted profiles. This finding was surprising because the
manufacturing sector accounted, on average, for some 24 per cent of GDP among all
developing countries in 2005 (without China it was 21 per cent) and for a reasonably high
share of GDP in many of the 21 countries (Table 5).
Table 5. Industry in GDP (as of 2005) and country profiles (as of 2002)
Bolivia 16.2 b 1/50 Nigeria 4.8 d 2/77
Brazil 19.6 c 3/71 Pakistan 17.3 c 1/63
Cameroon 13.9 c 2/57 Philippines 22.0 d 1/56
17.0 a 1/58
18.3 c 1/89
China 36.0 d 1/55 Sudan 5.9 a 0/0
Colombia 12.7 b 3/131 Thailand 36.5 a 0/63
14.0 b 1/57
18.1 c 1/69
Egypt 18.8 b 1/73 Turkey 18.8 a 1/78
Ethiopia 5.1 c 1/47 Viet Nam 22.8 c 1/40
India 15.6 b 2/121 Zimbabwe 13.2 a 1/55
Indonesia 28.0 b 1/68
Source: Update of Luken (2006). UNIDO Statistics (2007) for MVA, 21 national reports/surveys for
participation, and /www.un.org/esa/agenda21/natlinfo for pages on industry found in country profiles.
Extent of policy integration and implementation
Characterization of the extent of policy integration in the 21 countries surveyed is a
challenging task. Quantitative characterization is impossible and qualitative
characterization is difficult. Still, an attempt to sum up the situation qualitatively is
attempted below, as is an effort to identify some of the reasons for the limited extent of
policy integration. In addition, the major shortcomings of environmental policy
implementation are identified because these need to be corrected before real progress can
be made in reducing the environmental impact of industrialization.
Qualitative assessment of the extent of policy integration
Based on the in-depth review of 12 countries, there appears to have been only a
limited degree of integration of industrial development and environmental policies and
programmes. While there are some promising examples of coordination and cooperation
aimed at reducing environmental pressure and, more broadly, at achieving sustainable
development, these are clearly not widespread or sufficient. For the most part, industrial
development and environmental policy formulation and implementation continue to
proceed along two separate roads in most countries.
There is considerable literature on the challenges to policy integration in general,
which describes numerous political issues such as political leadership and such
methodological issues as lack of awareness and policy analysis skills (Russel and Jordan,
2006 and Daffern and Wyatt, 2001). More specific literature exists on policy integration
for sustainable development (Carley and Christie, 2000). Rather than reiterate those
concerns, it is illuminating for the purposes of this paper to reflect on the challenges,
which may or may not apply to a particular country, that developing countries have
encountered in reconciling industrial development and environmental policy objectives as
well as in exploiting win-win possibilities that could satisfy both objectives. These are:
• Lack of vision: Absence of a vision of where the industrial sector is heading
and, if there should there be such a vision, then the absence of a detailed
strategy for its implementation, translates into confusion and vagueness about
the environmental implications of industrial development;
• Industrial configuration: In many cases, changes in industry-related
conditions needed to reduce the environmental impact of industry are beyond
the political and financial resources of governments. These include
appropriate physical infrastructure for pollution control and management,
phasing-out of old and often second-hand production technologies, changes in
deeply rooted industrial cultures that resist change of any kind and
improvements in educational and skill-formation systems;
• Predominance of social objectives over economic objectives: Technology
upgrading that results in reduced employment and closing of facilities for
environmental non-compliance are officially not policy options;
• The huge size of the informal sector: Most institutional arrangements protect
the operations of the informal sector and encourage its expansion, despite its
negative implications for industrial productivity, worker health and safety and
• Existing industrial policy contradictions: On the whole, industrial
development policies do not offer incentives that favour non-polluting over
polluting industries, cleaner technologies over dirty ones, and high technology
over low value-added resource-based investments, despite general recognition
of the environmental damage resulting from industrial development.
Shortcomings of environmental policy implementation
While most of the 21 countries surveyed and many developing countries in
general have formulated environmental standards for industry, the pressing need remains
to improve compliance monitoring and enforcement. Admittedly, some of the more
advanced developing countries have recently set up compliance monitoring efforts that
generate data on pollutant releases to the environment, but these efforts are limited and
the information is not shared with the public. Second, better enforcement of
environmental standards, including the most basic step of tailored permits for major
industrial facilities, is needed to reduce the absolute level of pollutants going into the
environment. Little evidence was found in the 21 country reports that this was happening.
It was only with the threat, or the actual enforcement, of environmental standards that
industrialized countries were able to bring industrial facilities into compliance with
environmental standards. The same must be the case in developing countries if they want
to achieve significant and widespread reductions in pollutant discharge.
5. MEASURES TO BE TAKEN BY NATIONAL GOVERNMENTS
In light of the findings of the UNIDO survey of developing country policies and
programmes to integrate industrial development and environmental considerations, there
is a need for additional and accelerated efforts to achieve this integration with the
objective of enhancing the role of industry in sustainable development. One strategy that
national governments could pursue consists of three short- to intermediate-term, diverse
but inter-related, efforts. These are creation of an expanded set of environmental and
social indicators for monitoring the role of industry in sustainable development,
encouragement of greater participation of the industrial sector to ensure its ownership of
the sustainable development plan, and the design of new policies and programmes to
reconcile industrial development and environmental objectives and to support more winwin
Environmental and social indicators
While there are sufficient number of indicators to characterize the economic
contribution of industry to sustainable development as mentioned in sections 2 and 4,
there is an absence of indicators on the negative impact of industry on the environment as
well as insufficient information to characterize its social impact, particularly in regard to
An expanded programme to collect data on industrial resource use and pollutant
release should begin with a review of existing national and international data and include,
as needed, an approximation of pollutant releases using engineering coefficients available
from the World Bank and World Health Organization. The World Bank’s Industrial
Pollution Protection System is more widely used (see India case study, CRISIL, 2006).
The expanded programme could then take one of three approaches to improve its
industrial resource use and pollutant database, the first being much more resourceintensive
than the other two. A first approach would be to undertake a systematic
monitoring of pollutant discharge in a heavily industrialized state or province, following
established sampling and analysis protocols. This approach was successfully used by Sao
Paulo State in Brazil. A second approach would be a self-monitoring and reporting
system along the lines initiated by the Pakistan Environmental Protection Agency. This
system made the country’s industry owners and operators responsible for systematic
monitoring and reporting of their environmental performance, saving the Agency
expense, time and effort, as well as enabling industry to make long-term provisions for
environmentally friendly production. A third approach would be a public disclosure
programme modelled on the Program for Pollution Control, Evaluation and Rating
(PROPER) in Indonesia. The Indonesian government classified the compliance of a
limited number of plants with water pollution standards. The simple colour-coded
compliance status was first disclosed to the plants, many of which improved their
performance, and was eventually made available to the public, resulting in further
improvements in compliance.
An expanded programme to characterize the positive effect of industry on the
social dimension of sustainable development would need to clarify several confusing
aspects of currently available data and to enhance them in at least one important way.
Two estimates of manufacturing employment are currently available, one, reported by
UNIDO, on only the formal sector and another, reported by ILO, which includes the
formal and informal sectors. The major differences between the two estimates need to be
reconciled to the extent possible in order to gain a better understanding of the changes in
employment that are taking place in a country. Then, for the purposes of policy
intervention, there needs to be a better appreciation of which industrial sub-sectors have
the greater potential for employment generation, which have the greater potential for
female employment generation, and the employment potentials of firms that produce
primarily for the export market and those that produce for the domestic market.
Perhaps the most difficult challenge for the design of policy interventions is to
know the potential of employment in different sub-sectors to reduce poverty.
Unfortunately, there is only limited empirical information on this topic, and the debate is
usually about the relative importance of agro-based and labour-intensive industrialization.
Some evidence supports the view that agro-based industrialization is a promising strategy
for poverty reduction in low-income countries, as documented for India (Ravallion and
Datt, 1999). Other, but more limited, evidence supports the view that employment of the
poor in labour-intensive industries—particularly, but not necessarily exclusively, those
supplying the export market—can immediately lift them out of poverty, even to the
degree of enabling some accumulation of productive assets. This view is documented
with reference to the garment industry in Bangladesh and Kenya, two countries with
strikingly different experiences in industrial development (Fukunishi, 2006).
Greater industry participation
One avenue for achieving greater industry participation would be a sustainable
production initiative (SPI) at the national level of government. SPI would be privatesector-led,
most likely undertaken by the leading national industrial association, which
would work with both industrial and environmental ministries. It would engage the
private sector in developing a consensus about the most appropriate actions to be taken to
pursue simultaneously industrial and environmental objectives. It would work with the
national governments to clarify industry’s roles and responsibilities with regard to
sustainable development and community-based groups. It would ensure greater
ownership by industry of NSDS or its equivalent.
Renewed efforts to integrate industrial development and environmental policies and
There is an extensive literature on policy appraisal methodologies that would be
useful for identifying potential policy and programme spill-overs (both positive and
negative). Although it is not reviewed or summarized in this paper, it should be consulted
before undertaking new national efforts to identify ways to integrate industrial
development and environmental policies and programmes. Methodologies worth
reviewing are the European Commission’s Integrated Impact Assessment (EC, 2003) and
the United Kingdom’s Environmental Policy Appraisal and Regulatory Impact Analysis
(Russel and Jordan, 2006).
What is suggested here is that governmental organizations take advantage of the
“could do” options that lie between “must do” and “must not do” policy options for
industrial development and environmental management policies for industry. xxii This
would entail pushing the boundaries of the “must not do options” to create a ‘”could do”
territory that lies outside the boundaries of existing “must do” policy and legal
obligations (Daffern and Wyatt, 2001).
A comprehensive description of the numerous policies and programmes that
might emerge from efforts to expand the decision space that lies between industrial
development and environmental policies is beyond the scope of this paper. However, one
proposal is put forward because its need is very evident in many of the 21 countries
surveyed and lies within the mandate of UNIDO.
This proposal is to give more support to sub-sector and regionally focused (state
or province) technology-upgrading programmes. These programmes would align all the
factors—both internal capabilities and external pressures on a firm—to mitigate the more
serious environmental pollution problems as well as reduce utilization of energy, water
and material resources, helping to create ‘factories for tomorrow’. To be successful, they
should be undertaken within the context of enhancing the technological capabilities of
firms to compete in domestic and international markets. In particular, they should
enhance firm capability to obtain and adapt increasingly sophisticated technology
developed elsewhere, not only abroad but by other firms within their own country that
have taken advantage of the international specialization of industrial production. Based
on the experience of first tier East Asian NIEs, building these capabilities within firms
requires substantial investments in engineering education, an incentive system that
rewards firms that have learned to upgrade, and assistance to indigenous firms when they
face difficulties convincing their developed-country joint venture partners to invest in the
technical upgrading of local firms (Rock and Angel, 2006).
Using technical extension institutions to build firm-level capabilities that enhance
environmental as well as general capabilities is a long-term effort. xxiii This is partially so
because the existing technical institutions themselves need to build up sub-sector-specific
environmental expertise. In the shorter term, other measures are clearly needed. One such
measure could be subsidized programmes for those willing to be the early movers in
using cleaner technologies. Without these measures, many firms, particularly SMEs,
would hesitate to use technically proven cleaner technology options. Another and less
costly measure would be enhanced information dissemination about the financial as well
as environmental benefits of cleaner technologies, and about the importance of
addressing environmental issues. xxiv (UNIDO, 2007b for more than 200 case studies and
Luken and van Rompaey, 2007).
This paper has examined several aspects of why industry matters for sustainable
development. In brief, it describes the role of industry in the pursuit of sustainable
development; the positive contributions it has made and the negative impacts it has had;
the extent, based on a survey of a limited number of developing countries, to which
governments have made and still need to make efforts to integrate industrial development
and environmental policies in support of sustainable development, and the challenges
they face in doing so; and the efforts that could be made, both nationally and
internationally, to enhance industry’s contribution to sustainable development, and
reduce its negative impact. The key findings and proposals are:
• Industry provides a typical example of a sectoral aspect of sustainable
development that cuts across economic, social and environmental dimensions.
• The objective of monitoring sustainability in development has led to various
efforts at building and employing systems of indicators. An example of such a
system is ‘Indicators of Sustainable Development (ISD)’, developed at the
initiative of the Commission on Sustainable Development (CSD). However, as the
CSD-ISD system is designed for national use, the indicator values may not be
comparable across countries, their availability varies across countries and across
indicators, and they essentially ignore the industrial sector.
• A few industry-specific indicators, taken from limited globally available
databases and interpreted from a sustainability perspective, are presented in this
paper to characterize industry’s role in sustainable development. These show that
the positive economic contribution of industry to sustainable development,
measured in absolute terms as MVA per capita, increased in all six-country
groups (developed market economies, transition economies, NIEs, China, other
developing countries and least developed countries). In relative terms, measured
as the share of MVA in GDP, however, it increased in only two (NIEs and China)
of the six country groups between 1990 and 2005. Its positive social contribution
to sustainable development, measured in absolute terms as the number of
employees, increased in three of the six country groups (NIEs, other developing
countries and least developed countries). In relative terms, measured as
manufacturing employment as a share of total employment, however, its positive
contribution increased in only one country group, NIEs, between 1990 and about
2004. Its negative environmental impact, measured in absolute terms as energy
use, increased in five of the six country groups (not in transition economies). In
relative terms, measured as energy intensity, its negative environmental impact
increased in two country groups between 1990 and 2004. In short, industry’s
positive contributions to economic and social development were significant but of
declining importance compared to other sectors in most country groups. Taking
only the data available for energy use and carbon dioxide emissions into account,
industry has had an increased negative environmental impact, particularly in
developing and least developed countries that have failed to decouple industrial
growth and energy use. The results found would need to be tested with stronger
and broader data and with more rigorous analysis to be confident that this is a
• The integration of industrial development and environmental policies by national
governments is seen as an important and cost-effective way forward for
enhancing the positive contributions of industry to and reducing its negative
impacts on sustainable development. For the purposes of this paper, such policy
integration is defined as both efforts to insert environmental considerations into
industrial development policies and programmes and industrial development
considerations into environmental policies and programmes. The 12 country
reports commissioned by UNIDO show that these countries failed to make
significant advances in policy integration since the Earth Summit (1992). They
undertook only limited efforts: only four made tentative efforts to find
convergence among policies, and none appear to have undertaken the difficult
task of tracing back, in anything like a comprehensive way, all the potential
coordination and cooperation measures needed to support a coherent vision of
sustainable development. These findings are consistent with other surveys on such
policy integration for both developed and developing countries.
• The 12 country reports commissioned by UNIDO found that developing countries
face a number of challenges in their efforts to integrate industrial development
and environmental policies and programmes in support of sustainable
development; in particular, there are inadequacies in their institutional
arrangements to generate and disseminate data, there is a lack of participation of
their industrial sector in sustainable development planning and there is a need for
coordinated and cooperative policy and programme measures.
• The findings of the above-mentioned UNIDO survey of developing country
integration efforts show that governmental institutions need to take more
advantage of the “could do” options open to them. This would, undoubtedly,
enhance industry’s positive contribution to sustainable development and reduce
its negative impact. One strategy that national governments could pursue to
expand their set of options consists of three short- to intermediate-term, diverse
but inter-related efforts. These are the creation of an expanded set of
environmental and social indicators for tracking the role of industry in sustainable
development, the encouragement of greater participation by the industrial sector
in the sustainable development planning process, and modification of industrial
policies and programmes to reconcile industrial development and environmental
• One of the most pressing needs is an internationally-led effort to systematically
collect and vet indicators/ benchmarks that illustrate trends in industry’s role in
sustainable development: (i) The greatest need is in the environmental area. Even
in terms of energy use there are acceptable data for only 70 out of 139 other
developing and least developed countries to compare changes between 1990 to
2004 (see Table 3). There are no data to assess trends in the discharge of
conventional water and air pollutants, heavy metals and persistent organic
pollutants, something that falls within the mandate of UNEP, and only estimates
of water withdrawal by industry, something that FAO is attempting to do. Nor are
there data on the material intensity of production by manufacturing sub-sectors xxv
and fixed expenditures for pollution control equipment, which falls within the
mandate of UNIDO. (ii) There are also data needs in the social area. A
combination of ILO and UNIDO sources provide acceptable data for only 35 out
of 139 other developing and least developed countries to compare changes in
employment between1990/1991 and 2004 (See Table 2). An effort is needed, too,
to reconcile the reported percentage increases in manufacturing employment by
ILO, which reports on employment in the formal and informal sector, and
UNIDO, which reports on manufacturing employment only in the formal sector.
Finally, there is a need for data that will improve understanding, at present very
limited, of the role of employment in the industrial sector on poverty reduction,
which is a major objective of the Millennium Development Goals. (iii) There are
also some data needs in the economic area. While MVA data are reasonably
complete, there are no acceptable data for more than 20 other developing or least
developed countries to compare changes between 1990 and 2005 (see Table 1)
• The other pressing need is for new efforts to integrate industrial development and
environmental policies to reduce the significant environmental implications of
industrial development. No attempt is made in this paper to identify the full range
of possibilities. However, one proposal is put forward because its need is very
evident in many of the 21 countries surveyed and lies within the mandate of
UNIDO. This is to enhance the capacity of sub-sector and regionally focused
(state or province) technology-upgrading programmes, which lie at the heart of
UNIDO’s crosscutting mandate. These programmes would align all the factors—
both internal capabilities and external pressures on a firm—to mitigate the more
serious environmental pollution problems and reduce the utilization of energy,
water and material resources. To be successful, the programmes should be
undertaken within the context of enhancing the technological capabilities of firms
to compete in domestic and international markets.
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i Starting from the Brundtland Commission’s definition (1987) and its various interpretation—in particular,
the one contained in Agenda 21—three main dimensions of sustainable development can be identified:
economic, social and environmental (WCED, 1987). Briefly stated, the growth of economies and their
structural transformation has always been recognized as being at the core of development. Viewed from a
broad angle, development encompasses not only the strengthening of the material income base but
enhancement of human capabilities and extension of personal choices. Such a view of development
transcends the narrow concept of development-as-economic-growth and also emphasizes the importance of
social development in the context of sustainable development. The natural resource-environmental
constraint to human development is the main reason for concern about sustainability because of the
increasingly negative impact of development on the environment. More precisely, the economic processes
of production and consumption draw to a greater or lesser extent on services provided by natural resources
and the physical environment (air, water and land). These resources consist of two broad types: natural
resources (in the narrow conventional sense as inputs into the production process) and environmental
resources (in their capacity to neutralize or absorb pollutants released into the environment). (UNIDO,
Based on several case studies, a UNIDO report on the relationship between competitiveness and
environmental compliance concluded based on several case studies that in general (except for certain smallscale
and/or resource intensive firms) the impact of environmental regulations on compliance costs and,
therefore, on competitiveness is insignificant (UNIDO, 1995).
The International Institute for Sustainable Development homepage lists some 500 national and local
indicator efforts (www.iisd.org). Under the UN Statistics Office, indicator-monitoring systems are being set
up in many developing countries (see www.undp.org/mdgs). The Paris 21 group on development
cooperation has a Task Team on Improved Statistical Support for Monitoring Development Goals, with two
projects on the Millennium Declaration indicators system: one on country reports, looking at national data
sources and ways of improving national capacities to support the indicators and the other on international
statistics for the indicators and ways of improving harmonization and links to national sources
iv The conclusion about decline in the manufacturing production is well known. As countries mature, MVA
gains tend to come from productivity improvements rather than employment increases. Thus as the
economic structure of countries mature, they need to upgrade their economic structure to have growth in
service and knowledge industries in response to decreasing employment opportunities in manufacturing
v Within any country group, there was considerable variation among countries that have reasonably similar
compositions of the manufacturing level and levels of MVA. For example, energy intensity was 27 per cent
higher in Indonesia than Thailand, 195 per cent higher in Guatemala than in Costa Rica while at the same
time it was 145 per cent higher in Honduras than in Guatemala (meaning 625 per cent higher in Honduras
than in Costa Rica).
The 15 countries are Bolivia, Cameroon, Chile, China, Columbia, Cóte d’ Ivoire, Ethiopia, Nigeria,
Pakistan, Philippines, Sudan, Tunisia, Turkey, Viet Nam and Zimbabwe (Luken et al., 2002).
vii The countries are Brazil (Seroa de Motta, 2006), Egypt (Abdel-Latif and Elailah, 2006), India (CRISIL,
2006), Indonesia (Resosudarno and Isham, 2006), South Africa (McCarthy and van der Merwe, 2006) and
Thailand (Tambunlerchai and Sutummakid, 2006).
viii An informative exploration of the various meanings of integration in regard to the environment can be
found in Scrase and Stheate (2002).
ix The industrial development policy domain includes a wider range of policy instruments than industrial
policy per se (Sercovich et. al., 1999). “A distinction needs to be made between industrial policy, which is
aimed at changing the sectoral allocation of resources through short-run redistribution measures such as
subsidies, import restrictions and credit allocation, on the one hand, and industrial development policy,
which is aimed at increasing the productivity of resources in the medium- and long-run through capability
building on the other. Capability building refers to skill enhancement, scientific and technological progress,
capital accumulation, quality upgrading, resource mobilization, environmental sustainability and market,
institutional and regional development” (p.9).
x The environmental policy domain includes the main categories of environmental policy instruments:
command and control, such as licensing; economic incentives, such as taxes and fines; voluntary
agreements, such as negotiated covenants; and information disclosure, such as pollutant release inventories
xi In its description of what most governments do to integrate policies, the OECD Development Assistance
Committee has used similar criteria with slightly different terminology. These are coordination, consistency
and, more rarely, coherence. “Most governments, and certainly all of those in the OECD, have institutions
and management mechanisms for policy coordination. Officials will have familiarity with the interministerial
or inter-agency machinery in which an entity with primary responsibility for a policy decision
will bring together others that could be affected by or have an interest in it, to iron out a common position.
Such coordination often involves whittling down an original proposal to obtain consensus, in the lowestcommon-denominator
fashion. Policy consistency has more to do with the design and implementation of
policies of several ministries or agencies to support an overall objective, usually defined and articulated at a
high political level. Poverty reduction is such an objective. The key idea behind consistency lays in the
avoidance of policies that conflict in reaching for the defined goal. Policy coherence aims still higher. It too
operates to achieve politically defined goals, but looks beyond the removal of policy contradictions to a
more creative enterprise that harnesses all relevant policy actions to enhance the achievement of an
objective. It stresses a notion of cumulative value added from the contributions of different policy
communities, thus moving beyond mere consistency to a more positive, stronger vision of how objectives
can be achieved” [OECD DAC (2001b) as quoted in OECD/UNDP (2002) pp. 280-281]. The criteria used
here are very similar to those stated by Scrase and Sheate (2002) and taken from Hall (1993).
“…assessments can contribute to adjustment of existing policies, to the design, selection and
implementation of new policies and ultimately changing the central goals and sets of values informing
problem definitions and policy directions” (p 275).
xii A national sustainable development strategy (NSDS) sets out the measures a country intends to take to
progress towards its specific sustainability goals. As defined by the UN Department of Economic and
Social Affairs (UNDESA), NSDS is a coordinated, participatory and interactive process of thoughts and
action to achieve economic, environmental and social objectives in a balanced and integrated manner. The
process encompasses situation analysis, formulation of policies and action plans, implementation,
monitoring and regular review. It is a cyclical and interactive process of planning, participation and action
in which the emphasis is on managing the progress towards sustainability goals rather than producing a
plan as an end product” (UNDESA 2000a).
Within the industrial policy regime, there is often a trade-off between increasing productivity (the
economic dimension of sustainable development) and increasing employment (the social dimension of
sustainable development in regard to industry). The trade-off was not addressed in the 12 in-depth country
reports that form the major basis of this paper. For a discussion of the trade-off, see Lanndmann (2004).
xiv On the basis of their review of environmental and development policies in Asia, Angel and Rock (2001)
concluded that policy coherence is the most cost effective approach to the twin goals of poverty reduction
and environmental improvement. They found only a “few good examples of policy integration in action”.
xv For example, CCICED (2003) has raised questions about the extent to which China’s policies for the
manufacturing sector are encouraging sustainable development.
xvi In 1996, the Government ordered the closure of many small town- and village- enterprises, some 72, 000
in 15 sub-sectors, due to severe pollution of the Huai River. As a result, more than 4,000 small pulp and
paper mills with an annual capacity of less than 5,000 tons were closed between 1996 and 1997. These
mills had no effluent treatment plants and produced mainly poor quality packing grades of paper from agroresiduals.
In addition, the operation of numerous printing- and writing-paper-producing machines was
stopped (OECD, 2001c).
Lafferty and Meadowcraft (2000:433-5) state that high consumption societies have also only made
limited advances in policy integration in the 1980-98 timeframe and, often, so-called policy integration was
superficial, so the difficulties of integration are not those of developing and transition economies alone.
Volkery et al. (2006:2048) write: “Despite some true progress made, our findings indicate that countries are
still at the early stages of learning toward effective action for sustainable development. This applies both to
developing and developed countries. Key unsolved challenges include (a) coordination with the national
budget, (b) coordination with sub-national sustainable development strategies, and (c) coordination with
other national-level strategy processes”.
UNIDO called attention to the need for better integration of industrial and environmental policies
during its preparatory work for UNCED in 1992 (UNIDO, 1992).
See World Bank (2007), [World Development Indicators]. The organic water pollutant discharge is
measured in terms of biochemical oxygen demand (BOD), which refers to the amount of oxygen that
bacteria will consume in breaking down waste. The basis for the estimate of BOD effluent comes from a
World Bank study of manufacturing effluent by sub-sectors in 13 countries (Hettige, Mani and Wheeler,
1998). Estimated BOD data for the manufacturing sector are available for 11 of the 21 countries; they are
not available for Côte d’Ivoire, Ethiopia, Nigeria, Sudan, Tunisia and Viet Nam. Turkey is the only country
where it was possible to compare data collected-at-source with World Bank data on BOD, but only for
pollutant intensity and not for pollutant loadings. In the case of data collected-at-source and Turkish MVA,
pollutant intensity was 1.14 tons/per million US$ of MVA in 1992 and 0.338 tons/per million US$ of
MVA in 2000. In the case of World Bank data on BOD and MVA, pollutant intensity was 1.77 tons/per
million US$ of MVA in 1990 and 1.24 in 1999.
NSDS equivalents include national development plans, national conservation strategies, national
environmental action plans, national Agenda 21s, United Nations Development Assistance Frameworks,
World Bank Comprehensive Development Frameworks and World Bank Poverty Reduction Strategies.
xxi The Earth Council, an international non-governmental organization, was created in September 1992 to
promote and advance the implementation of the Earth Summit agreements. Its main activities include
economics and sustainable development, governance, mediation and conflict resolution and public
The density of the policy space that lies between industrial development and environmental
management policies for industry is explored in considerable detail for eight developing countries in Luken
and van Rompaey (2007).
xxiii There is extensive literature on building technological capabilities in firms in developing countries. No
attempt has been made to include the findings from this literature in the recommendations in this paper.
One starting point for reviewing the literature is Romijn (2001).
xxiv Similar efforts are also needed in the European Union. In a European survey, more than 75 per cent of
the firms polled requested information about cleaner technologies and best available technology solutions
Industrial production data in the UNIDO International Yearbook of Industrial Statistics has data that
would allow measurement of material intensity of production across 28 manufacturing sub-sectors and the
manufacturing sector as a whole. It is done simply by measuring the share of MVA in gross output. An
increase in the share of MVA in gross output over a period implies reduction in the material intensity of