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What is Sustainable Industrial Policy?

Sustainability is defined as meeting the needs of the present, without

compromising the ability of future generations to meet theirs. That

implies a healthy environment, a healthy economy, and a healthy

society, built on sound foundations and maintained through good global

governance.

An industrial policy is a plan to encourage desired patterns of

industrial development and growth. It should strategically target

specific industries and sectors, as well as consider broader needs

such as transportation and communications infrastructure, education

and skills training, research, and energy. A sustainable industrial

policy must create a healthy economy and quality employment

(decent,secure work that pays a living wage) while minimizing negative

environmental impact and advancing the interests of society as a

whole.

Sustainable industrial policy is not about creating conditions for

companies to thrive at the expense of workers, society and the

environment. It’s about creating conditions under which companies can

operate in order to make a sustainable contribution to society.

Why do we need it?

The triple crisis

Our current path is unsustainable. We are facing crises on three

fronts: environmental, economic and social.

Climate change is a real and serious threat. The Intergovernmental

Panel on Climate Change (IPCC) estimates that to maintain global

average warming below 2°C above pre-industrial levels (an amount of

warming that will nevertheless have serious consequences) very

significant actions need to be taken by 2015-2018. If the world delays

to 2020, maintaining the 2° limit will require technologies that have

not yet been developed, or are not yet proven.

The longer action is delayed, the more likely that social standards

and human rights will be sacrificed in a last minute panic to save the

planet.

The degradation of our planet’s natural systems continues with

reckless speed. Businesses have few solutions to offer. Too

frequently, private interests actively try to prevent solutions from

being found or implemented.

Global corporations act to maximize private control over resources,

production, consumption and investment, while spreading the costs and

risks of their activities over the rest of society. Their focus is on

maximizing short-term profit, in full knowledge that this is

unsustainable.

In the drive to generate ever-greater short-term profits, it has

become more profitable to manipulate financial instruments than to

actually make anything. Private equity buyouts promise phenomenal

returns to investors by maximising the short-term extraction of cash

from companies and loading them with debt at the expense of long-term

productive investment, jobs and employment security.

The economic crisis resulted from policies that fuelled unbridled

financial speculation and short-term profits at the expense of

productive investment in the real economy. In countries most affected

by the crisis, workers paid the price in massive job losses and rising

unemployment. Citizens paid the price when taxpayers’ money was used

to bail out the banks whose activities precipitated the crisis, and

continue to pay as governments use the deficits caused by the bailouts

to justify austerity measures.

The twin crises of the environment and the economy have created a

third: a social crisis. Increasing disparities in wealth and income,

reduced access to education, degraded population health (including

occupational health) and attacks on health care, an explosion in

precarious work, and vanishing opportunities, particularly for young

people and traditionally disadvantaged groups, are all consequences of

the failure to build a sustainable society.

Race to the bottom

Capital is no longer restricted to operating within national

boundaries. Companies of all sizes and industries are inter-connected

through global networks known as global value chains (GVCs).

Multinational corporations (MNCs) have driven the development of GVCs

by outsourcing parts or all of the production process.

Countries compete to be part of GVCs, often through narrow

specialisation in labour-intensive, low skilled stages of production.

Far from developing sustainable industrial policies, many governments

rely on Export Processing Zones to attract foreign investment. Tax

breaks and other incentives allow the wealth generated by production

and labour to go directly into the coffers of the MNCs at the top of

the chains, rather than into the hands of workers, or to contribute to

the development of local industry.

The result is a global competition to drive down wages. Suppliers

further down the chain are dependent on the price buyers above them

are prepared to pay, negatively impacting the capacity of the parties

to negotiate on wages and working hours and creating health and safety

risks. Governments are allowing MNCs to dictate the conditions under

which workers labour in their countries by demanding prices which do

not reflect the true cost of labour, but which they are able to impose

because of their dominant position in the chain.

We are witnessing the breaking down of the historical link between

wages and productivity through, among other factors, the decline of

collective bargaining as a mechanism to fairly distribute profits and

the gains from productivity improvements. In their drive to maximise

short-term profits, corporations seek productivity improvements via

the low road of intensification of work, rather than through

innovation.

The enormous and unnecessarily complicated value chains of today’s

MNCs have eroded respect for human rights. The UN Guiding Principles

on Business and Human Rights make it clear that corporations have

responsibility for what happens in their value chains, but the size

and complexity of the chains make it impossible for MNCs to know what

is really going on within them.

What does it look like?

Promoting equity

Social sustainability begins with respect for fairness, equity,

justice, human rights, and human cultures and communities. The United

Nations Universal Declaration of Human Rights, and the labour

standards of the International Labour Organization articulate many of

these values.

Sustainability must address inequality, not by competing on the lowest

wages, but by promoting collective bargaining to ensure that

productivity improvements benefit those that contribute to them, thus

raising wages and in turn contributing to industrial and social

stability, reducing inequality and driving demand for the products of

industrial production.

Crucially, sustainable industrial policy involves the development of

effective industrial relations to mediate between the competing

interests of workers and capital.

Harnessing technology

Sustainable industrial policy involves developing strategies to

encourage greener technologies that address problems like climate

change, while creating large numbers of decent jobs. Technological

development should benefit workers and make their jobs easier, leading

to increased productivity. It should not be used to reduce work to

limited, repetitive tasks which make work unfulfilling, de-skill

workers and cause illnesses and injuries, nor to cut jobs.

Advancing labour standards

A sustainable industrial policy includes the effective implementation

of labour standards. This includes promotion of collective bargaining,

resources for labour inspection, promotion of dialogue between

industry and trade unions and labour laws which restrict precarious

work. All international bodies concerned with development need to

promote freedom of association and collective bargaining as enabling

rights, to make sure that the gains are passed onto workers.

Moreover, a sustainable industrial policy must be underpinned by

social protection policies addressing unemployment, retirement and

health care, to which industry must be required to contribute.

Building sustainable industry in a globalised world

Participation in global value chains must be about employment and

quality of employment, not just driving increased profits for MNCs.

Governments need to create industrial policies which lead to a more

equitable distribution of the benefits of participation in GVCs

towards workers and society and reinvestment in research and

development and skills. We need integrated industrial development

strategies, linked to the sustainable development of local industries

as opposed to the enclave approach of EPZs.

Government policies should aim at encouraging higher level

participation in value chains to capture more of the value added, thus

strengthening the position of local companies and leading to increased

wages, better working conditions and higher skill levels. But these

benefits do not flow automatically. Collective bargaining must be

promoted as the means to ensuring that workers also benefit from a

higher level of participation in GVCs.

Just Transition

Knowing that our present-day systems are failing, the labour movement

seeks to create a better, fairer society. There will necessarily be a

transition period in getting to where we want to be, from where we are

now. It is not sufficient that many new, greener, jobs will be created

during that transition. The transition must consider the needs of

present-day workers in present-day industries, as well as the

potential to create newer, greener jobs in our journey to a

sustainable future. This is a “Just Transition”: a complete package of

sustainable industrial policies and social programs that will allow

workers to benefit from change, rather than bear its costs.

How can it be implemented?

Strengthening the role of government

The free market cannot create sustainable development. There is no

automatic link between economic growth and improved living standards.

Per capita GDP can increase, while inequality worsens, and the

environment is degraded. Government intervention is needed to

rebalance the distribution of the benefits of economic activity.

As the only institutions that can stand against corporate greed,

governments must create public policy that is genuinely in the public

interest; backed by a strong and enforceable legislative and

regulatory framework.

But the rise of free-market ideology has seen the decline of

industrial policy-making by governments. State intervention to shape

the direction of industrial development is challenged as protectionism

and an illegitimate constraint on capital. Trade rules and agreements

restrict government capacity to legislate environmental and social

protections in the interests of their own citizens. Investor-state

dispute settlement provisions in international trade agreements allow

corporations to sue governments when legislation conflicts with their

investment goals.

There needs to be a rebalancing of the power to dictate the terms of

industrial development, away from MNCs and back to

democratically-elected governments. Industrial policy needs to be

revived, in order to correct for market failures through state

intervention.

Inclusive policies

Sustainable industrial policy development requires an integrated

approach which ensures policy coherence between the different arms of

government, including departments of labour, the environment,

industry, trade, research and energy. Similarly there must be policy

coherence between and within the global institutions - the WTO, IMF,

World Bank, ILO, UN, OECD - so that governments do not receive

conflicting messages, particularly on labour market deregulation.

Unions must be part of industrial policy formulation and have an equal

seat at the table with industry. The transformation of industry cannot

happen without the active participation of workers.

Establish targets

Sustainable industrial policy needs targets in areas such as

employment, R&D, energy efficiency, carbon emissions, reducing

inequality, observance of labour standards, active labour market

policies focussed on employment creation, retraining and re-employment

of redundant workers, youth skills development. It should be guided by

the development of both qualitative and quantitative indicators which

are measured and analysed with the involvement of the social partners:

business and trade unions.

Who is going to pay for it?

Financing for sustainable industrial policy

Global corporate profits have reached unprecedented levels.

Shareholder dividends have increased at the expense of investment,

jobs and social protection. Instead of profits being reinvested in R&D

and innovation, they are directed towards speculation and

rent-seeking. Shareholders are privileged through financialisation of

corporate investment to deliver maximum short term financial returns.

Government action is needed to drive companies towards re-investing in

development. Equally, companies need to be protected from destructive

private equity buyouts. Governments must (re-) establish a regulatory

environment which promotes productive investment. Legislative changes

that have opened the doors to private equity buy-outs must be

reversed. Preference should be given to investment in venture capital

funds which focus on longer-term development and can thus contribute

to job creation.

External costs should be internalised so that companies are liable for

the true costs of their business, not society. Governments should

steer behaviour towards sustainable practices, for example through the

creation of incentives and public procurement.

Thanks to corporate exploitation of tax loopholes and tax havens,

governments are missing out on enormous amounts of tax revenue which

could otherwise be used to support local industrial development and

the public infrastructure that it needs. Regulation is needed to close

the loopholes as well as action by global institutions to chase down

missing tax revenue.

The financial sector must be put to the service of the real economy.

Sustainable industrial policy needs to improve access to private

sector financing for the transition to sustainable production as part

of the re- regulation of the financial sector.

The introduction of a Financial Transactions Tax would have the

benefits of restraining the excesses of the financial sector, helping

to stabilize currencies and raising a great deal of money that could

be used to address climate change and other global issues.

What can IndustriALL do?

IndustriALL, representing 50 million workers in both energy producing

and energy consuming industries, has a critical role to play in

calling for sustainable industrial policy. The industries where

IndustriALL’s members work create value through the transformation of

extracted natural resources into products, through manufacturing and

processing. How this is done can have significant positive or negative

impacts on sustainability.

Every industrial sector and every region has its own particular

challenges and concerns, with considerable variation between and

within them. Sustainability can only be achieved when each of those

challenges and concerns is dealt with in a consensus-seeking,

integrative fashion that attempts to balance the environmental,

economic and social imperatives of sustainability.

The IndustriALL Action Plan calls for strong industrial policies that

recognise manufacturing as a key engine of growth for national

economies. Yet well-paid, secure industrial jobs, which have

traditionally been drivers of social progress, are in decline, thanks

in part to global competition to drive down wages and the spread of

precarious forms of employment. Many countries still have no

industrial policy to speak of, let alone one that incorporates

sustainability.

IndustriALL has a responsibility, reflected in its Action Plan, to:

Promote strong industrial policies that recognize manufacturing as a

key engine of growth for national economies

Encourage investment in research and development, and training and

skills to assure sustainable industrial production and long-term

employment prospects

Support transfers of skills and technologies to developing countries

to accelerate industrialization and the creation of good quality jobs

while safeguarding the environment

Develop a proactive energy policy which establishes security and

sustainability as the foundations of industrial production world-wide

Support a fair, ambitious and binding global treaty on climate change

that takes into account social implications, promotes the creation of

green jobs and encompasses the principles of Just Transition, thus

ensuring that the transition to low-carbon societies is fair

Pursue union participation in all aspectsof industrial policy

development and implementation

Fight for a new global economic and social model that will confront

disparities of opportunity and wealth within and between countries

Make the voice of industrial workers heard in the global institutions,

including the ILO, OECD, WTO, IFIs and G20, to promote sustainable

development, social and economic justice and democratic global

governance

Work with other Global Unions to get governments and IFIs to take

concrete measures to combat poverty, unemployment, inequality and

social injustice

Insist on trade to be based on the principles of fairness and equity

in order to lift living standards by supporting employment growth,

improving social protections and providing for fundamental workers’

rights, environmental standards, human rights and democracy

Take action to ensure that ILO Core Labour Standards are included in

all trade agreements and IFI mechanisms

Build solidarity among affiliates against the negative effects of

market opening on employment and workers’ rights in trade deals

Push for regulation of global financial markets that will prevent

financial speculation from precipitating another disaster to the real

economy and fight against tax havens

Call for the introduction of an international Financial Transaction

Tax system.

The way forward

Significant work has already done by IndustriALL’s founding

organizations, which each have a long tradition of work on sustainable

development. This earlier work created the space for IndustriALL’s

affiliated trade unions to speak up for a fair, ambitious and

legally-binding global agreement on greenhouse gases.

Now there is a real - and urgent - need for IndustriALL to look at

resource extraction, processing, manufacturing and energy through the

lens of sustainability to develop a coherent and sustainable

industrial policy at the international level, and to assist its

affiliates in their work at the national and regional levels.

To this end, IndustriALL is developing a framework for sustainable

industrial policy to be endorsed by affiliates and widely promoted as

a basis for influencing governments, the global institutions and MNCs.

This will involve building on our alliances with other labour

organizations and with broader social movements.

All affiliates are encouraged to get involved in shaping IndustriALL’s

approach to sustainable industrial policy, to maximise the impact we

can make towards reorientating the global economy towards a

sustainable future.