Redefining industrial policy for sustainable growth

In the intricate dance of global progress, economic growth and innovation have long choreographed the steps of industrial policy. As the music shifts towards the urgent beats of sustainability and equitable development, there is a compelling need to reimagine global industrial policy. 

I had the privilege of speaking on a panel at the launch of the United Nations Industrial Development Organization Industrial Development Report 2024, focusing on this new era of industrial policy. The Report serves as a clarion call for this transformation and offers a roadmap to align industrial policy with the Sustainable Development Goals (SDGs) in a quest for fair globalization.

 Given its strong impact on societal and environmental goals, the industrial sector will be pivotal in delivering sustainable development solutions. Industrialisation does not happen independently, it requires investments, coordinated efforts and carefully designed policies. In recent years we have witnessed the renaissance of industrial policy globally. According to UNIDO, highly industrialised economies have implemented five times more industrial policies over the last 10 years compared to the previous decade. 

 As industrial policy becomes increasingly important again, it is necessary to reimagine its design in alignment with global trends and SDGs. Globally, we stand on the brink of monumental shifts due to the energy transition, digitalization, global rebalancing and demographic changes.

These mega trends pose a twofold challenge to countries: avoiding being blindsided by the rapid pace of change and harnessing these global trends as catalysts for sustainable development. This requires an anticipatory approach to policymaking, which is agile, adaptive, and ready to leverage innovations in renewable energy, artificial intelligence, and digital technologies. This also means massive investments with suitable strategies and policies to direct investment into the most beneficial sectors, such as the growing demand for food and health products.

 Future industrial policies should not only be adjusted to be less harmful to the environment or more socially inclusive; they should be restructured to drive the change envisioned by the SDGs. It means policies that prioritized economic growth at any cost must now weigh every decision against its impact on sustainable development targets.

 The Report concludes by advocating for a new era of modern industrial policies with four important elements. First, modern industrial policies should align with the SDGs, starting with a clear assessment of where countries and regions are with their progress towards achieving the SDGs. The assessment of developing countries in the International Yearbook on Industrial Statistics 2022 includes three areas that need special attention: innovation, clean energy, and employment. Accelerating progress in these areas through industrial policy means supporting industrial digitalization, decarbonization and job creation. Second, industrial policies should be future-ready and must consider the four mega trends reshaping the world. While the megatrends present significant challenges for developing countries, they also open new opportunities to accelerate progress through well-crafted industrial policies.

 Third, modern industrial policies should be collaborative as governments cannot solve today’s challenges independently. Industry and business must jointly contribute to policy design and ensure effective implementation in public private dialogue and private sector development. Finally, such policies should be regionally coordinated to mitigate tensions and unlock the full potential for cooperation among neighbours.

According to Jeffrey Sachs, Director of the Center for Sustainable Development at Columbia University, the real path to success requires pursuing solutions to sustainable development challenges not only at the national level but also at the regional and global levels.  Collaborative and regionally coordinated policies recognize that our fates are intertwined, mitigate tensions, and foster a spirit of cooperation.

 —The writer is a senior advisor (Global Lead), Industry & Commerce at the Tony Blair Institute for Global Change