Impact of the "industry 4.0" concept on sustainable development

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Impact of the "industry 4.0" concept on sustainable development

Г.Д. Папышев, студент

Университет Цинхуа

(Китай, г. Пекин)

Аннотация

В данной работе представлено потенциальное влияние реализации концепции «Индустрия 4.0» на устойчивое развитие. Автор утверждает, что «Индустрия 4.0» имеет большой потенциал, чтобы способствовать достижению «Целей устойчивого развития» связанных с: чистой энергией, инфраструктурой, инновациями, ответственным потреблением и умными городами. Однако, сильный политический курс и тщательно разработанные стратегии должны быть применены на национальном и мировом уровне.

Ключевые слова: Индустрия 4.0, устойчивое развитие, цели устойчивого развития, индустриальная революция, технологии, политика.

energy infrastructure innovation smart city

Introduction

The pace of technological change today is accelerating to a speed unprecedented ever before. Human-like machines, smart factories and self--regulating cities - these are not examples of the technologies from science-fiction books, they are the technologies of today.

Many economists and engineers argue, that we are stepping into a so-called fourth industrial revolution - the time in history when digital and real worlds become interconnected both in industrial and everyday settings. However, advanced technologies by itself do not equal to flourishing life for humankind - global issues such as poverty, climate change and malnutrition are still present. But, perhaps, never before technologies have opened so many opportunities for humanity to develop our world into a clean and prosperous place.

The new industrial revolution, indeed, has a great potential, but it is the way we use these technologies is a key to global success. This essay investigates what opportunities does fourth industrial revolution bring to world's sustainable development, as well as analyzes strategies, that different countries have implemented under the framework of Industry 4.0.

Defining Industry 4.0

At the very beginning of the 19^th century England was the first country, who experienced a so-called “industrial revolution”. The term “Industrial Revolution” refers to a shift from a human-powered labor work, to the creation of a manufacturing sector, which started heavily relying on the steam- and water-powered industrial facilities. Such historic event led to an unprecedented pace of economic and industrial development, spreading from England to continental Europe, and later across the globe. Thus, the first Industrial Revolution provided world economy with an opportunity to excess the manufacturing output in more than 200 times between 1800 and 2010. “Of all the events that shaped the world in the final 500 years of the second millennium, the Industrial Revolution was the most important” (Marsh, 2012).

However, the first Industrial Revolution was not the last one that the world experienced during the last two centuries. “The second Industrial Revolution, which started in the late 19^th century and into the early 20^th century, made mass production possible, fostered by the advent of electricity and the assembly line” (Schwab, 2016). After the second Revolution, there was the third one, which can be mainly characterized by a widespread of the usage of electronics and information technology in order to bring automation to manufacturing between 1960s to 1990s.

Not much time had passed since the launch of the third Industrial Revolution, however it is now becoming clear to everyone, that the speed of technology innovation accelerates, and the new technologies that build up on the technologies of the previous revolution not only appear and integrate into the manufacturing sector, but even appear in the lives of common people -- from the usage of smartphones to a growing number of futuristic technologies implemented in households. In other words, the new technologies are not only changing the ways we produce things, but also the way we live our lives.

Thus, many economists are now arguing that the world is stepping into the fourth Industrial Revolution. The main feature of it is so-called “cyber-physical systems”, which refers to connecting the real world with the virtual one -- connecting material objects and subjects with the information-processing ones. Examples of such technologies are numerous, however the key ones are: Internet of Things, 3D printing, Artificial Intelligence, Big Data, Block Chain, Cloud Computing, Bioengineering, Nanotechnologies, New Materials and New Energy.

Today it is commonly accepted to name the fourth industrial revolution as “Industry 4.0” if mentioned in the context of manufacturing. This term was introduced for the first time in 2011 during the Hannover Fair in Germany: at first it was sought as a type of project within the overall high-tech development strategy of Germany. However, in latter years the term was expanded into a broader definition, which can be summarized as “an environment, which includes the strong customization of products under the conditions of high flexibility of mass production (improved automation technology), requiring the introduction of methods of self-organized systems (self-optimization, self-configuration, self-diagnosis, etc.) to get the suitable linkage between the real (machines, workers) and the virtual worlds” (Devezas, Leitao, 2016). It is hard to argue, that the fourth industrial revolution is only about connecting smart machines with virtual objects. The scope of the technological advancements is much wider: from nano-- and biotechnologies, to renewable energies and smart cities. The interaction between the three major domains of the technological progress of this revolution (physical, digital and biological) will form the future reality we will be living in.

However, the fourth industrial revolution will not affect every country in the same way, as neither did the previous ones. “The second industrial revolution is yet to be fully experienced by 17% of the world as nearly 1.3 billion people still lack access to electricity. This is also true for the third industrial revolution, with more than half of the world's population, 4 billion people, most of whom live in the developing world, lacking internet access” (Schwab, 2016). Previous industrial revolutions teach us that a nation's progress is heavily affected by the scale and effectiveness of the implementation of new technological innovations. The fourth industrial revolution will allow people to change the way people live in many senses (it already does by providing us with services like Taobao, Uber and WeChat). However, it will also bring many challenges to the societies, which will implement the “Industry 4.0” programs, as well as to developing nations - mainly because of the changing industrial processes within the “human substitution by robots” framework and the change in the skillsets, that are valued. A good example of a changing environment can be a comparison between Detroit in 1990 and Silicon Valley in 2014. “The three top companies in Detroit produced revenues of $250bn with 1.2m employees and a combined market capitalization of 36$bn. The top three companies in Silicon Valley in 2014 had revenues of $247bn, only 137,000 employees, but a market capitalization of $1.09tn” (Manyika, Chui, 2014). Thus, it is clear that today the new industrial revolution allows companies to generate more capital by using much fewer human resources due to a substitution of low-skilled labor by the machines - in the long run it may become a heavy burden for the governments to handle the issue of unemployment of low skilled labor force.

Not only the new industries will require a more qualified labor, it will also require more infrastructure and equipment. The demand for high skilled human capital will definitely increase, so will the non-human capital. “The evolution of technology has certainly increased the need for human skills and competence. But it has also increased the need for buildings, homes, offices, equipment of all kinds, patents, and so on, so that in the end the total value of all these forms of nonhuman capital (reel estate, business capital, industrial capital, financial capital) has increased almost as rapidly as total income from labor” (Piketty, 2014).

Potential Impacts of Industry 4.0 on Sustainability

Sustainability, or Sustainable Development Goals, are, perhaps, the main global initiative of upcoming 15 years, and Industry 4.0 creates many opportunities to reach some of the SDGs. There can be seen clear connections between Industry 4.0 technologies and SDGs, however Industry 4.0 can have the greatest potential impact on SDG No. 7 (Affordable and Clean Energy), SDG No. 9 (Industry, Innovation and Infrastructure), SDG No. 11 (Sustainable Cities and Communities) and SDG No. 12 (Responsible Consumption and Production). Thus, the main impact of Industry 4.0 will be on “the allocation of resources, i.e. products, materials, energy and water, which can be realized in a more efficient way on the basis of intelligent cross-linked value creation modules”” (Stock, Seliger, 2016).

Successful business of today is not only characterized by its profitability, but also by its social contribution. New technologies allow companies to create new solutions, that are more environment and society friendly. In other words, access to advanced technologies allows companies to rethink their business models, and adjust them to SDG oriented ones. According to researches from University of Cambridge (Bocken, Short et. all, 2014), sustainable business models can be categorized in eight archetypes: Maximize material and energy efficiency; Create value from waste; Substitute with renewables and natural processes; Deliver functionality rather than ownership; Adopt a stewardship role; Encourage sufficiency; Re-purpose the business for society/environment; Develop scale-up solutions. Though, realization of these models heavily relies on successful implementation of Industry 4.0 technologies.

Another great potential of Industry 4.0 lays in the dimension of cross-linking the factories and creating closed-loop product life cycles. The interconnection between factories, and between the machines within factories allows companies to create sustainable and resource saving flow of energy, products, water and materials, which also leads to a possibility of creating closed-loop of product's usage - “multiple use phases with manufacturing or reuse in between” (Stock, Seliger, 2016). Such potential will greatly impact the environmental issues of today: less POPs will be created, waste management will be improved and energy will be used economically.

Censors and Internet of Things open an opportunity of “second life” for manufacturing equipment. The equipment installed in factories is a capital intensive investment with a life phase of up to 20 years. However, installation of censors and connection of old equipment into a network of machines can prolong its usage. Retrofitting of old equipment can become a low cost alternative for companies, which will have a great contribution to both economical and environmental dimensions of global sustainability.

Big Data helps companies create Smart Grids, Logistics and adjust their services according to precise needs of customers. Introduction of machine learning processes and artificial intelligence allows companies to create self-regulating autonomous systems, that are seeking to create resource efficient solutions (Roblek, Mesco, 2016). Thus, Industry 4.0 brings opportunity to increase the efficiency of resource allocation within the organizational structure of a company and by this contribute to sustainability of a country's socio-economic system.

Moreover, Industry 4.0 creates a momentum for developing countries to leap forward in their industrial capabilities and to catch up with developed world. It is stated in SDGs, that global development can only be achieved through sustainable holistic industrial growth. “Industry is also the most dynamic driver of prosperity and collective wellbeing, and therefore a global objective that touches upon the economic, social and environmental aspirations of all, and as such is intrinsically woven into the architecture of the 2030 Agenda” (Ngjecari, 2016).

The potential contribution of Industry 4.0 technologies on developing countries is greatly summarized by Columbia University Earth Institute Report (2016). The main potential contributions are as follows: accelerated upscaling of critical services in health, education, financial services, smart agriculture, and low-carbon energy systems; reduced deployment costs addressing urban and rural realities; public awareness and engagement; innovation, connectivity, productivity and efficiency across many sectors; faster upgrading in the quality of services and jobs.

Industry 4.0 Oriented Policies in Different Countries

There has not yet been developed a holistic global framework to work with the opportunities and challenges of Industry 4.0. However, certain initiatives have been supported by UNIDO, for example BRICS industrial cooperation initiative - though, all of them tend to be rather regional, than global.

Thus, adequate answer to the challenges and opportunities that Industry 4.0 brings to societies requires countries to establish and implement their own local strong policies and strategies that will be dealing with the upcoming issues. By now most developed countries already established frameworks to work with Industry 4.0, while some of the emerging economies have also performed some actions in that direction.

Germany is the first country that created a specific strategy to implement the technologies of the new industrial revolution, the strategy itself is named “Industrie 4.0”, which further coined this term in a broader context. This initiative is included in a broader framework of “High Tech Strategy 2020”, which is seen by Germany as a “major opportunity to establish itself as an integrated industry lead market and provider” (Industrie 4.0 website). By such initiative Germany is promoting implementation of the new technological solutions within its manufacturing sector in order to increase its competitiveness and efficiency.

The economy of the USA is heavily relying on both manufacturing and innovation; thus the potential of Industry 4.0 is trying to be realized through numerous industrial policies. Instead of having a single holistic Industry 4.0 oriented strategy, the USA implementing different policies, that are tackling certain sectors within the manufacturing landscape of the country, in order to increase the potential benefits form Industry 4.0 implementation.

While some of the country members of European Union running their own Industry 4.0 oriented programs, there has been established an overall innovation framework within the union. Horizon 2020 seeks to “ensure Europe produces world-class science, removes barriers to innovation and makes it easier for the public and private sectors to work together in delivering innovation” (Horizon 2020 website). Within this framework European Union is allocating $80 billion of funding to the innovative research projects, as well as running innovation-training programs at the leading European universities.

“To ensure sustenance of manufacturing competitiveness, emerging markets have also initiated the adoption of next generation manufacturing through the launch national strategies - most notably, China had launched “Made in China 2025” to promote Industry 4.0, India had initiated the “Make in India” mission to promote manufacturing, Russia had issued a program called the “Development of the manufacturing industry and improvement of its competitiveness for the period till 2020” (BRICS Skill Development Working Group Report, 2016).

“Made in China 2025” strategy seeks to promote implementation of Industry 4.0 in Industrial sector of the country by providing financial and legal incentives to the companies, who are taking actions in restructuring their manufacturing processes and creating sustainable business models. With the understanding of competitive nature of global market, China tries to adjust its current industrial capabilities to a new level, in order to continue to be an equal competitor in industrial sector to the USA, Germany and Japan. “Made in China 2025” will be a programmatic document guiding the transformation of manufacturing industry to intelligent manufacturing industry in China” (Li, 2017).

Indian Industry 4.0 oriented framework was established in 2014 in order to “transform India into a global design and manufacturing hub”. India is trying to raise awareness of new technologies among its manufacturing sector by advancing its technological development. Three main goals that are pursued by such initiative are: “Inspire confidence in India's capabilities amongst local potential partners, the Indian business community and partners abroad; provide a framework for a vast amount of technical information on 25 industry sectors; reach out to a vast local and global audience via social media and constantly keep them updated about opportunities, reforms, etc.” (Make in India website).

Conclusion

The fourth industrial revolution is happening today around the globe. As did previous ones, the new revolution is bringing many opportunities for countries to facilitate its development, however, the challenges associated with the revolution are still present.

Industry 4.0 can have a great potential impact on many SDGs, and help world to develop into a more social and environment oriented place. The biggest contributions of Industry 4.0 can be seen on SDGs associated with clean energy, infrastructure, innovation, responsible consumption and smart cities. The sustainability itself can be reached by the opportunity to create more sustainable business models, create closed-loop product usage cycles and upgrade old industrial equipment - all of these actions are only possible by introduction of the new technologies to the manufacturing processes.

In order to increase chances of benefiting from Industry 4.0, governments around the globe have to launch comprehensive strategies aimed at solving Industry 4.0 related issues. Such strategies have been implemented by main developed countries, as well as emerging economies. While strategies vary in their policies, the overall aim is similar - create an efficient climate for the implementation of the new technologies in order to increase competitiveness of a country's manufacturing sector.

While the true outcomes of the implementation of Industry 4.0 are still hard to measure, it is clear for the global society, that the new technologies can help us solve many of the global issues and finally reach desired sustainability. However, strong cooperation between countries and holistic policies are the two prerequisites required for successful international development.

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