Nature-based sustainable industrialization: Opportunities for developing countries
Macro of leaf. (Image: Mark Lyu via Unsplash).

Nature-based sustainable industrialization: Opportunities for developing countries

STI-led strategies to unleash the future potential of nature-based industrialization.

By Fernando Santiago and Niki Rodousakis

The World Health Organization (WHO) on 5 May 2023 declared that COVID-19 no longer represents a public health emergency of international concern.1 This does not mean that the threat has disappeared, and governments are being called on to continue dedicating resources to preparedness and resilience. While the pandemic’s long-term social and economic effects remain unknown, its short-term impacts have been severe. The most recent edition of the Human Development Index (HDI) reports a regression in education indicators and considerable losses in jobs, incomes and livelihoods.2 Over 90% of the 191 countries included in the 2021/22 HDI report recorded declines in their HDI score in 2020 or 2021.3 While the HDI growth rate of OECD economies has bounced back, developing countries—and even more so least developed countries (LDCs)—are lagging far behind (see figure below).

Human Development Index trends, 1990–2021

Source: Author, based on United Nations Development Programme (2023)

LDCs continue to be highly vulnerable to economic and environmental shocks

We have reached the halfway point in the implementation of the Sustainable Development Goals (SDGs). Several SDGs are moderately or severely off track.4 UNIDO’s latest data on SDG 9: “Industry, Innovation and Resilient Infrastructure“ illustrate the challenges that lie ahead. Despite tangible progress, particularly in developed and in large middle-income countries, we will not reach the SDGs’ industry-related without a serious increase in commitment and pace (see next figure). Moreover, the stark regional and country-level differences indicate that LDCs in Africa are at severe risk of being left behind.5

Progress on SDG 9 industry-related targets

Notes: The scores in the figure are based on the index proposed by Kynčlová, Upadhyaya and Nice (2020) and refers to SDG 9 targets 9.2.1a, 9.2.1b, 9.2.2, 9.4.1 and 9.b.1. Countries not marked have no available data.

Source: UNIDO elaboration.

How STI-led solutions can accelerate progress on the SDGs

During the Eighth Annual Multi-Stakeholder Forum on Science, Technology, and Innovation (STI) for the SDGs, participants discussed innovative strategies to accelerate progress on the SDGs. One such strategy are nature-based solutions which entail measures to protect, sustainably manage or restore natural ecosystems while simultaneously addressing societal and environmental challenges.6 Nature-based industrialization has significant future potential7, but to effectively unleash the potential embedded in environmental services that offer nature-based solutions, our focus must shift towards protecting and restoring natural habitats to improve the prospect of achieving SDGs 13, 14 and 15. By reshaping our relationship with nature, significant gains can be made in the reduction of poverty (SDG 1) and inequality (SDG 10) as well as in local community development (SDG 8) and healthier living (SDGs 3 and 6).89

Yet how best to move from rhetoric to reality to attain nature-based industrialization? First, the development of environmental services markets calls for a new set of incentives, regulations and monitoring mechanisms.10 This requires a combination of technology use, the engagement of multiple stakeholders and addressing ethical questions on the exploitation of nature’s environmental services. Achieving the right scale for such markets will be crucial if nature-based industrialization is to foster the systemic transformations necessary to achieve the SDGs.11

Second, the dynamics of structural factors that shape the landscape of industrial development must be taken into consideration. These include the digitalization of manufacturing, the consolidation of Asia as the global manufacturing hub and the intensified push for decarbonization.1213 The twin digital and green transitions are already salient in advanced economies’ industrial development agendas, with a focus on resource efficiency and circular economy principles. To ensure that the economic and social benefits do not remain geographically concentrated, access to new technologies and knowledge associated with the twin transitions must be made available to developing countries.

Third, research and development (R&D) are essential for supporting the emergence of nature-based solutions.14 R&D is often constrained by market conditions and how markets drive—or deter—eco-innovation. In addition to fostering an increased supply of more affordable eco-innovations, targeted policies should reorient market demand towards products and services that have a positive environmental impact. Improving the environmental sustainability of industrial activities requires the adoption of production technologies whose economic viability is not necessarily the decisive factor.15

Fourth, achieving carbon neutrality by 2050 will largely depend on dedicated industrial policies and actions.16 Developing countries often lack the policy space to effectively implement resource-based development strategies while also adhering to internationally agreed rules on trade, investment and intellectual property. Hence, in addition to scaling up development cooperation and SDG investment, the 2023 Financing for Sustainably Development Report advocates transformative industrial policies to accelerate sustainable industrial development.17 A new generation of sustainable industrial policies and integrated financing frameworks could help developing countries take advantage of windows of opportunity to build domestic capabilities to achieve a low-carbon transition while simultaneously increasing productivity and jobs.18

Finally, we need to strengthen multilateralism. Current structural trends, the challenges of building back better, geopolitical conflicts and rising trade tensions as well as the reorganization of global value chains has resulted in an increasingly complex industrial development landscape. There is growing demand in developing countries for new knowledge and capacity building around industrial development. Multilateral organizations should scale up their range of industrial policy advisory services to developing countries, while fostering knowledge sharing and multilateral learning, networking and partnership building to inform new approaches to industrial policy. Global forums such as UNIDO’s recently established Multilateral Industrial Policy Forum (MIPF) provide an opportunity for the global community to exchange knowledge and support mutual learning on topics related to nature-based industrialization.

From ambition to transition

Progress on the SDGs is increasingly uneven. We must recognize that the capabilities required to utilize advanced knowledge and implement nature-based solutions remain disproportionately distributed across and within regions and countries. These capabilities are in scant supply where they are needed most. This challenge can be addressed by nurturing interactions between the private sector, public agencies and local communities.

Recognizing the value of social and other non-technological forms of innovation will contribute to promoting nature-based industrial solutions. For example, a successful transformation of alternative approaches to healthcare provision into dynamic industrial complexes will require coordination between industrial and other policy areas and changes to the scope of science, technology and innovation (STI) policies to recognize traditional knowledge as a suitable option alongside allopathic medicine.19 Such recognition entails changes in the criteria for the allocation of funding or for granting property rights protection. Industrialization based on such alternative areas will lead to improvements in infrastructure, the development of supply chain capabilities, a redefinition of regulations on public procurement of medical products, and will ensure that products meet strict quality and safety standards.20

  • Fernando Santiago is Industrial Policy Officer at the Division of Capacity Development, Statistics and Industrial Policy Advice of of the United Nations Industrial Development Organization (UNIDO).
  • Niki Rodousakis is Programme Management Assistant in the Capacity Development and Policy Advice Unit (CDA) at the United Nations Industrial Development Organization (UNIDO).  

Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).

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