The Fourth Industrial Revolution: Disruptions or Opportunities For Company Executives
By Richard Howitt, Skytop Contributing Author February 10, 2021
Richard’s background celebrates three decades as a strategic thinker who integrates innovation into organizational practice. A 22-year member of the European Parliament Rapporteur on Corporate Social Responsibility, he led the EU’s Non-Financial Reporting Directive. This initiative, recognized as the world’s foremost legislation on Corporate Transparency, brought him to new challenges.
This includes his work as CEO of the International Integrated Reporting Council, the Task Force on Climate-Related Financial Disclosure, Advisor to the UN Global Compact, Member of the European Commission SDG Platform, and the UN Guiding Principles for Business and Human Rights Reporting Framework Eminent Persons’ Group.
Richard is recognized as a Sage Top 100 Global Business Influencer, Thomson Reuters ‘Top 30’ Influencer in Risk, Compliance and Regtech. He is a Member of the B20 international Business Leaders’ Group and its Climate and Resource Efficiency Task Force. He currently serves as Strategic Advisor on Corporate Responsibility and Sustainability, and Senior Associate at the law firm Frank Bold LLC.
The Fourth Industrial Revolution
One thing which connects the challenges of business sustainability with the profound economic changes represented by the Fourth Industrial Revolution (4IR), is the sheer immensity of each.
But sometimes, that’s where it stops.
As the World Economic Forum meets met – at least digitally – this year, I have been struck by my own attendances at the Forum, about how separated the discussion is between the two.
Again this year, ‘saving the planet’ and ‘technology for good’ were separate strands.
Yet if businesses are engaged in two great transformations, this surely cries out as the most important argument ever for integrated thinking.
Traditionally, these debates throw up eye-catching examples of technological innovations which can fuel (sometimes literally) new sustainable business models.
From the proven commercial viability of today’s wind turbine technologies to the extraordinary accelerated path to Covid-19 vaccines, the social and environmental benefits of such technological innovation are very apparent.
Nevertheless, the danger in this argument is that we still focus on sustainability as a separate niche, its own sector of goods and services, and not as part of the core business model for all companies – and for our economies.
It is also clear that 4IR has at least as much potential to exacerbate existing unsustainable business models as to help them adapt.
As children in poor families in rich countries struggle to learn from home without access to the internet or forced to pay premium rates for broadband, it is important to recollect that fewer than one-in-five people in the poorest countries actually use the internet, compared to nearly nine-in-ten of people in developed countries.
The frustrations of connectivity between devices with which we think we struggle in richer countries, is estimated to be achievable in low-income countries only at a cost of $1,000 USD per capita – equal to the entire gross national income of those countries, according to the World Bank.
The digital divide is getting wider.
The gross energy consumed by data centers worldwide is due to reach 11% globally by 2030, with internet usage already having the same carbon footprint as the global aviation industry. Meanwhile, reports that there are now more cellphones in the world than the world population, (nine to seven billion), expose the enormous challenges of e-waste. Disused, redundant mobile technology, computers and other electronic devices now amount to more than 7kg per person annually for everyone on the planet.
If the technology sector offers to move us all towards a genuinely circular economy, it could usefully demonstrate this by starting with itself.
Meanwhile, the Paris concept of a ‘just transition’ for workers remains highly aspirational.
Academics may disagree widely on the level and speed of job impact from the widespread introduction of Artificial Intelligence in replacing work previously undertaken by humans. However, history tells us that in the first Industrial Revolution it took the period of an entire human lifetime before the extra prosperity generated began to be distributed to the workforce. The period of most rapid technological change before today, the Great Leap Forward, coincided with the Great Depression of the 1930s.
At the very least, 4IR presages a period of intense dislocation for people at work, with potentially high social consequences for one-in-three of employees globally.
Meanwhile, the problems of Facebook and other digital and social media platforms on issues of privacy, bias and censorship will soon apply to all sectors in a future where all companies become ‘tech’ companies. The true scale of cyber-security concerns is already an everyday challenge for all in business.
These countervailing forces working against principles of sustainable development can be managed, but only if we have an honest debate about how we do so.
I do not want to do a disservice to colleagues at the WEF in stating this. They have established the 2030Vision platform to help create and spread the advanced technologies which they hope can support efforts towards 70 per cent of the UN’s Sustainable Development Goals.
The United Nations has established its own ‘Global Pulse’ to apply data science to pursue its sustainable development and humanitarian actions, with bases in Indonesia and Uganda.
As a member of the B20 business leaders’ group under the Japanese G20 Presidency two years ago, I remember enthusiastic and sincere deliberations behind the concept of moving from ‘Industry 4.0’ to ‘Society 5.0 for SDGs.’ This aimed to connect digital transformation with sustainable development goals (SDGs), believing this to be no less than the next stage of human evolution.
The Information and Communications Technology (ICT industry) itself has established its own Global e-Sustainability Initiative (GeSI) platform, also to address these challenges.
However, like each of these initiatives, the danger is that excellent ideas are generated but that there is a failure to find a way to achieve real traction in applying them.
The good news is that frameworks now exist which give concrete recommendations to those in business on how they can address these issues in practical terms.
The challenge remains on how quickly such actions can be generated at the company level which will have a demonstrable impact on meeting the SDGs themselves.
The Imperative To Move Forward
At a conceptual level, there is no doubt that both sustainability and technological challenges are intractable and must be addressed.
Every meeting or conference about business sustainability seems to include ‘scalability’ amongst its conclusions, which AI and big data are destined to help meet.
Conversely, decentralized technologies have the potential to democratize capital markets. Pension beneficiaries, retail investors as well as consumers can be empowered to direct their money based on real knowledge of the company’s sustainability performance.
Small businesses themselves may be able to occupy space which was previously the preserve of technology giants.
There is an unparalleled opportunity to link the ‘micro’ with the ‘meso’ and the ‘macro’.
Satellite imagery on deforestation and illegal fishing, mass use of sensors for climate change and disaster preparedness, and ‘clean’ technologies to combat ill-health impacts from previously dirty production techniques are dramatically transforming sustainability efforts already.
‘Moonshot’ breakthroughs such as quantum improvements in battery efficiency and charging, the successful development of hydrogen fuel cells or the development of mass meat substitutes could all mark a sea change for sustainability in the next decade.
Responsible Technology Governance
There are also lessons from history about how this can be channeled to meet societal objectives and norms.
Every Industrial Revolution has been accompanied by regulatory changes to cushion the transformations. For the first industrial revolution, these included child labor and factory safety. What are the equivalent protections in the transformations of the 21st century?
Many suggest that these can be found in the concept of ‘responsible technology governance’. This foresees hard and soft law approaches being developed which support the necessary innovations, but do so within an ethical framework.
Such efforts already include AI Principles developed by G20 governments, the EU’s General Data Protection Regulation and the work of the Global Smart Cities Alliance. They are seeking to apply these technologies in future technologically driven urban development, directly involving local governments.
In many ways, all of this mirrors the development of sustainability reporting requirements, codes and frameworks over the past twenty years. There may be merit in exploring joint exercises between the two fields in the governance context from now onwards to avoid time-consuming and potentially contradictory efforts, to the disadvantage of both.
The Internet Of Things
One challenge for the sustainability community is not simply to embrace technological possibilities, but to be prepared for disruption itself.
The painstaking efforts devoted to supply codes and audits are based on a model of outsourced manufacturing and attempts to drive out child forced and sweatshop labor in dispersed workplaces around the world.
As manufacturing moves from factories to the Internet of Things, the challenges of sustainability will completely change this focus. Whilst much is being written about utilizing blockchain in supply chain management, perhaps the real question is in how sustainability impacts manufacturing processes when they shift into the virtual world.
Actions For The Business
What are the immediate implications for companies which emanate from these debates?
First, external change is so rapid, companies must become comfortable in addressing ‘futures’ thinking and move beyond historic information systems, linear thinking and planning if they are to thrive.
Second, ensure your own sustainability and technology functions do not work in silos. Bring them together in multi-disciplinary teams with other functions in the company, in the way both areas are addressed. Ask yourself: how far are sustainability objectives an explicit part of your research and development programs?
Third, ensure you undertake an employment and environmental impact assessment on all new technology investments, not simply those dedicated to sustainability objectives. Engage with stakeholders outside the company who may be the best judge on whether an investment is inclusive, ethical and sustainable.
Such investment decisions are the inflection point where you have most opportunity to make change within the company, and where divergence may occur, unless you explicitly address it.
Fourth, if you develop or introduce systems which substitute algorithms for human judgment, it necessitates very careful consideration of how this impacts your responsible business obligations and respect for human rights. Don’t leave this to the technicians alone.
Fifth, recognise that there is an increasing switch from products to services with what has been called a ‘dematerialisation’ of the economy, as well as to net zero goals. This requires a fundamental re-evaluation of business models in all companies, and an historic opportunity to inject fresh thinking which combines future business success with sustainability.
In other words, if we are in the Fourth Industrial Revolution, don’t find yourself stranded behind the barricades.