INES 2000 conference -- Plenary speech
Friday, June 16, 2000, 9.15 am
Future technology paths will be confronted with increasing systems complexity and with the need for sustainability. This paper looks both at concepts and case studies for dealing with long term risks and at attempts for introducing sustainability criteria into the economic process.
In the past, technology has normally taken the road of increasing efficiency combined with increasing complexity, a higher economy of scale and thus a concentration of risks. As a higher economy of scale brings with it a higher dis-economy of risks, Nation States have taken on many of these risks, through legislation or standards which in effect limit the risk exposure of the economic actors. States have thus become 'insurers of the last resort', but without charging insurance premiums. This has led to distortions in choosing between competing technologies. We expect that technologies in the 21st century will have to carry the full costs of their risks, leading to a preference for decentralized solutions incorporating a fool proof and fail safe operation. The concept of insurability will gain importance in defining the border between State interventions and the market economy. Insurance premiums on risks will lead to an internalization of the cost of (technological) risks.
The development of the concept of Sustainability has moved from nature conservation to a minimisation of the effects of toxicology on the health of the population, and recently to the quest for a higher resource efficiency. The first two issues, protection nature and health, were clearly a case of 'command and control' by the State, in order to safeguard non-monetary values. In the move to the issue of resource productivity, there is a discontinuity which has been overlooked by most policy makers. A higher resource productivity can best be achieved by innovation - and SMEs are better at innovating than the State or large corporations. The role of the State should therefore be to foster radical innovation. But real innovation is chaotic - which creates a temptation of States to continue using command and control mechanisms. In addition, the real challenge still lies ahead, to move from a sustainable economy to a sustainable society.
Technological and societal evolution has led to a high 'anonymous' systems vulnerability. Manufacturing industry is responsible for the manufacturing quality of its products, not its usefulness or disposal. Sustainable production implies a 'cradle back to cradle' approach by legislators and economic actors, instead of a disposal optimization for wastes. The precautionary principle will increasingly play a role in this context.
In the 21st century, we expect to see a shift in the corporate strategy of most manufacturing industries towards a service economy. The drivers of this shift are business and technology issues, not environmental ones. Economic actors will now sell performance instead of goods, and thus accept an extended performance responsibility for their technology. But if economic actors carry the full responsibility, they will also want to reap the full benefits. 'Reaching down to the customer' means in many cases a vertical integration of businesses, giving policy makers a impossible choice of either obstructing technological progress or bending anti-trust rules.
Selling performance is a central part of the knowledge society, which is based on a knowledge economy. This again implies a privatization of knowledge, changing the relationship between industry and universities. It also implies that capital-intensive activities will preferably be outsourced to specialised contractors, in order to avoid the dangers of sunk or stranded investments, and the lack of flexibility that comes with it.
* Director of the Product-Life Institute, Geneva, www.product-life.org and
Deputy Secretary General of the International Association for the Study of Insurance Economics, Geneva www.genevaassociation.org
Bio-sketch Walter R. Stahel
Stahel is an alumnus of the Swiss Federal Institute of Technology (ETH) in Z?rich, where he received a diploma in architecture and town planning in 1971. He worked as a private architect in the UK and Switzerland, before joining the Battelle Geneva Research Centres as project manager in the Centre for applied economics, working on business strategy and techno-economic feasibility studies. In 1980 he became personal assistant to the CEO of a holding company with worldwide activities in railway maintenance, shipping and real estate.
Since 1984, Stahel has worked as a business consultant mainly in the fields of risk management and the development of strategies and policies towards a more sustainable society.
Paper in MSWord format