Industrial Policy for the Sustainable Development Goals
OECD
Abstract
But firms' contributions to the SDGs are cross-sectoral and international in nature.Taking into account these linkages is of utmost importance when designing industrial policies for the SDGs.With the rise of global value chains (GVCs) in the last decades, firms' impact has to be assessed at the global level, taking into account networks of cross-border suppliers and customers.The OECD's Inter-Country Input-Output (ICIO) infrastructure allows uncovering the cross-border impacts of economic activities on SDGs.Focusing on four SDG indicators linked to the SDG framework, this book underlines potential impacts of the private sector.On intersectoral linkages, the importance of upstream sectors in the attainment of the SDGs and the need for a whole-of-value-chain approach are highlighted.SDG-related activities rely on a network of domestic upstream suppliers, whose value added can account for up to 80% of that of SDG-related activities.International trade provides opportunities for sustainable firms to contribute to the SDGs in other countries. The analysis reveals significant heterogeneity across countries, in terms of value added and exports linked to each SDG, pointing to strengths and gaps at the national level, but also shedding light on the potential for mutually beneficial trade at the international level. International trade takes a prominent role, and a country's final demand for SDG-related activities often relies to a significant extent on foreign value added. Key recommendationsIndustrial policies (including innovation and general business framework policies) can foster the contribution of firms to the SDGs through their core business.To that end, governments rely on a diverse set of policy instruments, justified by the multifaceted challenge of the SDGs.This requires an integrated approach to articulate them: Regulations and taxes are key components of policy packages, but they need to be complemented with other types of policies as well.They may fall short when it comes to stimulating the innovation required to develop the new technologies and solutions needed to overcome the global challenges. In particular, the development of innovative solutions to global challenges requires a vibrant ecosystem, relying on many start-ups and entrepreneurs.Fostering the creation of innovative sustainable firms can be an effective tool to promote the contribution of the private sector to the SDGs through their core business. More generally, support to firms, and especially to small and medium-sized enterprises, is needed to trigger the transition to sustainable business models, as the process entails significant costs and risks. Beyond core industrial policies, adequate business framework conditions are needed.The advent of a sustainable economy will necessitate a significant reallocation of resources towards more sustainable activities and firms.In particular, international trade -when associated with a level playing field on sustainability issues -can contribute to the SDGs by increasing the market size for sustainable firms.Finally, demand-side instruments may also be useful to create new markets for sustainable products and services. Mission-oriented industrial strategies provide an appropriate structure for consistently articulating policy instruments and establishing suitable governance.To limit the risks of policy capture, emphasis should be placed on the inclusion of all types of firms (including young and small ones), policy evaluation and regular refit.