Networking: the green connection

In a world overshadowed by fears about the economy and the environment, information and communications technology is one of the brightest sources of hope. But can corporations unleash their potential in time? Introducing the first in a series of three monthly supplements, Hamish McRae explains how companies that use networking to reduce their ecological footprint can make their businesses sustainable – in more senses than one

Technology – and its global application – transformed the world in the second half of the 20th century, enabling it to enjoy the longest period of sustained growth that the world economy has ever maintained. It was an extraordinary achievement, lifting hundreds of millions of people out of poverty and vastly increasing the standard of living in most, though not all, regions of the world. Now, in this century, the world has to ask for a repeat performance, for it is only by the development and application of the new technologies that living standards can continue to increase in a sustainable way. Most of these new technologies will be in the communications/information technology space, for we are experiencing a burst of development now in these areas as significant as the |development of mass manufacturing in the 20th century.

The challenges now are in many ways greater than those faced half a century or more ago, because, looking ahead, the world economy is facing some severe headwinds. Most obviously, a larger world population, and one seeking and achieving higher living standards, is putting more strain on the planet’s resources. This is evident in energy use, in food production, in water resources and – looming large – in the threat of some radical changes to the world’s climate. Technology is possibly the only weapon, and certainly the most powerful one, that we have in our armoury.

There are myriad examples of the ways in which the new technologies can lead to a more sustainable economy. At its simplest, better information means that good practice developed in one part of the world can be replicated elsewhere more swiftly. More precise control of manufacturing and service processes means that we can use resources more efficiently. There are fewer sub-standard products that have to be discarded, lower energy use in factories, higher load factors on aircraft and fewer hotel rooms that are empty. In most developed countries in recent years living standards have risen without greater energy use: we have become richer but we have also become more efficient. The great task facing the world now is to carry on improving living standards but to do so while actually reducing our energy footprint. This is a theme that will be developed through this series of supplements.

But the challenge is not just about using resources more wisely; it is also about using human capital more effectively. The world’s population is ageing. That is already affecting Japan and parts of Europe, where the proportion of people over the age of 65 is greater than it has ever been in the history of our species. In one sense that is a great advance, for it is in part the result of improved life expectancy and not many people would welcome a world where people die younger. But it creates strains, as a shrinking workforce will have to support the growing army of the elderly. One way in which the world can better employ the scarce talents that it has available will be through new technologies.

To take one example, from the UK: there has been a large increase in the size of the workforce during the first part of the current century, partly from inward migration, partly from later retirement but also from increased part-time and home-working. There are now more teleworkers in London and the South-east than there are factory workers: close to 12 per cent of the working population compared with about 8 per cent. Teleworkers are defined as people working online from home or from a variety of locations using their home as a base. So people are able to participate in the workforce, thanks to the new technologies, who would have been quite unable to have done so even five years ago. You could almost say that teleworking is the new outsourcing.

There is a further issue. It has proved relatively easy to improve productivity in manufacturing. In round numbers, most manufacturing industries manage to increase their labour productivity by about 3 per cent a year. The world has learnt how to produce more goods with fewer people, initially by applying Henry Ford’s moving production line to different manufactured items, then by automating the production process and most recently by using IT to refine production still further. But improving productivity in the service industries has proved far more difficult. We buy relatively fewer goods and more and more services, which has meant that lifting service industry efficiency has become the key to improving living standards. This is where IT comes in.

In manufacturing, you make broadly similar products in controlled conditions. A Volkswagen made in Germany is broadly the same as one made in the US or China and the factories are laid out on similar lines. But in services, the products are much more custom-made, tailored to individual needs and tastes, often involving interchange between producer and consumer, and often fabricated at point

of delivery. So “buying” a consultation with a doctor or a degree from a university is quite different from buying a VW.

Until the past decade or so the main way to improve efficiency in services was to standardise them. The result was the Big Mac. You could get efficiency, sure, but at a cost. The new communications technologies hold out the possibility of crafting bespoke services with the same efficiency and at the same quality that is being achieved in manufactured products. IT is to services what the moving production line has been to manufacturing – though of course, IT improves the performance of manufacturing too.

There are profound implications here for the entire way our entire society organises itself. Some of these we can see reasonably clearly, some we can just about glimpse and others that we can only guess at.

We can see that though the world may not be flat, it is certainly flatter, in the sense that technology is universally available. So a hi-tech city such as Bangalore is just as competitive in creating electronic services as a corresponding city in, say, California. It can distribute its services throughout the world at near-zero transmission cost. But therein lies a paradox. Competition can come from anywhere in the world where there are well-educated and industrious people, but the need for such people to cluster together means that there are pinnacles of excellence around the world, centres that use the latest technologies to achieve global pre-eminence. The world is flat in the sense that technology is universally available; it is not flat in the sense that there are some places that exploit it much more successfully than others.

That leads to something else that we can assert with some confidence: that human capital matters more than ever before. So how we educate people, train them to apply the new technologies and, where possible, develop them, is the key competitive advantage for a country. Companies that are effective at attracting and fostering talented people will prosper by comparison with those that are less effective. And people who build their own skills will have more successful lives – as well as contributing more to general well-being – than those that wait to be shown what to do. Tomorrow’s world will be a world where individuals will tend to take more control over their lives, because they will be able to do so.

There are also big implications for government. The new technologies offer great opportunities to lift their own performance, tailoring their services more closely to their citizens’ needs and desires. But governments around the world do not have a good record when it comes to applying technology, and now the challenge is for them to do better. Government will seek more help from the private sector, which creates a business opportunity as well as a social need.

All this we can see, at least in some sort of outline. What we cannot see is the scale of the challenges that the world economy will face. We can see that without a more sustainable approach to economic growth we risk some sort of environmental, social and human catastrophe. But we cannot see the detail of the challenge, nor with any precision the ways in which technology will be deployed to meet it. So there is a profound need for us as individuals, as companies, as government agencies, as third sector bodies and so on to listen and learn. We need to see how different people and organisations in different parts of the world are developing and deploying the new technologies. We need to be flexible and thoughtful; and the purpose of this supplement, and of the two that follow in February and March, is to encourage and facilitate the sort of informed reflection that is required.

One of the reasons why The Independent is so pleased to be involved in this exercise is it is making us think and learn about the world’s march to more sustainable prosperity and our own role in chronicling it. We hope you will enjoy the journey too.

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