The world is more interlinked than ever before, and the manufacturing industry has been one of the leading sectors in this regard, linking together companies and manufacturing hubs in industrial parks and zones across the world.
Over the past four decades, much of manufacturing production internationally has been organized as part of national and global value chains. Raw materials and intermediate goods are shipped around and then assembled in yet another location, often in these industrial parks and zones. The final product is then re-exported to consumers located in both developed and developing markets.
Many of these value chains, however, have been severely affected by the COVID-19 pandemic. In fact, manufacturing is the second hardest-hit sector, after wholesale and retail trade, with regards to economic output and employment effects. In hindsight, not enough attention has been made to identify and manage the risks arising from health and associated emergencies in manufacturing value chains.
There have been increasing calls for a national re-examination of established economic models, in particular with respect to the international production and trade of goods.
In the past, outsourcing was in many cases driven by multinational firms’ desire to optimize their operations by minimizing costs, reducing inventories and driving up asset utilization. If anything, COVID-19 shows that it may perhaps be too simplistic to base decisions about production locations solely on economic factors.
In a post-COVID-19 world, new risk considerations are also extended to national and company- level decisions related to the manufacturing industry. Decisions on production sites for specific manufacturing activities in value chains will be carefully considered for resilience.
How would one then reduce the environmental, social and business risks from a pandemic for manufacturing activities?
There are some options. For example, before the COVID-19 pandemic, in an effort to mitigate supply chain risks, increase flexibility and improve product standards, global firms have relied on Industry 4.0 technologies. The application and scaling up of Industry 4.0 technologies may not be a possibility in many developing countries in the short-term. In these countries, the short-term solutions have to rely on improved spatial planning, implementation of standards and increased resilience of production sites.
This is where eco-industrial parks come in.
The eco-industrial park (EIP) concept is about creating resource-efficient and cost-effective industrial parks that are more competitive, attractive for investment and risk resilient. Collaboration between industrial park stakeholders – such as companies, government agencies, local communities, financial institutions, service providers and R&D institutions – ) is a core integrated part of this approach.
The EIP approach allows production crisis-associated risks to be appropriately managed while assuring sustainable industrial development opportunities to be maximized. It is of key importance for companies (e.g. located in industrial parks/zones) as well as stakeholders in their associated value chains to understand that social, health, environmental risks are truly economic risks, as also demonstrated by the COVID-19 pandemic.
And, EIPs can assist with increasing the resilience of manufacturing production sites. The international framework for eco-industrial parks supports industrial parks and their tenant companies to advance on planning, environmental, social and economic indicators where health aspects and multi-faceted risk- reduction are truly integrated elements.
Industries post-COVID-19 will look for production sites, including industrial parks and zones, which provide resilience and risk-mitigating measures and provide enabling conditions to rapidly recover production capacity and fix the value chain. EIPs can provide this for many types of operations, particularly small-and-medium-sized manufacturing companies being part of local and global value chains.
By integrating resource efficiency, circular business practices and benefits of shared services which enhance competitiveness through cost savings and better risk management, EIP practices would assist industrial parks and their tenant companies with catching-up and meeting the demands of the post-COVID-19 world. EIPs would further offer higher quality dialogue opportunities with local and national government stakeholders for creating enabling conditions for manufacturing activities in the country.
The opinions expressed herein are solely those of the authors and do not necessarily reflect the official views of the GGKP or its Partners.