Process Engineering and Industrial Management

PART 1

The Company as of Today

Chapter 1

The Industrial Company: its Purpose, History, Context, and its Tomorrow? ¹

The industrial company, as we know it, dates back almost 100 years. However, the understanding of technical issues, the customer-supplier relationship, and the place of the individual within the company have changed dramatically. At the beginning of this century, the consideration of sustainable development, depletion of fossil materials, and climate change require new approaches where innovation plays a decisive role.

Existing enterprises in liberal countries, or even countries that claim to represent socialist systems such as China, have very common characteristics due to their structure, mode of organization, and operation; these enterprises are based on capitalism that can be defined as a system based on individual investments to produce marketable goods [APP 10].

This is the type of company that we will be discussing.

The 18th Century witnessed the birth of the entrepreneur who risked his capital in the hope of achieving profit.

One cannot separate the company from its historical, social, economic, and environmental contexts. It is necessary to go back several centuries to understand the company today; its beginning was slow when compared to the rapid changes that have affected us relentlessly since the beginning of this century.

A flashback to the past will help us to throw light on the future.

1.1. Purpose, structure, typology

The purpose of the industrial company is to satisfy customers by selling them products coming from manufacturing tools, sometimes with services required for their use: after-sale customer service, technical support, possible reclamation after the use of by-products generated by the process if they are chemical products.

In the manufacturing (automotive, electrical equipment, audio visual, etc.) industry, the recycling of all or a part of equipment takes the form of a genuine fully fledged industry, due to the depletion of certain raw materials such as copper, rare earth elements and due to their cost, which keeps on increasing.

It is the existence of manufacturing means that distinguishes the industrial company from service corporations, such as banks, insurance companies, food service companies, and so on. The borderline between these two concepts is not clear cut. The kitchens of a food service company make up an industrial tool, thereby requiring maintenance and energy; this tool can be the source of environmental damage (smells, smoke, waste) which must be controlled using chemical processes.

The industrial company makes increasing use of subcontracting for executing non-strategic tasks, that is tasks which are not a part of the enterprise’s business. If security, cleaning, catering, and so on, can be rightly classified under this category, it is questionable whether the outsourcing of maintenance, instrumentation, inspection, utility production and sometimes, the complete manufacturing of the finished product is safe. There could be loss of control of know-how and project management.

The products marketed by the company originate from its research and development services and engineering and design departments or have been acquired from third-parties via patent or license purchases. The know-how and knowledge accumulated over the years are thus one of the essential characteristics in this type of organization.

At the initial stage of the company, there are generally one or more individuals who are willing to start out — the entrepreneur(s) — with reasons as diverse as the desire to buy their independence, sometimes by alienating themselves, to earn money and notoriety, to develop themselves, and so on.

The company is a human venture.

Industrial enterprises are vastly diverse. Can we compare General Motors, a skilled tradesman working alone or with a partner, an IT multinational, a pharmaceutical company or a building firm with 20 employees? What these enterprises have in common is the act of implementing financial, human, and intellectual means. The intellectual means recovered by the implemented technologies differentiate them from the original input.

1.1.1. The four pillars of the company

Any company is supported by four pillars: economic, financial, human, and legal.

1.1.1.1. The economic pillar: the product/market relationship

The concept of product/market relationship is currently the very basis of the economic concept.

The product is what the company offers on determined markets (automotive, electrical goods, audiovisual, construction, etc.) where it will face competition.

What the customer wants (Figure 1.1) is a product that meets his requirements, this is its functionality.

Figure 1.1. The product seen by the customer

The primary function of an automobile is, but not limited to, transportation. The customer also wants to spend as little as possible while being served quickly and assured of support from the supplier (after-sale customer service, repair, etc.).

Success at the company level (Figure 1.2) is based on another tripod:

– marketing that aims to analyze the markets in order to identify the customer’s requirements;

– research and development (R&D) in charge of designing the product and the engineering (engineering and design department), which must define the industrial tool and have it built;

– production and logistics, whose mission is the creation of the product and making it available to the customer, in other words, the distribution.

Figure 1.2. The product seen by the company

A wobbly tripod is a source of failures and disappointments. A product may be excellent, perfectly respond to demand, but if the plant that manufactures it is unreliable (breakdowns, repeated strikes, etc.), then the customer is tempted to look for another source of supply.

1.1.1.2. The financial pillar

Right from its creation, the company has required stable resources. This cash requirement is covered by the capital, which is provided by the entrepreneur and his associates, if any, and by loans taken mostly from the banks. This is the liability of the company.

The entrepreneur takes a risk that he shares with his shareholders.

He, therefore, has a duty to achieve a given result (profit) to pay for the capital loaned.

The company is the permanent seat of exchanges:

– expenses, caused by the production and distribution; and

– revenues generated by sales. The company must have money at all times: this is the treasury. The initial economic difficulties faced by an company are always at the treasury level. The inability to pay implies the suspension of payment.

1.1.1.3. The human pillar

Employees are considered the first asset of the company. They are the individuals who run the company and make it evolve; they dedicate the largest part of their everyday life to it, often carrying with them a sense of pride.

The company provides a social status: it is a source of development, satisfaction but sometimes also of imbalance, frustration, alienation, and even illness. Work forms an integral part of life; to assert this, all we have to do is listen to what the unemployed have to say. All enterprises state that their greatest capital is human capital, but how many of them practise what they preach? Stress, various occupational illnesses, suicides, and acts of violence are dreadful indicators of deep problems.

1.1.1.4. The legal pillar

The legal form of the company defines the hierarchy within the company and the relationships with third-parties.

The company has the obligation to accept the laws of the countries where it operates, be it only for the quality of the products that it sells there, which must respect some rules and adhere to certain codes. In capitalist economy countries, there are several types of companies: partnerships, joint stock companies, cooperative enterprises, and so on.

Most companies are corporations, whereas the individual is a physical person. Owing to this corporation status, the company has the right to have capital, to sign contracts, buy, sell, use, and so on.

1.1.2. Typology of enterprises

Enterprises can be classified according to several criteria. Besides the legal form that we have just described, enterprises are most often characterized by their size and the nature of their job stream.

1.1.2.1. The size of the company

This is the most important and most accessible criterion. It gives the company its power, its local, national, and international impact, and its ability to influence its field of activity.

The size of the company can be measured by the amount of capital, turnover, and by the number of employees.

French regulation distinguishes 4 categories of enterprises based on their size:

– small office/home office (SOHO) with less than 10 employees;

– small and medium-sized enterprises (SME) with 10-249 employees;

– mid-sized enterprises with 250-4,999 employees;

– large enterprises, which employ more than 5,000 employees.

1.1.2.2. The enterprise’s business

Enterprises, excluding non-financial or insurance companies can be industrial, commercial, agricultural, or service providers.

The company can belong either to the private sector or to the public sector (as with national energy or transport suppliers such as the Private — DOW Chemicals and the Public — NASA). The major technological breakthrough in information technology, especially with the Internet, and the significant interest in genetics have led to the creation of start-up companies. This is the domain of venture capital: the shareholder expects significant returns, given the nature of innovative products … which need to be invented.

1.2. A centennial history

One cannot separate the history of today’s company from the historical context of the last 6 centuries. The extraordinary exploration of the planet by men goes hand in hand, over time, with increasing technological discoveries.

The resulting innovations impacted on companies on a permanent basis.

The Age of Enlightenment brought about a revolution of ideas and the reconsideration of age old social systems.

The discovery of unprecedented mineral wealth (gold, silver), the use of unknown crops in Europe (sugarcane, cotton), not to mention silk, spices and furs, transformed companies. This influenced events by endowing some of the nations with powers that were not possessed by conquered countries; supremacy of transportation, where sea transport was practically the only viable mode of travel till the mid-19th Century, supremacy of weapons (rifle against bow, rapid-fire gun against primitive gun).

We must also take into consideration the importance of the quality of administrative and organizational systems and of the management that enables the efficient use of technical and human resources. It remains perplexing that England (excluding Scotland and Wales), populated by only 5-6 million people in the 18th Century, was able to conquer a country like India with 40 times as many people.

1.2.1. The Europeanization of the planet

Man, since time immemorial, has continued to migrate, to go further, driven by a desire for material and the quest for knowledge, or pushed by the need to move to escape famines, enemies, and disasters. Every human group has always tried to enslave its neighbors, to enforce its laws or its ideology on them: the missionaries have always accompanied the warriors.

Globalization as we observe it today has transformed the world into a single stage. In fact, globalization commenced in the late 15th Century with the discovery of America by Christopher Columbus, who landed in the Caribbean in 1492. Subsequently, the Portuguese, Spanish, French, English, and Dutch competed for vast territories.

The conquerors of these countries were able to control the Americas, Africa, and Australia; they imposed the culture and language of their native country, for better or worse; they exchanged goods, precious metals, techniques, animals, plants, and so on, as well as diseases with devastating effects. From the Pre-Columbian populations estimated at 90-110 million inhabitants, only 10% would survive the invaders [APP 10].

It is interesting to note that massive wealth acquired far away had very little impact on the lifestyle of some of the colonizing countries. The Spanish hidalgos despised trade, while a French nobleman derogated himself by being involved in trade.

Japan and China remain as special cases; we will analyze them later.

It is from the mid-18th Century that the great discovered territories experienced unprecedented growth, along with expansion of Europeanization. This standardization of the planet proceeded hand-in-hand with the Industrial Revolution and population growth.

Thirty million Europeans emigrated between 1880 and 1914, mainly to the United States, which accommodated the underprivileged and persecuted looking for a world of freedom and opportunity. The colonies provided opportunities to those who were not put off by exile and remoteness.

The need for manpower resulted in slavery. Brazil imported 4 million Africans over 3 centuries to cultivate sugar cane [APP 10]. The Caribbean soon followed suit.

The invention of the Cotton gin (gin, diminutive for engine) in 1793 by Ely Whitney [DOD 84] facilitated the separation of seeds from the staple fibers of American cotton. This simple invention allowed intensive production of cotton in the southern colonies. This resulted in the prosperity of plantation owners and the development of slavery, in turn leading to the American Civil War from 1861 to 1865.

The two world wars, a sad appanage of the first half of the 20th Century, saw a significant disruption of the global order. The beginning of the 21st Century sees globalization in full swing. Blue jeans, Coca-Cola® and other soft drinks have taken hold of the planet. The suit and tie is worn by businessmen from Tokyo to New York. There are no more borders to information and exchange of goods. The American model of consumption imposes itself universally, but for how long?

1.2.2. Evolution of the company over time

In Table 1.1, we have tried to represent the evolution of the Western company from the 19th Century to the present day. They are of course the state-of-the-art enterprises of their time. We can note that, even in countries just as developed as France, we find Taylorist enterprises. What about developing countries?

We can define 4 periods which lie between the 19th Century and the end of the 20th Century. Each period corresponds to a vision of the company, which is sometimes strongly influenced by political-economic theories such as capitalism or the various forms of communism, and the weight of great historical events.

The employee is managed very differently in terms of hiring, training, salary, job security, safety, working conditions, and also in terms of hierarchy. He will maintain highly variable relationships with his superiors depending on the time and the type of company where he works.

Breakthroughs in technology (cars, plastics, aviation, information technology, nuclear industry, etc.) will create new industries, new professions, influence the lifestyle of the citizen, and completely change his behavior and way of thinking. The old technologies will disappear; this forms the basis of Schumpeterism (see Box 1.5).

The Industrial Revolution of the 19th Century has rationalized the concentration of men, machines, and capital and given rise to the entrepreneur and the captain of industry. The foreman is the keeper of knowledge; and has total control over the worker. There are no engineers as yet.

1.2.3. The Industrial Revolution in England

The term The Industrial Revolution in England refers to the transformation of the essentially agricultural and artisan society of the 19th Century into a society that drew most of its wealth from industry based on mining, river, sea and land transport, and of course, on trade. The development of railway transport represented a revolution in itself.

Everyone agrees to the fact that this revolution based on the steam engine was born in England and that it gradually spread to France and Germany. The United States, by virtue of its size, its extreme wealth, the quality of its manpower provided to entrepreneurs through immigration and its liberal system, overtook Europe in the late 19th Century. The 20th Century was undoubtedly American, but what will the 21st Century be?

Chinese, perhaps?

Table 1.1. Brief overview on the evolution of the company and its environment (the Western world and Japan)

Japan entered the scene in the late 19th Century and cornered a vast empire in Asia; at the height of its ambitions defeating the Russian fleet at the Battle of Tsushima in 1905 and conquering what is now Taiwan, Korea, and a part of China. Having been defeated in 1945, Japan, reduced to its historic space, launched itself in to the commercial conquest of the world, which we will come back to later.

The origins of the Industrial Revolution are complicated. Joyce Appleby: [APP 10] questions the fact that this revolution started in England whereas it could have started in France, Germany, or China. These three countries in fact had intelligentsia of the highest order and a certain political stability, along with coal and iron in abundance.

It was actually the combination of a number of elements that enabled England to lead an unprecedented transformation during the first half of the 19th Century; this transformation began with the 18th Century and continued for two centuries. It should be noted that only at the end of the period, that is at the end of the 19th Century, could the British people … finally enjoy the benefits of the machine age. The factors that enabled England to make a mark for itself include, but are not limited to:

– innovations, in large numbers, which entrepreneurs industrialized and perfected for decades to conduct business as we would say today: it is impossible to list all of them!

As early as 1712, the Newcomen pump enabled us to extract the water that flooded mines (Figure 1.3).

Figure 1.3. Newcomen pump

Thomas Newcomen (1663-1729), a blacksmith by profession, is considered to be the Father of the Industrial Revolution. The pump that bears his name was the first steam engine to use steam power economically. Steam is injected into the cylinder where the steam lifts a piston. Cold water which is injected into the cylinder condenses the steam, thus creating a vacuum. Under the effect of atmospheric pressure, the piston goes down. The movement of the piston is transmitted to a reciprocating pump by means of a balancing beam. Many coal mines rendered unusable due to flooding were saved from bankruptcy. The first pump was installed in 1712. When Newcomen died, 100 pumps were in use. This technology prevailed for 50 years and was then modernized by James Watt (1736-1819). In 1763, he created a real steam engine by installing, amongst other things, a condenser that was separated from the piston (patent of 1769). The success of his partnership with Matthew Boulton (1728-1809) for the sales of machines, resulting from his inventive talent, is legendary. Boulton, who had a keen marketing sense, enabled Watt to devote himself to his works by freeing him of trade and financial concerns [BIL 96].

The Stephensons invented steam traction and railways. The textile industry was the first industry in the 19th Century: the steam engine enabled the mechanization of this industry.

1.2.3.1. Intellectual openness, entrepreneurship and protection of discoveries

Thinkers reflect on the governance of society, on human nature, on the production of wealth, and on the value of work. Among them, Adam Smith (1723-1790) is considered to be the founder of modern economics. His book in 1776, Inquiry into the Nature and Causes of the Wealth of Nations, established theories in relation to work, wages, prices, and taxes. He advocated free trade and non-interventionism of the state in economic affairs; he was opposed to corporations.

More than a century before Taylor, he advocated work specialization in order to increase productivity; his hairpin example is well known.

Inventions have been protected by patents since 1624 [APP 10], thus paying back the efforts and investments of the inventors.

1.2.3.2. An efficient banking system

The Bank of England, founded in 1694 [APP 10], emerged as the most important institution in Europe in the 18th Century. We can recollect that the first modern bank was founded in 1609 by the Dutch and that Bonaparte founded the Banque de France in 1800.

The effectiveness of the English system prompted Napoleon to call England a nation of shopkeepers!

1.2.3.3. The development of agriculture, political stability, population growth

At the beginning of the 17th Century [APP 10], 80% of the population worked on the land. England had 5-6 million people and 1 million horses. Advances in agriculture were very significant and the specter of famine disappeared. The population of England doubled between 1780 and 1830.

In the mid-19th Century, only 40% of the population was working on the land. This percentage is at 3% today. The end of the Napoleonic Wars brought about stability in the country and an unprecedented development of the colonial empire, a natural outlet for manufactured goods, and an important source of raw materials.

1.2.4. Taylorism, Fordism, Fayolism

In the late 19th and early 20th Century, Frederick Taylor and Henri Fayol (see Boxes 1.1 and 1.2) provided the traditional company with the form that we know today.

Taylorism [POU 98], still unduly criticized a century after its birth, probably due to the lack of knowledge of the industrial life of its detractors, has revolutionized the life of the factory.

Taylor invented the analysis of the actions needed to accomplish a task: this forms the basis of scientific management.

Translated into modern language, Taylor wanted to:

– improve plant productivity by asking the worker for an honest day’s work. But the timing, the visible tip of the iceberg, was unwelcome. The worker felt like a robot;

– improve the manufacturing processes (Taylor was the world’s leading specialist in machining), know the costs (Taylor was an accountant) by the introduction of what was to become analytical accounting;

– reconcile workers and employers by efficiently distributing the profit generated by better management, but the worker is paid for piece work;

– select and train workers (best man to fit a job);

– divide labor between those who design it and those who perform it: drive out empiricism; birth of the modern engineer, engineering and design departments, planning department, and scheduling.

The foreman is restricted to the supervision of laborers.

Henry Ford [LAC 87] adopted Taylorism to the letter (see below). He invented the assembly line in 1913 for the assembly of magnetos which reduced the time required for their production from 15 to 5 minutes.

Detroit emerged as the kingdom of timing, division of labor, cutting waste, and the continuous study of the manufacturing process. Previously, each car was handmade by skilled workers. The division into basic assembly line tasks, which are simple to perform, makes manufacturing by unskilled workers possible. We can recollect Charlie Chaplin’s Modern Times.

The production increased from 160,000 to 320,000 cars from 1912 to 1914 with the same strength of 14,000 workers.

However, Henry Ford, by reducing the manufacturing costs and hence the selling price, enabled the average American to buy a car; he even received congratulatory letters from public enemies no. 1 (Dillinger, Bonnie and Clyde) for whom the car was an essential work tool. Ford’s technology revolutionized the American way of life for the better and perhaps for the worse.

Fifteen million Model Ts were produced between 1908 (the year of launch) and 1927, when the Model A replaced the Model T. In 1919, half of the cars in American were Model Ts.

Ford also invented vertical integration; he produced steel for manufacturing his automobiles and had his own distribution network. In 1917, the Rouge plant was the largest factory in the world: 1,600 m long and 2,500 m wide.

Louis Renault met Taylor and Ford during a trip to the United States in 1911. He wanted to introduce their methods in France.

However, the ill-prepared application of the Taylor system resulted in major strikes, including the 44 day strike in 1913. Renault generalized timing after dismissing the union leaders.

Fayolism refers to the management of the company, whereas Taylorism refers to the factory.

Fayolism classifies the set of operations in the company into six main functions: technical, commercial, financial, accounting, administrative, and safety.

H. Fayol defined 14 principles of management from which we will quote:

– the division of labor into specialized tasks;

– the unity of command: the employee has only one manager;

– promotion of the best employees.

Fayol can be considered as the founder of modern management. Administration means anticipating, organizing, and controlling.

Box 1.1. Frederick Winslow Taylor (1856-1915)

F.W. Taylor was born near Philadelphia, to a very wealthy Quaker family. He passed the entrance test at Harvard, gave up his studies and became a simple worker in a small pump plant and then joined a steel plant, the Midvale Steel Co., where he worked for 12 years. He became a foreman and then a mechanical engineer by taking correspondence courses. He also held the post of accountant before finishing as chief engineer. Taylor became a specialist in metal working, with many patents, which made him rich and famous. He established himself as a consulting engineer in 1893.

Taylor invented the job analysis technique, whose most obvious manifestation is the timing of tasks. His book, The Principles of Scientific Management (1911), applies Taylorism and forms the basis of scientific management.

He had many supporters: Henry Ford, Louis Renault, Lenin, and so on.

1.2.5. The advent of research

The scientific discoveries of the late 19th and early 20th Centuries had a significant impact on enterprises.

The entrepreneur carried out research to create business. In modern-day terms, he wanted to innovate. Innovation means creating new products, new applications, whereas invention is limited to the acquisition of new knowledge.

Box 1.2. Henri Fayol (1841-1925)

H. Fayol, a French Engineer, graduated from the School of Mines of Saint-Etienne (France). He was the director of the Commentry mine for 30 years. He became the CEO of the Company Société de Commentry, Fourchambault, Decazeville, a post from which he retired at the age of 77. Fayol laid the foundations of administrative theory. His major work, Administration industrielle et générale, was published in 1916. He is considered to be one of the pioneers of management.

Non other than T.A. Edison better symbolizes the integration of research into the company. Start-ups, already mentioned, can be considered as a system pushed to the extreme: one that speculates on innovations … potential innovations.

No company today can do without research.

1.2.6. The individual in the company

Everything we have just discussed primarily relates to two periods ending around 1937. Until then, the company was a closed system, where man was considered to be completely rational. The salary must be sufficient to meet his needs. Work and keep quiet one might say.

Starting from the 1930s, the rise in the level of education, standard of living, access to more information, the growing maturity of the working masses (to use Marxist-Leninist terms) changed this Taylorian perception of the labor world.

A significant number of schools try to understand the behavior of the individual in the company. Elton Mayo (1880-1949) is regarded as the founder of the Human Relations movement and work sociology. The Ecole de Mayo, whose influence was significant around 1940, gave rise to behaviorism.

Box 1.3. Henry Ford (1863-1947) [LAC 87]

H. Ford, the son of a farmer, was the pioneer of the American automotive industry. An eccentric and visionary, he invented the standardization of major parts and assembly line work in his plants at Detroit. He fervently adopted Taylorism: everything was timed. Assembly line work was used for the first time in 1913 to manufacture magnetos. Applied to the manufacture of the famous Model T, it reduced the assembly time from 13 hours to one and a half hours. The Model T was the first car available to the average American.

Frederick Herzberg, a Professor of psychology, studied the motivations of men at work. Douglas McGregor proposed theories X and Y. According to theory X, man is lazy by nature, whereas theory Y states that he can be motivated if appropriate motivating elements can be found. Psychologists and social psychologists entered the company after the war.

Labor laws became increasingly concerned about protecting the employee. Advances in medicine, reduction of working hours, respect for rest periods, consideration of occupational hazards, the study of risk related to products, and ergonomic studies were some of the many benefits offered to workers in developed countries.

No other country in the world is more consuming than the United States, which was considered to be the master of the world after World War II. The end of hostilities halted the military-industrial system resulting from the unprecedented transformation of the industry in peacetime, especially in the automotive industry, to manufacture airplanes, tanks, and the most diverse means of transportation. The number of men and women in the armed forces would reduce from 12 million to no more than 1 and a half million in peacetime. Consumption broke all records: cars, refrigerators, televisions, and single-family houses were offered on credit to a population looking for comfort.

Box 1.4. Thomas Alva Edison (1847-1931) [PRE 89, ISR 98, JOS 92]

T.A. Edison, a news vendor (train boy) at the age of 12, deaf and self-taught, Edison was the author of 1,093 patents. An inventor of the phonograph and the incandescent lamp, among other things, he established companies for manufacturing and distributing electricity. His inventions helped America to transform from an agricultural country in to an industrial country. Visitors can visit his house and laboratory in West Orange, New Jersey. His friend Henry Ford relocated his first laboratory from Menlo Park (New Jersey), where he invented the incandescent lamp, to Greenfield Village, the first American theme park opened in 1929 near Detroit.

After World War II, France experienced exceptional growth: France copied the United States.

This is the period of The Glorious Thirty, the 30 years that ended with the first oil crisis in 1973.

There was a gradual change from a manufacturing economy to a free market economy. The customer found everything he desired; the situation was thus far from shortage.

Box 1.5. Joseph A. Schumpeter (1883-1950) [SCH 75]

J. Schumpeter, Austrian Finance Minister in 1919, did not prove himself to be a very shrewd banker. He left for the United States in 1935 where he taught at Harvard.

The book Capitalism, Socialism, and Democracy, published in 1942, is one of his most remarkable works. He invented the term creative destruction, a process by which new technologies, new products, and new manufacturing and distribution methods throw out the old and force companies to adapt themselves if they want to survive.

Innovation is not only a source of progress but also a crisis factor responsible for economic cycles; an expansion phase is followed by a recession phase.

Like Karl Marx, Schumpeter believed in the fall of capitalism in evolved societies. However, he thought that this would be the best economic system, provided it was implemented by entrepreneurs who took risks.

Advertising incited him to consume. Globalization amplified the phenomenon of competition. A job is no longer guaranteed. The loyalty that bound the employee to his company vanishes slowly. The best people sell themselves to the highest bidder. The company tries to retain them by employee stock ownership plans and partnerships. The company has become an open system.

During this period, the pace of innovation quickened. The last decades of the 20th Century were marked by the IT revolution of which the Internet is a part. This revolution is similar to that of the printing revolution in the 15th Century, which still continues today: its effects have not yet been assessed. The period of certainties is over.

The conquest of space had an unexpected consequence. The photograph of the Earth taken from space showed us that our living space is finite. The concept of company and notion of work are being challenged; resources, including petroleum, are limited. The purpose of the company and work are being challenged.

The energy problem began to increase sharply. Use of nuclear energy for peaceful purposes appeared to be an interesting solution in addition to renewable energy sources (hydropower, wind, solar, biomass, tidal, etc.).

1.3. New challenges imposed by globalization and sustainable development

The dawn of the 21st Century brings with it challenges that are unprecedented in the history of mankind. Population growth, the inevitable exhaustion of fossil resources (petroleum, copper, lithium), climatic disturbances, climate change, and disparities in living standards generate fear and questions.

The rich industrialized countries have mostly adopted the same capitalist system, born with the industrial revolution.

1.3.1. Globalization

The company is now faced with the globalization of economies and competition which keeps on growing. There are practically no barriers to trade and communication. In this context, enterprises are forced to define their strategies at a global level. The various financial crises that punctuated the global economy over the last 10 years continue to threaten the global stock markets.

The Asian countries, which represent half of all humanity, market quality products, although they have not completely monopolized entire markets such as the audiovisual or the motorcycle industry. Next to an aging but still powerful Japan, the four dragons (South Korea, Singapore, Taiwan, and in China) have risen to an international level. China with over 1.3 billion people has woken up from a slumber and transformed completely.

"Globalization of the economy implies the globalization of responsibility" (Kofi Annan, former Secretary General of the UN).

The concept of sustainable development changes the enterprise’s mission: it places man at the center of the system; this is a new vision. The industrial company or the service company, whether private or public, is thus obliged to implement a governance to cope with the abovementioned notions.

The UNDP (United Nations Development Programme) simply defines governance as — the exercise of economic, political, and administrative authority. It requires: participation, transparency, and accountability. To further simplify this, we can say that governance is the organization of decision-making processes, either at the government level or at the company level. There can be no governance without a value system!

1.3.1.1. Communication

Extraordinary improvement of communication and its deployment are undoubtedly the key factor of a system of belonging to the same planet. The Internet, mobile phone, and fax enable individuals who have never seen each other and, in most cases, have little chance of meeting each other, to connect almost instantaneously.

Television brings the world within reach of the poorest; it shows him landscapes that he has never seen and undoubtedly will never see, and gives him the impression of a global village. CNN, Cable News Network, right from its foundation in 1980, has given live reports of events around the world.

1.3.1.2. Transportation, space exploration

The development of aviation, which is just a century old, gave birth to mass tourism. One does China after visiting Machu Pichu in Peru. Tourism, which is manna from heaven for poor countries, desecrates the sites that were the very soul of the visited country; it leaves behind waste and exacerbates the desires of the underprivileged. The vision of the Earth by satellite gives a sense of finiteness and containment to Earthlings. Nothing escapes the space objects and terrestrial cameras which constantly monitor us.

1.3.1.3. The internationalization of goods and cash flows

Globalization leads to the commoditization of consumer goods; we buy the latest Japanese or Korean audiovisual product in New York. China has emerged as the global workshop; it knows how to exploit its manpower that costs about one-tenth of what it costs in developed countries to launch industries demanding personnel, such as the textile, electronics and plastics industries, and manufacturing industries in general.

The globalization of trade leads to economic globalization.

1.3.1.4. The new geopolitical order

The planet has almost nothing left to be discovered: there is practically no virgin land. Now, under the surveillance of satellites, it is watched constantly by the superpowers and nothing can obstruct the Internet.

There is practically no conquest of one country by another; the conquest of Kuwait by Iraq in 2001 was cut short. Countries are no longer colonized by other countries … at least openly. The colonial wars are over! Other subtler forms of war including terrorism and religious intolerance have replaced them.

1.3.1.5. The conquest of today is the conquest of markets

One billion people consume 80% of the planet’s resources; 1 billion of the damned endanger its future through deforestation, land overuse, water pollution, and generation of greenhouse gases, especially CO2 by burning carbon fuels. Do we need to emphasize that these poor people are at the origin of a population explosion that puts their future at risk and drives them to a wild emigration that is feared and rejected by most of the developed countries?

Another division is economic by nature: North America, Europe, and Asia-Pacific, mainly China, represent the existing forces and the forces in the making. Scientific progress and technological revolutions are changing our way of life more and more quickly each day and widening the gap that separates the developed countries from the rest of the world, and why not say it openly, the United States from the rest of the world! What we have just mentioned is the cause of fears that are becoming more and more intense.

1.3.1.6. Fears

1.3.1.6.1. Fear ahead of progress

It seems to be clear that, since the 1970s, technological progress has led to changes that society cannot take in and understand. This holds true for GMOs (genetically modified organisms), genetic engineering, and nanotechnologies. Some would want to stop every progress, even though progress has always existed undoubtedly, we would be surprised to meet our grandmother Lucy (Australopithecus afarensis) at a street corner.

1.3.1.6.2. Fear of the nuclear industry

In 1945, the United States alone had the knowledge and means to manufacture the atomic bomb. Currently, the atomic bomb is within reach of any country that wants to develop it. The fear of the bomb is coupled with the fear of nuclear power plants; the Chernobyl disaster 20 years ago is in everyone’s memory and what about Japan’s cataclysm in March 2011? The fear of contamination by radioactive materials and terrorist attacks using dirty bombs is also prevalent. The collapse of Russia and the waste that has resulted from it, leaves us to weigh suspicions that the accidents involving nuclear submarines will not disappear.

1.3.1.6.3. Fear related to the internationalization of enterprises, technological transfers

From 1970, large enterprises have tried to become global and leave their native country. China is a major target. They have sometimes relocated their production to countries with cheap labor. The developed countries are flooded with Asian products at prices that defy competition.

1.3.1.6.4. Fear of job loss

The feeling that setting up enterprises abroad helped in the drain of technology and created many competitors for the future has not yet disappeared.

1.3.1.6.5. Fear related to energy problems

The Industrial Revolution led to the exploitation of natural resources. This exploitation keeps on increasing rapidly. Developed countries are dependent on distant countries for their energy supply (oil and gas). Pipelines and gas pipes pass through countries which are sometimes unstable.

1.3.1.6.6. Fear related to pollution

There are no boundaries to pollution! The atmosphere and oceans are the finite receptacles. Water pollution, especially of water tables, is a major concern for the French.

1.3.1.6.7. Fear related to armed conflicts due to ideological conflicts

If the specter of a third world war seems to be far away (the Cuban missile crisis of 1962 is not so distant), the possession of weapons of mass destruction, whether nuclear or biological, by high-risk countries poses the question of their control. Poverty and underdevelopment are undoubtedly the breeding ground for fanaticism. But so far, the rise of fanaticism and terrorism that ensues from it appears to be the greatest danger.

1.3.1.7. The benefits of globalization: towards global governance, reasons for hope

However, it’s not all doom and gloom! Communication at a global level can help us to know what is going on! Poor countries know that they are poor … and declare it. Surveillance of the Earth helps to track the state of pollution, the ravages of deforestation, fire detection, construction of plants whose purpose may be risky and, in short, to monitor the state of the planet in real-time.

Scientific progress provided developed countries with a well-being which was unknown till now. Famines, although not completely eradicated, have declined significantly. China and India have become self-sufficient in food.

There is a global solidarity for the good reason that every country depends on others. Governance is gradually establishing itself at a global level. Many summits resound around the planet, aided by global conferences. Child labor, the situation of women and issues related to water and pollution are examined.

The big international companies are the holders of wealth: capital wealth and intellectual wealth. It is estimated that the top 300 companies of the world produce a quarter of the global production!

The UN tries to be the world’s policeman: its blue beret peacekeepers are present in conflict zones, but its soldiers practically have no right to use their weapons. The IAEA (International Atomic Energy Agency), based in Vienna, strives to inspect nuclear power plants.

Governance will either be global or will not exist.

1.3.2. Sustainable development

Every week, we receive an announcement of a conference or a forum on sustainable development. Industrial companies or service firms announce their engagement on this subject. All of this is hinted at in the media. Sustainable development has become an essential concept!

1.3.2.1. Birth of a concept

The following chronology highlights the essential steps that led to the concept of sustainable development; environmentalism can be considered to be its starting point.

Some of the milestones:

– 1850: David Thoreau: transcendentalism;

– 1962: Rachel Carson, Silent Spring;

– by 1970: the multinationals in question;

– 1971: first Ministry of the Environment in France;

– 1973: first oil crisis;

– by 1975: technological development faster than social transformation;

– 1987: Brundtland Commission: concept of sustainable development;

– 1960-1990: Internet;

– globalization, media coverage (mediacracy), space exploration (monitoring the Earth), disasters: Seveso (1976), Bhopal (1984), AZF-Toulouse explosion (2001), Aral Sea;

– 1992: Rio Summit: First Earth Summit;

– 1997: Kyoto protocol (global warming);

– 2002: Johannesburg Summit (Rio + 10): reducing the number of people without drinking water by 50% by 2015;

– 2005: enforcement of the Kyoto Protocol on reducing greenhouse gas (GHG) emissions in the European Union. Integration of the precautionary principle in the French constitution;

– 2009: Copenhagen Summit on climate change.

Two American figures, a century apart, have strongly influenced their age.

Box 1.6. Henry David Thoreau (1817-1862)

Was he the first ecologist?

At the age of 28, H.D. Thoreau lived in a small cabin in the woods, near a beautiful pond in the vicinity of Boston. He refused to pay his taxes, which led him into trouble. A little recognized author of his time, he was the inventor of civil disobedience and passive resistance: he inspired Gandhi and Martin Luther King Jr.

"Sustainable development will be planetary or will not exist!"