Janez Potočnik: Towards Green Growth: Seizing Business Opportunities

Janez Potočnik – European Commissioner for Environment

Green Economy Forum (Dublin Chamber of Commerce)

Dublin, 25-4-2013 — /europawire.eu/ — Ladies and Gentlemen,

People in Europe are looking for ways to recover from the devastation of the economic and financial crisis. Governments are searching to create jobs and growth. My message is that resource efficiency is an essential ingredient in the recipe.

From the industrial revolution, our economic growth has relied on the increasingly extensive use of ever cheaper resources, not just metals and minerals, but also natural capital. If our society goes on consuming resources at the same rate as we do now, by 2050, globally we will need three times more material resources, and 70 % more food, feed and fibre. And just in the next 20 years, we will need 40 % more energy and water. This is simply not conceivable.

In a context of growing global competition for resources and natural capital that is already damaged, the old growth model will be self-defeating. Trying to pursue resource-intensive growth will bring growth to a stop. It is simply not an option.

Today, material costs in some advanced European economies already make up more than 40 % of total costs in manufacturing industries, compared to less than 20 % for labour. And we should not forget that Europe is highly dependent on imports for many of its resources. Since 2000, resource prices have increased by almost 6 % per year in real terms, and this trend is set to continue, which means that prices may become even more volatile.

I firmly believe that business and industry will largely be in the forefront in bringing about Green Growth through a resource efficient, circular economy. This is an economy where one industry’s waste becomes another’s raw material. Mainly because their future competitive position depends on it. But it won’t happen by itself. We have to set clear goals that will allow us to address the emerging global water crisis, deal with the loss of biodiversity, the degradation of our land, the quality of our air and the productivity of our oceans. We need to set specific goals for all these and encourage market signals to play their part in generating the innovation and investments that are needed. And I stress the word innovation because I believe that it in this transition it will be key.

In putting forward ideas for a new European industrial policy, the sectors that we see as having the most potential for growth and jobs are actually the ones which address resource efficiency and the environment: advanced manufacturing technologies for clean production; bio-based products, including sustainable food; sustainable construction and raw materials; clean vehicles and vessels; and smart grids. But if Europe wants to maintain a leading position in these industries, then we need to invest more in innovation. That requires better access to finance, a competitive internal market and the skills that people will need to play a full part in Europe’s economic revival.

This is why we put forward proposals to support the innovation that is required for the transition to more sustainable growth. Together with my colleague Máire Geogheghan-Quinn, we put forward proposals for Horizon 2020, the EU’s new programme for research and innovation, to dedicate around 60 % of its resources to sustainability, environment and climate change. Eco-innovation in small and medium enterprises will be promoted by the new Programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME). The recent increase in the capital of the European Investment Bank will bring additional leverage of up to € 60 billion for resource efficiency in the coming 3-4 years.

The transition to a resource efficient economy will be led by forward-looking countries, companies, researchers, inventors and investors. I read that Ireland is leading on skills for innovation. The employment in knowledge-intensive activities in Ireland is one of the best in Europe (20 % with EU average at 13.5 %), and Ireland scores highest in the share of people aged 30-34 who have successfully completed third level education (49.5 %). This is a remarkable achievement.

The EU has clear strengths in eco-industries, an expanding sector with a high proportion of SMEs and widening international markets. Employment in the sector in the EU has been growing by around 3 % per annum even during the crisis years. The global market for eco-industries was more than a trillion Euros in 2010, and is expected to almost double over the next 10 years. We are doing particularly well in certain subsectors, for example, we hold a 50 % share globally in recycling, and 35 % in energy efficiency, so we are well-placed to benefit from the growth in global demand.

The waste sector alone grew more than 20 % between 2000 and 2008. Similarly, jobs in recycling grew by almost 80 %. We have published a study that estimates that full implementation of EU waste legislation would save € 72 billion a year increase the annual turnover of the EU waste management and recycling sector by € 42 billion and create over 400,000 jobs by 2020. For Ireland, these figures would amount to several thousand jobs and increase the annual turnover of the waste sector by around € 600 million, while reducing total direct and indirect greenhouse gas emissions by around 3 to 5 %.

An interesting case study is plastic waste, where it would make common sense to make rapid and tangible progress. Ireland is already a front-runner in this. Currently, in Europe, around 50 % of plastic waste is still dumped in landfills and a little more than 20 % is recycled in some way.There is a huge untapped potential here for resource efficiency gains and lowering greenhouse emissions. Plastics use 8 % of world oil reserves, 4 % for the material and 4 % for the production process. Low plastic recycling rates, and significant exports of plastic waste for reprocessing in third countries, are a significant loss of resources as well as employment in Europe.

Ideally all plastic products should be fully recyclable at reasonable costs. But improving recyclability is an economy wide challenge. We are counting on industry to take their responsibility as producers: products are often made with no consideration of recyclability; planned obsolescence is still common industrial practice; over-packaging is common and industry is still doing too little in organising take back schemes.

But green growth is not limited to the eco-industry sector. It offers an opportunity to most sectors of the economy, from the building industry to the food sector, from transport to energy production and also for the services sector and tourism.

I recognise the role of business in driving the transition. Last year we set up the European Resource Efficiency Platform and we called on key stakeholders to help us in getting policy implementation quickly off the ground. We brought business leaders to work with some of my fellow European Commissioners and Members of the European Parliament, Ministers from the Member States, international organisations, NGOs and civil society. The platform is chaired by your former Taoiseach [tee-shock], John Bruton.

The Platform will deliver a set of priority short term policy recommendations for resource efficiency in June.

I hope that some of these recommendations will lead to voluntary business actions to which many more businesses would adhere. I am thinking, for example, about pilots for measuring environmental footprints and resource use; or reporting that takes into account resource efficiency; or joining a system of sustainable sourcing. I believe such projects will be of interest to you and hope that many of you will participate in such innovative actions.

Next to this, we are continuing our efforts to develop concrete policies and initiatives that will set things in motion. Our new European innovation partnerships on water and raw materials will help encourage research and technological innovation in these areas. They will also support innovative ways of using existing technologies, good management practices and new business models, as well as help bring existing solutions to the market. For instance, achieving efficiency in both water management and use is good for agriculture; improving water quality is good for the citizens’ quality of life.

Investors need clear polices and stable framework conditions to provide predictability for high-risk investments and business. This is why we seek to deliver smart regulation, in partnership with stakeholders, taking full account of the costs and benefits. We see environmental legislation as a framework that establishes a level playing field for all actors, and unlocks opportunities for innovation. We see setting standards as an opportunity rather than a barrier. We seek to limit burden to its strict minimum.

Green products and organisations are a real motor for growth. They help create and retain jobs in Europe. European green products are remarkably successful on international low-carbon and eco-industry markets and their competitiveness keeps green markets dynamic in times of crisis. It is in our best interest to facilitate the good and fair functioning of this growing market.

As a concrete contribution to our resource efficiency agenda, and as a response to a call by many progressive businesses, we recently launched an initiative on the “Single Market for Green Products”. It aims ultimately to reward the most resource efficient products and organisations on the EU market better. A key initial step is to promote the voluntary application of Environmental Foot-printing methods across the Single Market.

We are proposing a harmonised, robust and user-oriented instrument to measure the environmental performance of products and organisations. Such a method will help to build confidence among consumers, business partners and investors, and help green markets expand further in the longer term. A single reference method instead of the many currently in use will also help reduce costs for our industry.

Given today’s complex supply chains, we cannot limit our actions to the EU. We are keen to cooperate with key trading partners to encourage a more coordinated approach at international level.

We now need to pursue work along this line to develop specific rules for product groups and sectors, which are simple and easy to apply – especially for SMEs. A three-year pilot phase will start very soon to support the application of these rules. This will be a multi-stakeholder process, with the participation of industry, public bodies, NGOs, in Europe and internationally. I strongly encourage you to respond to our forthcoming open call for volunteers and actively participate in the pilot. If the pilot phase is successful, then we can examine together how to include this concept in design and labelling requirements.

Measuring performance is a first step towards improving it. This holds not only for social or environmental reasons, but also makes economic sense. Taking a look along the whole value chain from the extraction of materials to the end of life of a product opens up new opportunities for performance improvement and efficiency.

Ladies and gentlemen,

We saw during the financial crisis the damages that can arise from a focus on short-term balance sheets. And the perverse incentives that this created in the financial sector. This is one of the barriers which hold back companies from investing in resource efficiency and new business models. For example, companies who would like to offer services instead of products to increase re-use – owning the resources but renting the products like mobile phones, electronic equipment, car tyres or carpets. Without a change in company reporting, many of these changes will be held back.

So, the Commission has just presented a proposal designed to strengthen reporting on non-financial information, including environmental matters. Experience tell us that companies that are more resource efficient, have also higher returns and more attractive to investors. This will help investors interested in supporting innovative business models which will be profitable over many years.

We will need the buy-in of dynamic business leaders like you to turn these ideas into action. We are trying hard to provide a modern policy framework that will provide you with the right conditions and support for green growth and resource efficiency. But it will be up to you to make it your own business opportunity, your own business future.

Thank you for your attention.