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European Commissioner for Environment
Towards resource efficient growth – the role of manufacturing
European Forum for Manufacturing Roundtable
European Parliament, Brussels, 29th November 2010
The Importance of manufacturing
One out of four jobs in the private sector in the European Union is in manufacturing. Together – manufacturing, and its associated industries and business services – account for more than a third (37 %) of our GDP. The sector accounts for three-quarters of our exports. These figures speak for themselves: manufacturing is an essential part of Europe's economy. It is often said – but still true – that it is the "engine of growth".
We want a future for Europe in which manufacturing can thrive. When we talk about structural transformation of the European economy – about developing a knowledge-based growth – or a smart, sustainable and inclusive growth –
Free competition under fair rules is part of the solution, but so is a Europe that is highly advanced, efficient and competitive in its use of resources.
As the world economy begins to recover, manufacturing is faced with a number of challenges. One of these is the challenge of resources: the increase in prices of metals and minerals and their availability.
Many rare earth metals are essential inputs to some of the most promising industries in the EU, such as consumer electronics, aerospace, and environmental technologies. Scarcity, supply constraints and rising prices are of increasing concern. China has recently been placing restrictions on exports of rare earth metals. Of course we are contesting this. But it goes to show that this is not just an issue of physical scarcity, but of politics.
But when I talk about resources, please don't think that I talk only about critical raw materials, or only about energy. Some of our resources are abundant, but an increasing number are under severe pressure: becoming scarce, or under serious threat of degradation. That is why resource efficiency must extend to all natural resources: water, metals, minerals, soils, land, ecosystems, biodiversity and others.
Let us look at Water for example. In the 20th century alone, we saw our water use increase nine fold. Our energy and food production are of course highly dependent on water, but so too are many of your industrial processes. Pressure on water supplies may become a real bottleneck for growth.
And water too will increasingly become an issue of politics.
I put these arguments in terms of economics because I want you to understand the business case for resource efficiency; and to understand that it is not just a public relations or marketing case.
As an economist I believe that the economic case is undeniable. Resource efficiency is becoming a commercial imperative, but this is not merely a constraint. It will offer many significant new opportunities.
Resource efficiency – doing more with less – goes hand in hand with important cost savings. It is a concept that business knows well – it is productivity – getting more out from what you put in. But companies and governments have been obsessed with labour productivity for several decades. Now, with resources such as raw materials, energy and water making up an increasing share of costs of manufacturing, they increasingly see resource productivity as crucial to their competitiveness.
It has been estimated that efficiency increases of 20 % could deliver around 1 million jobs in Germany alone. So resource efficiency is to a certain extent a triple win situation; "win-win-win" – a win for the environment, a win for business and a win for jobs.
That is why I don't want you to see environmental policy only as a constraint. It is a necessity for us all if we want to enjoy continued growth. But it is also an opportunity for those who understand this more quickly. They will reap the competitive advantages.
Let me give you one example; last week I heard from the CEO of Heineken that their new logistics centre will be designed to maximise water transport, taking hundreds of thousands of truck journeys off the road. They based this investment decision on the prediction that petrol and diesel may well cost three times what it does today in future. At the same time they are developing technologies and practices to reduce the amount of water it takes to make a litre of beer from five to just over one. This is good business planning; it is good risk management; and – incidentally – it does not do any harm for the company reputation.
So resource efficiency is not just about "green" industries; although it must be said that Europe has a dynamic, growing and exporting eco-technology sector. It is about "greening" all industries.
Paths towards Material resource efficiency
Manufacturing industry is part of the solution. It can move towards Material Resource Efficiency in a number of practical ways:
Tools for Resource Efficiency
There are also a number of practical tools that can be applied by any business to improve resource efficiency.
First let's look at procurement. Public procurement has an important role to play; in quantitative terms it is around 17 % of EU GDP; but its effects can be even greater as it affects the whole supply chain including the privately procured aspects. Public organisations can also set an example.
Nevertheless over 80 % of buying takes place through Private Procurement. And it is here that business can make a difference by setting the rules for what it buys. There are growing examples of best practice: including Sharp, Sony, Canon, or the "Renault-Nissan Purchasing Way".
Renault (France) has made the pledge to use set percentages of recycled plastic in cars. The Scenic now contains 34 kilograms of recycled plastics, representing about 14 % of total plastics in the vehicle, and this sets a requirement for purchasing levels of recycled plastic.
Second, new business models. Profits are not only based on masses of resources processed and sold. Increasingly service type-models linked with resource use are emerging. The Michelin Fleet Solutions for trucks or buses is an example: instead of buying tyres, customers purchase the service of "kilometre tyres". For Michelin this has incentivized resource efficient tyre use and lower energy consumption. Considering new business models for the manufacturing industry is essential.
Third, Certification. Managing processes is essential for business, in particular resource use and environmental impacts. Most manufacturers are large consumers of energy and resources. Therefore it makes sense to introduce environmental management systematically into daily management practices.
EMAS – the European Eco-Management Auditing Scheme - is a good tool for managing energy efficiency and the use of resources. EMAS helps companies optimise production processes, making use of life-cycle thinking. The EMAS awards took place just a few days ago on 25 November. The Mahou-San Miguel Group (a brewery) from Spain is this year's winner in the large enterprise category. Through implementation of EMAS, Mahou achieved significant improvements in resource efficiency. They introduced Best Available Technology-measures resulting in a 20% reduction of water consumption of all their plants since 2000 and a 34% reduction of total energy consumption. Some individual plants were even more impressive. Their Alovera plant for example reduced the total nitrogen emissions to water by 63 % between 2008 and 2009 alone.
Some Real Challenges for the Future
All of this sounds good – but these examples of good practice are still too few and far between. The real question is: how can we scale up some of the tools and approaches that we have to help trigger such a transformation?
There are over 20 million businesses in the EU:
The challenge for Resource efficiency is scaling these up by a factor of a thousand or more.
Such a scale up will need new organisational change.
We in the Commission will be adopting a roadmap of how to move towards a resource-efficient economy. We aim to publish this in mid-2011. It will set out some of the key steps – at European and national levels – needed to bring about the transition across many sectors and resources. It is clear that for such a transformation to take place both we the policy makers and business will have to play an essential role.
By 2020 we will be well on our way through a paradigm change, whether we like it or not: the transformation of the economy towards growth based on the resources that one planet can sustainable afford. You – Europe's manufacturing industry – are a part of that transformation. I want to work with you to make sure that Europe is a global leader in a resource-efficient future.