SPEECH/03/95

Mr Erkki Liikanen

Member of the European Commission, responsible for Enterprise and the Information Society

"Forest-based Industries and sustainable development"

Forest-based Industries Forum

Brussels, 18 February 2003

Introduction

Thank you once more for inviting me to give the opening address at the Forum. This is a unique occasion, which enables industry leaders and their representatives to meet together in the presence of representatives from the Community Institutions and other stakeholders for an exchange of views on key issues.

Looking back at our previous discussions within the Forum and at today's agenda, the key theme overshadowing all our discussions has been sustainability.

•  At our first meeting in Strasbourg we set out the basis for the Forum's activities by presenting the Communication from the Commission on the Competitiveness of your industries. This Communication placed sustainability at the heart of the strategy. Electronic commerce especially in terms of new opportunities for SMEs were also discussed. Climate change was also a key topic on that occasion.

•  In Stockholm we went on to discuss sustainable raw materials supply and enhanced use of wood, including in construction. Better regulation was also a key issue, especially in relation to impact assessment.

•  Today we will deal with the important questions of waste, energy and bio-fuels as well as the attractiveness of the forest-based industries.

It seems appropriate on this occasion to look at how some of these major issues have evolved, especially in terms of initiatives taken by the Commission to develop a Community Sustainable Development Strategy. The successful implementation of this strategy depends on solid achievement in the economic, social and environmental areas, and on finding the right balance between the objectives.

The starting point for the sustainable development strategy has to be the economic pillar, and in particular the global competitiveness of European industry and its continuing ability to innovate.

Current Economic Conditions

It is evident that the current economic environment is not especially good. Recovery has been slower than we had hoped and the uncertain political situation does not help as regards focussing attention on the challenge posed by slow economic growth. The economic slowdown has affected some key sectors such as construction and advertising, which have an important influence on the growth and profitability of your industries.

Many of your companies have been able to make essential adjustments in terms of controlling costs and relating production to demand, in order to meet the new situation. Coupled with greater price stability, this has at least put them in a situation which will allow them to take advantage of the upturn.

Industrial Policy

The current situation has also led to increased recognition of the importance of industry, which is now moving back to the first rank of Community's priorities.

In recent decades, the contraction in manufacturing's share of overall output, and the corresponding increase in the share of services, led some to think that manufacturing industry no longer mattered for overall competitiveness and sustainable development. This was a mistake.

The reality is that: productivity growth has indirectly led to growing demand for services; the apparent contraction of manufacturing partly reflects outsourcing, and manufacturing and services are more closely interconnected than many realize.

Today there is a keen awareness at all levels, including on the part of Europe's political leaders, that unless industry performs to its potential, we will have major problems in achieving our economic and social goals established at Lisbon. The Commission has also acted to draw attention to the key role of the manufacturing industry and, in its Communication on Industrial Policy in an enlarged Europe, it has set out a number of key messages.

• The first message is a simple one: industry matters.

Industry needs to be put back at the core of our policy concerns and stay there. Manufacturing industry plays a key role.

• Enlargement, despite real challenges, is an opportunity.

Industry, both in existing Community and in the accession countries has to a large extent anticipated enlargement: this has been reflected in trade and investment flows for years. Enlargement will be a major opportunity for industry in new and existing Member States alike.

•  All the synergies between the various policies that have an impact on competitiveness need to be exploited.

All Community policies have to contribute to industrial policy objectives.

Innovation and entrepreneurship for instance have been identified as two key drivers of competitiveness.

As a follow-up to the Communication, the Commission has just launched an internal screening exercise with a view to identify how every policy can maximise its synergies with industrial policy.

•  Industrial Policy, while being horizontal in nature, needs to take into account the specific characteristics and needs of every individual sector.

Industrial Policy needs to take into account the specific characteristics and needs of individual sectors. Developing our analytical tools and increasing our knowledge of individual sectors is the first step.

As regards the forest-based and related industries, we are already working closely with you and will continue this process on key subjects such as climate change, trade, the "Enhanced Use of Wood" and communications.

•  A balanced approach to the three dimensions of sustainable development needs to be ensured.

The EU's Sustainable Development Strategy hinges upon simultaneous progress in its three pillars: economic, social and environmental.

This brings me naturally to the implementation of this strategy which has had a key impact on your industries, and will continue to have so in the future.

Review of environmental performance of EU manufacturing industry over last 20 years

But, before looking ahead, it is worth reminding ourselves about what industry has already achieved up until now.

DG Enterprise's 2002 European Competitiveness Report summarised the available evidence on the environmental performance of EU manufacturing over the past twenty years.

The report showed that manufacturing industry made a very substantial improvement in environmental performance. This resulted in a so-called absolute de-coupling of environmental impact from output: while manufacturing output climbed by some 30%, its impact on the environment has actually fallen.

In particular :

•  The 10.5% reduction in industrial greenhouse gas emissions since 1990 represents a substantial contribution towards the achievements of the Kyoto targets. Over this period, the manufacturing sector alone contributed about 80% of the total EU reduction in greenhouse gases.

•  Manufacturing's emissions of the acidifying gases that cause acid rain (such as sulphur dioxide and the nitrogen oxides) were reduced by over two-thirds since 1980;

•  Emissions of ozone-precursors (including local air pollutants) have fallen by a full quarter since 1980,

•  The production of ozone-depleting gases in the EU has now almost ceased.

Important progress was also made in reducing energy and material inputs over the period.

•  Industrial energy consumption has been broadly constant since mid-1980s, despite the increase in manufacturing production; and

•  Industrial consumption of raw materials such as minerals and ores has also tended to stabilise over the 1990s.

•  The improved environmental performance has come at an important financial cost. EU industry's annual spending on environmental protection rose from the early 1980s to stand at € 32 billion in 1998 the equivalent of some 2 per cent of total industrial value-added, broadly equivalent to industry's expenditure on R&D.

The challenges of sustainable production

The focus of sustainable development policy is now widening away from reduction of emissions towards the broader agenda of sustainable production and consumption.

I want to mention three of the many challenges that arise.

•  The first challenge is that there is no simple and easily definable set of objectives directly associated with the reduction of the environmental impact of resource use and wastes. To assess environmental impacts, we need to consider the whole life cycle of resource and material use.

•  The second challenge is that it is not as easy to reduce energy or material inputs, and the cost of doing so may be very high.

•  The third and more optimistic challenge is that some enterprises are beginning to find ways of successfully reducing resource use and wastes at a reasonable cost - and even at a profit. The challenge is to understand how these firms are able to do this and attempt to harness this energy and enthusiasm to achieve an overall reduction in resource use.

•  The solution lies in exploiting the notion of "sustainable value", that is, creating profit opportunities from superior environmental performance. Many firms have succeeded in doing this.

Making the strategy operational

I believe the only successful way forward is a partnership between policy makers and industry.

•  For companies, this requires active participation in the strategy, demonstrating that they can deliver results.

•  In return, policy makers need to respect the difficulty and complexity of improving resource use. They should avoid arbitrary and unilateral targets and be prepared to review existing legislation to remove barriers and facilitate better resource use.

Governance, Better Regulation, Stakeholder Consultation, Impact Assessment

Last June the Commission adopted an important package of measures following its White Paper on Governance, and which is intended to bring about a lasting improvement in the way we regulate.

Among several new requirements I want to emphasise the decision on more systematic stakeholder consultation, for which general principles and minimum standards were decided in December 2002. These include transparency, wide and equitable access to consultations, a minimum reply time of 8 weeks and feedback to contributors. All the Commission's on-line consultations can be accessed from the Enterprise DG's dedicated web page and the "Your Voice in Europe" single access point.

Public consultation helps to improve the quality of Commission proposals and thus, ultimately, to shape a business environment that is conducive to competitiveness, innovation, growth and sustainability

There are also new rules on impact assessment, which will require that all major proposals and policies, be subject to an in-depth examination to identify the costs and benefits. This will include impact on competitiveness and also on the social aspects, including jobs, and on the environment.

This is an ongoing process. And only last week the Commission approved a major action plan designed to simplify and update the Community's body of law. Among the priority areas identified for examination was the waste legislation.

The changes set in motion by this approach are potentially far-reaching for businesses. Their effective implementation by how it comes across in public policy statements is essential.

Communication:

Finally, I would like to say a few words about the other major theme of this Forum, namely, communication.

In today's world image is an important factor in competitiveness. At the widest level the image of manufacturing industry can be very much influenced by the message given by public authorities, including of course the Commission. This was a key consideration in launching the recent Communication on industrial policy which sets out to show the links between industrial activity, jobs and a better environment.

This was an important consideration in our efforts last year to present a more balanced image of industry's real environmental performance as opposed to the wrongly held impression of a sector slow to respond to environmental concerns.

As far as your industries are concerned, the results of a European-wide public image study carried out on the F-BI sector, will give food for thought.

The study shows that the forest-based industries suffer from a low level of attractiveness, a low profile among the public at large and low environmental credibility. Apart from information technologies and, to a lesser extent, design, people tend to perceive the industries as involving manual, repetitive and low-skilled work that is badly paid and offers little by way of career prospects.

The possibility that these findings might not be very different in the case of other manufacturing industries should not be a cause for comfort. There are problems to be addressed. But this should not be an impossible task.

Yours is an industry which, in its origins, is closely associated with nature and which is linked to the responsible management of natural resources. At another level you provide the products that are essential to the quality of our lives. Your place in the implementation of the sustainable development is a central one; indeed, sustainability has to be your core strategy.

So, on this more optimistic note, I will end my remarks. Once again it has been a pleasure to come here, to see old friends and to meet some new people also.

I wish the Forum every success and look forward to receiving a full account of its results.