The Eco-Innovation Challenge

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The Eco-Innovation Challenge

The

Eco-Innovation

Challenge

Pathways to

a resource-efficient

Europe

Annual Report 2010

May 2011

eco-innovation

observatory


Edited by

Meghan O’Brien, Stefan Giljum, Michal Miedzinski, and Raimund Bleischwitz

Authors

Wuppertal Institute

Meghan O’Brien

Raimund Bleischwitz

Stefan Bringezu

Susanne Fischer

Dominik Ritsche

Sören Steger

Tobias Samus

Justus von Geibler

Sustainable Europe Research Institute

Stefan Giljum

Christine Polzin

Elke Pirgmaier

Stephan Lutter

Technopolis Group Belgium

Michal Miedzinski

Asel Doranova

Finland Future Research Centre

Universitty of Turku

Jarmo Vehmas

Anne Karjalainen

Minttu Jaakkola

Leena A. Saarinen

Acknowledgments

The authors would like the thank Prof. Rene Kemp (UNU-Merit, Maastricht University) and Prof. Friedrich Schmidt-Bleek (Factor 10

Institute) for their valuable comments and review of this report. We would also like to recognise the contributions from experts invited

to the EIO Expert Group meeting in Wuppertal on the 25th of January 2011. The discussions and debate at this meeting helped to

shape this report; we are grateful to Friedrich Schmidt-Bleek, Rene Kemp, Klaus Rennings (ZEW), Markku Wilenius (Allianz and

Finland Futures Research Centre), Hugo Hollanders (UNU-MERIT, Maastricht University), and Igor Jelinski (European Commission,

DG Environment (project officer)). We would also like to extend our gratitude to Till Ruhkopf (Wuppertal Institute) for his excellent

technical assistance. Finally we would like to recognise the helpful comments received from Friedrich Hinterberger (SERI) and

Arnold Black (C-Tech). Needless to say, the authors alone remain responsible for the contents of the report.

A note to Readers

Any views or opinions expressed in this report are solely those of the authors and do not necessarily reflect the position of the

European Union. A number of companies are presented as illustrative examples of eco-innovation in this report. The EIO does not

endorse these companies and is not an exhaustive source of information on innovation at the company level.

Please cite this report as:

EIO (2011). The Eco-Innovation Challenge: Pathways to a resource-efficient Europe. Eco-Innovation Observatory.

Funded by the European Commission, DG Environment, Brussels.

Design and Graphic identity

www.tobenotobe.be [Benoît Toussaint]


The

Eco-Innovation

Challenge

Pathways to

a resource-efficient

Europe

Annual Report 2010

May 2011

eco-innovation

observatory


Table of contents

List of Figures IV

List of Tables V

List of Boxes V

List of Eco-Innovation Good Practices V

List of Acronyms VI

Executive Summary VII

1 | Introduction 1

1.1 | What is eco-innovation 2

1.2 | Why focus on resources 3

1.2.1 | Environmental perspective: overconsumption 4

1.2.2 | Political perspective: material security 5

1.2.3 | Business perspective: saving material costs 7

1.3 | This report: resource efficiency and the eco-innovation challenge 9

2 | Resource efficiency: Key trends and targets 11

2.1 | Tracking trends: resource use and material productivity 11

2.2 | Future outlook: targets for sustainable resource consumption 16

2.3 | The targets, material productivity pathways and eco-innovation challenge 19

3 | The EU: Eco-innovation performance of countries 21

3.1 | The Eco-Innovation Scoreboard 21

3.2 | Comparing EU country performance with the scoreboard 23

3.3 | Understanding country performance 28

3.3.1 | Eco-innovation and economic performance:

is eco-innovation only for ‘rich countries’? 28

3.3.2 | Eco-innovation and environmental performance 31

3.4 | Eco-innovation performance and resource-efficiency targets 34

4 | The EU: Eco-innovation in sectors and markets 37

4.1 | Why sectoral perspective: where materials are used 37

4.2 | Eco-innovation activity in sectors: an overview 39

4.2.1 | Eco-innovation activity in sectors (CIS) 39

4.2.2 | Focus on manufacturing, construction, agriculture, water and food services 42

5 | Global dimension 51

5.1 | Future outlook: emerging markets and global areas of interest 51

5.2 | Business perspective: eco-innovation and international competitiveness 56

5.3 | Eco-innovation in practice: focus on developing and emerging economies 58


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6 | Driving eco-innovation 63

6.1 | Drivers and barriers of eco-innovation as seen by business 63

6.1.1 | General overview 63

6.1.2 | Exploring different types of eco-innovation determinants:

country perspective 67

6.1.3 | Sectoral perspective 70

6.2 | Drivers and barriers in EIO country profiles 71

7 | Future Outlook: Visions of a resource-efficient Europe 77

7.1 | The transition and resource consumption targets 77

7.2 | Dematerialization and rematerialization:

stepping stones to a steady-stocks society 79

7.3 | Harnessing the power of the sun 84

7.4 | The balanced bioeconomy 86

7.5 | The transition timeline 88

8 | Main findings and key messages 89

References 93

Glossary 99

Annex I. Barriers and drivers of eco-innovation in the EU-27 105


IV

List of Figures

Figure 1.1 Expectations about how companies’ material costs will evolve (5-10 years) 8

Figure 1.2 Cost structure in the German manufacturing industry in 2007 8

Figure 2.1 Material consumption of different world regions, in tonnes per capita (2000) 13

Figure 2.2 Material productivity of different world regions, in USD per tonne (2000) 13

Figure 2.3 Material consumption and material productivity in the EU-27, 2000-2007 14

Figure 2.4 Material productivity in EU-27 countries and selected non-EU countries, 2005 15

Figure 2.5 Material productivity increases in the EU-27 required to achieve reduction

targets (with different assumptions on annual DMC and GDP growth), 2000-2050 18

Figure 2.6 The eco-innovation challenge and material consumption 20

Figure 3.1 EU-27 Eco-Innovation Scoreboard: composite index 23

Figure 3.2 EU-27 Eco-Innovation Scoreboard: eco-innovation inputs 24

Figure 3.3 EU-27 Eco-Innovation Scoreboard: eco-innovation activities 25

Figure 3.4 EU-27 Eco-Innovation Scoreboard: eco-innovation outputs 26

Figure 3.5 EU-27 Eco-Innovation Scoreboard: environmental outcomes 26

Figure 3.6 EU-27 Eco-Innovation Scoreboard: socio-economic outcomes 27

Figure 3.7 Relationship between composite EI Index and GDP per capita in the EU, 2007 29

Figure 3.8 Relationship between composite EI Index and Competitiveness in the EU 29

Figure 3.9 Scatter of Eco-IS index and material consumption per capita (year 2007) 31

Figure 3.10 Material efficiency gains due to eco-innovation 34

Figure 4.1 Strategic sectors towards eco-innovation: Detecting direct and indirect

resource use for goods of final demand, Germany 2008 38

Figure 4.2 Share of firms in different sectors with innovations leading

to reduced material / energy use per unit output 40

Figure 4.3 Share of firms with innovations leading to reduced material use

per unit output separated into industry and service sectors 41

Figure 4.4 Share of firms with innovations leading to reduced energy use

per unit output separated into industry and service sectors 42

Figure 4.5 Types of eco-innovation introduced by companies in the last 2 years 43

Figure 4.6 Share of innovation investments related to eco-innovation over the last 5 years 44

Figure 4.7 Material costs as a percentage of company’s total costs 45

Figure 4.8 Types of changes to reduce material costs implemented in the past 5 years 46

Figure 4.9 Stylized material efficiency marginal cost curve 47

Figure 5.1 Eco-innovation in the electronic media (keywords in English)

of the three continents: Europe, North America and Oceania 52

Figure 5.2 Worldwide news coverage of generic eco-innovation keywords (in English) 53

Figure 5.3 Worldwide news coverage of sectoral keywords (in English)

connected to ‘eco-innovation 54

Figure 5.4 Worldwide news coverage on keywords (in English) based on the EIO vision 54

Figure 6.1 Eco-innovation drivers according to Eurobarometer 2011 64

Figure 6.2 Key eco-innovation drivers according to CIS2008 65

Figure 6.3 Eco-innovation barriers according to Eurobarometer 2011 66

Figure 6.4 Key eco-innovation drivers and barriers in countries according

to Eurobarometer 2011 68

Figure 6.5 Eco-innovation drivers in sectors according to EB2011 72

Figure 6.6 Eco-innovation barriers in sectors according to EB2011 73

Figure 6.7 Eco-innovation drivers in sectors according to CIS2008 74

Figure 6.8 Eco-Innovation determinants identified from EU 27 country profile analysis 76

Figure 7.1 Industrial metabolism 2010 78

Figure 7.2 Industrial metabolism 2100 78


List of Tables

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observatory

Table 2.1 The three scenarios and related targets until the year 2050 18

Table 3.1 “Ideal” indicators and best-available indicators in the 2010 version of the Eco-IS 22

Table 3.2 Comparing the ranking in the Eco-IS composite index

and in the structural environmental indicators 33

Table 4.1 Classification and examples of measures

for improving material efficiency in the manufacturing sector 48

Table 5.1 Summarized prioritization and urgency timeline for selected metals

with their selected applications (driving emerging technologies) 56

List of Boxes

Box 1.1 Problem shifting—what are the (hidden) costs of EU consumption abroad:

the case of biofuels 5

Box 1.2 Eco-innovation – a catalyst of the Europe 2020 Strategy 6

Box 1.3 Resource efficiency, productivity and intensity: distinguishing the terms 10

Box 2.1 Indicators derived from material flow analysis on the national level 12

Box 3.1 Social innovation 36

Box 4.1 The material requirements of renewable energies:

the cases of solar, wind, fuel cells and electric cars 38

Box 4.2 Material efficiency in the manufacturing sector –the German case 48

Box 5.1 Critical metals 55

Box 5.2 Frugal innovation 60

Box 5.3 Preventing the resource curse of the green economy 61

Box 7.1 Social and institutional changes to achieve the vision 82

List of Eco-Innovation Good Practices

The EIO online repository of good practices 2

SkySails 8

Resource-Efficiency Atlas 19

Urban mining 30

Living Lab 32

Closed system for soilless culture, Cyprus 44

AirDeck® - Energy and resource efficient floor system, Belgium 46

Eco-cement 49

Web Platform to Facilitate the Reuse of Construction Materials, Hungary 49

Eastgate shopping and office centre in Harare, Zimbabwe 59

City of Curitiba, Brazil 61

Biomimicry, the example of jellyfish light 81

Car2go 82

Resource-light construction 84

Floating Solar Islands 85

Arboform: ‘Liquid wood’ 88

Network Resource Efficiency, Germany 90

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VI

List of Acronyms

BAU Business–as-usual

BRIC countries Brazil, Russia, India and China

CIS Community Innovation Survey

DMC Domestic Material Consumption

DMI Direct Material Input

EB Eurobarometer

Eco–IS European EcoInnovation Scoreboard

EEA European Environment Agency

EIO EcoInnovation Observatory

EMAS Eco–Management and Audit Scheme

EPIA European Photovoltaic Industry Association

ETC/SCP European Topic Centre on Sustainable Consumption and Production

EU ETS The European Union Emissions Trading Scheme

GCI Global Competitiveness Index

GDP Gross Domestic Product

IEA International Energy Agency

LCA Life–Cycle Assessment

MFA Material flow accounting and analysis

MIPS Material Intensity Per Service unit

NACE Nomenclature statistique des activités économiques

dans la Communauté européenne (The Statistical Classification

of Economic Activities in the European Community)

NAS Net additions to stock

NIC Newly Industrialised Countries

OECD The Organisation for Economic Co–operation and Development

PPP Purchasing Power Parity

RMC Raw Material Consumption

RMI Raw Material Input

SME Small and medium-sized enterprises

TMC Total Material Consumption

TMR Total Material Requirement

UNEP United Nations Environmental Programme

WBCSD The World Business Council for Sustainable Development

WTO World Trade Organization


Executive Summary

eco-innovation

observatory

The Eco-Innovation Observatory (EIO) is a leading EU-funded initiative collecting and

analysing information on eco-innovation trends and markets in Europe and beyond. This

first annual report introduces the concept of eco-innovation, placing key findings on the

state and potential of eco-innovation in the EU into the context of the resource-efficiency

debate, in particular considering the flagship initiative “Resource-efficient Europe” of the

Europe 2020 strategy. Introducing the notion of the “eco-innovation challenge”, this report

also opens a discussion on the potential benefits of eco-innovation for companies, sectors

and entire economies.

What is eco-innovation

Eco-innovation is innovation that reduces the use of natural resources and decreases

the release of harmful substances across the whole life-cycle. The understanding of

eco-innovation has broadened from a traditional understanding of innovating to reduce

environmental impacts towards innovating to minimise the use of natural resources in the

design, production, use, re-use and recycling of products and materials. Technological

innovation alone is not sufficient to enable the transition of Europe into a sustainable

economy; the magnitude of the challenge also calls for systemic innovations in the way

services are delivered and organisations are run. Public acceptance and social changes are

key in this process.

Why focus on resources

This report focuses on material resources such as fossil fuels, minerals, metals, and biomass

for three reasons. First, it is the human use (and over-use) of material resources that are linked

to the most prominent environmental problems today, most notably climate change. Second,

Europe’s dependence on materials imported from abroad is increasing, raising concerns

over material security. European industries and consumers are increasingly vulnerable to

volatility, increasing scarcity as well as rising material prices. Third, reducing resource use

offers a significant business opportunity to reduce costs. At a time of increasing prices this

is particularly relevant. According to the recent Eurobarometer survey, 75% of businesses

in manufacturing, construction, agriculture, water and food services reported an increase

in the cost of materials in the past 5 years. Nine out of ten surveyed companies expect

material prices to increase in the future. Case studies on material efficiency improvements

in Germany have revealed that on average around EUR 200,000 can be saved per company

(from a pool of around 700 cases in the manufacturing sector) with investment costs under

EUR 10,000 for nearly half of the companies.

Resource efficiency and the eco-innovation challenge

Resource efficiency has become an “umbrella” issue included in various policy agendas

and contexts. The Europe 2020 strategy regards improved resource efficiency as key for

achieving both economic and environmental objectives. However, the resource-efficiency

gains made so far have not been enough to change the trend in the absolute consumption

of natural resources, which continues to increase in Europe and globally. The eco-innovation

challenge is two-fold: to further improve the resource-efficiency performance of Europe and

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VIII

to ensure that those efficiency gains are not offset by growth in the total consumption of

natural resources. The perception of eco-innovation as being limited to producing “green

products” must be overcome to realise the full potential of eco-innovation.

Resource efficiency: Key trends and targets

Tracking trends: resource use and material productivity

Recent increases in relative material productivity have been significant in Europe; with an

annual increase of 3.2% (when GDP is measured in purchasing power standards, when

measured in exchange-rate values annual growth has been 2.2%) between 2000 and

2007. The EU has a material productivity similar to the United States, but much lower than

Japan. Nevertheless, consumption levels are increasing in absolute terms. Global material

extraction and consumption have grown from around 40 billion tonnes in 1980 to around 60

billion tonnes in 2007.

Future outlook: targets for sustainable resource consumption

Establishing targets for resource consumption is necessary if companies are expected to

invest seriously as well as to signal ambitions towards effective resource-efficiency policies.

This report puts forward Factor 2 (reducing consumption by 50%) to Factor 5 (reducing

consumption by 80%) targets for the absolute reduction in material consumption by 2050.

A concerted effort towards transferring the scope of macro-level targets and providing

appropriate incentives down to the scale of companies, where action is taken, is needed.

This would make the eco-innovation challenge more tangible for companies and other

stakeholders. Harmonised methodologies to measure progress across the EU will allow

for better comparison and assessment of progress towards achieving overall city, regional,

country, EU and global targets.

The EU: Eco-innovation performance of countries

The eco-innovation scoreboard

Tools to measure innovation have been developed and in place for a number of years,

but tools to measure eco-innovation were largely missing. The EIO intends to fill this gap

with the eco-innovation scoreboard; a new tool to track the eco-innovation performance

of countries. According to the first edition of the scoreboard, Finland, Denmark, Germany,

Austria and Sweden are the most eco-innovative countries in the EU. A closer look at the five

components comprising the scoreboard (eco-innovation inputs, eco-innovation activities,

environmental outcomes, eco-innovation outputs and socio-economic outcomes) reveals

that no country performed well across all categories. Finland, for example, is the most ecoinnovative

country according to the overall index, but ranks 19th in environmental outcomes.

Understanding country performance

Eco-innovation performance is correlated with GDP and competitiveness. Currently, no

direct relationship can be established between good eco-innovation performance and neither

low nor high material consumption. The top five countries of the scoreboard have relatively


eco-innovation

observatory

low performance with respect to environmental aspects (measured with environmental

productivity indicators). Clearly, good performance in eco-innovation does not automatically

translate to good environmental performance in absolute terms. The factor of time may be

important in this context, considering that eco-innovation is an emerging area in Europe and

investments have only been intensified in the past few years.

Can emerging economies and developing countries also benefit from eco-innovation? We

view eco-innovation as a relevant strategy for all countries and sectors. It is not limited

to producing new green products and delivering new services, but also embodies the

processes that may leap-frog economic and social development in less developed countries.

The latter is particularly relevant for overcoming the “eco-innovation paradox”: the potential

for benefiting from eco-innovation may be higher in the countries and regions where the

capacity to develop or apply innovations is limited.

Eco-innovation performance and trends

According to the 2011 Eurobarometer survey on eco-innovation around 45% of companies

have introduced a product, process or organisational eco-innovation in the last two years.

Around 4% of eco-innovators declared that the change they have introduced even led to a

more than 40% reduction of material use per unit output; this roughly corresponds to a Factor

2 eco-innovation (50% improvements in resource productivity). While these companies

have made outstanding gains over a short time period, the majority of surveyed companies

reported more incremental improvements. 77% of eco-innovating companies reported

between 1 and 20% resource-efficiency improvements as a result of eco-innovation. Clearly,

if this scale of change is implemented continuously, such incremental improvements could

be key towards achieving goals. But, if efforts describe one-off measures, the intensity of

recent eco-innovation activity in European companies is not sufficient to achieve Factor 2,

let alone Factor 5, resource-efficiency targets.

The EU: Eco-innovation in sectors and markets

Eco-innovation activity in sectors: an overview

A handful of sectors contribute significantly to the environmental pressures of the European

economy as a whole, making specific sectors hot spots for potentially big resource savings

through eco-innovation. Results from two EU-wide surveys of European businesses -- the

Community Innovation Survey (CIS, 2008) and the Eurobarometer survey -- compare the

tendency for eco-innovation activity and implementation among sectors in Europe. The CIS

reveals that innovation to reduce energy is more pronounced than innovation to reduce

materials in almost all European sectors, with the exception of finance. Manufacturing is

the sector with the highest share (around 16%) of firms reporting eco-innovation to reduce

material use, with companies in the German industrial sector reporting outstanding shares

(nearly 40%). The Eurobarometer reveals that process eco-innovation was the most popular

type of eco-innovation for companies in the agricultural, water and manufacturing sectors.

Companies in the construction sector were more likely to have brought a new product or

service to the market, whereas companies in food services tended to implement higher

amounts of organisational innovation.

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Global dimension

Future outlook: emerging markets and global areas of interest

Media monitoring provides useful insights into emerging areas of interest. Analysis with

Meltwater news, a media-monitoring tool covering more than 130,000 online publications

from over 190 countries, reveals that the media presence of eco-innovation has continuously

increased since 2006. However, North America has traditionally dominated in the amount

of news on eco-innovation in comparison to Europe (with keyword searches in English). In

combination with sectors, eco-innovation revealed the most hits when coupled with energy

and industry, although all sectors showed an increasing trend. While the news coverage

of ´dematerialisation´ is very low in popular media in Europe, it has had remarkably better

coverage in scientific publications, indicating the need to create a stronger bridge between

science and the public on this critical issue.

Business perspective: eco-innovation

and international competitiveness

Product and technological eco-innovation are an opportunity for all European companies

to consolidate their position and expand to international markets. Further, eco-innovation

represents an opportunity for companies to reduce costs through material-saving innovations

along international material supply chains. European companies are facing increasing

competition as emerging economies are becoming more aware of the opportunities of green

markets and material efficiency.

Eco-innovation in practice: focus on developing

and emerging economies

Evidence suggests that dynamic developments in eco-innovation are happening in many

economic sectors of emerging and developing countries, also in the form of so-called “frugal

innovations”. These are innovations that bring products back to a level of basic simplicity,

especially targeting low-income consumers. Following the economic crisis, many countries in

Asia, in particular China and the Republic of Korea, pioneered an economic and employment

recovery plan based in part on significant investments in a green economy.

Driving eco-innovation

Drivers and barriers of eco-innovation as seen by business

The most important drivers of eco-innovation are the current and expected high prices of

energy, with material prices nearly as important, according to the Eurobarometer survey.

Every third company surveyed considered expected future scarcity of materials to be a very

serious driver of eco-innovation, with concerns over material scarcity more pronounced in

the EU-15 than the EU-12. According to the Community Innovation Survey, focused on a

broad range of eco-innovation types, nearly every fourth innovating firm in the EU introduced

environmental innovation in response to existing regulations or taxes. Companies from

Eastern and Southern Member States considered regulatory and policy factors as more

important than companies from Northern and Western countries.


Drivers and barriers in EIO country profiles

eco-innovation

observatory

The EIO country profiles include a section on barriers and drivers, offering a complementary

expert perspective to survey analysis. Country reports also reveal that the regulatory and

policy framework are among the most important determinants of eco-innovation development

in the EU. Availability of relevant expertise and human capital in research and post R&D

project implementation were also mentioned as important drivers for success; while new

Member States report widely about the lack of expertise, also leading nations like Denmark

and Finland seem to feel a pressing need to attract world class foreign specialists to keep

their leading positions.

Future Outlook: Visions of

a resource-efficient Europe

The visions in this report look beyond resource efficiency to ask what kinds of systemic

changes are needed, and what the possible eco-innovations to get there entail. They are

not scenarios or roadmaps, but should serve as a starting point for idea sharing and debate

on long-term policy objectives. The visions are positive; to present this optimistic future the

perspective of a citizen of the future (living around 2100), reflecting back on how sustainability

was achieved, is taken.

The transition and resource consumption targets

Around 45 tonnes/person (TMC, in the EU-15) were consumed annually in the year 2000.

By 2050 a Factor 5 had been achieved, and in 2100 a Factor 10 (4.5 tonnes/ person). This

transition was characterized by an increased mimicking of natural systems to create a more

dynamic system of production, consumption and reuse. Systemic change was gradual: it

began with greater life-cycle-wide resource-efficiency efforts, which triggered the need for

better product design to optimise recovery and ultimately enhanced systems thinking in

innovation efforts.

Dematerialization and rematerialization

As population growth steadied out, it became clear that remodelling and renovating the built

environment were the most cost-effective options and that the existing building stock held

valuable material components that could be mined for re-use (urban mining). Eventually,

secondary sourcing of metals became more common than primary sourcing. As regards

mainstream products, for instance, producers started selling the performance of a product,

but remained owners of the good. This transformed the concept of ownership and productservice

systems. Material stewardship became a complement to producer responsibility and a

driver for establishing new business models. Both coincided with a slow change in consumer

understanding of ‘living green’. Social values towards living space, mobility and ownership

have adapted with the overall shift towards dematerialization. Whereas at the beginning

of the century the net additions to stock (annual additions to buildings and infrastructure)

amounted to about 10 t/cap in Europe, it has reached values around zero today. This does

not mean that the economy has come to a standstill, but rather that economic growth and

physical growth are no longer co-dependent.

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Harnessing the power of the sun

In 2100 solar energy is not only used for heat and electricity production, but also indirectly

for the synthesis of materials. This process was dubbed ‘Industrial photosynthesis’, meaning

the use of captured carbon dioxide and solar energy to produce energy rich compounds for

materials and fuels. This effort, which reached commercial scale around 2100, has made

incredible gains in climate change mitigation and eased conflicts over land use and land use

change.

The balanced bioeconomy

In the 2nd decade of the 21st century international conventions were formed that first abolished

all biofuel quotas and then agreed to halt all cropland expansion beyond 2020. Forced to

use land resources more effectively, massive efficiency gains across the food chain—from

“the field to the fork”—were made. Organic wastes were found to be an excellent feedstock

for refinement and biorefineries eventually developed into processing and re-processing

facilities, as well as decentralized energy suppliers. At the end of the century, industrial

photosynthesis made it possible to rely more heavily on biomaterials and bioenergy, only

supply was not based entirely on land or ocean based harvest, but rather represented

the transition toward a sustainable economy, one built by mimicking natural systems of

production and use.

Main findings and key messages

Eco-innovation goes beyond eco-industries to encompass innovation in the way

resources are sourced and products are designed, produced, used, re-used and

recycled across all sectors. This includes technological and non-technological

changes that benefit both the economy and environment.

● Many European companies implement eco-innovation, but the majority either still do

not eco-innovate or the material savings achieved due to innovation are low. Strong

eco-innovation performance in terms of company investments and activities are not

automatically linked to strong environmental outcomes on the macro-scale.

The potential for eco-innovation and the capacity to benefit from eco-innovation are

different across EU regions and sectors. Eco-innovation may not only present the

opportunity for emerging regions to ‘leap-frog’ toward ‘green economies’, but may also

offer them the opportunity to develop new lead markets.

● Achieving the goal of a resource-efficient Europe represents a challenge for all EU

countries. Meeting Factor 2 to Factor 5 material consumption targets will require

an intensification of public policies and private investments towards both resourceefficiency

and absolute dematerialization.

● This report has shown that the potential for instigating meaningful change through

eco-innovation exists. While it has focused on the resource-saving efforts of European

companies (achieving more with less), more radical innovations both in companies

and across economies are needed (we must do better with less). Visions reveal that

a combination of all types of innovation may contribute to creating a prosperous and

resource-efficient Europe in yet unforeseen ways.


1 | Introduction

eco-innovation

observatory

Are you curious about eco-innovation? Maybe you have heard the term, but are not

quite sure what it means for you--as a consumer, a business owner, a policy maker.

At the EIO we not only observe what types of eco-innovation are happening across

the EU, but also identify future opportunities. We believe that eco-innovation represents

a chance for companies to save costs and to expand to new markets, and

that implementation of resource-saving eco-innovations at the company level could

contribute to greater structural shifts towards sustainability in Europe.

This first annual report is meant to introduce how we conceptualise eco-innovation

and present our major findings, but it shall also go beyond that; we invite you, the

reader, to take part in a debate with us about innovation, sustainability, and where

the EU is and should be headed regarding both. It is a discussion that shall shape

our future work and we hope to instigate it by not only presenting the work we have

done so far, but also the key questions we will strive to answer with future analysis.

To trigger the discussion we present a positive vision of the future, and aim to explore

the eco-innovations that will drive this transition in our future work.

This report includes a glossary to discuss and distinguish terms. Hyperlinks throughout

the text enable you to navigate to and from this glossary. The report also includes

a select collection of good practice eco-innovation examples from the EIO website.

Chapter 1 takes a closer look at the definition of eco-innovation and the kinds of innovation

this includes and excludes (section 1.1). It focuses on why innovation that

improves resource efficiency is a major focus of our work, as well as of this report

(section 1.2), and how this relates to the major challenges for the future development

of Europe (section 1.3).

Annual Report 2010

We invite you, the

reader, to take part

in a debate with us

about innovation,

sustainability, and

where the EU is and

should be headed

regarding both.

1


The key challenges

of the 21 st century

are not only about

reducing pollution,

but also about getting

a handle on the

overconsumption of

natural resources.

Eco-innovation does

not just mean inventing

green technologies,

but also encompasses

the “innovation cycle”

in the way products are

designed, produced,

used, re-used

and recycled.

2

Eco-innovation good practice 1

The EIO online repository of good practices

1.1 | What is eco-innovation

The EIO is collecting examples of good eco-innovation

practice and publishing them in our online repository on

www.eco-innovation.eu. This interactive search tool

allows users to search by country, sector or innovation

area, or simply to click through to get an idea of what is

happening across the EU and beyond. Examples are

gathered from across all EIO deliverables, spanning a wide

range of topics. This report includes a select few of these

good practices to give you a taste of what is happening in

Europe, as well as internationally. For further information

visit the EIO online repository of good practices.

Eco-innovation is the introduction of any new or significantly improved product (good or

service), process, organisational change or marketing solution that reduces the use of

natural resources (including materials, energy, water and land) and decreases the release of

harmful substances across the whole life-cycle.” – EIO (2010)

Traditionally, eco-innovation was understood mostly as a solution to minimise or fix

negative environmental impacts from production and consumption activities. These endof-pipe

solutions allowed for the ‘cleaning-up’ of polluted water and soils, and for reducing

harmful emissions. It is increasingly evident today, however, that the key challenges of the

21st century are not only about reducing pollution, but also about getting a handle on the

overconsumption of natural resources (SERI et al. 2009, Rockström et al. 2009, EEA 2010a,

WWF et al. 2010).

The understanding of eco-innovation has thus broadened to include a focus on resource

and energy efficiency taking into account a full life-cycle perspective (or “cradle-to-cradle”

approach). It does not just mean inventing green technologies, but also encompasses the

“innovation cycle” in the way products are designed, produced, used, re-used and recycled.

With its focus on resources, the EIO has termed this material flow innovation; this is a new

way of conceptualising resource-efficient innovation that is complementary to the traditional

classifications of product, process, organizational, and social eco-innovation.

The EIO works to observe the types, degrees, and impacts of eco-innovation in the EU; from

incremental to radical innovations. In this way, we can assess whether and in which form

eco-innovations are contributing to ‘green growth’, or whether certain developments may

actually slow down the transition toward a sustainable society. We are particularly interested


eco-innovation

observatory

in system innovation, i.e. innovations that change production and consumption patterns.

What the most effective types of eco-innovation are, where the barriers, drivers and potential

for significant changes are, and which policy and business actions can be taken to speed

up the pace and scope of eco-innovations in Europe are questions the EIO will continue to

grapple with.

In our work, we distinguish between eco-innovation and eco-industries. Eco-industries are

relevant players and a driver of European competitiveness on world markets (see for instance

Ecotec 2002; Ernst & Young 2006; Bilsen et al. 2009, EIO 2010). They will have a role to play

in environmental modernisation as well as in building up a voice for environmental policy in

developing countries. However, while eco-innovation and eco-industries are corresponding

(and partly overlapping) concepts, the affiliation between eco-industries and eco-innovation

is not always automatic. First of all, eco-innovations are by definition solutions that are novel

to the company and to the market, whereas eco-industries denominate an entire sector with

all its products and processes. Further, while eco-industries aim to produce “green products

and technologies” and generate “green energy”, eco-innovation also encompasses goods

or processes that are produced without an explicit aim to improve the state of environment.

In many cases, the motivation to invest in eco-innovation may be driven by the objective

of reducing costs for materials and/or energy and thus increasing competitiveness and

economic success. That is why we consider eco-innovation to be good both for business

and the environment.

Eco-innovation in industry alone is not sufficient to inspire the transition of Europe into a

vision of a sustainable economy. Transformative innovations are needed; ones that shift

entire systems from unsustainable consumption behaviours to more circular systems of

material use and re-use. Public acceptance and social changes are key to this transition;

people should not only have access to eco-innovative products and services, but – just like

industry - will need to make a contribution to this change in their everyday lives.

1.2 | Why focus on resources

In recent years, issues related to resource use have significantly gained importance in both

business and the policy areas. But what are natural resources?

In its Thematic Strategy on the Sustainable Use of Natural Resources, the European

Commission (2005) applies a very wide definition of natural resources. According to this

definition, natural resources include raw materials such as minerals, biomass and biological

resources; environmental media such as air, water and soil; flow resources such as wind,

geothermal, tidal and solar energy; and space (land area).

In this EIO Annual Report, we apply a much narrower definition of resources. We focus on

materials, which include non-renewable resources such as fossil fuels, minerals and metal

ores, and renewable resources such as agricultural products, timber or fish.

Why do we select this focus? On the global and European level, material use is a key issue

in the transition towards more sustainable production and consumption patterns (section

1.2.1); it is also an area of rising concern as Europe is largely dependent on imports of

Annual Report 2010

We apply a much

narrower definition

of resources to focus

on materials.

3


Europe has become

the world region

shifting most of the

environmental cost of

resource use abroad.

4

materials from abroad (section 1.2.2). On the industry and business level, reducing material

costs and avoiding material scarcity are increasingly important aspects for economic success

(section 1.2.3).

1.2.1 | Environmental perspective: overconsumption

Human societies have always built their (economic) development on the extraction and

use of natural resources. However, since the industrial revolution and especially during the

last six decades, worldwide material use has reached unprecedented levels (see section

2.1 for details). Only in the period from 1980 to 2007, worldwide resource extraction and

resource use increased by 62%, reaching more than 60 billion tonnes of renewable and

non-renewable resources extracted and used in the year 2007 alone in the global economy

(SERI 2010).

A number of recent environmental assessments (EEA 2010a, WWF et al. 2010) illustrate

that already at today’s level of global consumption, the natural resource base our societies

are built on is in severe danger of overexploitation and – potentially – collapse. At the same

time, around 80% of the world population still lives on less than 10 US$ per day (Ravallion

et al. 2008) and legitimately demands higher consumption in the future.

The most prominent environmental problems are linked to human use of materials (including

energy carriers); most notably climate change and the degradation of global ecosystems, as

well as the ecological services they provide: fresh water reserves and forests are shrinking,

many species are under threat of extinction and fertile land is being eroded. Environmental

impacts occur across the whole life-cycle of material use: from extraction through processing

to disposal. At every stage of this cycle, energy and water are used and emissions are

released into the air, water and soil (Bringezu and Bleischwitz 2009). Extraction of large

amounts of materials also impact land cover and biodiversity (EEA 2010b).

As materials and products are increasingly traded internationally, the environmental

pressures associated with resource use are distributed across the world (see Box 1.1).

Europe has become the world region shifting most of the environmental cost of resource

use abroad. From 1960 to 2005 the growth of traded goods has increased about 3.5-fold

(in terms of weight), whereas the ecological rucksacks (or hidden flows) of those traded

goods have multiplied by a factor of nearly 4.8 (Dittrich et al. forthcoming). Reducing natural

resource use through increasing resource efficiency is therefore one of the key means to

lowering the environmental impacts associated with production and consumption, both

within Europe and abroad.


Box 1.1 | Problem shifting—what are

the (hidden) costs of EU consumption

abroad: the case of biofuels

Using ‘green products’ may often appear to be an

‘environmentally friendly’ solution in the country of

consumption. However, when the detrimental impacts

are displaced abroad (often to the place of production)

the net environmental impact may worsen. In the case

of problem shifting the impacts of consumption are not

seen by the end user as they occur elsewhere. Thus, there

is no trigger to stop the behaviour causing the negative

externalities. With globalisation, the scale of these negative

externalities has increased.

eco-innovation

observatory

Biofuels are a classic example of problem shifting from the EU to other countries. To meet

the demand for food, feed, biofuels and biomaterials, the EU currently uses about 1/5 more

agricultural land than what is domestically available within the EU (Helmut Schütz, personal

communication). The growing use of biofuels, fostered by the aim to reduce greenhouse gas

emissions from transport, is further increasing the EU’s demand for land abroad, both directly

through imports and indirectly by displacing production elsewhere. Cropland expansion is

the biggest cause of deforestation worldwide. It is a major contributor of biodiversity loss and

may release significant amounts of carbon, completely negating the CO2 mitigation potential

of biofuels. In the most extreme cases, driving a car with palm oil biodiesel produced on

land that was converted from peat rainforest might release 2,000% more carbon than driving

fossil-fuel based diesel (Beer et al. 2007).

While biofuels currently provide around 3.4% of Europe’s transport energy demand

(EurObserv’ER 2009), plans to increase this share have sparked intense debates about the

above mentioned problem shifting of externalities as well as the problem of replacing one

supply dependency (fossil fuels) with another (biomass). Addressing these (hidden) costs of

EU biofuels consumption may include increasing the efficiency of biomass use (e.g. through

cascades), reducing the overall land requirements of the EU (e.g. by improving the efficiency

of the food supply chain), improving the energy and resource-efficiency of automobiles, and

approaching mobility with more creative approaches. It is vital that future eco-innovations

are examined from a life-cycle and systems perspective to prevent the resource curse of

the green economy (see Box 5.3). One aspect of this is monitoring sustainable supply to

determine how much land is actually available for sustainable use, and adjusting governance

accordingly. See the visions chapter (7) for a depiction of a sustainable use of biomass.

1.2.2 | Political perspective: material security

Photo: Katrin Bienge

Of all world regions, the EU has the highest net imports of resources per person (EEA

2010c, SERI et al. 2009). In 2008, European imports of raw material amounted to 1,800

million tonnes, which is about 3.5 tonnes per person (EEA 2010c). Europe is substantially

dependent on imports from other countries, in particular for fossil fuels and metal ores.

According to the EEA (2010), European import dependency around the year 2007 was 47%

Annual Report 2010

5


Europe is substantially

dependent on imports

from other countries,

in particular for fossil

fuels and metal ores.

The price of many

metals doubled or

even tripled between

2002 and 2008.

1. See The Independent,

3.8.2009: “Warning: Oil supplies

are running out fast”.

(http://www.independent.

co.uk/news/science/warningoil-supplies-are-running-outfast-1766585.htm.l)

6

for natural gas, 59% for coal and 83% for oil; 50% for copper, 65% for zinc and about 85%

for tin, bauxite and iron ores; and up to 100% for a wide range of high-tech metals. Without

major changes over the next 20 to 30 years, approximately 70% of the EU's energy will

have to be imported. This is 20% more than today (EEA 2009a). Resources and resource

use are already strategic issues and sources of conflict, and their importance will most likely

increase.

Thus, concerns about material security have gained widespread attention in Europe and

policy processes have been launched to address the threats of potential supply disruptions,

most notably the so-called Raw Material Initiative (EC 2008a). The EIO views material

security as the security of supply and access to the material resources on which economies

depend, as well as the ability to cope with volatility, increasing scarcity and rising prices. This

includes, but is not limited to, energy security.

The increasing use of and dependency on imported resources not only raises environmental

concerns, but also concerns by industries (especially in regard to future material prices; see

Figure 1.1). The rapidly increasing demand for commodities such as oil, raw materials and

wheat – not least from rapidly growing emerging economies such as the BRICs countries –

has led to a boost in resource prices, especially during the five years prior to the outbreak of

the financial crisis. For instance, the price of many metals doubled or even tripled between

2002 and 2008 (EEA 2010c). Although the financial crisis and the recession brought a

significant temporal drop in the oil price to below 40 USD per barrel, the fuel crisis remains

real. Oil prices have now passed 100 USD and peak oil is approaching, according to many

authors and institutions, recently also by the Chief Economist of the IEA1 .

For various other commodities, the peak of extraction seems to have already been reached

or is expected to be reached in the near future, e.g. for natural gas, for the production of

uranium and for the annual extraction of critical metals and minerals (European Parliament

2009). The inefficient use of these and other resources at a time of growing demand and

prices is therefore neither environmentally nor economically sustainable.

Box 1.2 | Eco-innovation – a catalyst

of the Europe 2020 Strategy

Resource efficiency and eco-innovation are two major cornerstones of the EU 2020 strategy,

the major 10-year strategy for development of the European Union, presented by the

European Commission in June 2010. Two out of its three priority themes are directly linked

to eco-innovation, namely “smart growth” (‘developing an economy based on knowledge and

innovation’) and “sustainable growth” (‘promoting a more resource-efficient, greener and more

competitive economy’).

Moreover, eco-innovation features strongly in three flagship initiatives: “A resource-efficient

Europe”, “Innovation Union” and “An Industrial Policy for the Globalisation Era”. All three

flagships consider eco-innovation and resource efficiency to be both a key challenge as well

as business opportunity for European economies and societies. The research and analyses

undertaken by the EIO will address eco-innovation activities pursued in the framework of these

flagships.


eco-innovation

observatory

The initiative “A resource-efficient Europe” is particularly

relevant for the present report and the overall context of

Europe 2020: A strategy

the EIO. It aims to help decouple economic growth from

for smart, sustainable and

resource use, support the shift towards a low carbon

inclusive growth

economy, increase the use of renewable energy sources,

modernise our transport sector and promote energy “Improving resource efficiency

efficiency. It states that increasing resource efficiency is key would significantly help limit

to securing growth and jobs for Europe, especially “to bring emissions, save money and

major economic opportunities, improve productivity, drive down boost economic growth.”

costs and boost competitiveness”. The flagship initiative also (EC 2010a).

strives for building a long-term framework for actions in many

policy areas to de-risk investment in eco-innovation and to ensure

that all relevant policies take into account resource-efficiency issues.

It provides one of the key orientations for innovation activities heralded

also in “Innovation Union” and “An Industrial Policy for the Globalisation Era”.

For general information on Europe 2020 strategy see: http://ec.europa.eu/europe2020/index_en.htm

For “A resource-efficient Europe” flagship initiative see: http://ec.europa.eu/resource-efficient-europe/#

For “Innovation Union” flagship initiative see: http://ec.europa.eu/research/innovation-union/index_en.cfm?pg=home

For “An Industrial Policy for the Globalisation Era” flagship initiative see:

http://ec.europa.eu/enterprise/policies/industrial-competitiveness/industrial-policy/

1.2.3 | Business perspective: saving material costs

Resource efficiency is becoming increasingly important for economic success in a world

where many resources are becoming increasingly scarce and expensive. There is evidence

that substantial resource-efficiency gains in industrial production can be realised relatively

easily and cost effectively2 . We focus on the potential to reduce material costs in this report

both because of their increasing importance to companies due to expected price increases

(Figure 1.1) and because we believe that focusing on material productivity, instead of for

instance on labour productivity3 , may represent larger potentials for economic, as well as

environmental, gains (see Figure 1.2). In this case, material productivity means increasing

the amount of output per unit of material input.

Business consultants report that even providing nothing more than technical advice to

companies in the processing sector could bring savings of around 20% of material costs

(Fischer et al. 2004; ADL et al. 2005; Aldersgate Group 2010). In the UK, estimated resourceefficiency

opportunities for 2009 are estimated at £55 billion (DEFRA 2011). For SMEs

the potential to improve material productivity is estimated to be even higher than for large

enterprises. Case studies on material efficiency improvements in Germany have revealed

that on average around EUR 200,000 have been saved per company (from a pool of around

700 cases in the manufacturing sector), with investment costs under EUR 10,000 for nearly

half of the companies (see Box 4.2).

Accounting for material flows properly and realising potentials to save costs through

increasing material productivity will therefore become one key determinant for European

companies in the coming decades, in order to maintain competitiveness on global markets.

Annual Report 2010

Eco-innovations allow

companies in Germany

to save 200,000 euro

per year on average

2. See for instance Marc

Grynberg, CEO of Umicore, talk

about how resource efficiency

policies are driving forward

his global business (http://

ec.europa.eu/environment/

etap/inaction/interviews/596_

en.html).

3. This may have been an

effective strategy to reduce

costs in the past because while

salaries rose continuously, prices

for raw materials may have been

subject to great fluctuations,

without following any clear

tendency (this is, however, no

longer the case).

7


8

8% No, material

costs will remain

approximately the same

Eco-innovation good practice 2

SkySails

Figure 1.1

Source: SkySails;

Copyright: SkySails

Expectations about how companies'

material costs will evolve (5-10 years)

1% No, material costs

will decrease

4% Not applicable

87% Yes, material

costs will increase

Source Figure 1.1: Eurobarometer (EC 2011b);

Q3. Do you expect price increases for materials in the coming 5 to 10 years?

Base: all companies, % EU-27

Source Figure 1.2: Demea (2010)

The Hamburg-based SkySails GmbH & Co. KG has

developed an automated towing kite system. The company

develops and produces a wind propulsion system for cargo

ships based on large kites. The kite is connected to the

ship by rope, and an automatic control system adjusts its

flight path. Depending on the wind conditions, the system

can reduce a ship’s average annual fuel costs by 10 to

35%. Under optimal wind conditions, fuel consumption can

temporarily be cut by up to 50%. An effective tractive force

of 8 tons by a SkySail corresponds to approx. 600 to 1,000

kW installed main engine power on average - depending

on the ship’s properties (propeller efficiency degree,

resistance, etc.). According to SkySails the worldwide use

of SkySails technology would make it possible to save over

150 million tons of CO2 a year, an amount equivalent to

about 15% of Germany's CO2 emissions.

For further information see SkySails or visit the EIO online

repository of good practices.

2% Hired labour

3% Depriciations

3% Taxes

chargeable as

expenses

11% Commodity

Figure 1.2

Cost structure in the German

manufacturing industry in 2008

13% Other

18% Personnel

2% Energy

45% Material

Note: Data for both figures requires further analysis because it has been generated based on responses to questionnaires.

Figure 1.2 may comprise hidden costs from other categories such as personal costs from suppliers and embodied energy costs.


1.3 | This report: resource efficiency

and the eco-innovation challenge

eco-innovation

observatory

Resource efficiency and eco-innovation have both recently climbed the EU policy agenda.

The Europe 2020 strategy includes a dedicated flagship initiative on “Resource Efficient

Europe” (EC 2011), which responds directly to the challenge of resource scarcity. Ecoinnovation

is explicitly mentioned in another flagship initiative “Innovation Union” (EC 2010a)

that mentions support to eco-innovation among its strategic commitments for action. The

flagship “An Industrial Policy for the Globalisation Era” includes the issue of sustainable

supply and management of raw materials in the context of industrial processes (EC 2010b;

see also Box 1.2). A number of other EU policy processes also focus on increasing resource

efficiency and eco-innovation (including for instance the “Thematic Strategy on the Use

of Natural Resources”, the “Environmental Technology Action Plan”, the “Raw Materials

Initiative”, and the “Sustainable Consumption and Production and Sustainable Industrial

Policy Action Plan”).

Resource efficiency has become an “umbrella” issue included in various policy agendas

and contexts. The Europe 2020 strategy regards improved resource efficiency as key

toward achieving both economic and environmental objectives. In this context, analysis and

research on the current trends and the practical ways to improve resource efficiency is also

becoming a priority.

However, resource-efficiency gains made so far have not been sufficient to bring about

a substantial change in the absolute consumption of natural resources. The underlying

logic of this report is based on the simple realisation that small gains in efficiency are not

enough. Both large gains in efficiency and a significant change in the way both materials and

resources at large are used, re-used and managed is needed. This change will be possible

thanks to new technological and non-technological solutions, new approaches to the way

businesses are run and the way goods and services are consumed and used.

The eco-innovation challenge is twofold. On the one hand, it is to further improve the

resource and energy efficiency performance of the EU by promoting eco-innovation and

by ensuring that the benefits of new solutions are widely disseminated. On the other hand,

it is to ensure that the efficiency gains are not offset by growth in the total consumption of

natural resources. Both efficiency gains and absolute dematerialization are needed to meet

the vision of resource-efficient Europe.

Many different types of eco-innovation can and will contribute to meeting this challenge. This

report focuses primarily on eco-innovation that reduces material or energy use—thereby

saving both resources and money. Indeed, much of our data in this first year stems from

survey analysis of company efforts to reduce resource use. We see these resource-efficiency

efforts as a critical first step towards more radical innovations along the material supply chain

and also argue that the potential for “saving resources” with this type of innovation is high.

However, more radical types of systemic change are also needed. We hope to capture

some of these with good practice examples in this report. Other types of eco-innovation

exist, for instance to reduce negative environmental impacts, but will not be the focus of this

report. This reflects our systemic approach to eco-innovation and rationale that reducing

Annual Report 2010

Resource efficiency is

key toward achieving

both economic

and environmental

objectives.

The eco-innovation

challenge is to ensure

that efficiency gains

are not offset by

growth in the total

consumption of

natural resources.

9


10

resource use will also reduce the negative environmental impacts associated with using

those resources. In the future, work on the distinguishing between different types and forms

of eco-innovation will be intensified.

This report offers a general framing of both the problems and the objectives; it begins by

analysing current unsustainable trends and ends with a vision of a resource-efficient Europe.

This vision reflects what resource efficiency means to us, it also depicts the scope the ecoinnovation

challenge.

As we will show, eco-innovation is already occurring in countries, sectors, and markets

across the EU, but not to the degree necessary. The EIO therefore aims to demonstrate

existing solutions and to explore the untapped, often unrealized, eco-innovative potential

of new solutions. In this context, this report aims to provide answers to the following key

questions:

● What are the current eco-innovation -- and eco-innovation relevant -- trends?

● What types of good practice can be seen in different EU Member States?

● What are the drivers and barriers of eco-innovation in countries, sectors and companies?

● What policy approaches are most effective for promoting eco-innovation?

Box 1.3 | Resource efficiency, productivity

and intensity: distinguishing the terms

Resource efficiency means using less resources to achieve the same or improved output

(resource input/output). It is an input-output measure of technical ability to produce “more

from less”.

Resource productivity has a component of economic value: it refers to the economic gains

achieved through resource efficiency (for example GDP/DMC). In this way it indicates the

economic effectiveness of natural resource use. This report often refers to material productivity.

At the company level, material productivity refers to the amount of economic value

generated per unit of material input. In other words, reducing material cost or adding more

value to the production output by increasing efficiency in the way material resources are

delivered processed and handled.

On the scale of economies, material productivity is an indicator calculated as GDP

per material consumption. In this case, material productivity refers to domestic material

consumption whereas resource productivity refers to total resource consumption (see also

Box 2.1 describing material flow indicators).

Resource intensity indicators are the inverse of productivity indicators. They are often used to

discuss energy and emissions. This report, for instance, considers GHG emissions intensity

(measured as CO2e/GDP) in the calculation of the Eco-Innovation Scoreboard (section 3.1).


2 | Resource efficiency:

Key trends and targets

eco-innovation

observatory

Resource efficiency has increased in Europe. However, efficiency gains have been

offset by increases in consumption, both in Europe as well as in other continents.

This chapter asks what is the dimension of the resource-efficiency improvements

required to meet the eco-innovation challenge? It overviews concrete targets for the

EU, which are used in this report to depict the scope of the challenge.

2.1 | Tracking trends: resource use

and material productivity

The global picture: rapid growth in material use

Global material extraction and consumption has grown significantly over the past few

decades, from around 40 billion tonnes in 1980 to around 60 billion tonnes in 2007 (SERI

2010). However, growth rates were unevenly distributed among the main material categories.

The use of metal ores showed the highest increase (more than 115%), indicating the

continued importance of this material category for industrial development, while industrial

and construction minerals grew by 75% and fossil fuels by 54%. Increases in biomass

extraction amounted to 46%, however, the share of renewable materials in total material

extraction is declining on the global level (from 39% in 1980 to 35% in 2007).

Model calculations illustrate that in a “business-as-usual” scenario, i.e. a scenario without

material efficiency policy intervention, the global annual use of primary materials could

be as high as 100 billion tonnes in the year 2030. This scenario assumes a stagnation of

current rates of material recycling and re-use, continued high levels of per capita material

consumption in industrialised countries and considerable growth of material consumption in

emerging and developing countries, aspiring to the same material welfare as people in the

developed countries (Lutz and Giljum 2009).

Annual Report 2010

Global material

consumption has

grown from around

40 billion tonnes

in 1980 to around

60 billion tonnes

in 2007.

11


People in industrialised

countries consume

up to twenty times

more materials

than people in least

developed countries.

12

Box 2.1 | Indicators derived from material flow

analysis on the national level

Material use at the national level is measured with material flow accounting and analysis

(MFA). This is a method of environmental accounting from which a number of indicators can

be derived; the most widely applied being indicators on the material inputs and consumption

of countries (see also EUROSTAT (2007) and OECD (2007).

The system of MFA-based indicators is modular. The simplest input and consumption

indicators--Direct Material Input (DMI) and Domestic Material Consumption (DMC)--only

include direct material flows. These are already being compiled by national statistical offices

across Europe and are published by EUROSTAT, making them the most accessible MFAindicators

in terms of data availability. However, they are also regarded as problematic, as

a country can improve its performance simply by substituting domestic material extraction

with imports of processed materials and because indirect flows (also called the “ecological

rucksacks” of international trade), which are used along the production chain to produce a

traded good, are not accounted for (Moll and Bringezu 2005).

Therefore, indicators which are ‘safe’ against these distortions are preferable. The second

pair of indicators - Raw Material Input (RMI) and Raw Material Consumption (RMC) - include

indirect flows. Methods to calculate these indicators are currently being tested in pilot studies

both at the European (EUROSTAT) and national levels.

The final pair of indicators - Total Material Requirement (TMR) and Total Material Consumption

(TMC) additionally include “unused domestic extraction”, such as overburden from mining

activities, excavation materials or harvest losses in agriculture. It also includes, for instance,

the extractions of soil and earth for infrastructure deployment and maintenance or the “bycatch”

in fishing (which may be unintentionally killed). TMR and TMC are thus the most

comprehensive MFA-based indicators. The European Commission also envisages them as

the most desirable indicators for measuring material input and consumption (EUROSTAT

2009). However, data on TMR and TMC are only available for a few countries so far, but

the data situation is improving and the EIO intends to use existing data to the largest extent

possible.

In per capita terms, people in industrialised countries consume up to twenty times more

materials than people in least developed countries (Giljum et al. 2011). In Europe, around

14.5 tonnes per person (measured with the indicator RMC) were consumed in the year 2000,

whereas North Americans consumed around 32 tonnes and inhabitants of Oceania about

37 tonnes per person. By contrast, average material consumption was about 5.5 tonnes per

person in Asia and less than 5 tonnes in Africa (see Figure 2.1).

Worldwide material productivity (which is calculated by dividing GDP by RMC) was around

615 USD per tonne of natural materials used in 2000. However, while Europe and North

America produced output worth more than 1,000 USD with one tonne of material (1,080 and

1,029 USD per tonne respectively), material productivities in Asia, Oceania, Latin America

and Africa were below average (420, 419, 324 and 149 USD/kg respectively) (see Figure 2.2).


eco-innovation

observatory

The material productivity of a country or region seems to be strongly related to its economic

structure and levels of GDP. Low material productivities are found on continents with small

industrial and service sectors (Africa) or on continents that are specialised in the extraction

and export of materials (Latin America, Oceania) (see Box 5.3 for a discussion of the

resource curse of resource-rich countries). This low material productivity is being observed

despite the fact that in those world regions, material cycles are often more closed compared

to industrialised regions. Repair rates and re-use of e.g. machinery or cars are often very

high. In regions with a higher share of manufacturing, and particularly services, material

productivity is typically higher (North America, Europe), driven by generally higher levels of

GDP.

The interpretation of worldwide rankings of regions regarding their material productivities

should therefore be taken with care. As Figure 2.1 has shown, material productivity is highest

for the continents with the highest levels of material extraction and consumption, except for

Oceania, whose economy is much more dominated by material-intensive activities. Based

on material productivity one might assume that Europe and North America are the most

sustainable continents in terms of material use. However, total levels of material extraction

and consumption per capita show that actually the opposite is true. The most efficient

countries in the world are in most cases also the ones which extract and consume the most.

EU level: relative de-coupling, but no absolute reduction

A number of current EU policy initiatives aim at „decoupling“ economic growth from material

use and its negative environmental impacts. As Figure 2.3 illustrates, the European economy

Figure 2.1

Material consumption of different world

regions, in tonnes per capita (2000)

Tonnes per capital US $ per tonne

40

1200

35

30

25

20

15

10

5

0

Oceania

North America

Europe

Latin America

Source: Giljum et al. (in press)

World

Asia

Africa

1000

800

600

400

200

0

Figure 2.2

Material productivity of different world

regions, in USD per tonne (2000)

Europe

North America

World

Asia

Oceania

Latin America

Africa

Annual Report 2010

The most resource

efficient countries in

the world are in most

cases also the ones

which extract and

consume the most.

13


Compared to the

year 2000, 24% more

economic value was

generated by a tonne

of material in 2007.

14

2000=100

140

135

130

125

120

115

110

105

100

95

90

grew by 35% between 2000 and 2007, but also material consumption increased in absolute

terms (7.8%), almost three times the growth in European population (2.6%). The absolute

growth in material consumption indicates that the EU did not achieve an absolute decoupling,

but only a relative decoupling. This means that growth in GDP (expressed in Purchasing

Power Standards, PPS), was higher than growth in material consumption (measured with

the indicator DMC).

Relative decoupling is illustrated by the indicator material productivity. This reveals that

in 2007, 24% more economic value was extracted from a tonne of material consumption

compared to the year 2000. A number of structural shifts in the EU economy are responsible

for this growth in material productivity (see also Bleischwitz 2010). The share of service

sectors comprising the EU-27 GDP is high and growing (71.6% in 2007 compared to 69.6%

in 2000), and service sectors have a much lower material requirement than primary sectors

(such as agriculture or mining). Wide-ranging changes in the energy production systems of

many countries in Eastern Europe, but also Germany, have also taken place in the past 20

years. This had positive effects on material productivity, as the extraction and use of coal for

electricity production has decreased and other energy carriers (gas, renewable energies),

which are less material intensive have become more favoured.

This transforms to an annual growth rate of material productivity of 3.2%, which is slightly

above the goal stated in the EU Resource Strategy (3% target) (EC 2005). However, the

numbers for material productivity increases would be lower, if GDP was expressed in

exchange-rate values instead of Purchasing Power Standards. Under these assumptions,

an increase of only around 2.2% p.a. between 2000 and 2007 can be observed.

Figure 2.3

Material consumption and material productivity in the EU-27, 2000-2007

2000

2001

2002

Source: own calculations based on EUROSTAT MFA database

2003

2004

2005

2006

2007

GDP (PPP)

Material

productivity

(GDP/DMC)

DMC

Population


GDP in € (pps) per

tonne DMC x 10000

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

eco-innovation

observatory

Moreover, if more comprehensive indicators than currently available were used, especially

if the ecological rucksacks of European imports were taken into account, it is likely that the

productivity performance of the EU would decrease. Considering that the EU imports around

6 times more materials than it exports (EEA 2010a), the outsourcing of environmental burden

through international trade should also play a role in determining productivity performance

with more robust indicators in the future.

While material productivity has increased in general, wide differences exist in the performance

of member states, as Figure 2.4 illustrates. The average EU-27 material productivity in 2007

was EUR 1,513 of GDP produced per tonne of DMC, compared to EUR 1,213 in the year

2000. Material productivity is in general higher in the EU-15 countries (average of EUR 1,715

in 2007) compared to the EU-12 countries (average of EUR 798 in 2007). EU-12 countries

thus have only around half the material productivity performance of the EU-15 countries.

This is due to the fact that these countries’ economies are, in general, still relatively more

focused on industrial and extraction sectors while their service sectors are not yet mature.

Most EU-12 countries are still undergoing the transformation from centrally planned to the

market economies. Ecological modernisation, backed by a regulatory push mostly in the

form of EU directives, is part of this transformation.

In the EU-15, countries with a high share of service sectors (e.g. financial services such as

in Luxembourg or the UK) or small countries with low material extractions and high imports

(e.g. Netherlands) have the highest productivities (EEA 2010a). On the other side of the EU-

15 spectrum are countries which either have a less pronounced service sector, or relatively

Figure 2.4

Material productivity in EU-27 countries and selected non-EU countries, 2005

Luxemburg

Netherlands

United Kingdom

France

Sweden

Austria

Italy

Belgium

Germany

Greece

Spain

Denmark

Portugal

Finland

Ireland

Malta

Hungary

Slovakia

Lithuania

Cyprus

Czech Republic

Slovenia

Estonia

Poland

Romania

Latvia

Bulgaria

Source: own calculations based on EUROSTAT database 2000 2005* / 2007

EU-15

EU-12

EU-27

Switzerland

Norway

Turkey*

Japan*

United States*

Annual Report 2010

If the ecological

rucksacks of imports

to Europe would be

included, Europe’s

material productivity

would decline.

EU-12 countries

have only around

half the material

productivity

performance of

the EU-15 countries

due to the higher

importance of

agriculture and

basic industries.

15


In comparison to

other OECD countries,

the EU has a material

productivity similar

to the United States,

but much lower

than Japan.

Where should the EU

be in 2050 and 2100 in

terms of material use

and productivity?

16

important material processing sectors (such as timber in Finland or milk and dairy production

in Denmark and Ireland).

As single Member States, Luxembourg and Malta had the highest productivities of all EU-27

countries in 2007. Luxembourg achieves its high productivity mainly by its very high GDP

level, whereas Malta’s high performance can be explained by the fact that extraction and

processing of materials within the territory of Malta is very small and material consumption

is to a large extent sustained through imports. In the same way, a city has a higher material

productivity than a whole country.

In comparison to other OECD countries, the EU has a material productivity similar to the

United States (1,316 € in 2005, up from 1,187 € in 2000), but much lower than Japan (2,114 €

in 2005 up from 1,593 € in 2000).

Recent increases in relative material productivity have been significant in Europe. However,

absolute amounts of material consumption are significantly higher in Europe than in other

world regions and these levels are still increasing in absolute terms. Achieving environmental

objectives can therefore not be guaranteed by focusing solely on increased material

productivity, as productivity improvements are typically overcompensated by economic

growth. Indeed, efficiency increases on the level of products and companies can directly

cause increased material use on the economy-wide level. This is known as the rebound

effect (Binswanger 2001). For instance, when companies are able to produce their products

with lower costs (i.e. through efficiency gains) and demand for those products increases,

those material-efficient companies might expand their production volumes, offsetting their

efficiency gains and leading to higher economic growth. These dynamics point to the

necessity of implementing (policy) measures on the macro-economic level tackling those

rebounds in addition to supporting material productivity on the micro level of products and

companies.

2.2 | Future outlook: targets for

sustainable resource consumption

The EU is improving its relative material productivity, but the absolute amount of material use

is still increasing. How can this development in the EU be set into context of a long-term and

sustainable development of material use? Where should the EU be in 2050 or 2100 in terms

of material use and productivity? And which policy targets should be introduced on the EU

level to support a transition to sustainable production and consumption patterns?

Concrete targets for reducing resource use and related negative environmental impacts

have already been introduced in several EU policy areas, most prominently in the area of

energy and climate policy. For example, the Europe 2020 headline targets include a 20%

reduction of greenhouse gas emissions (30% in the case of international cooperation), a

rise to 20% of renewable energy sources and a 20% improvement in energy efficiency (EC

2011).

In comparison, targets regarding the area of material resources have been discussed to

a much lesser degree in the EU policy context. However, a number of studies have been


eco-innovation

observatory

presented, which have proposed different targets for material consumption and material

productivity. Most widely known are the targets of Factor 4, defined as a doubling of income

while reducing material consumption by 50% (von Weizsäcker et al. 1997); Factor 5, i.e. an

80% increase in resource productivity (von Weizsäcker et al. 2009); and Factor 10, a ten-fold

reduction of material consumption in industrialised countries up to the year 2050 (Schmidt-

Bleek 1993; Schmidt-Bleek et al. 1993). Additionally, targets for the year 2050 of 6 tonnes

of resource use per capita (Schmidt-Bleek 2008b; Ekins et al. 2009) or a total use (including

unused material resources) of 10 tonnes of abiotic resources (Bringezu 2011) have been

suggested.

These visions of a dematerialised economy are also increasingly taken up in business

thinking. For example, a recently published report by the World Business Council for

Sustainable Development states that a “four to tenfold improvement in the eco-efficiency

of resources and materials from 2000” is required to achieve a sustainable world in 2050

(WBCSD 2010).

It is important to emphasise that targets on material consumption should be based on

comprehensive indicators of material use, which include indirect material flows of international

trade (such as RMC or TMC; see Box 2.1). Only those comprehensive indicators avoid the

risk that a country or world region achieves its targets by a dislocation of domestic material

and energy intensive parts of the economy abroad. This would only result in a relocation of

environmental burden, but not in an absolute reduction on the global level. However, as data

sets for those comprehensive indicators are not yet available on the European level, we refer

to DMC data in order to show the order of magnitude of the required change. In later stages,

the EIO project aims at employing more comprehensive indicators to target setting.

Based on the basket of suggested targets, we defined a set of three scenarios and related

targets for the European economy:

● Business-as-usual scenario, the trends of the past four decades continue, i.e.

assuming a 20% increase of DMC in the next 40 years (based on the 20% increase of

material consumption in the EU-15 countries observed between 1970 and 2008) (see

EEA 2010a). Note that this is a very simple scenario, which is not taking into account

structural changes of the economy and population;

● Weak reduction scenario, an absolute reduction of material consumption by 50% (or

a Factor 2) until 2050;

● Strong reduction scenario, significantly reducing material consumption by 80% (or

a Factor 5) until 2050.

The two described reduction scenarios could also be extended to a long-term goal in 2100,

resulting in a Factor 4 reduction in the weak reduction scenario and a Factor 10 reduction in

the strong reduction scenario.

Table 2.1 and Figure 2.5 provide an overview of key variables and targets in the three

scenarios. All numbers are for the EU-27.

Annual Report 2010

Targets on material

consumption

should be based

on comprehensive

indicators of material

consumption.

The EIO targets

are based on a

development pathway,

aiming for a Factor 2

to Factor 5

reduction in material

consumption by 2050.

17


18

Achieving an

absolute reduction

under a growth

scenario requires

significant efforts.

Index, 2000 = 1

4. Note that these values assume

constant population. According

to the UN statistics division,

European population is expected

to decline slightly from around

841 million people in 2010 to

around 824 million in 2050 (UN

Statistics, 2009).

25

20

15

10

5

0

The table shows that the rate of assumed average economic growth significantly determines

the need to increase material productivity. The rate of annual increase in material

productivity in the EU over the past few years was 3.2% (in relation to GDP in purchasing

power standards) or 2.2% (GDP at market exchange rates). This illustrates that achieving

an absolute reduction under a growth scenario requires significant efforts. Even under a

zero growth scenario, the absolute reduction of material consumption to 20% of the current

consumption level would require an annual growth of material productivity above the

current rate. As a general conclusion it can be stated that an absolute reduction of material

consumption under the current trend can only be realised, if the annual growth rates of

material productivity grow at a significantly higher rates than the GDP growth.

Table 2.1

The three scenarios and related targets until the year 2050

Figure 2.5

Material productivity increases in the EU-27 required to achieve reduction targets

(with different assumptions on annual DMC and GDP growth), 2000-2050

2000

Average annual increase in

material productivity required

to achieve target under different

assumptions of economic growth

2010

2020

CURRENT

SITUATION

(YEAR 2007)

2030

BUSINESS-

AS-USUAL

SCENARIO (2050)

2040

Note: This is an indicative figure based on the assumptions about material consumption defined in the weak and strong reduction scenarios (Table

2.1). It shows that, if the correlation between material consumption and GDP growth remains unchanged, the efforts to reach material consumption

reduction targets will need to be intensified depending on the rate of GDP growth. However, increasing dematerialization would decrease the effect of

economic growth on material consumption over time. This is not taken into account here.

2050

WEAK

REDUCTION

SCENARIO (2050)

STRONG

REDUCTION

SCENARIO (2050)

0% growth: -0.4% 0% growth: 1.6% 0% growth: 3.8%

1% growth: 0.6% 1% growth: 2.6% 1% growth: 4.9%

2% growth: 1.6% 2% growth: 3.7% 2% growth: 5.9%

3% growth: 2.6% 3% growth: 4.7% 3% growth: 6.9%

Indicative DMC per capita values 4 ~ 16 tonnes ~ 19.2 tonnes ~ 8 tonnes ~ 3.2 tonnes

DMC Factor 5, GDP 3%

DMC Factor 5, GDP 2%

DMC Factor 5, GDP 1%

DMC Factor 2, GDP 3%

DMC Factor 5, GDP 0%

DMC Factor 2, GDP 2%

DMC Factor 2, GDP 1%

DMC Factor 2, GDP 0%


Eco-innovation good practice 3

Resource-Efficiency Atlas

eco-innovation

observatory

No broad, global collection of resource-efficiency

technologies, products and strategies was available,

until recently. The “Resource Efficiency Atlas” (REA) has

collected a selection of good practice examples; including

technologies, products and strategies for increasing

resource efficiency and approaches for a sustainable

innovation policy. Overall, the global mapping resulted

in almost over 100 efficient technologies, products and

strategies. Most identified measures are located in Europe,

Asia and North America. The share of the identified

measures is highest in technologies, followed by products

and strategies. For further information visit REA the EIO

online repository of good practices.

The above makes the challenge to decouple economic growth from material consumption all

the more relevant. A trend towards absolute dematerialization could gradually decrease the

negative impact of economic growth on material consumption and lead to a win-win scenario

of dematerialized, sustainable growth over the long term.

The vision of a resource-efficient Europe provided in chapter 7 describes key possible

elements of the strong reduction scenario. It is oriented towards the Factor 10 reduction in

the year 2100.

2.3 | The targets, material productivity pathways

and eco-innovation challenge

Long-term targets are crucial for facing the eco-innovation challenge (Figure 2.6). They can

frame policies and strategies to significantly de-risk the investment decisions of companies,

governments, financial institutions or research organisations. The overall target should be

translated to the level of individual stakeholders, sectors and regions. Policy makers will

have to lead efforts to establish such operational performance targets, making them more

tangible for companies and other stakeholders.

Shared targets are imperative; meeting the scale of material productivity improvements

needed requires continuous and concerted efforts by different stakeholders:

● Companies: to develop and implement viable innovations with a high use value with

the reduced use of resources, including energy, materials, water, land and biomass;

● Public and private research organisations: to provide the knowledge foundations

for achieving significant reductions in resource use, such as new materials and new

production technologies as well as other innovative processes;

● Financial institutions: to provide the capital required for green investments at the

scale necessary to realise targets;

Annual Report 2010

19


20

Material consumption

(1970 - 100)

The eco-innovation

challenge can and

should be tackled

differently by

different companies,

regions or cities.

160

140

120

100

80

60

40

20

Figure 2.6

The eco-innovation challenge and material consumption

1980

1990

2000

2010

● Policy makers and public administration: to implement a regulatory and policy

framework which removes barriers and provides incentives for the implementation

and wider diffusion of eco-innovative products and services; and, last but not least,

● NGOs and think tanks: to provide an independent perspective on the progress made

by business and government and to promote good examples of eco-innovations for

business and lifestyles.

Without a clear direction and shared objective these efforts will remain uncoordinated and

may lead to burden shifting. Moreover, it is key that the methodologies to measure progress

are harmonised across the EU, to allow for comparisons and the assessment of progress

towards achieving the overall EU and global targets.

Operational targets, including the level of ambition and timing, should be diversified and

recognise that the eco-innovation challenge can and should be tackled differently by different

companies, cities or regions. The impact of eco-innovation in less developed industrial

regions, for example, could be critical over a relatively short term as substantial material and

energy productivity improvements could be achieved more easily than in more advanced

regions. The short-term targets in such cases could be more ambitious if backed up by

accompanying measures supporting the development and diffusion of resource efficient

production technologies and processes. Such a diversified approach requires a substantial

coordination effort at the national and EU level.

2020

2030

Eco-innovation challenge

2040

2050

Business as usual

Factor 2

Factor 5


3 | The EU: Eco-innovation

performance of countries

eco-innovation

observatory

Eco-innovation performance differs, sometimes drastically, in different EU countries.

Chapter 3 presents and analyses the results of the first edition of the European

Eco-Innovation Scoreboard (Eco-IS), asking whether common structural features

of good and poor performers can be identified, and whether eco-innovation

actually leads to positive economic and environmental effects.

3.1 | The Eco-Innovation Scoreboard

If the necessary targets for reducing resource consumption and their negative environmental

impacts should be met, Europe faces a huge challenge for increasing resource productivity

through eco-innovation. But how can the eco-innovation performance of countries be

measured?

In order to monitor progress in complex and multi-dimensional areas, scoreboards have

been introduced and widely applied by a large number of organizations. Examples of existing

scoreboards include the OECD Science, Technology and Industry Scoreboard5 , the Energy

Scoreboard by the IEA 6 or the Climate Scoreboard by Climate Interactive 7 . Scoreboards

have also been developed to monitor innovation performance, most notably the European

Innovation Scoreboard (see, for example, Pro Inno Europe 2010) and its successor, the

Innovation Union Scoreboard (Pro Inno Europe 2011), introduced to provide a comprehensive

measure of the research and innovation performance of EU countries.

The Eco-Innovation Scoreboard (Eco-IS) developed by the EIO is the first tool to assess and

illustrate eco-innovation performance across the EU. The Eco-IS shows how well individual

Member States perform in different dimensions of eco-innovation compared to the EU

average and presents their strengths and weaknesses. Thereby, the Eco-IS complements

other measurement approaches of innovativeness of the EU and EU countries, notably the

Innovation Scoreboards, and aims to promote a holistic view on economic, environmental

and social performance.

The Eco-IS serves several purposes in the EIO: to illustrate the eco-innovation performance

of EU countries compared with the EU average; to identify and compare strong and weak

areas of eco-innovation in single EU countries with regard to several thematic aspects, as

well as to compare these aspects with average performance in the EU and to top performers;

and to assist in identifying barriers and drivers of eco-innovation in EU countries.

The core part of the Eco-IS is the “performance profile”, which contains indicators in five

areas: eco-innovation inputs, eco-innovation activities, eco-innovation outputs, environmental

Annual Report 2010

The Eco-Innovation

Scoreboard

(Eco-IS) is the first

tool to assess

and illustrate

eco-innovation

performance

across the EU.

5. See http://www.oecd.org/

document/10/0,3343,

6. See http://www.oecd.org/de/

ieascoreboard.en_2649_33703_

39493962_1_1_1_1,00.html.

7. See http://climateinteractive.

org/scoreboard.

21


The Eco-IS consists

of two main parts: a

“structural profile” and

a “performance profile”.

22

ECO-INNOVATION INPUTS

ECO-INNOVATION

ACTIVITIES

ENVIRONMENTAL OUTCOMES

ECO-

INNOVATION

OUTPUTS

SOCIO-ECONOMIC

OUTCOMES

outcomes and socio-economic outcomes. The 2010 version of the Eco-IS is based on 13

sub-indicators in these five areas. Sub-indices are calculated for each of the five areas. The

overall eco-innovation performance of each Member State is calculated with the unweighted

mean of the 13 sub-indicators (for more information on the calculation methodologies see

the methodological note on the EIO website: www.eco-innovation.eu).

The performance profile of the Eco-IS is accompanied by a “structural profile”, which contains

indicators on long-term socio-economic and environmental trends. Indicators included

Table 3.1

Indicators in the Eco-IS

FIRST CHOICE INDICATOR AVAILABLE (PROXY) INDICATOR

FOR 2010 SCOREBOARD

Total level of financial support

for eco-innovation (as % of GDP)

Total R&D personnel and researchers in

eco-innovation sectors (% of total

employment)

Total value of new investment

in green early stage investments

Share of firms participating in eco-innovation

Share of firms implementing

eco-innovation-related management systems

Material productivity

(GDP/Total Material Consumption)

Governments environmental and energy R&D

appropriations and outlays (% of GDP), 2008

Total R&D personnel and researchers

as % of total employment

Total value of new investment

in green early stage investments

Firms having implemented innovation

activities aiming at a reduction of material

input per unit output (% of total firms)

SOURCE

EUROSTAT

EUROSTAT

CLEANTECH

GROUP

EUROSTAT

EMAS registered organisations (per population) EUROSTAT

Material productivity

(GDP/Domestic Material Consumption)

EUROSTAT

Water productivity (GDP/Water Footprint) Water productivity (GDP/Water Footprint) Water Footprint

Network

Energy productivity

(GDP/gross inland energy consumption)

Energy productivity

(GDP/gross inland energy consumption)

EUROSTAT

GHG emissions intensity (CO2e/GDP) GHG emissions intensity (CO2e/GDP) EUROSTAT

Eco-innovation patents

Eco-patents for the fields of pollution abatement,

waste management and energy efficiency

OECD

Employment in eco-innovation industries Employment in eco-industries (% of total workforce) Ernst & Young

Size of eco-innovation markets

Exports of eco-innovation products

Turnover in eco-industries Ecorys

Exports of products from eco-industries

(% of total exports)

Ecorys


160

140

120

100

80

60

40

20

0

eco-innovation

observatory

in the structural profile provide the general determinants for eco-innovation performance

measured in the “performance profile”. Combining structural and performance indicators

reveals, for example, to what extent GDP levels are linked with eco-innovation performance

(see chapter 3.3.1). The structural profile also allows putting the results of the performance

profile into perspective, e.g. exploring the links between the eco-innovation performance and

environmental performance of countries (see chapter 3.3.3).

The 2010 version of the Eco-IS is the first published version. As the data collection and

compilation process is an ongoing effort, in many cases the first choice indicators and

related data sets could not yet be included. Therefore, in several areas, proxy indicators are

used in the 2010 version. Moreover, the number of indicators included is not yet satisfactory

in several areas, for example, the area of eco-innovation outputs is only represented by a

single indicator. The following table provides an overview over the envisaged “first choice”

indicators and the available proxy indicator used in the 2010 version.

3.2 | Comparing EU country performance

with the scoreboard

The Eco-IS allows illustrating and comparing the overall eco-innovation performance of EU

countries. Figure 3.1 reveals the composite scoreboard and thus the overall ranking of ecoinnovation

performance. As illustrated by the different colours, Member States have been

separated into three groups8 based on their performance:

Eco-innovation leaders. The first group consists of five countries, which have the

highest results in the composite scoreboard. Finland leads the ranking, closely

followed by Denmark, Germany, Austria, and Sweden.

Eco-innovation followers. The second group encompasses eight countries, the index

of which is close to the EU average value (100)

● Countries catching up in eco-innovation. The third group is the largest group,

consisting of 14 countries with eco-innovation index values between 75 and 45.

Figure 3.1

EU-27 Eco-Innovation Scoreboard: composite index

Lithuania

Slovakia

Romania

Poland

Greece

Estonia

Bulgaria

Latvia

Cyprus

Malta

Hungary

Portugal

Czech Republic

Slovenia

Luxemburg

France

Italy

EU AVERAGE

Spain

Ireland

United Kingdom

Netherlands

Belgium

Sweden

Austria

Germany

Denmark

Finland

Annual Report 2010

Five countries belong

to the group of EU

eco-innovation leaders:

Finland, Denmark,

Germany, Austria

and Sweden.

8. Note that this grouping is

tentative and should serve

communication purposes.

The grouping has not been

statistically validated so far.

Methodologies to test this

tentative grouping (such as

cluster analysis) will be applied in

the 2011 version of the Eco-IS.

23


The analysis

of eco-innovation

inputs shows that

Finland performs

best regarding R&D

personnel, government

spending and

investments into

eco-innovation.

24

300

250

200

150

100

50

0

Analysing the compilation of the different groups it becomes apparent that the first group is

made up only of Central and Northern European countries, while the second group consists

of other EU-15 countries. The third group of countries catching up in eco-innovation consists

mainly of Southern and Eastern European countries.

While the performance scoreboard is useful for identifying general trends and informing

the debate on eco-innovation performance across the EU, it is by no means the ‘final word’

on explaining eco-innovation performance and its socio-economic and environmental

outcomes. In order to put the overall results into context, the results of the scoreboard need

to be analysed with relation to structural indicators (see section 3.3).

Here we investigate the different sub-categories and analyse to what extent typical patterns

of performance can be identified across the different areas of the scoreboard.

Eco-Innovation inputs

The analysis of eco-innovation inputs in the different EU countries shows as a result of

four especially well performing countries – Finland, Ireland, Sweden, and Denmark, with

especially Finland far ahead of the others (see Figure 3.2).

This is due to the fact that Finland has the best performance in all the different indicators in

this sub-category, including a particularly high score for the indicator “Total value of green

early stage investments”, where Ireland is scoring equally well. The distance from the fourth

(Denmark, 176) to the fifth (Belgium, 135) is already remarkable, whereas the gradient among

the following countries is rather low. Interestingly, due to the top-four performing countries

being way above average, the larger group of the EU countries is below the average, with

no real geographical or socio-economic patterns to be detected.

Figure 3.2

EU-27 Eco-Innovation Scoreboard: eco-innovation inputs

Malta

Cyprus

Poland

Slovakia

Bulgaria

Latvia

Lithuania

Greece

Romania

Hungary

Slovenia

Portugal

Czech Republic

Luxemburg

Estonia

Austria

Italy

EU AVERAGE

Netherlands

France

Germany

United Kingdom

Spain

Belgium

Denmark

Sweden

Ireland

Finland


250

200

150

100

50

0

Eco-innovation activities

eco-innovation

observatory

The analysis of the eco-innovation activities shows a similar picture, however, with different

countries leading the ranking (see Figure 3.3).

Four EU countries are far ahead of the others in this area: Spain, Denmark, Germany, and

Austria. After these four top-performers, the gradient in performance is flat, with old and new

Member States being allocated across the whole spectrum without any clear geographical

or socio-economic pattern.

Spain ranks first in this area of the scoreboard, but this can – at least partly – be explained

by a data artefact: out of the two indicators which make up the activities index only the

EMAS9-certificate index is available for Spain and shows an extremely high number; the

same holds true for Denmark. For those two countries, the EMAS indicator thus determines

the overall result in this area. Germany and Austria also have high performances in the

EMAS index, however their lower performances in the indicator “Firms having implemented

innovation activities aiming at a reduction of material input per unit output” – although still

high in comparison with the other countries – lowers the average of the two values.

Figure 3.3

EU-27 Eco-Innovation Scoreboard: eco-innovation activities

Slovenia

Bulgaria

United Kingdom

Cyprus

Poland

Lithuania

Netherlands

Slovakia

Romania

Latvia

Hungary

Malta

Luxemburg

France

Estonia

Ireland

Greece

Belgium

Czech Republic

Sweden

EU AVERAGE

Italy

Finland

Portugal

Austria

Germany

Denmark

Spain

Countries with a performance below the EU average in general have lower performances

regarding both indicators in this area. Data artefacts are also putting Slovenia, Bulgaria and

the UK at the end of the ranking. For Slovenia and the UK, no data is currently available for

the indicator on material input reduction in firms, while the reported EMAS performance is

very low. In the case of Bulgaria, the reported EMAS number was 0.

The data problems described here in detail re-emphasise the need to both improve the

quality of single indicators as well as the need to include a larger number of indicators within

certain areas in future versions of the Eco-IS.

Eco-innovation outputs

The sub-category eco-innovation output consists of only one indicator (“Eco-patents for

the fields of pollution abatement, waste management and energy efficiency – per million

inhabitants”), and as such the analysis of country performances shows a remarkably

inhomogeneous picture (see Figure 3.4).

Annual Report 2010

The gradient after

top-performers in ecoinnovation

activities is

flat, without any clear

geographical or socioeconomic

pattern.

.

There is a need to

improve the quality

of indicators in future

versions of the Eco-IS.

9. The EU Eco-Management

and Audit Scheme (EMAS) is a

management tool for companies

and other organisations to

evaluate, report and improve

their environmental performance

(see http://ec.europa.eu/

environment/emas).

25


26

250

200

150

100

50

0

160

140

120

100

80

60

40

20

0

While there are again five to six “leaders” with performances high above the EU average

(Austria, The Netherlands, Denmark, Germany, Sweden and Finland), the other countries

show a high gradient of decrease in their performance. Among the top-six, all the top-five

countries of the composite index can be found. On the other end of the spectrum various

countries – mainly from the EU-12 – have not reported any eco-patents at all. The next

version of the scoreboard aims to include additional indicators in this sub-category in order

to make it more robust.

Figure 3.4

EU-27 Eco-Innovation Scoreboard: eco-innovation activities

Bulgaria

Estonia

Malta

Slovakia

Slovenia

Romania

Lithuania

Latvia

Poland

Greece

Portugal

Spain

Ireland

Czech Republic

Hungary

United Kingdom

Italy

France

EU AVERAGE

Cyprus

Luxemburg

Belgium

Finland

Sweden

Germany

Denmark

Netherlands

Austria

Environmental outcomes

The sub-category “Environmental outcomes” consists of four different indicators on

productivity in material, energy and water use as well as the intensity of GHG emissions.

In this sub-category, again four to five countries can be regarded as top-performers, but

the distribution is much more equal compared to other indicators (see Figure 3.5). This is a

consequence of better data quality for those indicators (all four are based on EUROSTAT

data) and the larger number of indicators included in this category compared to other areas

in the scoreboard.

Figure 3.5

EU-27 Eco-Innovation Scoreboard: environmental outcomes

Bulgaria

Estonia

Romania

Poland

Czech Republic

Slovenia

Cyprus

Lithuania

Finland

Slovakia

Latvia

Portugal

Greece

Ireland

Belgium

Spain

Hungary

EU AVERAGE

Denmark

Italy

Germany

France

Austria

Sweden

Malta

United Kingdom

Netherlands

Luxemburg


180

160

140

120

100

80

60

40

20

0

eco-innovation

observatory

In contrast to other sub-categories, it is more difficult to distinguish any obvious patterns for

comparing country performance. The overall leader in this area is Luxembourg, mainly due

to its high material productivity, but Luxembourg’s performance with regard to energy and

GHG indicators is only slightly above EU average. The Netherlands, ranking second, also

has a very high value in material productivity and additionally ranks first in water productivity;

however, the values for energy productivity and GHG intensity are below EU average. The

UK performs above EU average with all 4 indicators, but significantly better in the material

and water productivity indicators. The four environmental productivity/intensity indicators are

therefore not closely linked in the group of the top-performing countries in this area of the

scoreboard.

At the other end of the spectrum, countries typically perform below average in all 4 indicators.

This can be mainly explained by the significantly lower GDP numbers compared to the topperforming

countries, which translate into lower productivity indicators.

Socio-economic outcomes

Figure 3.6 illustrates the results in the area of socio-economic outcomes. The scoreboard in

this sub-category is led by Bulgaria – 21st in the overall scoreboard ranking. Bulgaria has an

outstandingly high value in the index for “Employment in eco-industries”, which outweighs the

very low value in the index for turnover in this sector (no value for the export-related indicator

was available). In particular in this area of socio-economic outcomes, proxy indicators based

on eco-industry studies had to be applied in the 2010 version of the scoreboard. The authors

were not able to verify the numbers provided by the underlying study of Ecorys (2009).

Figure 3.6

EU-27 Eco-Innovation Scoreboard: socio-economic outcomes

Greece

Ireland

Slovakia

Malta

Lithuania

Portugal

Estonia

Luxemburg

Hungary

Spain

Czech Republic

Latvia

Poland

United Kingdom

Sweden

Netherlands

Italy

Romania

Cyprus

EU AVERAGE

France

Finland

Germany

Belgium

Denmark

Austria

Slovenia

Bulgaria

Bulgaria is followed by Slovenia (14 th overall), which also has a very high performance

in the employment index and values around the EU average in the other two categories.

Among the next five countries still above EU average four out of the overall top-performers

can be found (Austria, Denmark, Germany and Finland). Interestingly, among the lowest

Annual Report 2010

Below average

performers in

environmental

outcomes can mainly

be explained by the

significantly lower GDP

numbers compared

to the top-performing

countries, which

translate into lower

productivity indicators.

Bulgaria – 21 st in

the overall scoreboard

ranking – leads in the

area of socio-economic

outcomes, followed

by Slovenia.

27


There is no “model

country” which could

serve as an example

of best practice across

all areas observed

in the scoreboard.

There is a positive

correlation between

eco-innovation

and GDP and

eco-innovation

and competitiveness.

28

performing countries in this sub-category are three EU-15 countries (Luxembourg, Portugal,

and Greece).

In this sub-category no patterns regarding performances among the different indicators can

be distinguished. Many countries perform very differently in the three different indicators, with

remarkable outliers in one of them. Hence, a direct relation between a country’s performance

in the different categories is difficult to establish.

Comparing the performance in different sub-categories

Of the top 5 countries only two countries ranked first in one of the categories (Finland in

eco-innovation inputs and Austria in eco-innovation outputs), whereas none of the other

top performers scored higher than second (Denmark in eco-innovation activities) or third

(Germany in eco-innovation activities and Sweden in eco-innovation outputs) in the individual

categories.

This indicates that there is no “model country” which could serve as an example of best

practice across all areas observed in the scoreboard. On the contrary, significant potential

for improvement can be identified for all countries. For instance, Austria ranked 12th in the

category of eco-innovation inputs; Sweden 13th in the category of socio-economic outcomes;

and Finland – the best performing country in the composite index – only 19th in environmental

outcomes. Denmark and Germany showed a relatively balanced performance over all the

categories, with rankings between 2nd and 10th .

At the lower end of the scoreboard a more homogenous picture can be drawn: many of

those countries which had a low performance overall also scored low in the different subcategories.

One exception is Bulgaria, while ranking 21st in the overall ranking it ranked 1st in the sub-category of socio-economic outcomes. Other countries – especially those in the

middle performance part of the scoreboard – have a very inhomogeneous performance

throughout the sub-categories.

3.3 | Understanding country performance

Beyond just assessing performance, the EIO is interested in understanding why certain

countries perform better or worse than others. We correlate three important relationships and

ask whether there is a connection between eco-innovation and 1) GDP 2) competitiveness

and 3) environmental performance.

3.3.1 | Eco-innovation and economic performance:

is eco-innovation only for ‘rich countries’?

EIO analysis reveals a robust positive correlation between eco-innovation and GDP (Figure

3.7) and eco-innovation and competitiveness (Figure 3.8). This suggests that eco-innovation

may be contributing to the competitive advantage of economies and companies (see

also section 5.2). It may also show that eco-innovation is easier to develop and absorb

by companies with an established market position. These results should be regarded with

caution; further investigation is needed to establish causality between both GDP and ecoinnovation

and competitiveness and eco-innovation.


Composite EI index

160

140

120

100

80

60

40

20

0

Composite EI index

160

140

120

100

80

60

40

20

0

0

3,5

Figure 3.7

Relationship between composite EI Index and GDP per capita in the EU, 2007

Figure 3.8

10000

20000

Finland

Denmark

Germany

Austria

Sweden

Belgium

Spain

Italy

30000

UK

Czech Republic

France

Slovenia

Portugal

Hungary Malta

Latvia

Cyprus

Bulgaria

Poland

Estonia Greece

Romania

Lithuania Slovakia

Netherlands

Ireland

Relationship between composite EI Index and Competitiveness in the EU

4

4,5

40000

Spain

Belgium

Ireland

Netherlands

UK

Italy

France

Slovenia

Luxemburg

Latvia

Bulgaria

Greece

Portugal

Czech Republic

Hungary

Malta Cyprus

Romania Poland Estonia

Slovakia Lithuania

5

50000

60000

5,5

eco-innovation

observatory

Nevertheless, the question of whether new Member States and others with a GDP lower than

average can be expected to fully embark on this agenda without a substantial investment

over extended periods of time is raised.

We view eco-innovation as a relevant strategy for all countries. The business opportunities

may be different in different places, but clearly an eco-innovative development path (green

growth) is needed in countries still building up their infrastructures and built environment--so

as not to follow in the problematic footsteps of highly developed countries. In less developed

countries, eco-innovations are needed for responsible growth and building; for instance

Austria

Denmark

Germany

Finland

70000

Sweden

R 2 =0.2998

Luxemburg

R 2 =0.745

80000

6

Annual Report 2010

We view

eco-innovation

as a relevant strategy

for all countries.

GDP

per capita

Global

Competitiveness

Index 2010/2011,

Score-Value

29


The eco-innovation

paradox means

that the potential

for benefiting from

eco-innovation is often

highest in the regions

and sectors where

the capacity to

develop or apply ecoinnovations

is limited.

30

Eco-innovation good practice 4

Urban mining

Photo: Stefan Beck

Over time, massive amounts of material resources have been

extracted for buildings and infrastructure development. The resulting

accumulation - so-called urban stocks - could be important resource

reservoirs in the future. Eco-innovation in the area of urban mining

might create new opportunities; ultimately, it could expand the skills

set and workforce across the entire value chain; from exploration

and extraction to transportation and recycling/refining, and finally to

marketing, selling and re-use. Environmentally, secondary sourcing of

materials could drastically reduce primary extraction and thus lower

the resource requirements of an economy. For more information visit

the EIO online repository of good practices.

resource-light and energy-efficient technologies. In countries with a highly developed

infrastructure and built environment, the growth rate of the physical environment needs to

steady out—levelling off absolute levels of consumption. Eco-innovations are needed which

focus on the re-use, refining and recycling of materials, as well as infrastructures (urban

mining).

It could be argued that in a short term eco-innovation can lead to substantial energy and

material consumption savings, notably in those regions at earlier stages of ecological

modernisation. As these countries start from a relatively low level they should not follow the

path of more advanced countries, but set off to develop or transfer novel solutions to bypass

less efficient technologies and solutions. These countries are often in a process of rebuilding

their infrastructures, which offers a unique chance to radically improve environmental

performance of entire regions and sectors if eco-innovation principles are considered in

planning stages.

One of the problems limiting these opportunities is related to a weaker absorption capacity

and the lack of strategic and policy “drive” towards eco-innovation. The latter is often

perceived as something that incurs costs (e.g. adaptation to environmental legislation) rather

than economic benefits (e.g. saving costs and energy). Eco-innovation is also often seen as

a “sector” which does not allow for grabbing all the benefits. This is referred to here as the

eco-innovation paradox: the potential for benefiting from eco-innovation is often highest in

the regions and sectors where the capacity to develop or apply eco-innovations is limited.

The eco-innovation paradox is relevant also for more advanced regions and cities, which

face imminent decisions about their future development.

Moreover, it should be taken into consideration that the availability of eco-innovation related

data is sometimes better in countries with a high GDP. This may result in a bias in the

scoreboard toward capturing eco-innovations in richer economies.


Composite EI index

160

140

120

100

80

60

40

20

0

0

In summary, the EIO views the following aspects as key to this debate:

eco-innovation

observatory

The industry perspective: since a majority of business respondents to the

Eurobarometer view material costs as a significant share of their overall total costs

and an overwhelming majority expect higher material purchasing costs for the future,

doing better in eco-innovation is a ‚must have’ for successful business. The share

of material costs is especially high in the new Member States – another reason to

abandon barriers to resource efficiency (section 5.2).

The global perspective: there is a clear trend towards eco-innovation in major

emerging economies. The EU should be well prepared to meet this challenge in order

to maintain and improve its world market position (section 5.2).

3.3.2 | Eco-innovation and environmental performance

Is eco-innovation leading to actual environmental improvements? This section investigates

whether high eco-innovation performance is leading to an absolute reduction in material

consumption. Furthermore, an analysis is carried out comparing the performance of countries

in the overall Eco-IS composite index and different environmental structure indicators.

Figure 3.10 plots the performances in the overall composite eco-innovation index and

the indicator Domestic Material Consumption (DMC) per capita as a key indicator of

environmental performance with regard to resource use in different countries of the EU.

It is apparent that no direct relationship can be established between good eco-innovation

performance and neither low nor high material consumption. Finland, as the leader in the

overall eco-innovation scoreboard, has the second highest per-capita DMC in the EU; but

Figure 3.9

Scatter of Eco-IS index and material consumption per capita (year 2007)

Germany

Sweden

Austria

Netherlands

UK

EU Belgium

AVERAGE Spain

Italy France

Luxemburg

Malta

Hungary

Czech Republic

Bulgaria

Portugal

Latvia

Slovakia

Greece

Poland

Lithuania

Romania

10

20

Slovenia

Cyprus

Estonia

30

Denmark

40

Finland

50

Ireland

60

Annual Report 2010

No direct relationship

can be established

between good

eco-innovation

performance and

neither low nor high

material consumption.

DMC/cap [t]

31


The top-five performers

on the scoreboard

have relatively

low performances

with respect to

environmental aspects.

32

Eco-innovation good practice 5

Living Lab

Living Lab is an integrated technological-socioeconomic

approach to foster sustainable user-centred innovations.

It is based on the observation that resource-efficient

eco-innovations need cooperation of all actors along the

value chain to be successful – both in environmental

and economic terms. Thus, the main approach of Living

Lab is to integrate users (and other actors) into the

innovation process, i.e., putting the user on centre stage

in the development and testing of sustainable, innovative

domestic technologies. A Living Lab design study executed

by a European consortium of seven research and business

partners created a methodology, which consists of three

phases (generating insights, developing a prototype in

a co-creation process and executing field testing) and

a network of Living Labs across Europe. For further

information visit Living Lab and the EIO online repository

of good practices.

also the other top-performers rank rather high in terms of environmental impact. A special

outlier is Ireland, which ranks around the EU average (index of 100) in the composite Eco-

IS Index but has by far the highest per-capita material consumption (see also section 2.1).

To get a more complete picture regarding whether eco-innovation activities, especially

in high-performing countries, prove to be successful in terms of reducing environmental

pressures, we compare the Eco-IS Index with the per capita values of consumption of all four

environmental structural indicators considered in the EIO: consumption of materials, energy,

water, and GHG emissions.

Table 3.2 provides a comparison in the rankings of the specific countries with regard to

the overall composite index and different environmental structure indicators. Interestingly,

it can be clearly seen that the top-five performers of the scoreboard have relatively low

performances with respect to environmental aspects. Again, an extreme example in this

regard is Finland: it is above EU-average in all environmental pressure categories, having

the second highest per-capita DMC and energy consumption and the fourth highest percapita

emission production. Denmark (overall second performer) has the fourth highest

DMC per capita; Austria and Germany are close to and above the EU averages in most of

the categories; Sweden ranks third in per-capita energy consumption.

The conclusion can be drawn that countries with a high performance in the eco-innovation

scoreboard (and as such a high activity level in eco-innovation) are also those countries

with especially unsatisfying environmental performance in absolute terms. Hence, a high

eco-innovation performance as measured by the Eco-IS does not automatically lead to good

environmental performance in absolute terms.


eco-innovation

observatory

One key factor to explain this situation is that the top-performing countries are also very

wealthy countries in terms of GDP levels (see also chapter 3.3.1) and that there is a linkage

between high GDP and high absolute consumption of natural resources and GHG emissions.

Eco-innovations are thus implemented in those countries, leading to high environmental

productivity, but the overall result is not positive as the improved productivity is offset by high

GDP growth (see also chapter 2.1). Time also plays an important role as eco-innovation

is an emerging area in Europe and investments have only been intensified in the past few

years. Possibly, the broader environmental impacts of those investments will only be visible

in future years.

Table 3.2

Comparing the ranking in the Eco-IS composite index

and in the structural environmental indicators

COUNTRY INDEX DMC/CAP ENERGY/CAP WATER/CAP EMISSIONS/CAP

Finland 1 26 26 18 24

Denmark 2 24 17 12 19

Germany 3 10 19 14 17

Austria 4 20 18 16 15

Sweden 5 18 25 17 3

Belgium 6 13 24 21 20

Netherlands 7 2 23 10 21

UK 8 4 14 11 16

Ireland 9 27 16 - 25

Spain 10 16 11 23 11

Italy 11 6 10 27 10

France 12 7 20 19 8

Luxembourg 13 8 27 - 27

Slovenia 14 25 15 - 13

Czech Republic 15 15 21 15 23

Portugal 16 19 4 24 7

Hungary 17 3 7 7 5

Malta 18 1 3 22 4

Cyprus 19 22 13 25 22

Latvia 20 21 2 6 1

Bulgaria 21 14 6 13 12

Estonia 22 23 22 - 26

Greece 23 11 9 26 18

Poland 24 12 5 8 14

Romania 25 17 1 20 2

Slovakia 26 5 12 - 9

Lithuania 27 9 8 9 6

Annual Report 2010

33


The intensity

of the recent

eco-innovation activity

of companies is not

sufficient to achieve

the Factor 2, let alone

Factor 5, resource

efficiency targets.

34

3.4 | Eco-innovation performance

and resource-efficiency targets

Evidence suggests that eco-innovation activity is relatively widespread among European

companies with the level of engagement and resulting material efficiency gains differing

between countries and sectors. Eurobarometer (EC 2011b) offers the first EU-wide results on

material efficiency eco-innovations in five sectors: manufacturing, construction, agriculture,

water supply and food services (see Figure 3.11).

According to the survey around 45% of EU companies have introduced a product, process

or organisational eco-innovation in the last two years. The majority of eco-innovators (77%)

reported up to 20% resource-efficiency improvements as a result of eco-innovation. A small

share of eco-innovating companies reported substantial material efficiency changes as a

result of innovation. Approximately 4% of eco-innovators declared that the change they

have introduced in the last two years led to a more than 40% reduction of material use per

unit output. This roughly corresponds to a Factor 2 eco-innovation (50% improvements in

resource productivity). Less than 2% of eco-innovating companies reported Factor 3 ecoinnovations.

Connecting eco-innovation performance to its wider outcomes, notably in the context of

resource-efficiency targets, constitutes a significant challenge due to limited data availability

(e.g. limited sectoral and time coverage, no differentiation between different types of materials,

no information about the total material requirements of companies) and the methodological

challenges in connecting the micro, meso and macro levels of measurement.

Despite the above limitations, results of the Eurobarometer survey suggest that the intensity

of the recent eco-innovation activity of surveyed companies is falling short of achieving the

significant progress needed to reach Factor 2, let alone Factor 5, resource-efficiency targets

in the short term. First of all, the majority of companies have not introduced eco-innovation

in the last two years. Second, only a small fraction of companies approached Factor 2 ecoinnovations,

while the overwhelming majority of eco-innovators report only small material

efficiency improvements.

Figure 3.10

Material efficiency gains due to eco-innovation

34%

Less than 5% reduction

of material use per unit output

10%

DK/NA

2%

More than 60% reduction of material use per unit output

2%

Between 40% to 60% reduction of material use per unit output

10%

Between 20% to 39% reduction of material use per unit output

42%

Between 5% to 19% reduction

of material use per unit output

Source Figure 1.1: Eurobarometer (EC 2011b);

Question. How would you describe the relevance

of innovation you have introduced in the past 24 months

in terms of resource efficiency?


eco-innovation

observatory

Undoubtedly, incremental innovations may also be of relevance in achieving significant

material efficiency gains. If 20% material efficiency improvements were gained every two

years, for example, the Factor 2 goal (i.e. halving material input per unit output) could be

achieved by a company in roughly six years whereas Factor 5 in 25 years. These improvements

may be meaningful in the context of the overall resource consumption challenge only if they

are introduced continuously over long periods of time by a critical mass of companies.

The results also confirm the first analysis of country performance as captured by the Ecoinnovation

Scoreboard. Good performance in eco-innovation investments and widespread

eco-innovation activity do not automatically translate into better environmental performance,

measured as material and energy productivity. Improvements in the latter will depend on

the scale of resource-efficiency improvements as well as on the level of diffusion of ecoinnovation.

Needless to say, a time lag also has to be accounted for while attributing wider

effects to company level processes.

> Future Work Plan: Countries

The indicator base of the eco-innovation scoreboard will be expanded in 2011. The links

between measuring performance, impacts, and structural determinants of the eco-innovation

activity of countries will also be strengthened. Critical will be the use of additional data

sources, especially micro data from the CIS 2008 survey and the Eurobarometer survey

(2011) in relation to countries and sectors.

The EIO is especially interested in exploring the relationship between eco-innovation

performance and its structural determinants — asking why some companies and countries

perform better or worse than others. To this end, the structural profile for each EU Member

State will be improved.

Key questions we intend to explore on the macro level include:

● What are the links between eco-innovation performance and the structural

characteristics of countries;

- Are there common structural features among best performers that could be worked

on to improve eco-innovation performance elsewhere?

- Which policy environment is best suited to foster a high eco-innovation performance?

- Can catching-up countries benefit from leapfrogging?

- What is the regional dimension of the eco-innovation challenge? What types of

regions are better positioned to benefit from eco-innovation?

● What sort of eco-innovation will contribute to changes of economic structures leading

to better resource efficiency?

● Is outsourcing an answer to the resource productivity challenge?

Annual Report 2010

35


36

Box 3.1 | Social innovation

Eco-innovation is not only about developing new products and processes; it is also about

finding new ways to do things differently. These are often called social innovations and

examples are emerging across society as people start looking for more effective ways to

get things done. Motivations for changing behaviours may not just stem from a growing

environmental consciousness, but also because it means cheaper, healthier or more

equitable ways to achieve the same, or even better, services or functionality. Other reasons

may include movements, like gorilla gardening, with political connotations. According to a

European-wide survey, 30% of Europeans think that minimizing waste and recycling is the

action they could take with the highest impact for solving environmental problems; 21% and

19% ranked buying eco-friendly products and energy-efficient appliances (respectively) as

the most effective; whereas travelling less and adopting sustainable modes of transport

gained 15% of the vote and using less water 11% (EC 2009). While all these actions do

require changed behaviours, they are also often reactionary actions (choosing the ‘ecoproduct’

when the market provides it). More radical social eco-innovation goes more into the

creative potential of society and calls on people to be open to change. It may also lead to

user-led innovation.

Car sharing is one of the most classic examples of social/service eco-innovation; it challenges

people to approach car ownership differently. At the beginning of 2009, approximately

380,000 Europeans were estimated to be members of car-sharing schemes with around

11,900 cars available to them (Moma 2010). It is a trend that has been rapidly spreading

across Europe; beginning in 1987 in Switzerland, it reached Germany in 1990 and has since

reached 14 member states, with new programs emerging in both Portugal and Ireland in late

2008. Across Europe, the majority of users are private, with only about 16% being business

customers. Very successful schemes are those which collaborate with public transportation,

like in Brussels. The environmental benefits are manifold; cars are typically smaller with

better fuel efficiency than the average car. Most importantly, surveys reveal that 1 carsharing

vehicle replaces at least 4 to 8 personal cars (Moma 2010).

Eco-innovation good practice 5 Living Lab


4 | The EU: Eco-innovation

in sectors and markets

eco-innovation

observatory

A handful of sectors contribute significantly to the environmental pressures of the

European economy as a whole (section 4.1). This raises the question of whether

the impetus for eco-innovation is more strongly linked to countries and regions or

to specific sectors, or a combination of both. Results from two EU-wide surveys

of European businesses -- the Community Innovation Survey (CIS 2008, Eurostat

2010) and the Eurobarometer survey (EC 2011b) -- compare the tendency for ecoinnovation

activity and implementation among sectors in Europe (section 4.2).

4.1 | Why sectoral perspective:

where materials are used

A sectoral perspective offers three main advantages for analysing eco-innovation:

1.Input-Output-Analysis has revealed that a very limited number of industrial sectors

contribute significantly to the environmental pressures of the European economy (ETC/SCP

2009):

● Agriculture (and its consumer products of food, beverages and alcohol)

● Electricity industry (and its consumer products of electricity, gas, steam and hot water)

● Transport services and basic manufacturing industries (refinery and chemical

products, non-metallic mineral products, basic metals) and in particular construction

works i.e. buildings and infrastructures.

In Germany, ten sectors induce more than 75% of the TMR (Acosta 2008), including those

mentioned above.

2. According to innovation research, sectoral innovation systems determine innovation and

technological capabilities and absorptive capacities of companies in different industries

(Malerba 2007). The systemic perspective points to the role of many actors and links in

the innovation system, the role of framework conditions as well as to the cumulativeness

of knowledge as sectors depend on long term market dynamics and technological regimes

(“path dependencies”).

3. Climate strategies as well as related environmental and industrial policies are addressing

sectors, see e.g. the EU ETS, corporate strategies, voluntary agreements, and possible

sectoral agreements for the Post-Kyoto period.

Annual Report 2010

In Germany, ten

sectors induce more

than 75% of the TMR.

37


38

Coke + petrol

products

Figure 4.1

Strategic sectors towards eco-innovation:

Detecting direct and indirect resource use for goods of final demand, Germany 2008.

RESOURCE EXTRACTION

Metals

Other

market

services

Source: Acosta 2007

Mining

+

quarring

Agriculture

Chemical

products

Coal, peat

Glass

products,

ceramics

Construction

Food

products

Energy

Machinery

Motor

vehicles

Note: The lines indicate major total material requirements between sectors (blue line: strongest, red line: significant, yellow

line: important); arrows indicate directions of interaction. Note that energy is a major contributor; however, it delivers many

goods to a number of sectors in smaller proportions that are not revealed here due to scale issues.

Box 4.1 | The material requirements of renewable energies: the

cases of solar, wind, fuel cells and electric cars

One of the main drivers of climate change is our energy system based on fossil fuels. The

transition to a renewable based energy system is essential to tackling climate change. At the

same time, however, renewable energies also require resources (i.e. land--see Box 1.1 and

critical metals--see Box 5.1), so that their scale-up at current consumption levels could have

disastrous environmental consequences.

In a recent study, Kleijn and van der Voet (2010) investigated the potential consequences

of an economy based entirely on renewable energy sources. They constructed a — as they

acknowledge -- highly unlikely scenario in which 80% of energy is produced with PV solar,

15% with wind and 5% with other sources, mainly biomass. The primary objective was to

point to potential scarcities regarding the availability of certain materials.

As regards solar energy, in an area like the (sub) tropical desert, 1 million km² would be

needed to produce the 65% of primary energy, which is around 10% of the Sahara desert.

At the latitudes of Vancouver or Paris, an area of 2 million km² would be needed. While

solar cells based on silicon and thin-film cells would not face major problems of material

constrains, their low efficiency and high energy intensity would mark a restriction. So-called

thin-film cells can be produced at lower costs, but are based on rare materials which present

a severe constraint for their future production. The assumed demand in 2050 would be a

factor 10 to 100 higher than currently known reserves.

RESOURCE USE

D + I TMR associated with the

monetary value of supply from

activity i to activity j

D + I TMR associated with the

monetary value of supply from

activity j to activity i

(most relevant backflow)

500 * 10 5 < TMRij

250 * 10 5 < TMRij ≤ 500 * 10 5

100 * 10 5 < TMRij ≤ 250 * 10 5

66 * 10 5 < TMRij ≤ 100 * 10 5

33 * 10 5 < TMRij ≤ 66 * 10 5

10 * 10 5 < TMRij ≤ 33 * 10 5

5 * 10 5 < TMRij ≤ 10 * 10 5

1 * 10 5 < TMRij ≤ 5 * 10 5


eco-innovation

observatory

In regard to wind turbines, installed capacity would have to increase by a factor of 250 to

supply 15% of primary energy demand. This would entail more than 50 million tons of copper,

3 billion tons of iron & steel and 3.6 million of neodymium, which would imply expanding

current copper mine production by around 4 times, current iron & steel production by around

3 times, and current neodymium mine production by around 180 times.

Resource constraints related to fuel cells and electric cars are also significant. If all 2 billion

cars assumed to be on the roads in 2050 were equipped with fuel cells, 6,000 tonnes of

platinum would be needed, which is 30 times the mine production of 2008. If these cars were

equipped with electric motors instead, 2 to 4 million tonnes of neodymium would be needed,

which is about 100 to 200 times current annual mine production. In this case, alternatives

are available, such as the induction motor, which may represent an opportunity for ecoinnovation.

As these scenarios illustrate, it would be very difficult to significantly scale-up renewable energy

technologies due to resource constrains. The scenarios emphasise both the importance

of increasing energy efficiency and reducing absolute levels of energy consumption for a

transition toward a more sustainable development path, as well as the potential for ecoinnovation

to perhaps provide solutions not yet thought of.

Nevertheless, it is a question of scale: a transition to a renewable fuel mix may still increase

resource efficiency at certain levels. Assessments on the basis of the MIPS methodology

made in recent studies show that all renewable energy sources induce a lower material

consumption than conventional ones in terms of water, air, biotic and abiotic materials –

except for biomass which induces increased biotic materials and air consumption (see Rohn

et al. 2010)

4.2 | Eco-innovation activity in sectors:

an overview

Which sectors are the most eco-innovative? Based on the CIS 2008 we examine which

sectors have a higher tendency toward implementing eco-innovations – here: to reduce

material or energy use10 , as well as pointing to the differences between service sectors and

industry in different EU countries.

Section 4.2.2 takes a deeper look into the eco-innovation activities of 5 EU sectors:

manufacturing, construction, agriculture, water and food services.

4.2.1 | Eco-innovation activity in sectors (CIS)

The CIS is an EU-wide comprehensive survey focused on innovation performance in

companies. It has been used since 1990 to gain insight on innovation and its determinants

in companies, sectors and countries (see for example Cainelli et al. (2011) or Evangelista

Annual Report 2010

10. CIS 2008 offers

information on innovations

with environmental benefits as

well as specific information on

innovations leading to reduced

material / energy use per unit

output. Though this is very much

in line with the EIO’s definition

of eco-innovation one may

note that the CIS reference

to environmental benefits is

somewhat broader than EIO’s

definition and respondents may

also interpret it in different ways.

39


The manufacturing

sector has the highest

share of companies

implementing ecoinnovations

to reduce

material use.

40

30

20

10

0

and Vezzani (2010)). The most recent version (2008) included an optional section about

innovations with environmental benefits, making it a valuable source of data for analysing

eco-innovation.

Figure 4.2

Share of firms in different sectors with innovations leading

to reduced material / energy use per unit output

Manufacturing

Electricity, gas, steam and

air conditioning supply

Water supply; sewerage,

waste management and

remediation activities

Financial and

insurance activities

Mining and quarrying

Professional, scientific and

technical activities

Accomodation and food

service activities

Figure 4.2 depicts differences in terms of shares of eco-innovating firms. It presents the

share of enterprises within that sector which have declared implementing material and/or

energy reducing innovations between 2006 and 2008. The manufacturing sector has the

highest share of companies implementing eco-innovations to reduce material use while the

electricity, gas, steam and air conditioning supply sector has the highest share of companies

eco-innovating to reduce the use of energy. On the other hand, the energy sector itself

is among the industries with the highest efforts to save materials. Interestingly, with the

exception of financial and insurance activities, companies in all sectors tend to implement

eco-innovations aimed at improving energy efficiency; the focus on material efficiency is less

pronounced.

Countries with a strong service or industrial base may perform differently regarding material

productivity due to the different demands of their sectors. Service sectors have a lower

material requirement than primary sectors and industry. For example in Germany, the

average material requirement per 1,000 € of value added is only 44 kg in service sectors

compared to 557 kg across all economic sectors and 1,861 kg in manufacturing industries

(Statistisches Bundesamt 2009). As such, one would expect industry to be more innovative

Construction

Information and

communication

Transportation

and storage

Real estate activities

Wholesale and retail

trade; repair of motor

vehivles and motorcycles

Source: Eurostat 2010; own calculations Reduced material Reduced energy

Agriculture, forestry

and fishing

Administrative and

support service activities


40

30

20

10

0

eco-innovation

observatory

with respect to material reducing innovations. It should be kept in mind, however, that there

is no service without the use of products, machines, infrastructures, etc. Indeed, the natural

resource consumption following or due to a service rendered can be large; take, for instance

the work of consultants in the construction business, whose service may lead to construction

and material requirements.

Innovation activities regarding the reduction of material (Figure 4.3) and energy (Figure 4.4)

use per unit output is higher in industry than in service sectors in all countries11 . The highest

shares of firms implementing innovation in both categories was in Germany, with a high

share of industrial enterprises developing innovations leading to reduced energy of nearly

46% and to reduced material use of nearly 40%. It should also be noted that these figures by

far exceed the numbers as revealed in the analysis of Rennings and Rammer (2009) based

on CIS (2006) – indicating a landslide shift towards energy and material efficiency among

German companies. In a similar exercise, a survey done in the UK among 500 companies

has revealed that three-quarters of those companies have undertaken measures to cut their

material purchasing costs (Drury 2010).

Figure 4.3

Share of firms with innovations leading to reduced material use

per unit output separated into industry and service sectors

Germany

Ireland

Portugal

Finland

Luxemburg

Austria

Belgium

Czech Republic

Sweden

Croatia

France

Estonia

Source: Eurostat 2010; own calculations Industry Services

Romania

Malta

Lithuania

Netherlands

Hungary

Slovakia

Cyprus

Poland

Italy

Latvia

Bulgaria

Annual Report 2010

Innovation activities

regarding the reduction

of material and energy

use per unit output is

higher in industry than

in service sectors in

all countries.

11. Industry (except

construction): NACE B-E;

Service (of the business

economy): NACE G-N.,

Unfortunately not all countries

provided innovation data for

their service sectors. Data from

Denmark, the UK, Greece,

Slovenia and Spain is missing

entirely.

41


45% of European

companies in

manufacturing,

construction,

agriculture, water and

food services have

introduced at least one

eco-innovation in the

past two years.

12. The Eurobarometer

survey used the EIO definition

of eco-innovation

13. All references to

the water sector regarding

the Eurobarometer refer to

the Water supply; sewerage;

waste management

and remediation act.

42

50

40

30

20

10

0

Figure 4.4

Share of firms with innovations leading to reduced energy use

per unit output separated into industry and service sectors

Germany

Ireland

Portugal

Belgium

Luxemburg

Austria

Czech Republic

Finland

Croatia

4.2.2 | Focus on manufacturing, construction,

agriculture, water and food services

Sweden

France

Netherlands

Source: Eurostat 2010; own calculations Industry Services

The Eurobarometer survey 2011 (EC 2011b) investigated the behaviour, attitudes and

expectations of SMEs in five sectors towards the development and uptake of eco-innovation.

It specifically went into depth about material costs and import dependency12 .

According to the survey, 45% of European companies in manufacturing, construction,

agriculture, water and food services have introduced at least one eco-innovation in the

past two years. Process eco-innovation was the most popular type of eco-innovation

for companies in the agricultural, water13 and manufacturing sectors. Companies in the

construction sector were more likely to have brought a new product or service to the market

whereas companies in food services tended to implement higher amounts of organisational

innovation (Figure 4.5).

As regards eco-innovation investments, the agriculture and fishing sector has the most investments

related to eco-innovations (84%), followed by construction and manufacture (both

76%), food services (72%) and the water sector (69%). From all these in vest ments, companies

from agricultural (11%) and water (10%) reported the highest sha re of eco-innovation

Malta

Romania

Cyprus

Lithuania

Slovakia

Hungary

Italy

Poland

Latvia

Bulgaria

Estonia


% of companies

answering "yes"

to introducing

eco-innovation

40

35

30

25

20

15

10

5

0

Figure 4.5

Types of eco-innovation introduced by companies in the last 2 years

Food services

Source: EC 2011b; QD5:

eco-innovation

observatory

investments (in vest ment share of 50% or more) (Figure 4.6). At the sa me time, companies

from the water sector have the highest share of none eco-inno vation activities (20%) and of

no innovation activities at all (6%). Whereas in relative terms companies from the agriculture

sector have the lowest share of none eco-inno vation activities (12%) and of no innovation

activities at all (1%).

Manufacture

Water

The Eurobarometer survey also provides useful insight into the material cost structure of

companies in different sectors, and what they have done to reduce these costs. Whereas

about 50% from companies from the water sector have a material cost share of less than

30% of total costs, 60% of companies from the manufacturing sector have cost shares higher

than 30% and 27% report cost shares higher than 50% (Figure 4.7). The manufacturing

industry is also the sector which sources the highest amount of materials from abroad, with

12% originating from outside the EU-27 compared to 4-5% in other sectors. 75% of all

businesses reported an increase in the cost of materials in the past 5 years, and 87% expect

Construction

Agriculture and fishing

EU-27

Product Process Organisational

During the past 24 months have you introduced the following eco-innovation: A new or significantly improved

eco-innovative organisational innovation; A new or significantly improved eco-innovative production process or method;

A new or significantly improved eco-innovative product or service to the market.

Annual Report 2010

The manufacturing

industry is also the

sector which sources

the highest amount of

materials from abroad.

43


44

100 %

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

Eco-innovation good practice 6

Closed system for soilless culture, Cyprus

Figure 4.6

Source: ARI Cyrprus

Share of innovation investments related

to eco-innovation over the last 5 years

Agriculture and fishing

Construction

Scarcity of water combined with high costs of collection

are constrains for irrigated agriculture in Cyprus. An

open system of soilless culture is currently favoured

commercially, but it is associated with water and fertilizer

loss. A closed water use system has been developed by

the Agricultural Research Institute of Cyprus and is being

tested on tomato cultivation. Protected cultivation and

soilless culture are promising alternatives for agriculture in

the Mediterranean region; the water consumption of a well

managed closed system is nearly zero, being reduced to

the evaporisation level of the plants. For more information

visit the EIO online repository of good practices.

Water

More than 50 % Between 30 % and 49 % Between 10 % and 29 % Less than 10 % None No innovative activities DK/NA

Source: EC 2011b; Q6: Over the last 5 years, what share of innovation investments in your company were related to eco-innovation,

i.e. implementing new or substantially improved solutions resulting in more efficient use in material, energy and water?

Manufacture

Food services


40

30

20

10

0

eco-innovation

observatory

future price increases. Criticality of materials adds to this outlook and gives further pressure

to innovate, especially in the electronics industry, automotive and others.

The preferred business strategies to reduce material costs within the last 5 years seem to

vary, comprising purchasing more efficient technologies (56%), developing more efficient

tech nologies in-house (53%), increasing recycling (52%), better supply chain management

(46%), substitution of materials (38%), outsourcing (30%) and changing business models

(27%). Those measures taken to reduce material costs differ among sectors (Figure 4.8).

Figure 4.7

Material costs as a percentage of company's total costs

Food services

Manufacture

Water

50 % or more Between 30 % and 49 % Between 10 % and 29 % Less than 10 % DK/NA Not applicable

Source: EC 2011b; Q1: What percentage of your company's total cost - i.e. gross production value - is material cost?

Purchasing more efficient technologies was mentioned as the most popular change by

companies in the agriculture and fishing (69%), manufacturing (57%) and construction (56%)

sectors. Developing efficient tech no lo gies in-house was commonly cited by companies in

the manufacturing (58.1%) and agriculture and fishing (57%) sector. Recycling was the most

often cited method by companies in food service (59%), construction and manufacture (both

52%). No big inter-sectoral differences can be poin ted out for the strategy of improving the

material flow in the supply chain, it is re a li zed by 40 to 50% of the respondents over all

regarded sectors. Substituting ex pen si ve materials for cheaper ones is especially mentioned

in the agriculture and fishing sector (45%). The stra te gies of out sour cing and of changing

the business model are the least favourites and are im ple men ted by about 20 to 35% of the

respondents.

Construction

Agriculture and fishing

Annual Report 2010

Purchasing more

efficient technologies

was mentioned as the

most popular change

by companies in the

agriculture and fishing,

manufacturing and

construction sectors.

45


46

Eco-innovation good practice 7

AirDeck ® - Energy and resource efficient floor system, Belgium

Figure 4.8

Source: AirDeck ®

AirDeck ® is a floor system with bidirectional load-bearing

capability; it is based on a framework panel fitted with an

array of robot-placed airboxes. The floor system needs

around 30% less steel and concrete, which also means

lighter foundations and supporting walls. Less concrete

per storey and fewer columns and beams can reduce

the total weight of the structure by as much as 50%,

while maintaining the strength of conventional concrete

floors. The airboxes do not adhere to the concrete and

can be recycled, making it a promising innwovation

towards resource-light and recyclable buildings. For

more information visit the EIO online repository of good

practices.

Types of changes to reduce material costs implemented in the past 5 years

"Have you implemented any

changes to reduce material

costs in the past 5 years ?"

(times mentionned,

in % of total value

Purchasing more efficient

technologies

Developing more efficient

technologies in-house

Agriculture

and fishing

Construction

Food

services

Manufacture

Water supply;

sewerage;

waste

management

and remediation

act

69 56 49 57 48

57 46 45 58 45

Recycling 41 52 59 52 34

Improving the material flow

in the supply chain

Substituting expensive

materials for cheaper ones

Outsourcing production or

service activities

50 46 44 47 43

45 38 37 38 28

31 32 18 31 28

Changing business model 34 22 29 28 31

Source: EC 2011b; Q5: Have you implemented any changes to reduce material costs in the past 5 years? Legend: green shading indicates

most relevant strategies per sector (the darkest colour indi¬ca¬tes the most cited strategy (50% or more)


Material efficiency

marginal costs

Figure 4.9

Stylized material efficiency marginal cost curve

Material efficiency measure 1

NACE SECTOR XY

Material

efficiency

measure X

eco-innovation

observatory

> Future Work Plan: Sectors

An up-scaling of activities and more in-depth analysis dedicated to sectors and markets is

planned for the future. The EIO intends to intensify activities using 1) CIS 2) Eurobarometer

3) Demea and 4) input-output analysis.

At the micro level, efforts will be made to classify and better distinguish different types of

eco-innovation and different profiles of eco-innovating companies.

The possibility of creating an eco-innovation scoreboard for sectors will also be explored.

Key questions include:

● What is the sectoral relationship between e.g. material productivity and eco-innovation

performance?

● What is the position of European industry in eco-markets towards competitors from outside?

● How vulnerable are European industries to restrictions in the supply of materials and

energy from other world regions?

● How does eco-innovation in sectors differ from the same sector in other countries with

no scarcity / vulnerability?

Moreover, the EIO will use Demea data (German case studies) in the next few months to

develop a material efficiency marginal cost curve. This is an exercise that visualizes the

marginal costs and savings in relation to different material efficiency measures (see Figure

4.9). Such an aggregated view on material efficiency measures, their costs and potential

could support a company’s strategic decision toward actively improving its material efficiency,

without denying the need to do specific analysis at each company. The EIO hopes to be able

to provide such strategic knowledge, especially to SMEs, in the future.

The German experience is perhaps representative of similar trends in other EU-countries. In

the upcoming year the EIO will further investigate the data situation in other Member States

to explore the possibility of a similar, EU-wide study.

Cumulative material

efficiency potential

Annual Report 2010

47


48

Box 4.2 | Material efficiency in the manufacturing

sector –the German case

Approximately 800 billion Euros are spent annually on materials by the manufacturing sector

in Germany (Destatis 2010). While material costs seem to make up a share of 45% of to tal

costs on average, expenditures for energy and personnel are indicated to be lower (Demea

2010). Yet many of the efficiency measures implemented in companies have been directed

at labour productivity, not material productivity (KfW 2009).

Since 2005 Demea (the German Federal Ministry of Economics and Technology the German

Material Efficiency Agency) has been advising companies, in particular SMEs in the

manufacturing in dustry, about options for improving their material efficiency. After some 700

cases Demea experiences are pro ving that material efficiency can be done at a profit. Nearly

half of the companies achieve material efficiency improvements with investment costs under

10,000 Euros and 20% of companies for around 50,000 (Demea 2010). Mea sures for

improving material efficiency can be process-orientated, pro duction-orien tated, production

peri phe ry-orientated, and personnel-orientated (see Table 4.1).

In the Demea cases, around 200,000 Euros have been saved per company through material

efficiency gains on average, which means that the material efficiency measures had a

leverage effect of factor 20. This is the equivalent of around 3,300 Euro per employee and

increases the yearly sales-to-profit margin of about 2.4%. In relation to their turnover, small

com panies have the highest relative material cost-savings potential (Demea 2010).

Additionally, those industries classified as resource-intensive, like the manufacture of

appliances, metal products, plastic products and the chemical industry, have the highest

potential for material ef ficiency gains (KfW 2009).

Supported by political measures the realization of material efficiency measures in the

German industry can save material costs with an amount to around 60 billion Euros yearly

between 2012 and 2015 (Arthur D. Little 2005).

Table 4.1

Classification and examples of measures for improving

material efficiency in the manufacturing sector

PROCESS-ORIENTATED

INTEGRATION OF

A QUALITY MANAGEMENT

SYSTEM

ESTABLISHMENT OF

A RECYCLING SYSTEM

PRODUCTION-

ORIENTATED

Replacement of

additive material and

operating material

New production

methods

PRODUCTION

PERIPHERY-

ORIENTATED

Warehousing

and consignment

Packaging

PRODUCT-

ORIENTATED

Re-design,

new material,

less material,

less material variety

Standardization,

modularisation,

typification

PERSONNEL-

ORIENTATED

Awareness raising

and training of

the employees

Employee motivation


Eco-innovation good practice 8

Eco-cement

Waterford Bypass, Ireland

Source: Ecocem 2009

eco-innovation

observatory

Cement is one of the most relevant construction materials

today. However, it is typically material and energy intensive,

and its production emits high amounts of CO2 (about

5% of anthropogenic CO2 emissions globally (WBCSD

2009)). Research on eco-cement is ongoing—this is for

example cement that uses industrial waste materials

like slag or cement with a reduced calcium content, for

instance Celitcement. The Waterford Bypass in Ireland

was constructed using 50% eco-cement; this saved around

1,000 tonnes of CO2 (Ecocem 2009). For more information

visit the EIO online repository of good practices.

Eco-innovation good practice 9

Web Platform to Facilitate the Reuse of Construction Materials, Hungary

Photo: Meghan O’Brien

An online web portal facilitates the brokerage of

used construction materials in Hungary. Developed

by the Independent Ecological Centre (a Hungarian

environmental NGO) in 2003, the objective was to reduce

the amount of construction waste sent to landfills by

increasing the reuse of second-hand construction materials

(e.g. bricks and tiles) and building components (e.g.

windows and doors). It has become a particularly popular

tool in Hungary with approximately 65,000 visitors in

2009. The portal is particularly successful in the trading of

bricks and tiles. For more information visit the EIO online

repository of good practices.

Annual Report 2010

49


5 | Global dimension

eco-innovation

observatory

Eco-innovation is not only an important aim in the European Union, but an increasing

number of resource-efficient products are also being developed in the rest of

the world, including emerging economies such as China and Brazil. Moreover,

eco- innovation in Europe can hardly be analysed without a connection to the rest

of the world, as European products are either traded globally or embedded in global

value chains.

Chapter 5 answers a number of key questions:

● What are the emerging markets and areas of interest relevant for both business and

policy? (section 5.1)

● What does the global perspective of material flows mean for European companies?

(section 5.2)

● How do eco-innovation efforts differ in other parts of the world? (section 5.3)

5.1 | Future outlook: emerging markets

and global areas of interest

Examining news coverage of eco-innovation and eco-innovative related terms can provide

useful insights into emerging areas of interest, as well as to regional differences. Using the

media monitoring tool Meltwater News -- covering more than 130,000 online publications

from over 190 countries in 100 languages -- this section takes a closer look at eco-innovation

related news coverage over the last five years (2006-2010) by using English keywords. It

examines three levels of keyword searches:

Eco-innovation in general, with generic eco-innovation keywords connected to

resource efficiency and productivity;

Eco-innovation in sectors, with keywords relating specific sectors to innovation and

eco-innovation

Eco-innovative concepts and strategies, with keywords relating to the EIO vision of a

resource-efficient Europe (chapter 7).

From a global perspective, North America consistently dominated in the amount of news on

eco-innovation (also in proportioned to population), in comparison to Europe, Africa, Asia and

Australia/Oceania. Latin America and Africa, in particular, showed significantly fewer results.

This result is affected by the fact that the relative usage of the English language in electronic

media varies a lot between countries in different parts of the world. Understandably, the

developing economies are difficult to analyse with electrical source media monitoring. This

is due to a fact that roughly 1.5 billion people worldwide live without access to energy and

thereby no access to and influence on electronic media.

Annual Report 2010

From a global

perspective, North

America consistently

dominated in the

amount of news on

eco-innovation.

51


52

News coverage in

proportion to population

As regards generic

eco-innovation topics,

resource efficiency

has been the most

widely covered topic

in the context of

ecoinnovation.

14. Note that while the amount

of sources has increased, it does

not affect the analysis because

searches are done based on

current source base, and the

Meltwater news search machine

is able to index past articles as

well (personal communication,

Meltwater News)

1,6

1,4

1,2

1

0,8

0,6

0,4

0,2

0

Figure 5.1

Eco-innovation in the electronic media (keywords in English)

of the three continents: Europe, North America and Oceania

2006

2007

2008

Figure 5.1 reveals that eco-innovation has gained an increasing media presence since 2005 14

As regards generic eco-innovation topics, resource efficiency has been the most widely

covered topic in the context of eco-innovation (Figure 5.2). Interestingly, whereas ecoefficiency

and resource productivity appeared together widely, no results were found when

connecting material productivity and eco-innovation. This is a gap the EIO intends to fill. In

addition, only resource efficiency and material efficiency showed similar (and linear) growth

patterns. In the generic eco-innovation category keywords were found almost exclusively

from Europe and North America.

Figure 5.3 presents the amount of global news coverage of sectoral keywords combined with

eco-innovation. All the sectors demonstrated growth in the five year period, but particularly

energy and industry have shown fast growth in past three years. Since these two issues

have appeared increasingly in news particularly after 2008, it can be suggested that the

public discussion has been effected by the financial crisis, as well as the debate on climate

change issues.

Two queries for each of the sectors in Figure 5.3 have been run: the name of the sector in

connection with ‘eco-innovation’ and with ‘innovation’. A remarkable difference is observed

2009

2010

Europe North America Oceania


Amount of news

400

350

300

250

200

150

100

50

0

Figure 5.2

Worldwide news coverage of generic eco-innovation keywords (in English)

2006

2007

2008

eco-innovation

observatory

Eco-efficiency Material efficiency Resource efficiency Resource productivity Material productivity

Source: Meltwater 10.2.2011.

Note: “Eco-innovation” was connected with five keywords describing efficiency and productivity: eco- efficiency,

material efficiency, resource efficiency, resource productivity and material productivity

in the amount of ‘hits’. For instance, ‘eco-innovation’ and ‘agriculture’ provided around 4,000

results in 2010 whereas ‘innovation’ and ‘agriculture’ bore over 21,000 news articles. However,

searches with ‘eco-innovation’ reveal the same growth patterns as those with ‘innovation’,

just to a lesser degree. In each of the sectoral keyword searches North America, Europe and

Australia/Oceania were above the world average. Results from Australia/Oceania showed

inconsistent trends, but indicated that news coverage in all of these areas was higher than

in Europe.

Keyword searches in Figure 5.4 are based on the EIO vision (see chapter 7); they include

concepts related to the eco-innovation challenge.

The topics most covered in electronic media are ‘green lifestyle’ and ‘carbon recycling’,

which have both demonstrated a significant increase in news coverage since 2006. ‘Green

lifestyle’ was the only keyword with a consistent growth trend; it has been increasingly

covered in North America, Europe and Asia, where news coverage has grown rapidly since

2008. The prevalence of this social innovation concept seems to point towards a growing

environmental consciousness across the globe.

2009

2010

Annual Report 2010

Eco-innovation’ and

‘agriculture’ provided

around 4,000 results

in 2010 whereas

‘innovation’ and

‘agriculture’ bore over

21,000 news articles.

53


54

Amount of news

50000

45000

40000

35000

30000

25000

20000

15000

10000

5000

Amount of news

0

700

600

500

400

300

200

100

0

Figure 5.3

Worldwide news coverage of sectoral keywords (in English connected to ‘eco-innovation

2006

Source: Meltwater 10.2.2011.

Figure 5.4

2007

2008

Agriculture Construction Energy Industry Transport Water

Worldwide news coverage on keywords (in English) based on the EIO vision

2006

Source: Meltwater 10.2.2011.

2007

2008

Biomimicry Carbon Recycling Cradle to cradle Dematerialisation Green lifestyle

2009

2009

2010

2010


eco-innovation

observatory

The key-term ´dematerialisation´ - one of the driving concepts behind our work at the EIO -

has gained considerably less attention in the media. Its coverage has been increasing slightly,

but almost exclusively in North America. On the other hand, while the news coverage of

´dematerialisation´ is rather non-existent in popular media in Europe, examination of the Web

of Science15 reveals that the term has a remarkably better coverage in scientific publications

in European countries. Thus, it can be concluded that in Europe dematerialisation is more

typical to scientific vocabulary than to public media, so far.

All in all, queries related to eco-innovation overwhelmingly revealed a growing presence in

the media, indicating that eco-innovation is an area of growing interest both in Europe and

abroad.

Box 5.1 | Critical metals

A large number of products used daily contain small, but critical amounts of critical metals;

the non-availability of these metals could endanger entire sectors. High-tech industries,

particularly the electronic industry, will be affected by the declining availability of precious

metals. Also the development of new clean-technologies, such as renewable energies and

energy efficient technologies, could be slowed down by resource scarcity (see Box 4.1).

In many cases, the rapid diffusion of technologies can drastically increase the demand for

certain metals. Hence, the list of the “most critical metals”(Table 5.1) will vary depending on

the needs of emerging technologies (EC 2010c).

Over a short time horizon (e.g. ten years), criticality is not determined according to geological

scarcity, but rather according to changes in the geopolitical-economic framework. This means

rapid, unexpected demand growth and high supply risks (UNEP and Öko-Institute 2009; M2i

2009; EC 2010c). Many of the critical metals essential to the EU economy are increasingly

coming under supply pressure, as EU nations rely heavily on imported rare metals (M2i

2009; EC 2010c;). China is one of the most important exporters of critical metals (e.g. 99% of

Dysprosium and Terbium and 95% of Neodymium). The EU, Japan and the US have already

considered suing China because of austere export restrictions that are not allowed under

WTO laws (Kim 2010). Imports may also be associated with severe environmental problems

(problem shifting) and violations of human rights, for instance in the Congo, where mines are

controlled by various armed groups that recruit civilians, including children, as forced labour.

To meet the challenges posed by metals scarcity, the ad hoc group of the European

Commission made a number of recommendations (see EC 2010c); eco-innovation could

play a key role in enacting these recommendations. For instance, through innovation in the

field of metals recycling (improving and developing recycling techniques and infrastructures

for the collection of used goods), developing viable substitutes and improving the overall

material efficiency of critical metals.

For eco-innovations, the whole lifecycle of the metal has to be considered: from mining

to final disposal. The goal should be no less than to ensure that metals are fully re-used,

remanufactured, or recycled to serve as new materials or products in a sustainable industrial

metabolism (see the visions chapter)

Annual Report 2010

While news coverage

of dematerialisation

is rather non-existent

in popular media in

Europe, the term has

a remarkably better

coverage in scientific

publications.

15. Web of Science consists

of seven databases containing

information gathered from

thousands of scholarly journals,

books, book series, reports,

conferences etc.

55


The lead markets are

expected to be energy,

mobility, water and

efficiency; a tripling of

sales is also expected

in material efficiency.

56

Table 5.1

Summarized prioritization and urgency timeline for selected metals

with their selected applications (driving emerging technologies)

PRIORITARY AND URGENCY

REGARDING TIMELINE

SHORT-TERM (WITHIN NEXT 5 YEARS)

+ rapid demand growth

+ serious supply risks

+ moderate recycling restrictions

MID-TERM (TILL 2020)

+ rapid demand growth

and

+ serious recycling restrictions

or

+ serious supply risks

+ moderate recycling restrictions

LONG-TERM (TILL 2050)

+ moderate demand growth

+ moderate supply risks

+ moderate recycling restrictions

Source: UNEP and Öko-Institute 2009; EC 2010c

METAL APPLICATIONS AND DRIVING

EMERGING TECHNOLOGIES (SELECTED)

Tellurium

Indium

Gallium

Rare earths

Lithium

Tantalum

Palladium

Platinum

Ruthenium

Germanium

Cobalt

Solar cells and flash memories

Displays (LCD), thin layer photovoltaics

ICT, Thin layer photovoltaics, LED

Catalysts, magnets (magnetic refrigeration)

Batteries, ceramics/glass, hybrid electric vehicles

Micro capacitors, medical technology, airplane turbines

Automotive catalysts, seawater desalination

Fuel cells, automotive catalysts, LCD and fibre glass

Electronics, hard disks, gas-to-liquid technologies (high quality fuels)

Optics (fibre and infrared), PET, solar

Lithium-ion batteries, synthetic fuels

5.2 | Business perspective: eco-innovation

and international competitiveness

Business is increasingly aware of the opportunities that come along with the eco-innovation

agenda. Roland Berger Strategy Consultants (2009) expect 3.1 trillion in global sales

generated by eco-industries by 2020, i.e. more than a doubling, and call eco-technologies

the 21st century lead industry. While this is indeed good news for technology providers,

eco-innovation clearly offers additional benefits for those improving their performance and

developing system solutions over the long term.

The lead markets expected are energy, mobility, water and efficiency; a tripling of sales is

also expected in material efficiency (Roland Berger Strategy Consultants 2009). A trend,

however, is fierce predatory competition as the first movers are accompanied by smart

followers. Thus, success will depend critically on delivering real solutions for customers with

verifiable sustainability achievements, as well as on suitable mass markets strategies to

overcome current fragmentation and niche orientation. Such strategies seem to be supported

by consumer orientation, i.e. price-conscious target groups nowadays consider ecological

aspects of consumption when making product purchase decisions. Indeed, certainty about

future market demand is a critical variable for any such trend, and willingness to pay for

green products may not be as high as expected (see McKinsey 2008 in WBCSD 2010b and

chapter 6 on drivers and barriers).


eco-innovation

observatory

The most frequently cited benefits that firms expect from eco-innovation relate to improved

business outcomes: the ability to attract and retain customers (37%), improved shareholder

value (34%) and increased profits (31%), according to a survey done by the Economist

Intelligence Unit in 2008 (PWC 2008). Managing eco-innovation from a cost/profit perspective

may be pursued via the following seven steps (Lettenmeier et al. 2009):

● Step 1: Form a team

● Step 2: Choose a product and determine the service it is providing

● Step 3: Identify the product chain

● Step 4: Assess the current status of the product

● Step 5: Estimate the MIPS (Material Intensity Per Service unit) of the product

● Step 6: Optimize the product and implement eco-innovation

● Step 7: (Re-)design the product service-oriented

Redesigning products service-oriented clearly requires intense communication with

customers from all relevant target countries internationally. It might overcome the uncertainty

about future markets (see Chapter 6 on barriers according to Eurobarometer) and lead to

new business models of user-led innovation and social entrepreneurship. Seen from a

comprehensive perspective (Bleischwitz et al. 2009, Petrie 2007), new business models for

base metal industries might emerge, which could position the industry at the heart of global

material value chains. This is a horizontal task which clearly transcends vertical production

patterns, for example, it cuts across the automotive chain. Within networks and partnerships

of integrated material flows management, the base metal industry can demonstrate

stewardship and leadership. The challenge will be to overcome the attitude of a primary

production company delivering basic materials in favour of a fully integrated material flow

company network, with high knowledge intensity, customer orientation, worldwide reverse

logistics, high-level recycling and a long time horizon; such future companies will manage

products, flows and stocks along certain materials or groups of materials. With strong

locations in the South, those new material flow companies may also help to heal the current

North–South divide of low value added in the South and high value added in the North.

Eco-innovation, however, clearly goes beyond materials: in line with EIO’s visions, the

economics of ecosystems and biodiversity report for business (TEEB 2010) features how

ecosystem services, currently not accounted for, might be turned into business opportunities.

As part of these efforts, markets for certified agricultural and forestry products are estimated

to increase by a factor of ten to twenty by the year 2050, with further opportunities in areas

such as water management and ecosystem service provision. Worth noting, the EIO’s

visions of industrial symbiosis and carbon recycling are not yet conveyed in. Certainly, this

needs more in-depths analysis about trade-offs and sustainable pathways.

Encountered with these unleashed opportunities, business will need to take leadership, form

partnerships and integrate business strategies with risk management and wider responsibility

strategies. Mining companies, for instance, need to work out biodiversity strategies with

long-term objectives while also providing transparency.

Annual Report 2010

57


Material efficiency

seems to be an area

in which the NICs are

especially building up

their knowledge base.

Emerging economies

are actively addressing

the business

opportunities of

resource efficiency

and will soon become

strong competitors on

these markets.

Dynamic developments

in eco-innovation are

happening in many

economic sectors

of emerging and

developing countries.

58

Emerging economies are increasingly aware of those opportunities. The TEEB (2010)

reveals that business in Latin America, Africa and the Asia Pacific region is more concerned

about biodiversity losses as a threat to their business growth potentials than their European

and Northern American competitors. Singapore, Taiwan, South Korea, Malaysia, India and

Chile now offer general capabilities for sustainability innovation that can be compared with

OECD countries (Peuckert 2010). In most Newly Industrializing Countries (NICs), the world

trade shares for sustainability technologies are considerably higher than the patent shares.

According to Walz (2010a + b) this indicates that these countries are quite active in exporting

sustainability relevant technologies, though based on a domestic knowledge base that is still

below average. In more detail, Brazil, Malaysia, Mexico and South Africa focus on patenting,

while China, South Korea and Argentina specialize on exporting eco-innovative technologies.

Within these technology fields, material efficiency seems to be an area in which the NICs

are especially building up their knowledge base. Almost all NICs show positive patent

specialization here. Different rationales may explain such patterns: For Brazil, Malaysia

and Argentina, the natural resource factor endowments and the related export potential

encourage further build up in the knowledge base of associated technologies along the value

chain. However, other technological areas are also contributing to the knowledge build up,

e.g. recycling in Brazil and South Africa. Singapore and South Korea, on the other hand, are

already highly successful in various manufacturing fields, but put a below average emphasis

on material efficiency. India and China both still show a negative trade specialization. The

positive patent specialization is more likely to be explained by the efforts made to build up

domestic knowledge competences, in order to augment the strategies of securing access

to raw materials from abroad with additional options to reduce the demand for these raw

materials. Interesting to note, a global sustainability indicator developed at the University

of Wuppertal (Welfens et al. 2010; composed of genuine savings rates — covering also

depreciations on natural capital —, the international competitiveness of the respective

country in the field of environmental (“green”) goods and the share of renewable energy

generation) also delivers the strong ‘green’ position of some emerging economies.

Despite these differences it seems that emerging economies are actively addressing the

business opportunities of resource efficiency and will soon become strong competitors

on these markets. Perhaps this competition will act as ‘process of discoveries’ to leapfrog

strategies for resource efficiency towards a green economy.

5.3 | Eco-innovation in practice: focus

on developing and emerging economies

With the growing awareness of environmental problems, emerging and developing

economies have an enormous potential for developing markets for eco-innovations and clean

technologies. Following the economic crisis, many countries in Asia, in particular China and

the Republic of Korea, pioneered an economic and employment recovery plan based in part

on significant investments in a ‘green economy’ (see for example Barbier 2010).

Although no systematic assessment of eco-innovations in developing and emerging

economies has been carried out so far, this should not blind us to the high innovation activities

in those countries. Evidence suggests that dynamic developments in eco-innovation are


Eco-innovation good practice 10

Eastgate shopping and office centre in Harare, Zimbabwe

Source: Ask Nature

eco-innovation

observatory

Modelled on the self-cooling mounds built by termites, the

Eastgate shopping centre is ventilated, cooled and heated

entirely through natural means. The termite structures can

maintain the temperature inside the building to within one

degree of 31°C both day and night, even when external

temperatures vary between 3°C and 42°C. This passive

cooling system works by storing the heat generated by

machines and people during the day when the sun is

shining and venting it through chimneys at night when

temperatures outside drop. The Eastgate Centre thus uses

90% less energy for ventilation than a conventional building

of the same size. For more information on this building see

the biomimicry institute, Baird (2001), Gissen (2003) and

the EIO online repository of good practices.

happening in many economic sectors of emerging and developing countries, notably in the

form of so-called “frugal innovations” (see The Economist 2010a, b and Box 5.2) 16 .

A large number of good practice examples have been realized in developing and emerging

economies, in particular in the areas of construction, urban planning and transport17 . Urban

planning and sustainable transport solutions are also an area of great interest in many

developing countries which have to tackle rapid rates of urbanisation and strong population

growth.

At the product or systemic level eco-innovations have the power to contribute to social

objectives in emerging and developing economies, while significantly reducing the material

and energy use related to the provision of housing and transport services.

> Future Work Plan: Global

Future analysis will focus on emerging global opportunities for eco-innovators as well

as assessing eco-innovation activities in different countries within comparable groups

of economies (e.g. OECD, resource-exporting countries, emerging economies etc.). It

shall include performance over time and the linkages with aspects of burden shifting and

international trade. A step-up in activities of media monitoring and patent analysis to gain

more in-depth insight into what is happening and where it is happening is planned.

Annual Report 2010

16. For examples on frugal

innovations, see e.g. http://

frugalinnovation.blogspot.com.

17. For more examples

illustrating the great diversity

of eco-innovations around the

world, see Pauli (2010) and von

Weizsäcker et al. (2009).

59


60

Box 5.2 | Frugal Innovation

One of the latest and most rapidly growing trends in emerging

economies which caters to the needs of consumers with low

income is bringing products back to a level of basic simplicity.

These products are not only designed to be inexpensive, but they

must also be robust and easy to use. This kind of innovation has

been dubbed as “reverse”, “constraint-based” or “frugal”. Frugal

often also means being sparse in the use of raw materials and

their impact on the environment (The Economist, 2010a,b).

Frugal innovations can thus in many cases be regarded as

eco-innovations particularly designed for use in non-OECD

countries.

Some examples of these simpler and cheaper versions

of existing products include:

The Nano, a $2,200 car produced by Tata Motors, an Indiabased

multinational company,

● A $70 fridge that runs on batteries, known as chotoKool (“the

little cool”), developed by Godrej & Boyce Manufacturing, one of

India’s oldest industrial groups

● A wood-burning stove that consumes less energy and produces

less smoke than regular stoves, invented by the Indian start-up

company First Energy,

● A bank branch reduced to a smart-phone and a fingerprint

scanner that allow ATM machines to be taken to rural customers,

developed by the telecoms entrepreneur Anurag Gupta in India

Frugal innovations also extend to production processes and

business models in order to reduce costs, for example by contracting

more work out, using existing technology in imaginative new ways,

and by applying mass-production techniques in new areas such as health care. So far, the

concept of frugal innovation is still young, and one of the challenges for eco-innovation

research is to measure its size and impacts.

Source: The nano

Source: The chotoKool

Source: The wood stove

Source: The bank branch


Eco-innovation good practice 11

City of Curitiba, Brazil

Source: Wikipedia

Box 5.3 | Preventing the resource curse

of the green economy

eco-innovation

observatory

Brazil’s 7th largest city and “Green Capital”, Curitiba, is regarded

as one of the world’s best examples of green urban planning.

Curitiba demonstrates that it is possible to greatly enhance

resource efficiency while decreasing harmful pollution and

unnecessary waste. The city provides about 52m2 of green

area for each of the city’s 1.8 million inhabitants has (up

from 1 m2 in 1970). Environmental legislation protects the

local vegetation of mixed subtropical forest, which has been

threatened by urban development. A special employment

programme enables deprived groups in the slums to receive

food and bus tickets in exchange for their rubbish bags. Curitiba

thus has less waste in its streets, rivers and public parks. In

combination with other initiatives, it has achieved a recycling

rate of 70% of its waste. Public transport is organised in such

a way that concentric circles of local bus lines connect to five

lines that radiate from the city centre in a spider web pattern.

On the radial lines, triple-compartment buses in their own traffic

lanes carry three hundred passengers each. They go as fast

as subway cars, but at one-eightieth the construction cost. The

buses stop at Plexiglas tube stations. Passengers pay their

fares, enter through one end of the tube, and exit from the

other end. This system eliminates paying on board, and allows

faster loading and unloading, less idling and air pollution, and a

sheltered place for waiting – which is usually short (Rabinovitch

and Leitman 2004). For more information visit the EIO online

repository of good practices.

The transition to a low-fossil, carbon economy does not come without risks. Indeed, not only

increasing demand per se, but also any increasing use of renewable resources will probably

place increasing demands on land, minerals and other natural resources, which were not

sought with such intensity before. These resources will most likely stem from abroad – and

may trigger growth and development in extracting countries. On the other hand, problem

shifting is a major concern. The question is, what can the EU do to prevent natural resources

from becoming a curse to the citizens of resource-rich countries?

Understanding the (future) resource requirements of eco-innovations is the first step. It

should also become part of any business plan. The most important groups of resources

for the emerging ‘green economy’ are biofuels and the metals and minerals needed for

renewable energy applications and other green technologies. The second step is to map hot-

Annual Report 2010

61


62

spots where green economy resources correspond with weak governance zones (Bringezu

and Bleischwitz in press). In those places, a push for transparency and public participation

will be crucial to ensuring that resources are utilised properly and that the resulting revenues

are handled responsibly.

As regards biofuels, the risks of continued land grabbing for large-scale, commercial

investment threatens the security and livelihoods of local landholders. Land acquisition

and leasing has sometimes been encouraged by governments, and there is a risk that the

revenues from selling and leasing the land, as well as those from biofuel production, will not

benefit the majority of citizens in those countries. In the case of mining, opportunities for

corruption are plentiful. For instance, the militarization of mining for tantalum (used e.g. in

mobiles and PCs) in the Democratic Republic of Congo is well documented. The demand for

gallium (used in green-tech) will probably lead to enhanced bauxite mining in Guinea, China,

Russia and Kazakhstan. The need for rare earth metals (used in wind turbines and hybrid

cars) will probably mean more mines in China, Russia, Kazakhstan, South Africa, Botswana

and Malaysia.

Potential measures to prevent the resource curse of the green economy can be learned

from development research (Gylfason 2009) and ongoing activities aimed at the oil, gas and

mining industries. Transparency is a critical first step and organizations like the Extractive

Industries Transparency Initiative, Publish What You Pay and the Revenue Watch Institute

are promoting the public disclosure of industry payments and host government earnings.

The World Bank (2010) proposes transparency as one of their 7 principles for responsible

agro-investment in farmland. International legal instruments may be another method—for

instance Siegle (2009) suggests criminalizing the diversion of natural resource revenues, for

which the United Nations Convention against Corruption could provide the framework. In the

private sector, corporate responsibility is a must. Those corporations which have met high

standards of transparency and sustainability in the mining industry could be used as models

for others, in particular for greening the supply chain. Codes of conduct should promote

adherence to social and environmental standards and continued consultation and oversight

of affected local communities. The Rio+20 Earth Summit is an opportunity to address these

issues and facilitate forward-looking mitigation efforts for responsible resource use; for

instance by establishing open trade for critical metals and recycling, forming an international

covenant to close material loops of resource-intensive consumer goods, and taking steps

towards an international agreement on sustainable resource management (Bleischwitz

2009).

In any case, the development of a green economy must not exacerbate the existing resource

curse, but instead draw on experiences and work with ongoing initiatives to prevent it from

the start. In developing the eco-innovations that will enable this transition, it is critical

to also look at life-cycle wide impacts beyond the borders of the EU when establishing

accounting schemes, standards and certification of new products along the supply chain.

In the long-term, the growing strain on natural resources may be best addressed by

enforcing legal requirements, supporting democracy, stepping up civil society oversight

and demanding business commitments to transparency and responsibility. In doing so, the

market opportunities of sustainable resource management and making best use of mineral

endowments will be enhanced.


6 | Driving eco-innovation

eco-innovation

observatory

From an idea to a successful implementation, all innovation activities are driven

forward or hampered by various factors both internal and external to company. The

EIO follows a systemic approach to understanding determinants of eco-innovation

that encompasses a diverse range of factors:

Economic and financial factors (e.g. pricing, market position, access to capital,

demand)

● Technical and technological knowledge base (e.g. absorption capacity, human

capital, infrastructure, technological lock-ins)

● Environmental factors (e.g. access to natural resources)

● Socio-cultural factors (including elements of social capital understood as the ability

to collaborate and to take collective action, as well as cultural capital e.g. attitudes

towards change, risk)

● Regulatory and policy framework (including environmental and innovation polices,

taxes, standards and norms).

This chapter analyses eco-innovation drivers and barriers in EU countries and various

sectors. It is based on the results of CIS (Eurostat 2010b) and Eurobarometer (EC 2011b)

(major EU-wide surveys), as well as on the findings of EIO country profiles (EIO 2011) for

countries (sections 6.1.2 and 6.2) and sectors (section 6.1.3).

6.1 | Drivers and barriers of eco-innovation

as seen by business

6.1.1 | General overview

Eco-innovation drivers

The most important drivers of eco-innovation according to the Eurobarometer survey are

the current and expected high prices of energy. Every second company that introduced an

eco-innovation ranked current (52%) and expected energy prices (50%) as “very important”

(Figure 6.1). High material prices are nearly as significant with 45% of companies indicatating

high material prices as a very important driver.

Another key factor is having “good business partners”; 45% of companies deemed it “very

important”. Significantly more companies considered having “good business partners” of

higher importance than cooperation with research institutes and universities (19%). Four

in ten eco-innovators (40%) considered access to subsidies and fiscal incentives a very

important driver.

Annual Report 2010

The most

important drivers

of eco-innovation

according to the

Eurobarometer

survey are the current

and expected high

prices of energy.

63


64

Figure 6.1

Eco-innovation drivers according to Eurobarometer 2011

Expected future increases in energy price

Current high energy price

Current high material price

Good business partners

Secure or increase existing market share

Access to existing subsidies and fiscal incentives

Technological and management capabilities within the enterprise

Increasing market demand for green products

Expected future material scarcity

Good access to information, knowledge and technology support services

According to CIS

2008 nearly every

fourth innovating firm

in the EU introduced

environmental

innovation in response

to existing regulations

or taxes.

Expected future regulations imposing new standards

Limited access to materials

Existing regulations, including standards

Collaboration with research institutes, agencies and universities

0 %

20 %

Very important Somewhat important Not important Not all important Not applicable DK/NA

CIS 2008 included a simpler typology of drivers and barriers; it focussed mainly on

regulatory and policy determinants and, to a lesser extent, on economic factors (i.e. just

on demand from consumers). According to CIS 2008 nearly every fourth (23%) innovating

firm in the EU introduced environmental innovation in response to existing regulations or

taxes on pollution (Figure 6.2). Seeking regulatory compliance was followed by complying

with voluntary codes or agreements for environmental good practice (20%), expected future

environmental regulations or taxes (18%) and current or expected market demand for

environmental innovations from the customers (16%). The least often indicated driving factor

was availability of government grants, subsidies or other financial incentives for environmental

innovation (8%).

Although the results from CIS and Eurobarometer are not directly comparable (e.g. slightly

40 %

60 %

80 %

1000 %


Economic factors

Regulatory and policy framework

eco-innovation

observatory

different definition of eco-innovation, different sectoral scope and different country coverage),

they suggest that when confronted with market and regulatory determinants, companies

tend to point to the former as a more important driver of their eco-innovation activity. It

needs to be kept in mind, however, that the regulatory framework is one of important factors

determining the prices of energy as well as, although to a much lesser extent, materials.

Figure 6.2

Key eco-innovation drivers according to CIS2008

DRIVERS

(% of innovating

companies introducing

eco-innovation in

response to the driver)

Current or expected

market demand

from your customers

for environmental

innovations

Existing environmental

regulations or taxes on

pollution

Voluntary codes

or agreements for

environmental good

practice within your

sector

Environmental

regulations or taxes

that you expected to be

introduced in the future

Availability of

government grants,

subsidies or other

financial incentives

for environmental

innovation

EU

27

BE BG CY CZ EE FI FR DE HU IE IT LV LT LU MT NL PL PT RO SK SE

16 14 4 4 14 17 30 18 18 32 25 13 14 27 15 11 14 13 22 18 12 15

23 20 9 7 41 24 16 24 21 41 27 23 19 39 10 24 10 24 32 38 37 8

20 26 5 13 24 26 29 24 19 33 28 15 34 24 43 13 13 13 42 18 19 15

18 16 5 5 27 19 18 15 19 34 20 16 11 32 11 24 9 16 18 20 27 12

9 8 2 3 9 4 6 6 8 4 9 13 8 12 4 8 7 5 7 9 5 3

Source: Eurostat 2010; Legend: green shading indicates three most relevant drivers in a country

(the darkest colour indicates the most significant driver).

Annual Report 2010

65


66

Figure 6.3

Eco-innovation barriers according to Eurobarometer 2011

Lack of funds within enterprise

Uncertain demand from the market

Uncertain return on investment/too long a payback period

Lack of external financing

Insufficient access to existing subsidies and fiscal incentives

Reducing energy use is not a innovation priority

Existing regulations and structures not providing incentives to eco-innovate

Lack of qualified personnel and technological capabilities

Technical and technological lock-ins in economy

Market dominated by established enterprises

Reducing material use is not a innovation priority

Limited access to external knowledge, incl technology support services

The most significant

barriers are related

to economic and

financial factors.

Lack of suitable business partners

Lack of collaboration with research institutes and universities

0 %

20 %

Very serious Somewhat serious Not serious Not at all serious Not applicable DK/NA

Eco-innovation barriers

The Eurobarometer survey included a dedicated question on barriers to eco-innovation.

The most significant barriers are related to economic and financial factors, notably to the

lack of funds within the enteprise (36% companies ranked this barrier as “very serious”),

uncertain demand from the market (34%), uncertain return on investment (32%) and the lack

of external financing (31%). The insufficient access to public subsidies and fiscal incentives

are closely following market factors with every third company (30%) coinsidering them a

“very serious” barrier. The technological capacities or strategic objectives and social and

relational factors (e.g. lack of good business partners, limited access to external knowledge

and the lack of collaboration with research) are seen as least serious.

40 %

60 %

80 %

1000 %


6.1.2 | Exploring different types of eco-innovation

determinants: country perspective

eco-innovation

observatory

Economic and financial factors

According to the Eurobarometer results, companies consider economic and financial factors

to be by far the most important drivers and barriers of eco-innovation in EU countries (Figure

6.4). This does not come as a surprise as firms introducing eco-innovations face the same

market realities as any other innovating company, which typically point to similar innovation

barriers. It is important to underline that companies consider the high prices of materials a

very important eco-innovation driver nearly as often as high prices of energy. It indirectly

confirms that many companies eco-innovate in order to decrease the cost of purchasing

materials. Furthermore, four in ten companies (42%) introduced eco-innovation to ensure

or to enlarge their market share. This confirms that the capacity to eco-innovate may be

considered an element strengthening the competitive advantage of companies. Market

drivers are much stronger than the concerns related to material scarcity (35%) or limited

access to material (30%).

Demand from customers is also an important driver. Both CIS and Eurobarometer suggest,

however, that in the majority of countries it was not considered as relevant as other market

or regulatory factors. As one could expect, however, according to the CIS 2008 companies

in countries with more environmentally aware consumers (e.g. Nordic countries) consider

market forces as relatively more important than companies in other countries. Indeed, in

Finland, Sweden, Luxembourg and the Netherlands, the role of demand as a motivation to

eco-innovate was indicated more often than the regulatory framework.

Regulatory and policy framework

Regulatory and policy factors are considered important or very important by the majority of

companies surveyed by Eurobarometer. Both the CIS and Eurobarometer results confirm

that in general companies from Eastern and Southern Member States consider regulatory

and policy factors, notably access to subsidies, as more important than companies from

Northern and Western countries. The higher relevance of current and future regulations

in these countries, notably in the newer Member States, may indicate a response to the

implementation of EU environmental regulations. This could also confirm the role of the EU

regulatory framework for directing ecological modernisation in these countries. Conversely,

the lower relevance of regulations in more advanced countries, e.g. in Denmark, Sweden

and Finland, may be explained by the traditionally higher level of national environmental

regulations and a relatively strong environmental performance of companies.

Probably the most surprising result coming from the CIS is the high relevancy of voluntary

codes and agreements for environmental good practice. One reason may be the growing

popularity of eco-labelling schemes, which induce changes in companies’ practices. Thus,

being part of a sectoral agreement may lead to (probably mostly incremental) innovation.

This may also reflect the tendency of companies to enter into voluntary agreements --

establishing their own performance targets -- to avoid regulatory intervention.

Annual Report 2010

Companies from

Eastern and Southern

Member States

consider regulatory

and policy factors

as more important

than companies

from Northern and

Western countries.

67


68

Economic factors

Technological

capital

Natural capital

Socio-cultural factirs

Regulatory and policy

framework

DRIVERS

(% of companies

considering the

drivers "very

important")

Expected future

increases in energy

price

Current high

energy price

Current high

material price

Secure or increase

existing market

share

Increasing market

demand for green

products

Technological

and management

capabilities within

the enterprise

Expected future

material scarcity

Limited access to

material

Good business

partners

Good access to

external knowledge,

incl technology

support services

Collaboration with

research institutes,

agencies and

universities

Access to existing

subsidies and fiscal

incentive

Excepted future

regulations

imposing new

standards

Existing regulations

including standards

Figure 6.4

Key eco-innovation drivers and barriers in countries according to Eurobarometer 2011

EU

27

EU

15

EU

12

AT BE BG CZ DK DE EE EL ES FR IE IT CY LV LT LU HU MT NL PL PT RO SI SK FI SE UK

52 51 56 62 60 66 30 43 58 61 76 75 29 68 42 78 62 73 51 59 85 46 54 75 66 60 55 47 40 53

50 50 52 58 66 60 30 40 54 50 70 76 37 53 41 77 63 72 58 58 84 40 43 70 70 56 56 45 43 43

45 44 49 47 56 59 30 32 37 44 64 67 33 47 39 76 57 60 51 48 73 38 42 67 69 48 48 35 32 47

42 41 46 48 38 54 26 39 46 51 60 49 24 52 40 55 47 60 58 60 65 47 35 60 66 48 45 42 37 37

36 36 36 46 46 42 22 33 33 28 67 49 26 34 39 45 36 40 46 41 62 27 33 41 51 33 33 25 42 27

37 37 40 50 44 56 28 28 45 42 45 48 22 36 38 57 38 39 64 56 66 27 28 51 63 47 31 28 39 24

35 37 29 51 40 40 16 18 39 27 54 46 32 36 36 46 28 32 51 25 56 34 25 54 50 33 25 16 26 30

30 32 27 38 30 29 13 26 26 25 34 23 45 38 31 25 16 35 28 24 11 25 36 22 31 34 30 28 25 34

45 42 54 73 50 69 39 33 68 58 62 35 24 38 34 69 61 56 79 66 27 37 43 61 73 48 55 42 44 34

34 33 38 49 37 52 23 20 33 31 52 43 20 41 35 52 38 38 51 61 59 32 25 43 59 37 38 24 25 32

19 20 19 22 25 32 13 10 15 18 40 32 7 18 26 31 21 18 38 15 16 19 13 28 29 21 21 13 13 17

40 38 48 52 43 64 28 15 31 45 68 61 30 39 44 61 51 46 56 72 81 32 40 43 59 48 46 25 24 24

33 32 36 25 42 48 24 30 29 34 53 43 27 40 33 48 38 46 57 40 63 31 31 28 48 43 31 30 19 31

30 29 34 24 41 50 23 20 24 30 35 36 21 37 33 50 30 40 50 43 68 25 26 35 49 35 25 30 13 32

Legend: green shading indicates three most important drivers (the darkest colour indicates the most significant driver in a

country); orange shading indicates three most serious barriers (the darkest colour indicates the most serious barrier in a country)


Economic factors

Technological

capital

Socio-cultural factirs

Regulatory and policy

framework

BARRIERS

(% of companies

considering the

barriers "very

important")

Lack of funds within

enterprise

Uncertain demand

from the market

Uncertain return on

investment/too long

a payback period

Lack of external

financing

Lack of personnel

and technological

capability in the

enterprise

Technical and

technological

lock-ins (e.g. old

infrastructure)

Reducing energy

use is not a

innovation priority

Market dominated

by established

enterprises

Reducing material

use is not a

innovation priority

Limited access to

external knowledge,

incl technology

support services

Lack of suitable

business partners

Lack of

collaboration with

research institutes

and universities

Insufficient

access to existing

subsidies and fiscal

incentives

Regulations and

structures not

providing incentives

to eco-innovate

EU

27

EU

15

EU

12

eco-innovation

observatory

AT BE BG CZ DK DE EE EL ES FR IE IT CY LV LT LU HU MT NL PL PT RO SI SK FI SE UK

36 34 42 24 18 50 31 11 24 28 61 68 30 37 40 58 44 40 36 54 50 23 38 37 51 40 37 15 12 22

34 32 38 26 27 46 27 22 30 28 46 62 21 32 35 55 28 32 23 55 55 28 35 37 45 24 36 22 16 23

32 30 37 41 22 47 23 22 32 31 45 53 18 27 31 43 35 34 32 57 62 39 37 32 34 31 37 24 18 19

31 30 34 28 25 45 21 13 16 20 64 61 20 37 39 49 38 33 34 49 43 20 33 31 35 25 33 9 8 23

23 24 21 33 40 35 18 7 24 20 27 37 18 18 22 37 30 31 44 17 34 23 12 31 34 31 19 9 17 18

22 21 26 21 22 38 14 5 15 19 34 42 16 12 23 38 28 29 34 41 23 17 23 27 31 21 16 13 11 12

26 27 21 29 34 22 14 14 29 15 40 43 8 34 29 49 25 31 33 17 40 39 16 39 34 12 29 11 10 26

21 22 21 26 24 29 15 12 26 19 30 41 8 19 23 45 18 23 33 26 33 20 21 28 14 16 26 12 11 12

17 18 15 21 23 16 15 12 19 9 24 31 6 19 20 42 15 15 25 18 29 21 14 28 17 11 15 13 7 15

16 17 14 21 22 16 8 4 14 12 31 35 12 14 19 39 17 15 15 19 19 15 10 20 24 17 12 5 8 8

16 15 18 17 17 22 14 6 13 11 32 21 11 10 21 44 17 28 36 26 14 9 12 22 26 20 18 6 7 10

13 13 12 18 13 24 7 6 6 10 35 28 6 17 18 32 14 9 28 12 19 10 7 17 23 15 12 6 6 7

30 29 35 38 25 53 12 13 27 26 56 52 24 18 31 71 40 36 22 45 56 28 26 30 55 32 38 8 11 14

25 24 30 29 19 45 15 13 18 26 54 35 19 28 29 46 35 38 22 38 43 22 26 25 41 20 20 22 10 17

Source: Eurostat 2010; Legend: green shading indicates three most relevant drivers in a country (the darkest colour indicates the most significant driver).

Annual Report 2010

69


Every third company

considers expected

scarcity of materials

as a serious driver of

eco-innovation.

23% of eco-innovating

companies believed

that the lack of

qualified personnel

and technological

capabilities is a very

serious barrier.

Highly regulated

sectors, notably

water and energy,

are also those which

consider regulation as

a highly relevant driver

for eco-innovation.

70

Socio-cultural factors

Having good business partners was considered a very important driver by a significant

number of companies surveyed by Eurobarometer. While it was the second most important

driver in the EU-12, there were significant differences in the perceptions this factor among

countries in the EU-15: it appears as the most important driver in Austria and Sweden and

one of the least important drivers in France and Spain. Nearly all countries considered the

collaboration with universities and research institutes as one of the least important drivers

and barriers to eco-innovation.

Environmental factors

Every third company (35%) surveyed by Eurobarometer considered expected future scarcity

of materials as a very serious driver of eco-innovation. The material scarcity concerns are

more strongly pronounced in the EU-15 (37%) compared to the EU-12 (29%). There are also

significant differences between individual countries in this respect (see Figure 6.4).

Technical and technological knowledge base

Companies consider factors related to their own technological capacities or strategic

objectives as significant to eco-innovation efforts, e.g. 23% of eco-innovating companies

believed that the lack of qualified personnel and technological capabilities is a very serious

barrier. Moreover, every fourth eco-innovating company indicated the lack of strategic

priority to reduce energy use within the company as a serious barrier to eco-innovation.

Interestingly, this was considered a very serious barrier more often in the EU-15 than in the

EU-12 (27% and 21% respectively). Similar concerns about material use were expressed by

17% of companies.

6.1.3 | Sectoral perspective

According to Eurobarometer, the expected and current high prices of energy were considered

the most important driving factors of eco-innovation in all five sectors covered by the survey

(see Figure 6.5). High material prices were also of high relevance, notably in the agriculture,

construction, food services and manufacturing sectors, but less so in the water sector.

Results on barriers to eco-innovation confirmed the high relevance of economic barriers: the

lack of internal funds, uncertain return on investments and uncertain demand are the most

frequently noted obstacles in all five sectors (see Figure 6.6). While the water sector suffers

least from the lack of internal and external funding, companies from other sectors, especially

agriculture, manufacturing and food services, indicated these issues as the most serious

barriers to pursuing eco-innovation

Regulatory factors

According to CIS, highly regulated sectors, notably water and energy, are also those which

consider regulation as a highly relevant driver for eco-innovation (Figure 6.7). Indeed, nearly

every second (47%) innovating firm in the water sector introduced environmental innovation

in response to regulation. Other sectors highly influenced by regulation included energy

generation (electricity, gas, steam and air conditioning supply; 40%), mining (35%) and

construction (31%). Eurobarometer did not register significant differences between sectors

in this respect, however, it did suggest that expected regulation was more important than

existing regulations in all surveyed sectors except for water (see Figure 6.5).


eco-innovation

observatory

According to CIS, sectors where availability of government grants and subsidies played a

key role for environmental innovation included construction (17% of innovating companies

in the sector), transport (16%), water (16%), mining (14%) and energy (12%). The higher

relevance of grants in construction may reflect a growing role of environmental performance

requirements in publicly funded construction works. Access to public subsidies and fiscal

incentives was highlighted as a very important driver by respondents in Eurobarometer,

notably in agriculture and fishing (48% of eco-innovators in the sector).

Technological, socio-cultural and natural capital factors

Around one fifth of the SMEs surveyed by Eurobarometer considered the lack of qualified

personnel and technological lock-in as a significant barrier to eco-innovation (Figure 6.6).

Food and agricultural sectors seemed to be more exposed to these barriers, while the water

sector is the least challenged. Technological and management capabilities help drive ecoinnovation

in 44% of SMEs in agriculture and 35-38% of enterprises in other industries

(Figure 6.5).

Socio-cultural drivers of eco-innovations, such as collaboration with research organizations

and other business partners, and access to external knowledge and assistance, are reported

to be more important in the agriculture and fishing sector. The Eurobarometer survey

showed that the current and future lack of materials is a particularly relevant factor in the

manufacturing industry, and less significant in the water sector (Figure 6.5)

6.2 | Drivers and barriers in EIO country profiles

The analysis of EIO country profiles18 contributes a complementary perspective to reflection

on the barriers and drivers of eco-innovation in EU Member States. Each of the 27 country

profiles has highlighted the most critical barriers and drivers of eco-innovation in that country,

based on literature review and interviews with policy makers.

Regulatory and policy framework

The country reports also reveal that the regulatory and policy framework is one of the most

important determinants of eco-innovation development in the EU. Twelve country briefs report

the current or expected stringency of regulation, introduction of standards, pollution charges

and taxes, as well as targeted initiatives of the government as drivers of eco-innovation.

On the other hand, several countries, mostly in new EU Member States, report that weak

regulations and a lack of relevant policies form a barrier to eco-innovative initiatives.

Economic and financial factors

Every country report underlines the importance of economic drivers to both the initiation and

long-term viability of eco-innovation. Critical points seem to be seed funds and venture capital

(which is largely lacking in the EU) necessary for technology transfer and commercialisation

projects.

Eco-innovative developments in new EU Member States have been largely driven by

special funding programmes of the EU in cooperation with national authorities; whereas

dedicated investments into green R&D have been seen more in Austria, Finland, Germany,

Denmark and France. Growing demand for green, ecological, and bio products, as well as

Annual Report 2010

The current and future

lack of materials is a

strong driver in the

manufacturing industry.

18. The EIO has developed

eco-innovation profiles for all

Member States utilizing both

internal expertise and national

country experts. These reports

contain concise analysis of ecoinnovation

performance, leading

and emerging eco-innovation

areas, an overview of relevant

policy measures and a summary

of barriers and drivers to ecoinnovation.

The country reports

are available on the EIO website

71


72

Figure 6.5

Eco-innovation drivers in sectors according to EB2011

Economic factors

Technological

capital

Natural capital

Socio-cultural factirs

Regulatory and policy

framework

DRIVERS

(% of companies considering the drivers

"very important")

Expected future increases

in energy price

Current high

energy price

Agriculture

and fishing

Construction

Water supply;

sewerage;

waste

management

and remediation

Manufacture Food services

61 49 53 52 58

58 48 45 50 60

Current high material price 52 45 36 45 45

Secure or increase existing

market share

Increasing market demand for green

products

Technological and management

capabilities within the enterprise

Expected future material scarcity (as

an incentive to develop innovative less

material intensive substitutes)

47 39 31 44 39

47 35 26 36 37

44 35 37 38 36

33 34 30 37 33

Limited access to materials 24 29 16 32 33

Good business partners 49 44 42 47 37

Good access to external knowledge,

incl. technology support services

Collaboration with research institutes,

agencies and universities

Access to existing subsidies

and fiscal incentive

Excepted future regulations imposing

new standards

Existing regulations,

including standards

38 35 24 34 31

29 19 14 20 13

48 42 38 39 41

37 35 31 31 34

32 29 32 30 29

Legend: green shading indicates three most important drivers (the darkest colour indicates the most significant driver in a country)

Source: data from Eurobarometer (EC 2011b); analysis and presentation by Eco-Innovation Observatory


Figure 6.6

Eco-innovation barriers in sectors according to EB2011

Economic factors

Technological

capital

Socio-cultural factirs

Regulatory and policy

framework

BARRIERS

(% of companies considering the

barriers "very important")

Agriculture

and fishing

Construction

Water supply;

sewerage;

waste

management

and remediation

eco-innovation

observatory

Manufacture Food services

Lack of funds within enterprise 40,5 34,4 29,1 36,1 37,8

Uncertain return on investment/too long

a payback period for eco-innovation

39,1 33,7 26,9 30,8 29,3

Uncertain demand from the market 32,9 33,6 35,4 34,6 27,8

Lack of external financing 30 31,3 23,5 31,2 28,5

Market dominated by established

enterprises

Lack of qualified personnel and

technological capabilities in the

enterprise

Technical and technological lock-ins

(e.g. old infrastructure)

Reducing energy use is not

a innovation priority

23,9 22,1 21,2 21,9 16,3

23,2 22,8 12,7 22,7 27,5

25,8 21,1 20 22,4 20,5

30,5 23,1 20,7 26,6 25,8

Lack of suitable business partners 11,2 14,7 12,2 17,1 16,5

Lack of collaboration with research

institutes and universities

Reducing material use is not

a innovation priority

Limited access to external knowledge,

incl. technology support services

Insufficient access to existing subsidies

and fiscal incentives

Existing regulations and structures not

providing incentives to eco-innovate

19,3 13,4 20,5 12,2 9,7

18,2 14,2 17,4 19,4 15,8

14,4 15,6 13,3 16,3 20

35,1 30,5 19,7 30,3 28,7

33,1 25,6 28,5 24,9 20,4

Legend: red shading indicates three most serious barriers (the darkest colour indicates the most serious barrier in a country)

Source: data from Eurobarometer (EC 2011b); analysis and presentation by Eco-Innovation Observatory

Annual Report 2010

73


74

Professional, scientific

and technical activities

Financial and

insurance activities

Information

and communication

While new Member

States report widely

about the lack

of expertise, also

leading nations like

Denmark and Finland

feel a need to attract

world class foreign

specialists to keep their

leading positions.

Transportation

and storage

Figure 6.7

Eco-innovation drivers in sectors according to CIS2008

EXISTING AND ESPECTED ENVIRONMENTAL

REGULATIONS OR TAXES

Wholesale and

retail trade; repair of

motor vehicles and

motorcycles

50 %

40 %

30 %

20 %

10 %

0 %

Industry

(except construction)

Mining and quarrying

Construction

Services of

the business economy

VOLUNTARY CODES OR AGREEMENTS

FOR ENVIRONMENTAL GOOD PRACTICE

50 %

40 %

30 %

20 %

10 %

0 %

Manufacturing

Electricity, gas, steam

and air conditioning

supply

Water supply;

sewerage, waste

management and

remediation activities

AVAILABILITY OF GOVERNMENT GRANTS,

SUBSIDIES AND OTHER FINANCIAL INCENTIVES

CURRENT OR EXPECTED MARKET DEMAND

FROM CUSTOMERS

for environmentally friendly services, is a serious driver of eco-innovation in a few forefront

countries (Germany, Denmark, the Netherlands, Belgium), as well as in Greece and Romania.

Technical and technological knowledge base

Technological capital is a highly relevant determinant in the majority of EU countries.

Availability of relevant expertise and human capital in research and post R&D project

implementation was mentioned as an important driver for success in the eco-innovation

areas. While new Member States report widely about the lack of expertise, also leading

nations like Denmark and Finland feel a pressing need to attract world class foreign

specialists to keep their leading positions.

50 %

40 %

30 %

20 %

10 %

0 %

50 %

40 %

30 %

20 %

10 %

0 %


eco-innovation

observatory

Socio-cultural factors

Among the socio-cultural factors, weak linkages and cooperation between research and

industry appears to be one of the most common (both in cases of EU leaders and followers;

see the scoreboard in chapter 3) barriers to eco-innovation, especially as regards translating

inventions onto the market, defining priorities, and knowledge exchange (information flows).

Lack of entrepreneurship in ‘green markets’ is said to be due to cultural risk aversion among

citizens, SMEs and potential investors. That said, awareness about environmental issues

is increasingly becoming a catalyst for the demand of green products and services, and

forming the basis for favourable governmental policies, in several Member States.

Natural capital

Lack of natural resources and materials has been driving solutions toward more efficient use,

as well as the search for more viable alternatives (like renewable energies, water recycling

schemes, etc.). These developments have been particularly important for isolated regions

(e.g. Malta). Growing uncertainties about future prices of natural resources are already

defining the innovative strategies of companies in technologically advanced EU countries.

This is especially becoming critical for smaller, resource poor and export-oriented countries

like The Netherlands and Belgium.

In summary, Figure 6.8 presents an indicative overview of eco-innovation determinants most

commonly mentioned in the EIO country profile analysis. For a more detailed breakdown of

specific barriers and drivers identified in the EU country briefs see Annex I.

> Future Work Plan: Barriers and Drivers

The work on the drivers and barriers in the countries and sectors will be extended by adding

additional dimensions and variables to the analysis mostly based on the micro-level data

sets of Eurobarometer (2011) and CIS 2008 (2010). The thematic reports will give a specific

attention to analysing the relevance and perceptions of eco-innovation determinants in the

selected sectors and areas.

In particular the following questions will be tackled:

● How do the determinants of eco-innovation differ depending on the size, the turnover

and the investment in eco-innovation of the company? (based on micro data from

Eurobarometer and CIS)

● What are key drivers and barriers of different types of eco-innovation? (based on

micro data from Eurobarometer and CIS)

● Which factors drive and hamper radical and incremental eco-innovations? (based on

micro data from Eurobarometer and CIS)

● What are the expected future drivers and barriers of eco-innovation in selected

sectors? (based on Delphi surveys and scenario approaches)

● Can the barriers and drivers help to explain the eco-innovation performance of

countries and sectors? Does the perception of barriers and drivers relate to the

structural profiles and long-term trends identified in the countries and sectors?

Annual Report 2010

Growing uncertainties

about future prices of

natural resources are

already defining the

innovative strategies

of some companies.

75


76

Economic factors

Technological

capital

Natural capital

Socio-cultural factirs

Regulatory and policy

framework

Figure 6.8

Eco-Innovation determinants identified

from EU 27 country profile analysis

DETERMINANTS AT BE BG CY CZ DK DE EE IE EL ES FR IT LV LT LU HU MT NL PL PT RO SI FI SK SE UK

R&D investments

& support

VC&seed fund for

start-up & techtransfer

EU & national

funding programs

economic benefits/

profitability

demand for "green"

products/services

Availability of

relevant expertise

& human capital

R & D capabilities

Access to material

and natural

resource

Uncertainty about

future resource

prices

Awareness of

consumers &

industries

Linkages &

cooperation

Entrepreneurship

capabilities

Env. & innovation

policy regulation/

standards

Government's

commitment

"Red-tape"/

governance

Driver Barrier Dual (positve and negative) effect


7 | Future Outlook: Visions

of a resource-efficient Europe

eco-innovation

observatory

Improving resource efficiency is certainly one of the important strategic goals for the

upcoming decade. But it is not enough to ensure a long-lasting prosperity. For this, systemic

change is needed. In the following chapter we look beyond resource efficiency to ask what

kinds of systemic changes are needed, and what the possible eco-innovations to get us

there entail. We will present visions19 of how we think a ‘sustainable society’ could function.

These visions do not attempt to be realistic scenarios of what we expect or roadmaps of what

we think will happen, nor are they complete. They are a starting point for idea sharing and

debate on long term policy objectives. The EIO hopes to spark further ideas and discussions

about the future: with policy makers to develop a responsible, long-term orientation for

policy guidance, with businesses to discuss the kind of innovations that will be competitive

in the future, and with the public to develop a vision of how they perceive sustainability and

prosperity in the future20 .

To present our ideas we take the perspective of a citizen of the future (living around 2100),

reflecting back on how sustainability was achieved over the course of the 21st Century.

7.1 | The transition and resource

consumption targets

The transition was characterized by an increased mimicking of natural systems to create a

more dynamic system of production, consumption and reuse. Figures 7.1 and 7.2 illustrate

the scope of this change, depicting the industrial metabolism at the turn of the century

(linear system) and the sustainable metabolism at the end of this century (a more circular

system). Around 45 tonnes/person21 (TMC) were consumed annually in the year 2000. By

2050 a Factor 5 had been achieved, and in 2100 a Factor 10 (4.5 tonnes/ person).

This transition required a mixture of technological ingenuity, social acceptance and creativity,

and forward-looking policies combined with ambitious targets. Systemic change was gradual,

beginning with greater life-cycle-wide resource-efficiency efforts, especially focused on

waste recovery, which triggered the need for better product design to optimize recovery and

ultimately enhanced systems thinking in innovation efforts. Key characteristics of systemic

change included the greater utilization of sunlight for energy and material production,

accompanied by the recycling of carbon flows, and the coinciding maturation of the physical

growth rate of the built environment (buildings and infrastructure) until it eventually steadied

out (through greater renovation, refurbishment and urban mining). The latter significantly

reduced the primary material input needs while carbon recycling marked a turning point

in climate change mitigation efforts. The biggest milestone was reached recently (around

Annual Report 2010

We look beyond

resource efficiency to

ask what kinds

of systemic changes

are needed, and

what the possible

eco-innovations

to get us there entail.

The perspective of

a citizen of the future,

reflecting back on

how sustainability

was achieved over

the course of the

21 st Century, is taken.

19. The visions presented here

are mostly based on the visions

presented in Bringezu (2009)

20. The EIO invites your

feedback and comments to the

visions presented here under:

www.eco-innovation.eu

21. In the EU-15, no data is

available for the EU-27

77


78

Figure 7.1

Industrial metabolism 2010

BIOMASS

MINERALS

METALS

FOSSIL FUELS

Note: A simplified version of resource flows is depicted. Indirect flows are not shown; these are the flows associated with

resource extraction and can contribute significantly to the environmental pressures associated with resource consumption.

Figure 7.2

Industrial metabolism 2100

BIOMASS

MINERALS

METALS

FOSSIL FUELS

LAND-BASED

RESOURCES

LAND-BASED

RESOURCES

Note: The sustainable metabolism is characterized by 4 key conditions (see Bringezu 2009); (1) stabilization of the net

physical growth (infrastructures, buildings) of society through better reuse (renovation) and recycling (urban mining), (2)

the drastic reduction of primary resource extraction (by about 90%;), (3) steady or slightly increased harvest of biomass,

primarily for food, utilizing sustainable practices on existing cropland—no cropland expansion past 2020), (4) Better use

of sunlight for power and material production (designing the industrial ecology based on the example of natural systems),

ultimately including the recycling of carbon and capture of CO 2 from air for industrial photosynthesis.

AIR

SOCIETY

WATER

AIR

CARBON CAPTURE AND REUSE

SOCIETY

REUSE & RECYCLING

WATER

AIR EMISSIONS

WASTE

WASTEWATER

AIR EMISSIONS

WASTE

WASTEWATER


eco-innovation

observatory

the turn of the century) when industrial photosynthesis became technologically and

economically feasible.

We will take a closer look at the progression of some of the major concepts and innovations

characterizing the 21rst Century, including how people and institutions adapted to new

circumstances. Major events, milestones and turning points are presented together

on the transition timeline (section 6.6), summarizing key aspects of all the visions: 1)

dematerialization and rematerialization as stepping stones to a steady-stocks society, (2)

harnessing the power of the sun and (3) the balanced bioeconomy.

7.2 | Dematerialization and rematerialization:

stepping stones to a steady-stocks society

In the 2nd and 3rd decades of the 21st Century, substantial gains were made in resource

efficiency and recovery efforts. This was mostly driven by the rising prices of materials (notably

fossil fuels, metals and minerals) as former transition and developing countries rapidly built

up their physical stocks (buildings and streets). In Europe, especially in Western countries,

the physical stock of the built environment was already extensive. As population growth

steadied out, and even started declining in some member states around 2020 (Eurostat

2008), it not only became clear that remodelling and renovating the built environment were

the most cost-effective options, but also that the existing building stock (which increasingly

included empty buildings) held valuable material components that could be mined for re-use.

Urban mining thus became a popular and profitable practice. Renovation efforts also vastly

improved the energy efficiency of buildings22 , consequently reducing fossil fuel requirements.

For these reasons, the growth rate of the physical environment in the EU began to slow

down23 , and finally, to steady out. Of course, it didn’t happen alone, but was aided by smart

public policies24 as well as by a growing social acceptance of energy and material efficient

products.

While the construction sector certainly offered the largest amount of materials for re-use,

this trend extended across the entire material stock. Of course, the recycling of consumer

products like paper, plastics, glass and aluminium was already common in 2010, but these

processes were improved, broadened and complimented by other processes to optimize

resource use. Indeed, a major lesson learnt was that recycling was not always the best

option, but that cascading use (downcycling) and energy recovery could lead to higher

environmental and economic benefits. It became common practice to utilize methods like

material flows analysis, Life-cycle assessment and material input per service unit (MIPS)

to compare and identify ‘best’ end-of-life options. Possibilities for ‘rematerialization’ -- the

reuse, recovery and refining of metals, minerals and organic (carbon based) compounds --

were dependent on a number of factors, the most decisive of which was the material itself.

For instance, metals continued to be used in the construction sector, but use also increased in

operational functions, like in electronic goods. Different applications meant different recycling

strategies. First, in order for recycling to become the primary source for new products

(including buildings), the material stock entering and leaving the industrial metabolism

had to roughly balance out, so that demand could be met with secondary supplies. For

construction, this meant when the physical growth of the built environment slowed down and

Annual Report 2010

It not only became

clear that remodelling

and renovating were

the most cost-effective

options, but also that

the existing building

stock held valuable

material components

that could be mined

for re-use.

22. At the turn of the century

heating and lighting buildings

contributed to the largest

share (42%) of EU final energy

consumption (EC 2007).

23. Of course, the phase out of

physical growth is unavoidable

(in Germany, about half of the

country is made up of agricultural

land and 1/3 of forestry land; but

if the expansion of settlement

and infrastructure areas were to

have continued at the average

rate of expansion between

2003 and 2007, it would haven

take 750 years, but eventually

the entire surface area of the

country would be covered

(Bringezu 2009)). The only real

questions are; at which level

will it happen and will countries

will be prepared for it to avoid

significant losses of financial

capital. In other words, will the

bulk of investments have shifted

from ‘fixed’ material stock to

intangible assets such as knowhow,

software and patents soon

enough?

24. They included, for

instance, cap-auction-trade

systems for natural resources,

environmental tax reforms, and

promoting technology transfer

and international ecosystem

protection (Daly 2010; Jackson

2009).

79


Between 2030 and

2040 the world market

was flooded with steel

scrap, spurring the

shift of production from

primary - ore based -

to secondary – scrap

based – production.

Product innovation not

only focused on utility,

comfort and look,

but also on improving

the possibilities

for recycling.

Producers started

selling the performance

of a product,

but remained

owners of the good.

80

the end-of-life of significant shares of buildings and infrastructures was reached. The turning

point occurred between 2030 and 2040 when China demolished the first bulk of short-lived

medium to high rise buildings, which had been constructed in the early boom phase (Müller

2006; Wang and Müller 2007). As a consequence, the world market was flooded with steel

scrap. This coincided with a similar trend in the EU, where rising scrap volumes from endof-life

products met the demand for steel in about the same decade (Moll et al. 2005). This

spurred the shift of production from primary - ore based - to secondary – scrap based –

production.

Primary resource extraction continued to be practised in the latter half of the 21 st Century,

but to a much lesser degree, and eco-innovation efforts paid off with the development of

underground drilling technologies capable of minimizing the amount of unused extraction.

Primary extraction also shifted almost exclusively to geographical locations rich in mineral

ores, but typically far from densely populated regions. In contrast, centres of steel and

aluminium scrap sampling and smelting were built up in major urban regions, bringing them

much closer to demand.

As regards products, rising prices triggered the search for substitutes (e.g. platinum free

fuel cells) and increased the trend towards miniaturisation (e.g. mobile phones). At first,

this impeded recycling efforts—it created unbalanced input/output flows and high costs for

recovering small quantities of rare metals in mini products. However, over time this impedance

led to product innovation and development that not only focused on utility, comfort and look,

but also on improving the possibilities for recycling. The European Union took a forefront

in this development as it provided incentives for incorporating end-of-life design options in

product innovation already in the 2020s.

Designing mainstream products for improved and easier re-use and recycling marked a

critical turning point. It 1) transformed the concept of ownership and product-service systems

and 2) coincided with a slow change of consumer understanding of ‘living green’.

Regarding 1), companies which invested in end-of-life design also had a vested interest to

recover end-of-life products as a feedstock for their own production (cradle-to-cradle). In

addition to horizontal and vertical supply chain orientation, cyclical supply chains were born.

Of course, this did not work for all products, but forerunners sparked a surprising number of

innovative ideas. Companies began offering customers a greater amount of maintenance

and cleaning, as well as renewal options. At big enough scales, this also led to ‘pick-up’

and replacement options, causing logistic departments to expand into the area of ‘reverse

logistics’. An early example was the Shaw Contract Group, which offered customers a

guarantee of reclamation and recycling of their ‘Ecoworx’ carpet. Naturally, this process

took time, as it depended on products being in circulation in order to work. But, it signified

the greater attention to service combined with resource-efficiency. In the 3rd and 4th decades

leasing goods, such as electric vehicles or even computers, not only became common for

companies, but also for individual customers. Producers started selling the performance of

a product, but remained owners of the good. This was considered an easier way to ensure

the producer’s extended responsibility imposed by stricter regulations.


Eco-innovation good practice 12

Biomimicry, the example of jellyfish light

Source: Gordonisimo 2010

eco-innovation

observatory

Biomimicry, or innovation inspired by nature, became

very popular around the beginning of the 21st Century.

For instance, while energy-efficient light bulbs underwent

a large amount of innovation in the first decade, natureinspired

lighting started to become popular in the 2nd. For

instance, studies showed how jellyfish, squid and fungi

produce light; brightness is activated by calcium, in its turn

activating protein which releases energy in the form of light.

The result is blue light rather than the human standard

preference of white light. However, through optical effects

white can be obtained without additional chemistry (Pauli

2010). The greatest benefit is that this type of lightening

requires no mercury. For more examples of biomimicry see

the Biomimicry Institute and Pauli (2010), as well as the

EIO online repository of good practices.

Indeed, stricter regulations and consumer awareness have developed hand in hand.

Consumer protection regarding product durability, sustainability and fair trade is much more

stringent today. This is because as Europeans became more aware of the entire life-cyclewide

impacts of the products they bought, a demand for better labelling and control was

sparked. It also marked the beginnings of a social change. In 2100 quality of life is not linked

to excessive material wealth; social values towards living space, mobility and ownership

have adapted with the overall shift towards dematerialization. Urban mobility concepts such

as Car2go (see Good Practice Box 11) have come into style, aided by public education about

issues of well-being, values and ecology, and a gradual reduction of the structural incentives

towards materialistic consumption that powered the economic boom of the industrial period.

Policies today are supported by innovative indicators and indicator sets for measuring

quality of life and well-being (see Box 7.1). Both the public and private sector invest in public

goods and social infrastructures (such as open public space in cities, recreation areas, sport

facilities) and social innovation. In 2020 resources became more heavily taxed than labour

(see Ekins and Speck 2011), which have led to gradual changes in the patterns of work,

the work-week, and the life/work balance (see also Jackson 2009). Without such socioinstitutional

shifts and changes toward consumption behaviours, the absolute reduction of

material consumption necessary to achieve targets would not have been possible.

Annual Report 2010

Policies today

are supported by

innovative indicators

and indicator sets

for measuring quality

of life and well-being.

81


82

Eco-innovation good practice 13

Car2go

Source: 2010 car2go GmbH.

Copyright 2009 Daimler AG.

Box 7.1 Social and institutional

changes to achieve the vision

The ‘next level’ of car-sharing may be the concept of Car2go.

This is an ‘urban mobility’ concept designed by Daimler,

which involves a vehicle fleet of ‘smarts’ that are accessible

to registered users at all times. It was first launched in Ulm,

Germany, where there are now around 20,000 customers with

a vehicle fleet of 200 smarts. The main concept is that cars

can be spontaneously ‘hired’ (customers use a chip to unlock

the car), kept for as long as needed and left anywhere within

the city borders when finished. The customer is charged per

minute (19 cents), or for longer trips per hour or day, whereas

the company pays for fuel and cleaning. Since March 2009,

customers in Ulm have driven more than 4 million kilometres

with the fleet, with 9 out of 10 rentals ending at a different

location from where they started. Daimler has already

expanded the concept to Austin, Texas, and has plans to start

Car2go in Hamburg and Vancouver BC, as well as to produce

a series specifically for car sharing—the car2go edition, which

will be outfitted with solar roofs and touch screens—in 2011

(Daimler AG 2010). The concept of Car2go may present a new

mobility concept for densely populated cities in developing

countries, such as China. For more information visit the EIO

online repository of good practices.

Quality of Life

How content we are with our life and how well we feel about it does no longer have to go

hand in hand with high resource consumption. Over time, people recognized that material

affluence does not per se guarantee a high quality of their life. Today the overall target is to

increase people’s quality of life instead of increasing GDP and material affluence. Policies

that supported this re-orientation included the development of indicators for measuring

quality of life and wellbeing.

Economic growth

For this transition it was necessary to discuss alternative development models. A new

macroeconomic framework and politically acceptable solutions that respect the planet’s

ecological boundaries had to be found. Policy options for moving there included cap-auctiontrade

systems for natural resources, environmental tax reforms, or promoting international

ecosystem protection. Through policies and related behaviour changes it is today possible

to have a job and live comfortably in an economy that is no longer strongly growing in

GDP terms. Low growth rates have not led to economic crisis. This does not mean that the

economy has come to a standstill. It is in flux and innovations are mushrooming, but the

targets are different.


eco-innovation

observatory

Work

The aim of employment policies today is to guarantee sustainable working and living

conditions for the entire population. A reorganization of the employment system was

essential to face increasing income disparities, increasing cases of burn-out and other

forms of work-related diseases, precarious working arrangements and other undesirable

trends. For the design of employment policies it was essential to keep in mind that economic

growth alone would not solve the unemployment problem. In addition to “old” labour market

instruments, alternative approaches were needed. A key part of the transition towards more

and better jobs was achieved by a re-design of the tax system. A comprehensive, long-term,

cost neutral environmental tax system is in place to trigger both positive effects for the labour

market and at the same time a reduction of resource use.

Distributional aspects and social justice

It was realized that a resource-efficient Europe also needs to take into account a fair

international distribution of resources. This required implementing instruments to limit

consumption in material terms, e.g. by introducing cap-auction-trade systems for basic

resources or higher taxes on resource intensive products. Other measures for promoting

social justice include fair prices for natural resource exports, international standards for

sustainable resource extraction, promotion of fair trade, and the establishment of a global

climate adaptation fund for developing countries, among others.

Research and development activities also continued looking for ways to reduce the total

amount of materials needed—both in the production of the product (process eco-innovation)

and the products themselves (product eco-innovation). The biggest incentive turned out to

be price, but resource-light products also became more and more trendy. This trend had

already started in consumer electronics at the turn of the century, as marked for example by

the demand for paper-thin laptops and flat screen televisions. It extended to resource-light

buildings. Resource-light construction started to become more and more common in the

2020s; it meant not only using light weight materials, but also applying the most appropriate

materials and building techniques to meet the specific needs of a built object in the most

efficient way. A standard house in 2050 required practically zero fossil energy and demanded

less than 10% of the primary material resources per square meter of a standard house built

around the turn of the century.

Resource-light innovations and rematerialization became parts of a larger trend of

dematerialization. Combined with bionic principles learned from nature, molecular design

and nanotechnologies continued to contribute to the dematerialization of the product world

in unforeseeable and elegant ways. Over the 21st Century the total material requirement,

of European society especially, sank. However, it was not all smooth going. Enhanced

product service systems, for instance, have developed hand in hand with resource efficient

technology, but were also accompanied by the rebound effect in some cases. It wasn’t

until the 2030s that policy measures to tackle the rebound effect, most notably, resource

certificates (cap-and-trade systems) came on board. These followed the principle of GHG

emission trading schemes, and were based on per capita resource consumption levels.

Annual Report 2010

83


Economic growth and

physical growth are no

longer co-dependent.

84

Eco-innovation good practice 14

Resource-light construction

Source: Werner Sobek.

R129: Planning time:

2001 - 2012

They made significant inroads towards monitoring and regulating the level of resource

consumption to ensure it remained within the boundaries of the planet.

Whereas at the beginning of the century the net additions to stock (NAS, annual additions

to buildings and infrastructure) amounted to about 10 t/cap in Europe, it has reached values

around zero today. This does not mean that the economy has come to a standstill, but rather

that economic growth and physical growth are no longer co-dependent. Innovations in this

‘steady-stocks’ society are thriving. This development was key to meeting the EU target

of a factor 10 by 2100, which not only meets the global threshold of acceptable resource

extraction, but has enabled a more equal distribution of resource use between world regions.

7.3 | Harnessing the power of the sun

Resource-light construction aims to identify the best material

for each specific application. This process goes beyond

the built object and accounts for the local conditions, the

user’s behaviours and the economy. It is achieved when the

characteristics and interactions of all construction materials

maximize the performance of the building as a whole, while

reducing energy and material flows, carbon emissions as well

as other harmful emissions to humans and/or the environment.

In R129, by architect Werner Sobek, the building envelope

consists of a plastic material which is extremely light and

transparent. An electrochromatic foil enable the envelope

to be controlled electrically, so that it can be darkened or

made completely opaque either in sections or as a whole.

The structural frame consists of carbon box sections, with

a technical installations floor that provides storage facilities

and connections for electrical energy, water, compressed air

and communications lines. The Kitchen and sanitary facilities

are housed in a central, non-stationary module; the interior

of the building is devoid of fixed partitions or walls. For more

information visit Werner Sobek and the EIO online repository

of good practices.

In 2100 solar energy is not only used for heat and electricity production, but also indirectly

for the synthesis of materials.

At the turn of the century, the prospect of replacing fossil fuels with biofuels was extremely

popular. It took some time to realise that this was not the most effective strategy. That was

because in 2010 average solar technology could already transform 10-20% of sunlight into

energy; typically 15% for commercial solar cells (EPIA 2010). Highly efficient crops could

utilise no more than 6% (Woods et al. 2009). When looking at the industrial metabolism,

scientists quickly realized that it made much more sense to directly utilize sunlight as


Eco-innovation good practice 15

Floating Solar Islands

Source: Photo from CSEM;

the Nolaris project

eco-innovation

observatory

Dedicated ‘solar islands’ were developed. These were

not only built in the desert, but when the technology was

ready were also mounted on ocean floats as ‘floating

solar islands’. Their basic operation involved using solar

thermal or photovoltaic systems to generate electricity, in

order to produce hydrogen through electrolysis. Storing the

hydrogen in floating tanks allowed it to be directly loaded

to tankers. The systems have advanced so far that these

floating islands can be steered out of the way of hurricanes

and even dive to escape tsunamis. For more information

see the Nolaris project.

an energy source rather than planting, harvesting and processing biomass for energy.

Politicians also realised that cropland expansion was contributing to the irretrievable loss of

biodiversity and international resource conventions came together to monitor and regulate

not only onsite production, but also demand to ensure it didn’t exceed levels which could be

met with a sustainable supply of global biomass.

This led to the continued solarisation of the technosphere, meaning that building surfaces

and roads became multifunctional surfaces that also produced electrical and heat energy.

Highways were equipped with side walls or light roofing carrying photovoltaic panels to

add to domestic electricity supply while reducing the requirement to agricultural or natural

areas for energy production. Technologies to cool buildings using sunlight also became

widespread, especially in countries receiving large amounts of sunlight (see for instance

Fraunhofer 2010).

While using the surfaces of buildings and infrastructures, as well as deserts and oceans,

has resulted in more land for agriculture, forestry and natural areas, it has also had its costs.

The mineral resource requirements for the construction and maintenance of solar panels,

concentrated solar panel systems, and photovoltaics have been significant (see Box 4.1).

Recycling made inroads toward reducing parts of this load, but it took a few decades to build

up a material stock ready to recycle, and in the meantime there was a trade-off between

renewable energy and mining activities.

Innovation made it possible to efficiently use solar energy to produce hydrogen from water

(hydrolysis). While gains were made to utilize this hydrogen as a fuel for mobility, the first

turning point came when scientists figured out how to cost-effectively combine hydrogen

with carbon dioxide to synthesize a number of carbohydrates. Thus, further mimicking

natural processes. In the beginning, the carbon dioxide was sourced from carbon recycling

Annual Report 2010

It made much more

sense to directly utilize

sunlight as an energy

source rather than

planting, harvesting

and processing

biomass for energy.

There was a trade-off

between renewable

energy and

mining activities.

85


The key milestone

happened around

the middle of the

century when highly

efficient absorption

technologies were

developed that could

capture carbon dioxide

directly from the air.

25. Replacing them with

technology-neutral policies like

a carbon tax, which still gave

biofuels an advantage over

fossil fuels.

86

stations—for instance from dry organic waste, but also from fossil fuels. Gasification or

pyrolysis were used, along with synthesis technologies and solar power. Of course, the

evolution of this technology system began gradually, encouraged by policy incentives and

funded by ‘green investments’.

The key milestone happened around the middle of the century when highly efficient

absorption technologies were developed that could capture carbon dioxide directly from the

air. The first successful attempt to capture C0 from the air was performed in 2008 by Klaus

2

Lackner (Lackner 2010). But it wasn’t until much later that the potential for carbon capture

and reuse was realised.

Efforts toward ‘Industrial photosynthesis’ intensified in the latter half of the 21st century and

reached commercial scale around 2100. Industrial photosynthesis is the use of captured

carbon dioxide and solar energy to produce energy rich compounds for materials and fuels.

It has made incredible gains in climate change mitigation and eased conflicts over land use

and land use change. While using industrial processes to produce food will probably never

be the case—and hopefully not—it could be used to synthesise the materials of the future.

7.4 | The balanced bioeconomy

It was the cultivation of biomass that originally allowed hunter-gatherer societies to settle

and develop into cities. Their industrial metabolism was largely based on biotic resources—

crops for food and wood for shelter (especially in Europe)—or local resources like stone and

clay. With the technological advances in the latter half of the 20th Century, it was thought

by some that a return to a largely bio-based economy was one way to reduce fossil fuel

dependence and mitigate climate change. However, it was quickly realized that the limited

systems perspective of agrofuels was too narrow to take in greater impacts and that a

growing population of more than 6 billion needed to use its agricultural land to produce

food. In the EU leaders realised that biofuels meant substituting one supply dependency

(fossil fuels) with another (biomass), and that by stimulating production and consumption

of liquid biofuels, demand would grow in such a way that, regardless of how efficient these

processes became, it could only be met by cropland expansion—leading to an unforgivable

and irreversible loss of biodiversity.

In the 2nd decade international conventions were formed that first abolished all biofuel

quotas25 and then agreed to halt all cropland expansion beyond 2020 (van Vuuren and

Faber 2009). Forced to use land resources more effectively, massive efficiency gains across

the food chain—from the field to the fork—were made and better practices to maintain soil

fertility of existing cropland were implemented by farmers throughout the world (aided by

new assistance programmes).

In the 2010s, hype for bio-based products started to emerge, as customers were keen to buy

‘green’ products and governments were happy to encourage this trend. However, lessons from

the biofuel hype had been learned and biomaterials were put through systems-wide scrutiny.

It was determined that organic wastes made an excellent feedstock for rematerialization and

that to some extent, fast growing, non-food plants rich in lignocelluloses (switchgrass, poplar,

ect.) could be used in so-called cascades. This meant as a material first, and then re-used,


eco-innovation

observatory

recycled and refined until it made more sense to retrieve the energy from it. Biorefineries

became processing and re-processing facilities, as well as decentralized energy suppliers.

For instance, better separation and sorting capacities based on the product’s basic polymer

structure were established, enabling material specific recycling of dry organic wastes

(plastics). Wet organic wastes (from food and feed) were increasingly separated and used

to produce biogas, so that the left-over nutrient content could be returned to the soil and the

natural carbon and nutrient loops could be closed.

In order to ensure that land use demands for biomaterials did not encroach on agricultural

land needed for food (it could not encroach on natural land as all cropland expansion was

halted in 2020) or contribute to problem shifting between countries, the method of land use

accounting (see Bringezu et al. 2009) was employed. In this way, EU countries could monitor

their total land demands and employ governance to keep these demands within the levels

dictated by a fair share of acceptable resource extraction.

Over time, the use of biomaterials did increase, especially as innovation efforts intensified

and new and better applications were created to make better use of the limited harvest.

A pre-indicator of this was, for instance, the creation of ‘liquid wood’ (see good practice

Box 15). ‘White biotechnology’, i.e. the breeding of biochemicals in closed fermenters, also

using GMOs, increased somewhat over the years and was used only for material/chemical

applications. ‘Green biotechnology’, i.e. the use of GMOs in the open field, was deemed

too uncertain and hazardous, and could not effectively overcome the limitations of biomass

production set by natural conditions and regulatory requirements (e.g. nutrient pollution

thresholds).

Finally, technologies became so advanced that solar energy and carbon dioxide could be

used for industrial photosynthesis. It was a development that enhanced independence from

open field agriculture and forest plantations. This meant that the socio-industrial metabolism

did indeed transition to a sort of bioeconomy, only it wasn’t based entirely on land or ocean

based harvest. Instead, it marked the beginnings of the transition toward a photoautotrophic

system.

All in all, the 21st Century can be characterized by rapid and incredible amounts of innovation

achievements that transformed the prevailing concepts of ownership, responsibility,

functionality, design and life-quality in ways that had not yet been imagined at the beginning

of the century. Ingenuity, technical innovation, socio-institutional changes and human

adaptability have created a resource efficient and prosperous society that functions within

the finite boundaries of the earth.

Annual Report 2010

Biorefineries became

processing and

re-processing

facilities, as well as

decentralized energy

suppliers.

All in all, the

21 st Century can be

characterized by

rapid and incredible

amounts of innovation

achievements that

transformed the

prevailing concepts

of ownership,

responsibility,

functionality, design

and life-quality.

87


88

Eco-innovation good practice 16

Arboform: 'Liquid wood'

Source: TECNARO 2009

7.5 | The transition timeline

Arboform’ combines the properties of natural wood

with the processing capabilities of thermoplastic materials;

it is a biodegradable and renewable polymer which has,

to some extent, substituted plastics. With it, the SME

TECNARO GmbH won the European inventor award

2010 in the SMEs/research category. Today t is in high

demand from the automotive sector and for applications

in children's toys, furniture, castings for watches, designer

loudspeakers, degradable golf tees and even coffins.

While this ‘bioplastic’ can be formed into very precise

shapes and is extremely stable, it can also, just like wood,

eventually decomposes in landfills instead of lingering

around for thousands of years like "normal" plastic.

For more information see Technaro and the EIO online

repository of good practices

The transition timeline summarizes these corresponding visions and the progression from

resource efficiency to resource sufficiency. It shall be developed further in the context of the

EIO project as new insights into eco-innovation and eco-innovation potential are gained.

Europe is in

the industrial period

2000

The EU takes a

forefront in recycling

rare metals by

providing incentives

for incorporating

end-of-life design

options in product

innovation

2010

Solar cooling

becomes common

in the EU

2020

Expansion

of cropland

is halted

worldwide

Biomimicry takes off as a

design principle of ecoinnovation

Light-weight

zero emission

cars are mass

produced

2030

New business models

on leasing and materials

stewardship are developed

2040

Urban mining

becomes

common

practice

Resource certificates

are established as a

part of international

sustainable resource

management efforts

A standard

European

house requires

practically zero

fossil fuels

European

population

growth peaks

around 520

million citizens

2050

Secondary sourcing

of metals becomes

more common than

primary sourcing

China demolishes

first bulk of short-lived

buildings, flooding the

market with steel scrap

2060

European buildings and roads serve multifunctional

purposes; producing heat and

electricity with solar energy

Growth rate of the

physical environment in

Europe peaks; renovating

is more common than

building new

2070

Highly efficient

absorption

technologies

capture CO 2

from the air

The first carbon

recycling station

is established in

Europe

2080

Biorefineries are

processing and reprocessing

centres, as

well as decentralized

energy suppliers

2090

Material supply chains are commonly cyclical

(involving for instance reverse logistics—

companies typically provide services to collect

their products at the end of the product’s

useful life to regain the material for re-use)

Europe enters the

photoautotrophic period

2100

Industrial photosynthesis

goes commercial


eco-innovation

observatory

8 | Main findings and key messages

Resource efficiency, material productivity and the

eco-innovation challenge

1. The rate of annual increase in material productivity in the EU over the past few years was

3.2% (GPD in purchasing power standards) or only 1% (GPD in market exchange rates).

With around 16 tonnes of material consumption per capita, however, Europe is among the

world regions with the highest consumption levels. Although the EU has achieved a relative

de-coupling of economic growth from material use, absolute levels of consumption also

grew by around 8%. An absolute reduction can only be realised, if the annual growth rates

of material productivity are higher than the economic growth rate.

2. The eco-innovation challenge is to improve the resource and energy efficiency performance

of the EU by promoting eco-innovation and by ensuring that the benefits of new solutions are

widely disseminated. It is also to ensure that the efficiency gains are not offset by growth in the

total consumption of natural resources. Both efficiency gains and absolute dematerialization

are needed for achieving a decoupling of environmental impact from economic growth and

to meet the vision of a resource-efficient Europe.

3. Initiatives like “Resource-efficient Europe” provide key orientations for innovation activities

over the short term. Long-term targets to reduce the absolute levels of material consumption

are also critical for facing the eco-innovation challenge. Such targets can act to frame

policies and strategies and to significantly de-risk the investment decisions of companies,

governments, financial institutions and research organisations.

EU performance

4. In order to monitor and compare the eco-innovation performance of EU member countries

the EIO has developed an Eco-Innovation Scoreboard. According to this new tool, Finland,

Denmark, Germany, Austria and Sweden are the most eco-innovative countries in the EU.

However, no EU country has a high performance across all eco-innovation-related indicators.

Thus, within the EU-27 there is no model country which could serve as an example of best

practice across all areas observed in the scoreboard.

5. High eco-innovation performance in EU countries is strongly correlated with both GDP

and competitiveness. However, environmental performance of the “eco-innovation leaders”

in the EU is often poor; many of these countries consume high levels of material and energy

and emit high levels of GHGs.

Annual Report 2010

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90

Eco-innovation good practice 17

Network Resource Efficiency, Germany

The "Network Resource Efficiency" (NeRess) pools

knowledge about the efficient use of resources to intensify

communication between business, research and politics.

It builds on the MaRess project (Material Efficiency and

Resource Conservation) and intends to foster eco-efficient innovations while at the same time

providing a permanent base for technological progress. Designed as a cross-sector, open “learning”

platform, it aims at bundling know-how and experience regarding resource efficient production,

products and management, as well as successful applications. It provides possibilities for the

mutual exchange of information to intensify communication and cooperation between actors from

enterprise, industry associations, advisory and educational institutions, academia, politics and the

media to mobilise their central competencies and create a broad awareness of the issue resource

efficiency. Furthermore, it develops proposals for the design of framework requirements that provide

incentives and reduce barriers. For more information visit the NeRess website, Wuppertal Institute

and the EIO online repository of good practices.

Company performance

6. According to the 2011 EU-wide Eurobarometer survey, 45% of European companies in

manufacturing, construction, agriculture, water and food services have implemented at least

one eco-innovation over last 2 years.

7. The manufacturing sector has the highest share of companies implementing eco-innovations

to reduce material use while the electricity, gas, steam and air conditioning supply sector has

the highest share of companies eco-innovating to reduce the use of energy. It should also be

noted that these recent figures by far exceed the numbers of previous analyses – indicating

a landslide shift towards energy and material efficiency among companies.

8. However, only about 4% of eco-innovating companies declared that the eco-innovation

they have introduced led to a more than 40% reduction of material use per unit output.

The results suggest that the intensity of the recent eco-innovation activity of companies

is not sufficient to achieve a Factor 2, let alone Factor 5, resource-efficiency target. The

overwhelming majority of companies report incremental improvements. Clearly, incremental

innovations can also be of key relevance toward achieving goals, but only if they are

introduced continuously and if they are part of a wider strategic objective of the company.

Drivers and barriers

9. According to the Eurobarometer (2011) survey, a majority of companies expect raw

material prices to increase in the future and realise the opportunities of saving material

costs. The strongest drivers for eco-innovation are the current and expected high prices of

energy as well as expected future scarcity of materials. Existing regulations and taxes are

another key driver: nearly every fourth innovating firm in the EU introduced environmental

innovation in response to those policy instruments.


eco-innovation

observatory

10. Most important barriers are related to economic and financial factors, notably to the lack

of funding and the uncertain market demand. Thus, the European Union has a role to play

in fostering eco-innovation via intelligent regulation, economic incentives and smart funding

mechanisms.

The EIO believes that realising a resource-efficient Europe in the next decades is possible.

As a special feature of this report we offer a positive vision of life in the year 2100 and

illustrate how the implementation of eco-innovation technologies and products, as well as

changes in the socio-institutional context, can bring Europe onto a sustainable development

pathway.

Annual Report 2010

91


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Glossary

eco-innovation

observatory

Biomimicry “Biomimicry (from bios, meaning life, and mimesis, meaning to imitate)

is a new discipline that studies nature’s best ideas and then imitates

these designs and processes to solve human problems” (Biomimicry

Institute 2011). It is thought of as “innovation inspired by nature.”

Back to Good Practice Box 11.

Circular economy The circular economy is one in which used materials are recycled

back into production stream. It is the better use of waste for new

materials. Back to Ch 7.

Critical metal A metal which is essential to an industrial process and for which there

is no actual or commercially viable substitute. Back to the critical

metals Box 5.1.

Decoupling Decoupling compares resource use to economic growth. There are

2 types: relative and absolute. Relative decoupling means that

resource use may increase, however, at a lower rate than economic

growth. Or, resource use remains constant while the economic output

increases. Absolute decoupling is achieved when resource use

declines over time while the economy grows (Schütz and Bringzu

2008). Back to Ch 2.

Dematerialization Dematerialisation is the supply and use of products and services with

less and less materials. It means a decrease in material flows, i.e.

reduced material input due to greater efficiency (Schütz and Bringzu

2008). Back to Ch 1, Ch 7.

Direct Material Input DMI is an indicator derived from national material flow accounts. It

measures the direct flows of materials that physically enter the economic

system as an input, i.e. materials that are used in production

and consumption activities. DMI equals domestic (used) extraction

plus the direct mass of imports. Back to Ch 2.

Domestic Material consumption DMC is an indicator derived from national material flow Consumption

accounts. DMC subtracts the direct mass of exports from DMI, thus

illustrating the consumption of materials by the domestic economy.

Back to Ch 2.

Downcycling Downcycling means converting waste into a new product of lesser quality

and reduced functionality. For instance, plastic is recycled into a lower

grade plastic. The goal is to re-use raw materials to the most effective

degree, reducing the need for primary extraction. Back to Ch 7.

Eco-industries Those industries which produce goods and services with the intention

of reducing environmental risk and minimizing pollution and resource

use. They are often called clean tech or green tech innovations. Back

to Ch 1.

Eco-innovation Eco-innovation is the introduction of any new or significantly improved

product (good or service), process, organisational change or market-

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ing solution that reduces the use of natural resources (including

materials, energy, water and land) and decreases the release of

harmful substances across the whole life-cycle.

Eco-innovation paradox The potential for benefiting from eco-innovation is often highest in

the regions and sectors where the capacity to develop or apply ecoinnovations

is limited. Back to Ch 3.

Ecological rucksack The ecological rucksack describes the resource requirement of

producing products and offering services. For products, it is the

complete material input needed to manufacture that product from the

cradle to the point of sale, minus its own weight. For services, it is the

sum of the shares of the rucksacks of the technical means (“Service

delivery machines”) employed (for example, vehicles, refrigerators,

buildings, etc.), plus the sum of materials and energy used to deliver a

unit of service (Schmidt-Bleek 2011). Back to Ch 1, Ch 2.

Frugal innovation Eco-innovations designed to be inexpensive, robust and easy to use.

This kind of innovation has been dubbed as “reverse” or “constraintbased”.

It also means being sparse in the use of raw materials and

their impact on the environment. Back to Ch 5.

Hydrolysis Hydrolysis is a chemical reaction in which water is split into hydrogen

cations. Back to Ch 7.

Incremental innovation Innovations concerned with improving components of products or

services, processes or streamlined organisational set-ups that do

not lead to a substantial change in a short time. Over time, however,

incremental innovations or sequences of incremental innovations may

cause systemic, positive or negative changes. On a large scale they

may lead to significant impacts in e.g. energy efficiency gains as in the

example of the insulation of buildings. Back to Ch 1.

Indirect flows Indirect material flows refer to up-stream material requirements of

imported or exported products, which are used as material inputs

along the production chain in foreign countries. In contrast to direct

flows of traded products, indirect flows do not cross the national

boarder. Back to Ch 2.

Industrial metabolism A sustainable development perspective which regards societies and

their economic systems as embedded in the larger environmental

system. Societies are shown to have a “metabolism” with the

surrounding natural systems in a similar way to plants, animals or

humans. The ‘inputs’ in industrial metabolism include resources such

as raw materials (including fossil fuels), water, air and land. These

resource inputs are transformed into products (goods and services)

and are finally disposed back to the natural system in the form of

outputs; mainly solid wastes, waste water and air emissions (Schütz

and Bringzu 2008). Back to Ch 7.

Industrial photosynthesis The use of captured carbon dioxide and solar energy to produce

energy rich compounds for materials and fuels. This is a vision for the

future. Back to Ch 7.


eco-innovation

observatory

Land grabbing The large scale land acquisition – be it purchase or lease – for

agricultural production, often by foreign investors. Back to Ch 5.

Life-cycle assessment Life-cycle Assessment (LCA) is the assessment of every impact associated

with all life stages of a product, from raw material extraction,

over production, selling and application and up to disposal or re-use,

often in comparison with another, competitive product. Back to Ch 7.

Life-cycle wide Refers to all life phases of a product, from raw material extraction over

production and use to recycling/disposal.

Material flow analysis Material flow analysis (MFA) refers to the monitoring and analysis

of physical flows of materials. It can be applied to a wide range of

economic, administrative or natural entities at various levels of scale

(world regions, whole economy – economy-wide MFA, regions,

industries, firms) and can be applied to materials at various levels

of detail (individual materials or substances, groups of materials, all

materials) or products (Schütz and Bringzu 2008). Back to Ch 2, Ch 7.

Material flow innovation Material flow innovation captures innovations across the material

value chains of products and processes that lower the material intensity

of use while increasing service intensity and well-being. It aims

to move societies from the extract, consume, and dispose system of

today’s resource use towards a more circular system of material use

and re-use with less total material requirements overall. Back to Ch 1.

Material productivity At the company level, material productivity expresses the amount

of economic value generated by a unit of material input or material

consumption. On the economy-wide level it is calculated as GDP per

material input/consumption. Back to Ch1, Ch 2.

Material security The availability and access to the material resources on which economies

depend, as well as the ability to cope with volatility, increasing

scarcity and rising prices. Back to Ch 1.

Material stock The materials contained within the built environment of an economy.

Back to Ch 7.

MIPS MIPS means the material input per unit of service. It is “the life

cycle-wide input of natural material (MI) which is employed in order

to fulfill a human desire or need (S) by technical means” (Factor 10

Institute). It is used to compare the material and energy requirements

of functionally comparable goods or services. Back to Ch 7.

Organizational EI Eco-innovation (EI) towards organizational methods and management

systems that improves environmental issues in the production and

products. The EIO considers such organizational changes to be the

socio-economic dimension of process innovation, especially as it is

closely linked to learning and education (see Bleischwitz 2003). Back

to Ch 1.

Problem shifting The displacement or transfer of problems between different environmental

pressures, product groups, countries or over time. Back to Ch 1.

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Process eco-innovations Process eco-innovations minimise or reduce effects and emissions

of production and consumption, for instance through recycling.

Examples of types of process eco-innovations include the substitution

of harmful inputs during the production process (for example replacing

toxic substances), optimization of the production process (for instance

improving energy efficiency) and reducing the negative impacts of

production outputs (such as emissions) (Reid and Miedzinski 2008).

Back to Ch 1.

Product eco-innovation Product eco-innovation includes both goods and services. Eco-innovative

goods are those produced in such a way that the overall impact

on the environment is minimized. This includes environmentally

improved material products, such as passive houses, and eco-design

is a key word in this area. Back to Ch 1.

Radical innovation Radical innovations are those changes that lead to substantial

improvements of products and processes that, however, do not

necessarily lead to a systemic change. Radical innovations may in fact

preserve the existing technological regime (Kemp 2010). Back to Ch 1.

Raw Material Consumption RMC is an indicator derived from national material flow accounts.

RMC equals RMI minus exports and their RMEs. Back to Ch 2.

Raw Material Equivalent RMEs transform the mass of direct imports and exports into the corresponding

mass of raw materials. For example, one ton of imported

steel is transformed into the equivalent of crude iron ore, which had to

be extracted and processed in order to produce one ton of steel.

Raw Material Input RMI is an indicator derived from national material flow accounts. RMI

includes the so-called raw material equivalents (RMEs) of imports.

Back to Ch 2.

Remanufacturing Remanufacturing is the process of disassembly and recovery. Lund

(1998) describes remanufacturing as “… an industrial process in

which worn-out products are restored to like-new condition. Through

a series of industrial processes in a factory environment, a discarded

product is completely disassembled. Useable parts are cleaned,

refurbished, and put into inventory. Then the product is reassembled

from the old parts (and where necessary, new parts) to produce a unit

fully equivalent and sometimes superior in performance and expected

lifetime to the original new product.” See World News Remanufacturing

for more information.

Rematerialization The reuse, recovery and refining of metals, minerals and organic

(carbon based) compounds. Back to Ch 7.

Resource curse Instead of being an advantage, resource endowment can become a

curse for countries under certain conditions. This is because it can

open the door for corruption; for instance, governments that rely

primarily on revenues earned from natural resources do not need

citizens to provide a tax base, and thus avoid an important form of

accountability. Without accountability, funds generated from natural

resources may be mismanaged, poorly invested or siphoned-off to an

elite minority that seeks to concentrate power. In such cases, social


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observatory

inequity and poverty may actually rise while long-term economic

growth falters. In addition, macro-economic conditions such as

exchange rates and wages are crucial to avoid related risks of ‚Dutch

Disease’ and other negative impacts. Back to Ch 1, Ch 2.

Rebound effect The rebound effect is when a positive eco-innovation on the micro

level actually leads to negative impacts on the meso/macro level. This

can happen due to a change in consumer behaviour, i.e. consumers

using more of a product, which outweighs the efficiency improvements

to that product. Back to Ch 2.

Resource intensity Resource intensity indicators are the inverse of productivity indicators.

They are often used to discuss energy and emissions, and are

calculated as resource use / value added. Back to Ch 1.

Resource efficiency An overarching term indicating the general concept of using less

resources to achieve the same or better outcome (resource input/

output). It is an input-output measure of technical ability to produce

“more from less”. Back to Ch 1.

Resource productivity Resource productivity has a monetary component, it refers to the

economic gains achieved through efficiency. It is calculated as value

added / resource use. Back to Ch 1.

Social innovation Innovation that considers the human element integral to any discussion

on resource consumption. It includes market-based dimensions

of behavioural and lifestyle change and the ensuing demand for green

goods and services. The Forum on Social Innovation defines it as

innovation that “concerns conceptual, process or product change,

organisational change and changes in financing, and can deal with

new relationships with stakeholders and territories”. Back to Ch 1.,

Box 3.1.

Steady-stocks society The steady-stocks society is one in which the inputs to the economic

system roughly balance with the outputs. It is an econonmy in which

the physical environment remains more or less balanced (remodeling

and renovation occur, but not expansion). Back to Ch 5.

System innovation System innovations lead to systemic changes in both social (values,

regulations, attitudes etc.) and technical (infrastructure, technology,

tools, production processes etc) dimensions and, most importantly, in

the relations between them. System innovation may include elements

or combinations of all types of innovations (product, process, marketing,

organisational or social) and are, by definition, developed and

implemented by many actors. Back to Ch 1.

Total Material Consumption TMC is an indicator derived from national material flow accounts. TMC

equals TMR minus exports and their indirect (=used and unused)

flows. Back to Ch 2.

Total Material Requirement TMR is an indicator derived from national material flow accounts. It

refers to the total ‘material base’ of an economic system (i.e. the total

primary material requirements of production activities). TMR measures

the total mass (weight) of materials that are required to support

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an economic system, whether for use in production and consumption

activities or not, and whatever their origin is (domestic, rest of the

world). Back to Ch 2.

User-led innovation Innovation in which new goods or services are driven by customer

demands or developed with stakeholders, thereby minimizing the risk

of superfluous product features or functionality. Back to Ch 3.


Annex I. Barriers and drivers of

eco-innovation in the EU-27

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observatory

The drivers and barriers in this annex are based on the EIO country profiles and

depict the main determinants identified by country experts based on data analysis,

literature review as well as interviews with national policy makers.

Austria

Belgium

Bulgaria

Cyprus

Eco-innovation drivers in sectors according to EB2011

Drivers Barriers

• High environmental standards

• Generous funding for research

• Uncertainty about future energy prices

• Strong greening policy agenda (regional and

national)

• Strong national technological capabilities

(HC,R&D efforts)

• Increasing local and international demand in

green technology and products

Economic payback

• Targeted funds (programmes and credits)

The high quality and educational level

• Growing financial support for Innovation

and R&D

• Flexible policy formulation, coordination

and dissemination due to the small size of

country

• Focus on exchange of experience through

participation in funded schemes

• SME-type structure of the industry

• Lack of linkages

• Funding for high-risk/long-term research and

demonstration projects

• Pitfall in inter-regional coordination,

integrated planning and decision making

• “Picking the winner strategy” (bias towards

climate related areas)

• Lack of information

• Lack of educated and experienced

specialists

• Lack of efficient organisational forms

• Psychological barriers in the realization of

innovative ideas

• Indifferent to eco-innovation regulation

• Lack of linkages/ communication between

research and industry

• No support in transfer of technologies.

• Lack of financial instruments supporting

eco-innovations in the private sector

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Czech Rep

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Eco-innovation drivers in sectors according to EB2011

Drivers Barriers

• Strong green profile in policy

• High market demand for green products

• Strong NIS

• Progress as a knowledge based society

• Targeted funds

• Pursuits of profits

• High public investment in R&D and

collaboration between financiers

• Functionality combined with strong knowhow

& high standard of education

• Strong commitment to env. policy of all

levels

• Governmental and EU regulation

• Increased public funding mechanisms for

env. R&D

• Profits from commercialisation of green

products

• Advanced regulation and strict standards

• Lack of local natural resources (which

pushes material intensive industries to

innovate)

• High technological & technical capital

• Direct funding from Structural Funds and the

Development Law

• Significant number of research and

educational institutes, research labs and

collaboration among them

• Growing market for green products and

services

• Potential Economic benefits, cost savings

and securing market niche

• Targeted (national and international) funds

• Accelerated integration into the international

setting, collaboration and the innovation

networks

• Non-systematic and non-effective State

support for eco-innovations

• Lack of cooperation between research and

business

The absence of VC and economic stimuli

(subsidies, taxes, amortization),

• Lack of human capital

• Less-competitive and productive ecoinnovation

sector in comparison to other

leaders

• Fragmented policies and knowledge

• Difficulties in attracting foreign experts

• Limited progress in eco-awareness raising

• Limited political interest

• Low spending on eco-innovation

• More emphasis on technical aspects and

less emphasis on commercialisation of

innovation

• Overlap in public services/need for

streamlining activities of various ministries

• Scarcity of world class human capital,

foreign R&D and cross-border venture

capital.

• Low innovative behaviour of SMEs

• Weak knowledge circulation and transfer

among key stakeholders (no clusters/

platforms)

The low levels of public awareness and

lack of environmentally-oriented consumer

behaviour

• Awareness gaps and information deficits

at all action levels (political, economic,

industry, enterprise, consumers, etc.)

• Weak green public procurement

• Uncertainty in financial and environmental

policies

• Limited access to funding (loan) for

business exploitation of eco-innovative

concepts, especially for SMEs

• Regulatory and policy restrictions/red tape/

lack of flexibility in setting up start-ups

• Very low demand for eco-innovation & low

societal awareness

• Investment difficulties for commercialisation

of innovations

• Lack of trust in potential investors


Ireland

Italy

Latvia

Lithuania

Luxemburg

Malta

Netherlands

Eco-innovation drivers in sectors according to EB2011

Drivers Barriers

• Tax /penalties prompted waste minimisation

& material recovery

• Potential economic benefits

• Public incentives mechanisms and funding

• Internationalisation

• Good examples in the media

• National state and EU funding

• Direct financial support and economic

incentive mechanisms

• Progressing innovation policy mix

• A strong set of national environmental and

innovation laws and standards

• Societal challenges (population growth,

cross-border traffic, strict EU standards)

Economic diversification strategy

• Lack of natural resources

• High environmental pressure (featured for

small island economies)

• Growing transparency, flexibility and

stringency of environmental regulation

• Potential economic benefits

• Strict regulatory and policy framework &

standards

• Limited natural resources and growing

prices for NR

• Growing image of green companies and

green products

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observatory

• Regulatory and planning barriers

• Green public procurement is well behind EU

leaders

• Lack of access to ‘green’ finance (incl. VC)

• Low cultural awareness and readiness for

eco-innovation

• Start-up difficulties (costs, taxes, lengthy

bureaucracy, rigid market)

• Exclusion of the 'naturally' most innovative

(young citizens) from the innovation process

• Weak involvement of private businesses

and lack of entrepreneurship

• Weak R&D

• Lack of policy on eco-innovation

Economic crisis related finance cuts for

innovation

• Lack of understanding of environmental

problems by many SMEs

• Limited external financial support for R&D

• Weak links between research and industry

actors

• Small and open economy depending

on cooperation and interaction with its

neighbours

• Immaturity of eco-innovation technologies

and sectors

• Lack of industry-research collaboration

• Immature innovation system

• Lack of human resources in new sectors

• Difficulties in translation of R&D into

business (lack of entrepreneurial spirit, risks

seen by VC investors)

• Cultural barriers such as the aversion to

risk, growing climate scepticism, growth VS

environment conflict, mental fatigue with

env. issues

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Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

UK

Eco-innovation drivers in sectors according to EB2011

Drivers Barriers

• EU initiatives related to energy and climate

• Growing stringency of environmental

regulation

• Some increase in understanding of

importance of eco-innovation

• Identification of a potential for ecoinnovative

products and services by foreign

capital.

• Continuous promotion of an “innovation

environment” as a national objective

• New redefined Portuguese energy paradigm

(policy)

• Existing and forthcoming environmental

regulations and/or taxes

• Voluntary codes or agreements for

environmental good practice

• Growing interest in green products

• EU and national fund for eco-innovative

projectsx

• Increase in the mobility of researchers and

the exchange of knowledge

• Good organizational capital

• National ETAP roadmap and regulatory

provision for its implementation

• Growing human & knowledge capital

• Growing technological and technical capital

• Growing culture of environmental

awareness

• Environmental regulation

• Growing env. management system

application

• State policy and efforts in RES

• Increasing public awareness about

environmental issues

• Political Consensus about environmental

issues

• High level of env. expertise

Eco-innovation is seen as an opportunity to

strengthen the competiveness of Swedish

business

• Cultural attitude to environment

• Governmental commitment to greening

(greening the procurement, etc.)

• Growing concern about resource and

material efficiency

• Striving for independency from imported fuel

• Lack of belief in progress through ecoinnovation

• Red-tape in initiation and implementing

projects

• Lack of well-qualified and experienced staff

• High investment risk in eco-innovation/

products

• Low demand for eco-innovative products/

services

• Comparatively lower educated Human

capital

• Still low R&D investment by companies

• Companies and citizens are culturally

averse to risk & low entrepreneurship

• Low seed & VC investment

• Insufficient knowledge of market situation &

potential for environmental technologies

• Lack of private finance for eco-innovation

• Lack of investment in human and knowledge

capital and R&D

• Insufficient investment in new projects

• Lack of regulatory and policy incentives

• Poor links between research and business

• Poor entrepreneurship culture

• Disperse situation on the institutional level

• Poor awareness of consumers about ecoinnovation

• Lack of collaboration between business and

research agents

• Limited research effort

• Low budget for research

• Unsustainable consumption patterns

• “Relaxing” image on being a leader

• Red tape in planning and approval of ecoinnovations

• Lack of understanding

Economic recession


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About the

Eco-Innovation

Observatory (EIO)

The Eco-Innovation Observatory (EIO) is a 3-year initiative financed by the European

Commission’s Directorate-General for the Environment from the Competitiveness and

Innovation framework Programme (CIP). The Observatory is developing an integrated

information source and a series of analyses on eco-innovation trends and markets, targeting

business, innovation service providers, policy makers as well as researchers and analysts.

The EIO directly informs two major EU initiatives: the Environmental Technologies Action

Plan (ETAP) and Europe INNOVA.

This first annual report of the EIO introduces the concept of eco-innovation into the context of

the resource-efficiency debate, in particular considering the EU flagship initiative “Resourceefficient

Europe” and “Innovation Union” of the Europe 2020 strategy. Bringing about the

notion of the “eco-innovation challenge”, the report opens a discussion on the potential

benefits of eco-innovation for companies, sectors and entire economies.

The evidence suggests that eco-innovation is already occurring in countries, sectors, and

markets across the EU, but not to the degree necessary. The EIO aims to demonstrate

existing solutions and to explore the untapped potential of eco-innovation. In this context,

this report addresses the following key questions:

What are the mega-trends relevant for eco-innovation, notably in the context of the resourceefficiency

debate?

● What do we know about eco-innovation activity in countries and markets?

● What types of eco-innovative good practices can be seen in different EU Member

States?

● What are the drivers and barriers of eco-innovation?

● What policy approaches are the most effective for promoting eco-innovation?

Visit our website and register to get access to more information

and to discuss all EIO reports, briefs and databases.

www.eco-innovation.eu

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