• Regulatory environment

For the EU to achieve better regulation, it needs to balance ambition, innovation and protection

Ambitious environmental objectives come at a cost, which creates an unlevel playing field, warns Alexandre Affre. When it comes to pushing for a more circular economy, everything should be driving the principle of making Europe more innovative.

As part of its work, BusinessEurope makes the case to policymakers that the three most important things to bear in mind when shaping Green Deal legislation are ambition, innovation and protection. Furthermore, in order for regulations to adequately fulfill their purpose, these efforts must be balanced.

“The climate neutrality objective which has now been set for Europe is an ambitious environmental objective which we support. European business is conscious of its responsibility and is committed to act,” says Alexandre Affre, Deputy Director General.

“We need innovation at the center of designing regulations because in some cases Europe is lagging behind its competitors. And we need protection because some global businesses are facing strong competition — ambitious environmental objectives come at a cost, which creates an unlevel playing field.”

Incentives make room for the best solutions

According to BusinessEurope, there are two principles to take into account when thinking about how to regulate to best deliver the Green Deal. Policy and regulation should not only serve the objectives and the requirements to meet them, but they should enable industrial sectors to deliver on those objectives through some framework.

“This comes in the form of various tools,” says Affre. “If these tools are well applied, then you have regulation that stimulates and incentivizes innovation and can deliver circular results. When it comes to pushing for a more circular economy, everything should be driving the principle of making Europe more innovative.”

BusinessEurope sees banning as a legitimate approach to legislation, but only in cases where there has been a well-documented high risk with strong scientific evidence. It also advocates an approach in which decision-making should play a role proportionate to those risks and policy objectives.

"Using regulation to act as incentives should be the norm. Regulation should only set the essential requirements and not be too technical."

“Using regulation to act as incentives should be the norm,” says Affre. “And giving industries the choice to select the best technologies to achieve objectives is the right approach, through frameworks such as the New Legislative Framework (NLF) for products. Regulation should only set the essential requirements and not be too technical.”

This idea of leaving technological decision-making to industries is known as technological neutrality and is an essential part of BusinessEurope’s view on innovation. “Sometimes, by pushing certain technology – particularly at an early stage – you reduce room for potentially more impactful technology. That's something that we think European nations should respect as much as possible,” he adds.

Open dialogue leads to better regulation

When it comes to the circular economy agenda and how to incentivize and enable more secure positions, BusinessEurope cites the Ecodesign Directive as a useful model. “It’s a well-known product policy currently looking into the energy efficiency of products, and we feel there is potential here to look further into circularity,” says Affre.

Again, the organization emphasizes that this should not be done prescriptively, otherwise there would be a risk of stifling the innovation objective. “How you create enabling conditions and frameworks is not by becoming prescriptive on the technology that needs to be used or technical specifications which change with innovation quickly, but by having a good framework on how to design products ecologically,” says Affre.

Reimagining the public sector

BusinessEurope recognizes that European businesses are strongly committed to being part of a society that calls for good environmental protection, but that in reality it comes at a certain cost. “When policymakers set high environmental objectives, financial support should be part of a support scheme,” says Affre. “There are a number of EU-level programs in the field of research and innovation, for example, where Europe co-invests with businesses.”

The organization also promotes green public procurement as having the potential to drive more demand for circular products, and constituting a good European approach that stimulates the demand for circular solutions by using public procurement, which currently only represents around 16 percent of GDP.

The future of circularity

Looking to the future, Europe has set a 30-year-long climate change objective to be carbon-neutral. But compared to climate change more broadly, circularity is a more multi-dimensional concept. Despite the challenges ahead, BusinessEurope expects Europe’s economy to be more circular in the future.

“We will probably use primary raw materials for decades because the demand will be there,” says Affre. “Secondary or reused products might not be enough to meet demand, even in the medium term. But the bottom line is that, given the conditions the single market provides, circularity makes a lot of business sense, so it should be our common objective that we hope materializes as soon as possible.”

This article is part of a series where different stakeholders discuss the opportunities offered by digital innovation for the manufacturing sector, ahead of our virtual roundtable ‘How can digitalization deliver circular and sustainable manufacturing?’.

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