The EU’s Sustainability Agenda After the Elections: How Do We Make Sustainability an Integral Part of EU’s Prosperity Agenda?
Bur?ak ?nel
Award-winning advocate, partnership builder and innovator for inclusive and sustainable growth
Part 3 in a series of articles on the future of the EU Green Deal
This article reflects my personal views only and should not be attributed to any current or past employers.
In July 2024, I started publishing a series of articles on the future of the EU Green Deal in light of the EU elections that took place in June and the new EU executive term starting in November. Today, I publish the last article in this series, Part 3, which contains my views on the upcoming EU policies that will impact sustainability in the new EU term. It is my hope that this article will provide a useful conceptual framework for both European and non-European observers of the EU’s sustainability journey over the coming years.
While the opinions expressed here are my own, I would like to acknowledge valuable comments I received from Denisa Avermaete, Senior Policy Adviser for Sustainable Finance, EBF and Alexia Femia, former Policy Adviser for Sustainable Finance, EBF. More broadly, I want to express my appreciation for the work done by these two colleagues and the member experts and business leaders involved in the EBF’s sustainable finance work, in particular Antoni Ballabriga and Linda van Goor, Chair and Vice Chair of the EBF’s Sustainable Finance Expert Group, respectively.
3.1 Scope and Structure of this Article
As a recap of the first two articles:
·??????? In Part 1 , I argued that the electoral results of July 2024 should not be read as a repudiation of the EU’s Green Agenda for a number of reasons. At the same time, I argued that the results must trigger well-chosen changes to the EU’s agenda to ensure that it is a balanced, credible policy agenda that is democratically supported and internalized by all citizens.
·??????? In Part 2 , I argued that the EU’s sustainability agenda should be adjusted, not overhauled, and explained better; and that it should be better embedded in a bigger picture, that of a prosperity agenda. I also summarized the challenges specific to sustainability reforms and those that are more generally applicable to EU policy design that must be tackled when implementing this approach.
Now, as we look to the unfolding EU term, the good news is that many of the policy objectives currently receiving broad attention could indeed make the EU’s sustainability efforts more impactful and better embedded in its growth strategy. However, the policy task is extremely complex and the politics of the efforts truly challenging. Publishing this article as I do now, after the announcement of the political guidelines and the mission letters, allows me to reflect on which of these initiatives could be particularly useful and where the gaps might lie.
At the same time, my analytical approach will be, by necessity, broad-brush. My professional experience comes from the financial sector and I do not hold substantive expertise in any of the underlying topics that sustainability practitioners and policymakers must master. I include my suggestions for further reading on these topics at the end of the article.
Like many experts, I believe that the key to success is to facilitate the implementation needs of successful and credible sustainability journeys of households and companies. [Similar concerns apply to the public sector, which has an impact on the journeys of all actors in the economy]. But how to do that? What does implementation really mean and where can it go wrong? I want to contribute to this debate by offering a framework to think through implementation of sustainability projects and identify challenges. Therefore, the article is structured around three core actors:
-?????????? EU consumers (households, companies and governments) purchasing sustainable products/services & executing longer-term sustainability investments;
-?????????? EU innovators undertaking ground-breaking innovation which continues to generate revenues and jobs for the EU economy;
-?????????? EU employers and employees jointly benefitting from green jobs’ value-added to the economy.
Moreover, I want to outline how professionals engaged in sustainability efforts for their own companies or sectors can help policymakers.
Accordingly, the four sections of the current article are focused on the following questions:
(1)???? How can the EU help consumers and owners of sustainability projects to execute and finance their projects? What makes the owner of the project contemplate the project in the first place, what determines if it makes economic sense and what makes it possible to get financing?
(2)???? How can the EU help innovators of clean tech? What determines the extent to which EU innovators are starting and scaling up companies that generate breakthrough technological innovation??
(3)???? How can the EU help European businesses create high-quality sustainability jobs for employees? What do companies need to draw benefits from their sustainable business conversions and create new jobs??
(4)???? What can sustainability professionals do to make sustainability an integral part of a prosperity strategy for the EU? What is the role of companies and sectoral level representation?
Before looking at these four questions in turn, let us start with the contours of the EU’s emerging new generation of sustainability policies.
3.2 Setting the Scene: Political Guidelines and Recent Reports ?
On July 18th, the European Parliament elected Ursula von der Leyen as President of the European Commission. Before the vote, she gave a speech that outlined her political priorities for the next five years during a?debate with MEPs . On the Green Deal, she said: “We will stay the course on our new growth strategy and the goals we set for 2030 and 2050. Our focus now will be on implementation and investment to make it happen on the ground.” [i] The same day, she published her political guidelines .
On the 9th of September, the report of Mario Draghi was published, entitled “The future of European competitiveness – A competitiveness strategy for Europe”. The themes of the Draghi report (along with those of the Enrico Letta [ii] report) were widely echoed in the mission letters to the Commissioners-designate published on 17th September 2024.
On the political front, national and regional elections that took place in France , Germany and others in the same period can also be expected to shape the EU agenda, reinforcing the need for EU policies on sustainability to be understood and endorsed widely as part of the EU’s growth agenda.
The next step is for the new European Commissioners to appear before the European Parliament in confirmation hearings , expected to take place in November 2024.
3.3 How can the EU help consumers and owners of sustainability projects to execute and finance their projects?
Let us now look at the three stakeholder groups – consumers, innovators, and employers/employees - one by one to see how sustainability policies can help with their journeys.
At the simplest level, a successful Green Agenda requires retail and corporate consumers purchasing sustainability-aligned products and services and making longer-term investments for the conversions of their homes, offices, factories and production processes. This in turn requires:
1) incentives,
2) feasibility, and
3) financing.
In the absence of an economic incentive (ie the presence of an economic or other benefit compared to alternative routes of action), the means and ways to achieve the goal (eg affordable and available products and services), and available funding, sustainable purchases and investments will not take place.
While the above statement is self-evident, and while the funding gap has been written about a lot, the absence of economic /non-economic incentives and purchase/project feasibility deserve greater attention in the next phase when we focus on implementation. There has been much criticism of the EU’s efforts to increase private sector funding for sustainability through the sustainable finance framework in the absence of the right incentives and feasible/bankable projects to fund. As many in the financial sector have stated, no amount of pressure on the financiers (through mandatory disclosure to stakeholders, standardization of reporting and other means) will enable financiers to finance projects that do not make economic sense for their actors due to a lack of incentives, lack of expertise, lack of products and services or excessively cumbersome processes. Certainly there is a role for sustainable finance, but it is also true that individual decarbonization projects need to make sense at a micro level for them to be financed.
On the incentive front, the phasing out of fossil fuel subsidies, the further extension of the ETS to additional sectors , tax credits in support of house renovations are among the many steps that the EU and Member States could take to ensure that the externalities of fossil fuels are incorporated in the cost of products and services? and that decarbonization steps are properly priced compared to the status quo. Looking at the recently published mission letters for the EU Commissioners-designate, the following elements are particularly relevant to strengthening the alignment of underlying economic incentives for households & corporates investing in decarbonization:
On feasibility, the challenges revolve around nothing less than a complete re-arrangement of the economic order, necessitating new processes, products, skills, and systems, in a coordinated fashion. Rendering projects that by definition use new technology or new materials realizable is above all a material, physical challenge. Having sufficient technicians who can install heat pumps in houses, having administrative processes that are adapted to companies’ knowledge and staff size, and having charging stations for e-vehicles are just some examples of the physical hurdles that can derail a project, investment decision or sustainable purchase, even in the presence of the right economic incentives and funding. The build-up of skills, availability of affordable and practical commercial options, and procedures that are proportionate in terms of time, cost and literacy of the consumer all determine whether projects are feasible. While this transformation has also a separate technological element (which will be discussed in the clean tech section in 3.3), it also benefits from the simplification and streamlining of the rules for the economy. Therefore, the following initiatives from the mission letters are promising for improving the feasibility of sustainability investments by corporates and households:
On education and training, in many cases a whole-scale change of the national education systems may be needed to design and deliver the new skills needed, and yet these reforms can only deliver medium-term results. Therefore, priority should be given to those skills that must be in place in the short run to enable consumers to realize their sustainability projects and they should be executed with the strongest EU coordination possible.
On obstacles such as the absence of sufficient charging stations for green transport, clearly the public sector has a crucial role of coordination. ?To stay with this example, as early experience from the US demonstrates, the initial phase involves front-loaded efforts to build the systems and skills needed to successfully roll out funds for an extension of charging stations.
On proportionate administrative processes, the focus on SMEs is particularly important, because sustainability projects can be particularly cumbersome for the smaller companies as the consumers of such projects (when they are installing equipment or changing a manufacturing process for example). Although individually small, SMEs’ aggregate share of emissions is such that without SMEs, there is no transition. In addition to their stand-alone role as employers, SMEs are in the supply chain of other, larger companies as suppliers and as clients. Moreover, SMEs are a critical part of the innovation market: More than half (53%) of all enterprises reported some form of innovation activity in 2018-2020 ; they introduce product innovations and business process innovations; 46% of European SMEs surveyed in the EC SAFE survey were labeled as “innovative”. However, precisely because they are small, SMEs all around the world struggle with accessing the skills, data, and resources they need to transform their business models into sustainable business models.
And finally, even if incentives and feasibility are aligned, the lack of affordable funding is an obstacle of its own. Sustainable projects – such as the installation of double glazing in a house, or a bakery’s purchase of a more efficient furnace - may be manifestly more profitable in the long run, and products and services may be available, but the investors in these projects often need external funding to reap the benefits later if they do not have the funds today. The project may not be bankable or it may be bankable but the owners of the project may not have the internal funds to make the lump-sum or periodic investments. (For more on the question of bankability (with a regional focus), please see this report .) Therefore, external funding is a key part of many sustainability purchases and investments by households as well as companies of all sizes. That is why the following initiatives in the mission letters are important for increasing the availability or effectiveness of the EU’s public and private funds:
Here, the announced improvements to the application of the sustainable finance framework are noteworthy, especially as both public and private sources of capital are needed for the required sustainability reforms. For example, many banks are finding it difficult to categorize household purchases of solar panels and e-vehicles as “green loans”, even though they are the kinds of purchases we need to boost for decarbonization. This is confusing and could suppress the amount of funding for such purchases. Definitions that are easier to implement are needed to encourage green loans.
Separately, further EU work to unblock transition finance is essential to finance not just purchases of new green assets (such as an e-vehicle or a new house) but the financing of investments in greening existing assets (such as house renovations).
Here an important challenge is how to streamline regulation that has already been rolled out without creating further compliance costs, uncertainty and additional obstacles to finance. The key challenge is that, being the global leader on sustainability, the EU has already laid out much of an extensive framework. For example, coming back to the case of smaller companies: A simple carving out of SMEs from the sustainable finance framework (in which they are formally not included but which impacts them through the obligations on the larger companies and financiers) would not be realistic, as long as their larger counterparts and financiers need their sustainability data. Therefore, the focus should be on awareness-raising and capacity building among SMEs as a complement to targeted efforts to streamline administrative burdens on SMEs.? (For an overview of the challenges and national policy approaches specifically on funding, please see the OECD Platform on Financing SMEs for Sustainability , a multi-stakeholder platform seeking to facilitate SMEs’ access to sustainable finance and to increase momentum toward the green transition.)
Bringing together all three aspects – incentives, feasibility and funding – many of the announced initiatives are clearly critical to facilitating the implementation of sustainability projects on the ground by making these investments more economically advantageous, easier to execute and more affordable. The overall success of these initiatives will depend on three variables:
·??????? Will economic incentives align in a heterogenous landscape? The economic incentives faced by hundreds of thousands of EU households and millions of companies need to be aligned at both a micro and a macro level, in a coordinated fashion, for the necessary projects to be realized in the short timeframe needed, with delays leading to greater costs and risks. Overarching questions such as how many EU Member States are convinced of the urgency of action and can convince their electorates of this urgency will determine whether the EU’s decarbonization efforts are sufficiently front-loaded. ???
·??????? Will simplification and streamlining lead to better implementation? Simplification of already rolled out policies will require extreme caution against across-the-board simplification that creates unintended new gaps and inconsistencies. Long-standing plans to improve the regulatory process and transparency of policy choices in all EU institutions would help the outcome of this streamlining campaign.
·??????? Will there be enough funding? The impact of many of the initiatives above will ultimately depend on the overall volume of EU and national public funding for sustainability – which is beyond the scope of this article but a critical factor. If the envelope is not sufficient, transfers from one bucket to another could have an overall negative impact. ?
3.4 How can the EU help innovators of clean tech?
As mentioned above, SMEs are involved in adopting innovation as purchasers of innovative products or services. Furthermore, a small but very important sub-set of SMEs are innovative firms (start-ups or scale-ups) producing solutions for sustainability – and not just for EU users, but for the world market.
The clean tech sector is crucial to both the EU’s competitiveness and economic security. Looking at the broader enterprise population of 31.5 million active enterprises in 2021, Eurostat estimated that 11?% (3.4 million) were created that year. In 2018, Eurostat estimated that about 172 000 companies were classified as?“high-growth enterprises ”?in the EU, accounting for over one tenth (11.9%) of all active enterprises with at least 10 employees. Together, these enterprises provided work for almost 14 million employees.
Such companies are especially active in the clean tech sector and have made the EU into an important player in this sector. From the Draghi report: “More than one-fifth of clean and sustainable technologies worldwide are developed in the EU and the pipeline is still strong: around half of EU clean tech innovations at a launch or early revenue stage, 22% at scale-up stage and 10% already mature.”
On the other hand, the scarcity of risk capital for start-ups and scale-ups in the EU is a big constraint. As Draghi put it:
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“Although Europe is a world leader in clean tech innovation, it is squandering early-stage advantages owing to the weaknesses in its innovation ecosystem.. [S]ince 2020 patenting in low-carbon innovation has slowed down in Europe, while in recent years the sector has seen its early-stage advantages being challenged. For example, from 2015 to 2019 the EU represented 65% of global early-stage VC for hydrogen and fuel cells, but this share declined to 10% from 2020 to 2022. The clean tech sector is suffering from the same barriers to innovation, commercialisation and scaling up in Europe that afflict the digital sector: a total of 43% and 55% of medium and large companies, respectively, cite consistent regulation within the Single Market as the main way to foster commercialisation, while 43% of small companies identify lack of finance as an obstacle to growth. As in the digital sector, the lower capacity of EU clean tech companies to scale up leads to a gap between the EU and US in later-stage funding.”
Indeed, the lack of risk capital was recognized as a problem already 10-15 years ago, and the EU has been making collective efforts at expanding financing for smaller firms as they move up the “funding escalator”. I was among the individuals involved in the setting up of the European IPOs Task Force and in the creation of the Small and Mid-Cap Awards , both in 2014. The successive efforts to deepen and integrate the capital markets in 2014-2019 and 2019-2024 under the Capital Market Union Action Plan were meant to create, above all, more private sector risk capital to finance innovation and to enable EU investors to benefit from the prosperity generated by EU innovators. It was with these thoughts in mind that I initiated, with partners from multiple sectors, the Markets4Europe campaign in 2019 in order to advocate for the EU and national level actins needed to enable cross-borders investments and to boost the demand and supply of risk capital.
Despite these and similar efforts, the capital markets of the EU remain both fragmented and underdeveloped. In the words of Enrico Letta:
“The initial priority should be to mobilise private capital, a crucial step that lays the groundwork for a more inclusive and efficient financing framework, as it is the area where the EU is most lagging behind. The European Union is home to a staggering 33 trillion euros in private savings, predominantly held in currency and deposits. This wealth, however, is not being fully leveraged to meet the EU's strategic needs. A concerning trend is the annual diversion of around €300 billion of European families’ savings from EU markets abroad, primarily to the American economy, due to the fragmentation of our financial markets. This phenomenon underscores a significant inefficiency in the use of the EU's economic assets, which, if redirected effectively within its own economies, could substantially aid in achieving its strategic objectives. In this context, this Report calls for a significant transformation: the creation of a Savings and Investments Union, developed from the incomplete Capital Markets Union. By fully integrating financial services within the Single Market, the Savings and Investments Union aims to not only keep European private savings within the EU but also attract additional resources from abroad.”
Therefore, I find it absolutely important to spend the next EU term achieving two goals:
(1)???? As a short-term strategy, expand the volume and effectiveness of public funds available to reduce the risk of investments in the clean tech industry, while increasing the demand for risk capital from innovative firms;
(2)???? As a medium-term strategy, deepen and integrate capital markets so as to boost private sector financing for innovative firms from all corners of Europe.
While both efforts need strong momentum and short-term/mid-term and long-term milestones, we must recognize that we cannot wait for the completion of a deeper and more unified capital markets union (which involves actions not just by the public sector but by private sector actors) to finance innovative firms in the clean tech sector.
Regarding the first goal, I find the following initiatives from the mission letters particularly useful:
Looking at these initiatives together, we can see that they could expand the universe of promising clean tech start-ups and scale-ups, enable more of the scale-ups to remain on EU ground, and create a pipeline of publicly listed innovative companies in Europe that generates value for broader swaths of society through shareholding. ??
However, whether the above initiatives reach their goal depends on two variables:
·??????? Will Member States do their share to integrate and deepen capital markets? Here, a key challenge is that the benefits of deepening and integrating markets may not always be visible to the national policymakers who need to enact the often disruptive and costly structural reforms needed (for example to harmonize insolvency laws and security laws and revise pension plans). This blurred vision has two reasons: (1) The time horizon for the countries to reap these benefits in the form of greater access to risk capital for their companies and investors may be long – in any event, longer than several political cycles. In addition, (2) geographic asymmetries will inevitably occur and/or worsen as the more integrated and deeper capital markets will not necessarily be evenly distributed across the EU, with markets continuing to specialize in certain locations and leaving others as users of these markets, rather than as employment centers in finance. While this is no different than the regional challenges described in the Letta report for other sectors, it leads to a particularly strong case of collective action problem in the case of the integration of capital markets. Member States should be made more aware of the benefits of a Capital Markets Union, or the Savings and Investments Union, and work together, irrespective of the short-term dividends their specific national economies may or may not reap, since it is ultimately in the interest of the EU overall to have deeper risk capital funding.?
·??????? Will clean tech companies find the EU a fertile ground on which to grow? Irrespective of the availability of EU sources of funding, innovative companies may decide to move outside the EU as they grow. When they do, the EU economy loses the chance to recoup its public sector investments in the education, research and development that supported these companies, and there are almost always European job losses. While the funding leg of their journey is one of the risks that leads to such departures (especially at the IPO stage), other constraints, above all bureaucratic complexity, must be minimized to keep these companies in the EU. In addition, the scale of the EU market has to be attractive for them to continue to scale up here.
This last point is as relevant to the clean tech sector as it is to EU businesses in general, and brings us to the question of integration of the Single Market.
3.5 How can we help EU businesses create sustainability jobs for employees?
As both Letta and Draghi have pointed out, the EU is not all that big, especially in its current fragmented state, which is a constraint for business growth. The most obvious help to EU companies in any sector (and especially those that will benefit from scale) is to enable them to compete in a fully integrated EU market – hence the emphasis on improving the functioning of the Single Market in Letta report and the implicit support given to this topic in the Draghi report.
The reforms such as those proposed by Letta, if realized, would make the EU economy “bigger than its parts” and both lower the costs, and increase the benefits, of sustainability policies. For example, more integrated EU public procurement would enhance the power of public investments in climate action[iii], while a more integrated Single Market means greater opportunities for green jobs, stemming de-industrialization and reducing regional inequalities. Moreover, both public and private funding for sustainability investments can only be increased if the EU becomes much more integrated.
The following initiatives to strengthen the Single Market that come up in the mission letters are worthy of mentioning:
On the other hand, strengthening the competitiveness of the EU’s (sustainability-related and other) industries requires more than expanding the internal size of their home markets; it requires competitiveness in the external dimension of activity through a coordination across a range of policy areas that affect how EU industries compete externally. This is because, in a globalized market, those practicing sustainability are at a price disadvantage. (This is on top of the compliance cost of sustainability regulations). As the global leader of climate action, the EU’s sustainability efforts clearly generate risks of greater compliance and production costs and lower profitability for its economic players.
These risks need to be offset by strong global climate diplomacy, various instruments to ensure fair trade practices, and external aid policies to help expand sustainability practices abroad, to name a few. Among the most notable examples of such policies is the Carbon Border Adjustment Mechanism (CBAM), designed to give EU actors a level playing field vis-à-vis countries that do not have? mechanisms to price carbon.
However, ensuring this global level playing field for the EU is not easy, for a number of reasons. As Draghi explains: “Industrial policies today – as seen in the US and China – comprise multi-policy strategies, combining fiscal policies to incentivise domestic production, trade policies to penalise anti-competitive behaviour abroad and foreign economic policies to secure supply chains. In the EU context, linking policies in this way requires a high degree of coordination between national and EU policies. However, owing to its complex governance structure and slow and disaggregated policymaking process, the EU is less able to produce such a response.”
That is why the topic of competitiveness is a theme that across many of the mission letters. The following objectives are especially relevant for the effort to boost the EU’s industrial competitiveness:
In addition to these initiatives focusing on the industry, a number of initiatives targeting the competitiveness of other sectors (more oriented inward) are also worth mentioning here:
Looking at these inward and outward oriented initiatives, we can see that they can boost competitiveness by increasing the scale of the EU market, ensuring that sustainability is not a global competitive disadvantage, and coordinating EU and policies across regions and sectors. However, whether they will be successful in creating broad-based prosperity in terms of jobs depends on several variables, among which I want to highlight two:
·??????? Will the net benefits of a green economy be distributed sufficiently across the EU? If sustainable competitiveness is to become the norm in the EU, across all industries and sectors, sufficient resources will have to go to those sectors and regions that have the most to adapt (among others for re-skilling). The EU and Member States will have to work in a coordinated fashion to ensure a homogenous distribution of prosperity created by sustainability. As has been noted by many observers, the regions that will lose the closed coal mines are not necessarily the ones that will host the new clean tech companies. How the benefits of green growth are re-distributed will be a key area to watch.
·??????? Will the global market for sustainable products and services continue to grow? Looking at the globe, political uncertainty, geopolitical tensions and low levels of capacity, awareness and funding in developing countries are some of the reasons why the expansion of products and services beyond the EU’s borders will be challenging. It will be a main challenge for the EU to contribute to sustainability promotion and mainstreaming globally and to ensure that EU companies continue to enjoy good access to these growing markets. ?
3.6 What can sustainability professionals do to make sustainability an integral part of a prosperity strategy for the EU?
The above three sections have focused on what the EU and Member States can do help consumers, innovators and companies/employees achieve their sustainability goals in a way that generates value added, jobs and sustainable prosperity. One important question is the role of the private sector industry and financial sector.
For sustainability to become mainstreamed, private sector business models need to become sustainable – which requires a full-scale conversion and re-imagining of the business model of a company (and business models in a sector) in a way that is compatible with sustainability goals (including goals related to the climate, environment, gender equality and others). Ultimately, sustainable business transformations happen because a business leader takes the initiative – to some extent as a reaction to, or triggered by, external or internal stakeholder expectations. But this action/reaction requires a sold level of awareness that sustainability can be good for profitability and exposure to business practices that are both sustainable and profitable in the long run. That is why sectoral-level actions carry a special value in spreading awareness and promoting best practices.
While a lot can be said about companies generically, I want to focus on the business leaders who are active in the area of sustainability in this section. To me, there are three ways in which sustainability professionals (lobbyists, practitioners, NGOs/activists, academics and others active in the EU policy area) can be constructive in the coming years:
·??????? Build sustainable business models in their companies: For those looking for a guide on how companies can execute sustainable business strategies, I recommend Professor Rebecca Henderson’s book Reimagining Capitalism as well as the Harvard Business School course Sustainable Business Strategy . Experiences from different sectors show that, ultimately, a sustainable business strategy is only possible if the manager/owner is behind it. Of course, for change management to be successful, internal champions need to be supported by internal and external stakeholders. Importantly, with the arrival of increasing standardization of sustainability disclosures, the era of self-reporting is coming to an end, and external stakeholders will be able to hold managers more accountable. ????
·??????? Work with others in their sector to build ambitious best practices: Voluntary standardization / convergence in selected areas not only sets a level playing field for competition and consumer protection, it also encourages others to emulate the front-runners and prevents unnecessary regulatory interventions when voluntary action will be sufficient. ?While some of these initiatives can be EU-based and purely private and industry-led (see for example the EBF’s Report of the C-level ESG Risk Roundtable Physical Risks Workstream ), they can also be structured as global and private-public sector partnerships, as demonstrated for example by the OECD’s initiative on SMEs’ access to sustainability .
·??????? Avoid EU scapegoating and focus on combatting genuine cases of over-regulation. Industry players who are subject to heavy regulation have a special responsibility to be proportionate and fact-based in their criticisms of regulatory decisions. Given the emotional power of sustainability policies when they are perceived as elitist red tape, lobbyists have to take special care to advocate for well-balanced, constructive EU policies as a complement to their internal strategies, while staying away from non-factual criticisms.
3.1?? Summary & Conclusion
In this article, I argued that there are three core challenges that will determine whether the EU’s sustainability agenda leads to positive impact on the ground:
-?????????? EU consumers purchasing sustainable products/services & executing longer-term sustainability investments;
-?????????? EU innovators undertaking ground-breaking innovation which continues to generate revenues and jobs for the EU economy;
-?????????? EU employers and employees jointly benefitting from green jobs’ value-added to the economy. ?
Outlining the initiatives announced in the mission letters of the European Commission that will help facilitate each of these groups’ contribution to sustainability, I highlighted three questions that will determine the outcome of these efforts, ie the importance of aligning economic incentives in a heterogenous landscape, the challenge of ensuring that simplification and streamlining leads to better implementation and the need to have sufficient overall funding.
In the section on clean tech, I outlined the importance of a short-term strategy of expanding the volume and effectiveness of public funds available to reduce the risk of investments in the clean tech industry and that of a medium-term strategy of deepening and integrating capital markets so as to boost private sector financing for innovative firms from all corners of Europe. I highlighted the need to raise the awareness of Member States of the benefits of integrating and deepening capital markets since they have to enact the often disruptive and costly structural reforms needed. However, I argued that, irrespective of the availability of EU sources of funding, innovative companies may decide to move outside the EU as they grow due to excessive bureaucratic complexity and the fragmentation of the EU Single Market, if not adequately addressed.
Looking more broadly at companies of all sectors and sizes, I outlined the initiatives that promise to boost the internal and external competitiveness of EU companies, such as the strengthening of the Single Market and the coordination of competitiveness measures, arguing that the true test for the initiatives to boost competitiveness will lie in whether they create better jobs. This is turn depends on whether the net benefits of a green economy can be distributed sufficiently across the EU and whether the global market for sustainable products and services will continue to grow, which is only partially subject to EU influence.
Finally, as a member of the community of sustainability professionals, I concluded that we have an important role to play in making sustainability an integral part of a prosperity strategy for the EU by building sustainable business models in our companies; working with others in our sectors to build ambitious best practices; avoiding EU scapegoating and focusing on combatting genuine cases of over-regulation; and contributing to awareness raising both by sharing success stories as well as the challenges faced along the way.
With so much at stake for both EU citizens and the rest of the world, we should all be committed to playing our part in implementing the EU’s sustainability ambitions and converting them into success stories on the ground.
END?
SUGGESTIONS FOR FURTHER READING:
For those who want to have more in-depth analyses, I especially recommend (on the Green Deal in general)? “Reinventing the deal – What new narrative to put sustainable development at the centre of the next EC mandate? ” by Céline Kauffmann and Sébastien Treyer (IDDRI) from April 2024 and (on sustainable finance specifically) the Friends of Europe policy report entitled “The EU’s sustainable finance agenda: recommendations for a fair and competitive transition ” by Luke O’Callaghan-White & Davide Sofia, to which I was grateful to contribute to by attending the workshops. An important upcoming review looking at the environment agenda more broadly will be the European Environment Agency’s 2025 "State of the Environment" report , one of the workshops of which I was also honored to attend. I also recommend the EEA’s report entitled “Europe’s sustainability transitions outlook” from June 2024 for an overview of where we are and the priorities for future action. More broadly, for those who want to understand where the technologies for the transition stand in different stages of development, I recommend the Breakthrough Energy report “State of the Transition 2023.” ?
END NOTES:
[i] On the Green Deal, she said: “(…)? in the first half of this year, 50% of our electricity generation came from renewables – home-grown and clean. Investments in clean technologies in Europe have more than tripled in this mandate. We attract more investments in clean hydrogen than the US and China combined. Finally, in the last years, we have concluded with global partners 35 new agreements on clean tech, hydrogen and critical raw materials. This is the European Green Deal in action. So I want to be clear. We will stay the course on our new growth strategy and the goals we set for 2030 and 2050. Our focus now will be on implementation and investment to make it happen on the ground. This is why I will put forward a new Clean Industrial Deal in the first 100 days. It will channel investment in infrastructure and industry, in particular for energy-intensive sectors. This will help create lead markets in everything from clean steel to clean tech and it will speed up planning, tendering, and permitting. We must be faster and simpler. Because Europe is decarbonising and industrialising at the same time. Our companies need predictability, for their investments and innovation. And yes, they can rely on us. In this logic, we will enshrine our 90% target for 2040 in our European Climate Law. Our companies need to plan their investments for the coming decade already today. And this is not only about business. For our young people, 2030, 2040, 2050 is around the corner. They know that we have to reconcile climate protection with a prosperous economy. And they would never forgive us if we do not rise to the challenge. So, this is not only a matter of competitiveness, but also a matter of intergenerational fairness. The young people deserve it. (…) The new Clean Industrial Deal will also help bring down energy bills. We all know that structurally high energy prices hamper our competitiveness. And high energy bills are a major driver of energy poverty for people.I have not forgotten how Putin blackmailed us by cutting us off from Russian fossil fuels. But we withstood together. We invested massively in homegrown cheap renewables. And this enabled us to break free from dirty Russian fossil fuels. Therefore, together, we will ensure that the era of dependency on Russian fossil fuels is over. Once and for all.”
[ii] In “Much More Than A Market”, former Italian Prime Minister Enrico Letta describes three goals that are “central for the coming years and which the EU seems to have now irreversibly embraced. These are bold and positive choices that will accompany European life for at least a decade and will be vital for us and for future European citizens. These choices, while also offering considerable opportunities, will also inevitably come with significant costs.” He lists “the commitment to a fair green, and digital transition” as “a long-term commitment to transforming European society and economy in a sustainable and equitable manner” and states that the “upcoming legislative term is identified as crucial for ensuring the implementation and success of this comprehensive transition.” (The other two are the decision to pursue enlargement and the need to enhance the EU’s security).
[iii] Letta: “…fostering greater integration within the public procurement market is crucial for realising the strategic goals of the European Union; innovation procurement, especially in green and digital technologies, could be one of the most important levers to support startups, scale-ups and SMEs in developing new products and services.”
Growth @ Cofactr
1 个月This article was abundantly thorough. I really enjoyed the focus on incentives, SMEs, and innovation to resolve the 3 challenges. The article incorporated a lot of economic theories related to alignment of interests, principal-agent dilemma, and the value of network effect in clean tech infrastructure. The European Parliament has such a great opportunity to bring pen to paper in a pivotal time.
CEO Ethics & Boards | ??? Governance | ?? Sustainability | ?? Strategy | ?? Data Analytics | Board Member | Angel Investor
1 个月Great article. We need incentives!
Financing green for a just transition
1 个月Excellent analysis Inel!!!! ????