European Economic and Social Committee OPINION

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1 European Economic and Social Committee NAT/652 The circular economy: job creation and the Green Action Plan for SMEs Brussels, 10 December 2014 OPINION of the European Economic and Social Committee on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Green Action Plan for SMEs Enabling SMEs to turn environmental challenges into business opportunities COM(2014) 440 final and the Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions Green Employment Initiative: Tapping into the job creation potential of the green economy COM(2014) 446 final Rapporteur: Antonello Pezzini NAT/652 EESC AC-TRA (EN) 1/12 Rue Belliard/Belliardstraat Bruxelles/Brussel BELGIQUE/BELGIË Tel Fax Internet: EN

2 On 2 July 2014, the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions Green Action Plan for SMEs Enabling SMEs to turn environmental challenges into business opportunities COM(2014) 440 final and the Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions Green Employment Initiative: Tapping into the job creation potential of the green economy COM(2014) 446 final. The Section for Agriculture, Rural Development and the Environment, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 12 November At its 503rd plenary session, held on 10 and 11 December 2014 (meeting of 10 December), the European Economic and Social Committee adopted the following opinion by 135 votes to 1 with 1 abstention. * * * 1. Conclusions and recommendations 1.1 The European Economic and Social Committee (EESC) believes that the prospect of a European circular economy should bring a major boost to the systemic competitiveness of the EU, providing it is based on a shared European strategic vision with active participation from the world of work, governments, employers and employees, consumers and legislative and regulatory authorities at various levels. 1.2 The EESC is convinced that the transition to a circular economy could improve the outlook for achieving the Europe 2020 strategy objectives: becoming a driver for growth, a generator of new green jobs and skills, and building capacity to manage natural resources sustainably within a sustainable and competitive economy. 1.3 The Committee calls for the launch of a major participatory foresight initiative at European level, with a view to moulding a common vision among all public and private players, in order to pave the way for a consensus-based transition to a circular economy with coherent and effective policies and instruments at EU, national and regional levels, and in order to give NAT/652 EESC AC-TRA (EN) 2/12

3 concrete impetus to the green innovation agenda. Networks of civil society actors advocating the transition to a circular economy model should be supported. The Committee could actively promote such networks and also explore the setting up and management of a European platform for the circular economy. 1.4 At the same time, the EESC considers it essential to set up a structured dialogue with individual sectors within which to launch pilot schemes to provide guidance and demonstrate the potential of more sustainable practices, with the full participation of consumer organisations, micro- and small businesses and the social economy. 1.5 The Committee believes cost-benefit analysis should be used to assess who would stand to lose out from the systemic conversion of manufacturing, commercial, distribution and consumption systems, doing away with planned obsolescence and shifting to new forms of use and consumption, involving products and components maintaining their added value and continuing to be reusable for as long as possible. 1.6 In the Committee's view, the transition to the new circular economy model, including remanufacturing and re-use, must go hand in hand with the generalised dissemination of socially responsible territory methodologies that draw on the development of a shared innovative and participatory culture. 1.7 The Committee calls on the EU to use predetermined criteria to pick out a significant number of well-defined areas for facilitated innovation smart cities, free port areas, local clusters, green deal in which to trial the transition to a circular economy. This could also be done by tapping into the positive experience garnered from European instruments such as the Covenant of Mayors. 1.8 The EESC therefore welcomes the proposals of the Green Action Plan for SMEs and the Green Employment Initiative but regrets the absence of concrete measures and practical guidelines to help SMEs to become more sustainable and ecological. It also calls for the "Think Small First" principle to be placed at the centre of the action plan, in line with the Small Business Act. 1.9 In particular the EESC considers it crucial to secure an active role for the social partners and civil society in the design, application and monitoring of national sustainable development policies and in the transition to an environmentally sustainable circular economy with strong potential for creating businesses with high "green" employment In the Committee's view, the measures proposed for bridging the current gap in green skills should be backed up by the efficient and targeted use of the Structural Funds, in particular the European Social Fund (ESF), the European Regional Development Fund (ERDF), the European Agricultural Fund for Rural Development (EAFRD), the European Maritime and Fisheries Fund (EMFF) and innovation instruments such as Horizon 2020 (H2020), NAT/652 EESC AC-TRA (EN) 3/12

4 COSME and LIFE, not to mention the European Investment Bank (EIB) one-stop facility for green microfinance Other worthwhile ventures include: properly quantifying sustainable and non-relocatable employment potential; safeguarding the fairness and sustainability of the process, using structured social dialogue at the various levels within a joint strategic vision so as to avoid poverty and energy poverty; promoting joint action by the social partners to develop awareness-raising and guidance activities; providing for close interaction between the world of work and that of education and training, making the most of input from social interest groups The EESC is convinced that a consensus-based, participatory transition to a European circular economy could open up a great number of opportunities for micro-, small and medium-sized companies and for the social economy, becoming a major driver for growth on both the internal and the international markets. In this respect, priority should be given to: fleshing out and promoting more widespread application of the voluntary green audit mechanism for companies; boosting access to credit, especially with guarantee systems; financing eco-innovation for micro- and small enterprises, particularly in demonstrator regions show-casing systemic eco-innovations; building on in-company entrepreneurial training and tutoring measures; supporting a circular EU market for materials, parts and intermediate products, not least by launching a "circular ebay" based on European and international technical standards, and also in order to stabilise those primary and secondary resources in Europe which could constitute valuable aspects of security of supply and trade balances The Committee is convinced that the shift towards a circular economy warrants strong support, especially for the European continent. This would therefore require: building a joined-up policy approach into the mid-term review of the Europe 2020 strategy for smart and inclusive growth so that its economic and job-related benefits can be reaped; focusing attention on new ideas and/or extremely innovative sectors with a high degree of practical technological implementation, including the exploitation of existing technologies and the integration of sustainable social innovation; shifting from a prohibitory to a proactive political and legislative approach at the EU, national and regional levels, not least through the much needed publication of a White Paper on the circular economy, employment and growth, encompassing the wide range of instruments and policies concerned. NAT/652 EESC AC-TRA (EN) 4/12

5 2. Introduction 2.1 The concept of a circular economy, as opposed to a linear "take-make-use-dispose" economy, was born of the need to foster sustainable growth, with a view to ensuring that products retain their added value for as long as possible and to maximising the chances of reusing their components productively, thus reducing waste generation and waste disposal and environmental pressures ever further. 2.2 According to McKinsey, between 60 and 80% of resources are wasted at the end of the linear take-make-use-dispose process. In a world where three billion consumers are set to join the middle classes, this is no longer sustainable. 2.3 The transition to a circular economy requires producers, workers, consumers and citizens to make significant changes to their attitudes towards the use of resources and raw materials, product design, market and business models, and the search for new waste and resource processing methods. 2.4 There are the technologies required for tracking the lifecycle of materials throughout the value chain. Then there is also the growing scarcity of resources and high commodity prices. For consumers, a timely one-off service may prove more convenient than simply having a product in their possession. 2.5 A green growth model of this type requires not only a wholesale culture shift, with a strong boost to innovation and research, but also significant investment in technology, education, organisation, training for new occupational profiles, new funding methods and appropriate policies. 2.6 An integrated policy approach is essential in order to exploit job creation potential based on appropriate access to new occupations and to address the challenges inherent in the transition to a non-linear economy, partly by enhancing communication in order to address the set of major challenges involved through new training, labour and organisational models. 2.7 The future of the EU's industrial competitiveness hinges on boosting the capacity to produce sustainable goods with fewer raw materials and energy and water resources and to recover abandoned resources in its territory. It is necessary to design and manufacture goods that can be reused, repaired, reprocessed and recycled and to organise functional services for this purpose. 2.8 It should be possible to transform waste generated by processing into resources for various industries and, possibly, for use as fertilisers for farms in the area. Heat should not be wasted but harnessed and used for other purposes such as heating homes or greenhouses. NAT/652 EESC AC-TRA (EN) 5/12

6 2.9 The circular model: it should be possible to get more value-added and more benefit from each ton of material, each joule of energy and each hectare of land by saving, reusing and recycling materials In order to benefit from the transition to a circular economy, the following actions will be required The systemic barriers impeding the deployment of circular business models by SMEs will have to be removed and efficient use made of materials from waste streams and sectoral and cross-sectoral information networks, including at EU level New occupational profiles will have to be developed for staff responsible for managing these processes since education and training aimed at creating greener jobs relies on sound basic training supported by lifelong learning and should incorporate training geared to raising environmental awareness Appropriate financial instruments will have to be made available, especially for research and innovation, capacity building and market analysis, through instruments such as H2020, the Structural Funds, the EIB and public-private partnerships (PPPs) The various levels of authority will have to undertake legislative simplifications and transitions from prohibitory systems to proactive approaches to make it easier to set up and develop green businesses that can generate long-term skilled jobs, in line with the Small Business Act (SBA) An active role will have to be developed for the social partners and civil society in the design, application and monitoring of national sustainable development policies and in the transition to an environmentally sustainable circular economy with strong potential for creating green jobs Micro-, small and medium-sized enterprises and cooperatives will have to be provided with practical technical support and guidance on how to make their production methods more ecological; this should take the form of a toolbox for new business models and involve the exchange of best practice A culture of dialogue and cooperation in the workplace must be fostered in order to encourage a more rational use of resources, to cut waste, adopt clean and risk-free technologies and working methods and improve the quality of employment The greening of jobs and promotion of green jobs in both traditional and emerging sectors should contribute to an ecologically sustainable and competitive economy with a low-carbon 1 OJ C 318, , p NAT/652 EESC AC-TRA (EN) 6/12

7 footprint, sustainable consumption and production patterns that help to mitigate climate change The EESC has addressed this broad area on many occasions in various opinions 2, emphasising, inter alia, the following points: how everyone must be fully aware of the fact that we are facing a new industrial revolution that places quality of life and of the environment at the heart of development and requires a new, integrated approach to planning, production and consumption, and to conserving and managing natural resources; the urgent need to move on from a defensive, knee-jerk approach to one that is decisive and proactive; support must be given to initiatives aimed at developing an EU policy of sustainable production and consumption, fully mainstreamed into other EU policies, with a view to: converting potential challenges into opportunities for EU industry to be competitive; the need for a serious dialogue involving EU institutions, national and local government, and all the social partners about the potential for changing consumption patterns and the overall economic and social model Many of the industrial advances achieved in the last 30 years stem from laws and standards imposed on industries in order to reduce pollution and find new ways to convert waste into profit. New tax rules must be found to create a balance between energy savings and consumption, along with appropriate provisions to enable industries to take responsibility for their products' entire lifecycle Furthermore, in a recent opinion, the EESC argued that "the far-reaching and much-needed changes to production and consumption make it absolutely essential to involve civil society throughout the transition to an inclusive green economy at all levels, especially at the sectoral and territorial levels (European, national and regional)" On 12 December 2013, the European Parliament adopted a resolution on "Eco-innovation jobs and growth through environmental policy" 4 which: highlighted the dual environmental and economic benefits of transition to a green sustainable economy, in terms of creating sustainable jobs; stressed that these opportunities should generate high-quality, sustainable jobs both for skilled and unskilled workers; and encouraged the Member States to provide incentives for businesses, in particular SMEs, to promote greater investment in private sector R&D activities OJ C 224, , p. 1 7; OJ C 226, , p. 1 9; OJ C 67, , p and OJ C 44, , p OJ C 271, , p NAT/652 EESC AC-TRA (EN) 7/12

8 2.15 In October 2011, the Committee of the Regions (CoR) adopted an opinion on the resourceefficient Europe flagship initiative, expressing the CoR's support for "the creation of a 'multiactor transition platform on resource efficiency', which should also include 'policy makers from various administrative levels including regional and local". 3. General comments 3.1 The EESC welcomes the publication of the Circular Economy Package and, in particular, the two initiatives to promote green employment and the development of SMEs the subject of this opinion in the transition to a circular economy. 3.2 Nevertheless, at the same time, the EESC has concerns about these initiatives especially the Action Plan for SMEs due to the considerable amount of information given without providing the SMEs and workers involved with concrete measures and practical guidelines on efficient and affordable ways to develop green production processes and services while also improving the quality of work without losing competitiveness. 3.3 In the EESC's view, the transition to the circular economy cannot happen without the involvement of production, processing and consumption structures and of the political authorities and public administration at various levels, starting with the EU level, which should shift from a prohibitory approach to a consistent proactive one that supports transition by introducing green specifications across the public procurement system. 3.4 After all, it is not simply about new manufacturing systems and the resulting need for entrepreneurs and workers to acquire new skills, or about innovative organisational systems and markets, or new forms of use and consumption, but it is also, perhaps above all, about developing a whole new industrial and service culture and possibly more importantly a legislative and administrative one. 3.5 The Committee is convinced of the need to launch a major participatory foresight initiative at European level, under H2020, with a view to shaping a common vision for all public and private players, so as to have coherent and effective instruments available at EU, national and regional levels for a consensus-based transition to a circular economy, in addition to the positive efforts of the European Resource Efficiency Platform (EREP) to involve citizens, workers, consumers and companies through specific innovative including individual incentives for rewarding behaviour and actions; to promote environmental and social sustainability and stimulate innovation and investment in human, social and environmental capital through facilitated EU regulatory and financial frameworks; NAT/652 EESC AC-TRA (EN) 8/12

9 3.5.3 to establish a consistent and simplified institutional framework within which companies, workers, investors and consumers can play an active part in the transition process; to secure adequate levels of EU, national and regional financial support, facilitating access to credit, especially for micro-enterprises; to promote targeted tax concessions, innovative PPPs and green public procurement policies, and disseminate best practice with a view to opening up access to markets and making labour markets more inclusive, conserving resources at the regional level; to set up lasting interaction between the world of work and business and that of education and training, with regard to green production, consumption and jobs 5 ; provide assistance and mentoring for micro-, small and medium-sized enterprises by means of European networks and centres of excellence for the development of knowledge, skills and markets, but above all through funding and training support; 3.6 At the same time, the EESC considers it essential to set up a structured dialogue with individual sectors within which to establish pilot schemes to serve as guidance and demonstrate the potential of more sustainable practices, with the full participation of social interest groups, consumer organisations, micro- and small enterprises and the social economy. 3.7 The EESC believes that before adopting measures to create new decent and durable green employment and develop green action plans for SMEs, it would make sense to launch a plan to combat the planned obsolescence of products. 3.8 The costs of the recycling and reuse industries and the quality and the security of the new jobs thus created cannot be treated as the mere dictates of environmental policy; they require complex proactive governance systems involving integrated measures in many strategic sectors as well as in areas relating to consumers, transport, farming and energy Innovation in recycled materials markets needs to be able to count on a renewed and consistent European regulatory framework, with incentives linking product innovation with product use, combatting the present flows of scrap materials and components for reprocessing and disposal in countries with low processing costs, where scant attention is paid to the health and safety of workers OJ C 311, , p OJ C 24, , p OJ C 107, , p. 1 6 NAT/652 EESC AC-TRA (EN) 9/12

10 3.10 In the Committee's view, the transition to the new circular economy model, including remanufacturing and re-use, must go hand in hand with the generalised dissemination of the concept of a socially responsible territory. 4. The circular economy and job creation 4.1 The EESC considers the measures proposed to bridge the current gaps in terms of green skills to be insufficient: the exchange of best practice within existing networks does not appear to be enough to secure a better evaluation of development in terms of skills and jobs. In the EESC's view, clearer analyses and more targeted foresight exercises could be achieved by providing a clearer European definition of green skills and jobs, which would also feed into better statistical analysis, with the involvement of the social partners, SMEs and the social economy. This would make it possible not only to devise new job profiles, but also to convert job profiles that have become obsolete, to reflect flexicurity and the introduction of the European Quality Framework The Committee believes that efficient and targeted use of the Structural Funds and innovation instruments such as H2020, COSME and LIFE and also the EIB green microfinance facility are absolutely key to promoting skilled work, particularly when geared towards small companies and the social economy and when tied in with the consensus-based foresight process promoted by the Committee. In this respect what is needed is: a proper estimation of the number of potential sustainable, non-relocatable jobs at local, sectoral and inter-sectoral levels that could be generated by the circular economy, not least in the light of the European economy's pressing need for sustainable growth that can generate jobs; the guarantee of a fair and sustainable process: the shift to the circular economy should not pose social justice problems for workers, micro- and small enterprises or the social economy; a structure for social dialogue at the various levels enabling full involvement in defining a joint strategic vision and joined-up policies whose implementation will ensure that the circular economy is equipped at once with occupational skills and a work force that can enable it to grow close interaction between the world of work and that of education and training for the positive development of skills, and technical and professional training systems that involve social interest groups directly EESC opinion 217/2014 OJ C 311, , p NAT/652 EESC AC-TRA (EN) 10/12

11 5. The Green Action Plan for SMEs 5.1 The EESC is convinced that the transition towards a European circular economy could open up a great number of opportunities for micro-, small and medium-sized companies and for the social economy, becoming a major driver for growth on both the internal and the international markets, and boosting their capacity to manage natural resources sustainably and generate new skilled jobs. 5.2 The EESC calls for the Action Plan for SMEs to follow and promote the "Think Small First" principle throughout the legislative and implementation process, with particular attention to legislation on the efficient use of resources and in line with the Small Business Act, carrying out "SME Tests" as a key factor in the transition to a circular economy. 5.3 According to the EESC, the instruments designed to support small companies and the social economy therefore need to be readjusted since the previous set of instruments, for instance the Eco-innovation Action Plan, garnered limited results. 5.4 Of the 34 actions described in the Commission working document 10 appended to the proposal, the Committee considers that priority should be given to the following: building up and expanding the piloting of the voluntary Environmental Technology Verification (ETV) green audit mechanism for SMEs, involving widespread verification of ecodesign and processes, potentially using the EU's green label (e.g. Eco-label II), with the help of EU subsidies: boosting access to credit: broadening the role of the EIB with regard to companies' access to credit for transition to the circular economy, expanding the Natural Capital Financing Facility (NCFF); establishing specific guarantee systems for micro- and small companies for rapid and simple access to credit, microcredit, venture capital and Private Finance for Energy Efficiency (PF4EE) instruments throughout the EU; financing eco-innovation in micro- and small companies: facilitating use of the new SME instruments under Horizon 2020, the ERDF, the EMFF, the LIFE fund and the EAFRD, for innovative EU pilot schemes by means of a cross-programme, one-stop facility in welldefined and circumscribed areas such as the Systemic Eco-Innovation Demonstrator (SEIDEM) in areas such as smart cities, territorial clusters, and free zones in which to focus measures, concessions and exemptions, with quantifiable, high-profile intermediate objectives; 10 SWD(2014) 213 final. NAT/652 EESC AC-TRA (EN) 11/12

12 5.4.4 stepping up in-company entrepreneurial training and mentoring: giving priority to incompany training by means of digital applications with support from the Enterprise Europe Network (EEN) and the future European Resource Efficiency Excellence Centre and mentoring from experts with EU funding for professional organisations working with local micro-and small companies, using Erasmus Plus and COSME for selected projects; establishing a circular market for materials, parts and intermediate products: launching a "circular ebay" with easy, secure, access for green micro- and small companies and the social economy, involving an exchange based on stiffer CEN-CENELEC-ETSI and ISO technical standards. Brussels, 10 December The President of the European Economic and Social Committee Henri Malosse NAT/652 EESC AC-TRA (EN) 12/12