The new European Commission had grand plans for the EU: European Green Deal, digital transition, further democratisation, … While efforts to make European policymaking more relevant were already frustrated by the reticence of some Member States to contribute more to the EU budget, the COVID-19 pandemic has more decisively delayed the Commission’s ambitious policy agenda. However, even if priority is given to the current crisis, regular policy work carries on in the background. As COVID-19 is set to monopolise the news over the coming weeks and months, monitoring and engaging with policy processes that will affect businesses has become even more essential.
Earlier in March, the European Commission presented its European industrial strategy and a new EU Circular Economy Action Plan. The two documents contain a wide array of measures but work towards a similar objective: helping the European economy transition towards a greener and more digital future.
This article digs into the measures that were announced and specifies how they could be relevant to businesses across the EU.
Supporting SMEs and deepening the single market to boost the transition
In order to accomplish this vision, the documents set out a strategy combining sustainability with economic growth. The industrial strategy bases this sustainable growth on the two pillars of the European Green Deal and the Europe fit for the digital age. It will invest in these two programmes significantly in order to develop sectors with high potential and low-intensity use of finite resources. In doing so, it also sets out policies that will affect all companies across sectors.
The first is a deepening of the single market by working towards greater harmonisation – which in practice will mean stronger harmonisation of economic standards and facilitation of cross-border trade. The second is a plan to unleash the potential of small and medium-sized enterprises (SMEs), focusing on three areas:
- Encouraging the transition of companies by creating up to 240 Digital Innovation Hubs to advise SMEs on how to integrate digital innovations into their activities and by providing €300 million to encourage breakthrough innovations delivering Green Deal objectives;
- Cutting red tape by developing an EU Start-up Nations Standard, a framework encouraging Member States to follow best practice to help start-ups address challenges and attract talents, and by implementing the Late Payment Directive, which enforces legal time limits for companies and public authorities to pay businesses;
- And facilitating access to finance by creating an SME Initial Public Offering (IPO) Fund, along with ESCALAR, a mechanism to boost the size of venture capital funds.
Overall, the Commission aims to help SMEs take advantage of the potential of the green and digital transitions and model their economic activity through an EU-wide lens.
Reducing plastics and boosting product sustainability to build a circular economy
While the industrial strategy presents investments and strategic objectives for the future of the European economy, the Circular Economy Action Plan provides further measures on product standards and economic processes. In broad term, the document sets out policies to improve the circularity, rationalisation the use of resources and reduce the waste of seven key product value chains: electronics and ICT; batteries and vehicles; packaging; plastics; textiles; construction and buildings; food, water and nutrients. In more practical terms, the Plan includes two especially interesting policies.
The first is a sustainable product policy framework: as part of this initiative, the European Commission will release legislative proposals aimed at restricting single-use and countering premature obsolescence; enabling remanufacturing and high-quality recycling; reducing carbon and environmental footprints; and improving products by making them more durable, reusable, less concentrated in hazardous chemicals and more energy- and resource-efficient. This will have an impact on packaging and food, as the Commission also considers measures on labelling the environmental impact of products and setting legal targets on food waste reduction. The second is the EU Strategy for Plastics in the Circular Economy. The European Commission will monitor and ensure the timely implementation of the new Directive on Single Use Plastics by the deadline of 3rd July 2021. The Directive’s Article 7 specifies that a list of single-use products, include sanitary towels, tampons and wet wipes, shall display clear and legible information on waste management options and the environmental impact of littering. The goal, more largely, is to help companies move away from single-use plastics in order to reduce plastic waste and its impact on the environment.
Rethinking processes and models
Overall, the EU’s industrial strategy and Circular Economy Action Plan include a wide array of policies to help Europe transition to a green and digital future. More interestingly, they aim to address the economic activity of businesses comprehensively, be it through further regulating products, reviewing the production process, investing in promising sectors or deepening the single market. In other words, not only will the energy and telecommunications sectors be affected: industries that are not typically affected by green or digital concerns, such as consumer goods or healthcare.
Ultimately, these two documents should encourage companies to review and adapt their business model. The environmental impact of production, the quality, safety and sustainability of products, the transport of merchandise, the availability of goods and services and the digitalisation of processes will all be covered, directly or indirectly.
Given the scale of the COVID-19 pandemic and the measures needed to counter it, the policy measures announced by the European Commission will certainly be delayed. The nature of the structural economic changes announced over the past two weeks and the environmental effects of economic activity slowing down – air pollution rates have dramatically decreased – could either encourage policymakers to be even more ambitious, or instead to shelve all the announced measures. Nonetheless, EU institutions will soon adapt to the new normal and re-start the policy pipeline – which means that now is the time for businesses to engage and become key players. In the meantime, cutting through the COVID-19 noise remains essential.
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