Eco-innovation SMEs can help Europe bridge the gap between economic growth and environmental sustainability. However, existing barriers hampering their development must first be removed.
Eco-innovation represents more than just a tool to address environmental problems. It is also vital for economic competitiveness, job creation and wealth. As Europe strives to achieve environmentally sustainable economic growth, the role of eco-innovation becomes all the more important. – as does that of the many small and medium-sized enterprises (SMEs) involved.
Today, more than 99% of all European businesses are SMEs with the 23 million companies concerned providing two thirds of all private sector jobs. Moreover, SMEs are the true backbone of the economy, being primarily responsible for wealth and economic growth, in addition to their key role in innovation and R&D.
With enough support, SMEs can deliver the next generation of technologies to enable economic growth without harming the environment. The creativity and dynamism of SMEs means they have a crucial role to play in this area as both eco-innovators and as recipients of green technologies. However lack of available financing, high innovation activity costs and the perception that eco-innovations represent commercial risks must be addressed to ensure their creativity benefits the larger economy.
The biggest challenges facing SMEs relate to the time and cost needed for an innovation to penetrate the market. The cost of developing an eco-innovation without access to seed finance can cause an SME to fall at the first hurdle. Finding such finance can be difficult, particularly when eco-innovations are widely viewed as risky. Such perceptions are influenced by the longer period required for investment returns associated with eco-innovation.
The EU has begun removing the barriers facing eco-innovation SMEs. Since 2004, the European Environmental Technologies Action Plan (ETAP) has sought to overcome the obstacles preventing eco-innovation entering the market place. By improving market conditions, and facilitating the transition from research to market, ETAP has improved the uptake and implementation of eco-innovation.
In addition to this, the Competitiveness and Innovation framework Programme’s (CIP) Eco-Innovation initiative is supporting the first application and market uptake of innovations developed by SMEs. By allocating almost € 200 million from 2008 to 2013, this initiative is helping eco-innovation SMEs take their environmental solutions out of the laboratory and into the market place.
In parallel, the European Innovation Platform for Eco-Innovation is addressing the market failures hampering eco-innovation. The Platform aims to support emerging eco-innovation markets, as identified by the Lead Market Initiative (LMI), by strengthening the innovation potential of SMEs active in the field.