“Eurostars 2”: Support for research intensive SMEs to continue under Horizon 2020
On 10 July 2013, the Commission adopted the Innovation Investment Package, a EUR 22 billion investment in research performed by and through industry. This package consists of European Commission proposals for the participation of the EU in five public-private partnerships (better known as Joint Technology Initiatives) and four public-public partnerships (better known as Joint Programme Initiatives).
In practice, a EUR 8 billion investment from Horizon 2020, the next EU research and innovation programme, will secure about EUR 10 billion from industry and almost EUR 4 billion from EU Member States (MS).
The Eurostars Joint Programme (2014-2020) or “Eurostars-2”, is one of the four public-public partnerships undertaken with MS. With its strong focus on transnational collaboration of highly research intensive SMEs, it is perfectly in line with the overall EU strategy to boost the competitiveness of European industry through collaborative international research, and Horizon 2020’s objective to stimulate growth and job creation by means of increasing SME innovation levels. However, the added value of “Eurostars-2” does not only lie in the special type of SMEs that are supported, (i.e. research intensive SMEs), but also in the way this support is implemented: Eurostars is a joint programme between several MS and associated countries in the context of EUREKA, and the EU (through H2020). This makes Eurostars fully part of the integrated approach to assist SMEs under Horizon 2020, as it will complement support provided under the SME instrument and through participation in collaborative projects.
The objective of “Eurostars-2” is to support research-performing SMEs by co-financing their market-oriented transnational research in a bottom-up manner and by providing them with a legal and organisational framework. Having a dynamic segment of R&D performing SMEs is essential for the overall economy. They are able to stimulate healthy technological competition in the market by offering alternative solutions to those proposed by large industry, or even coming up with innovative solutions for entirely new problems.
Some of these companies are expected to grow rapidly to become the large firms of tomorrow, while others play an important role by driving innovation in value chains and/or in existing large firms. Yet for innovative SMEs, their small size and flexible organisation may prove to be a significant advantage in the changing economic landscape, enabling them to adapt quickly, and in so doing, seize new market opportunities. These SMEs can make a very important contribution towards the conversion of science and new technology into innovative products, processes and services, thus contributing to the Lisbon Strategy for economic growth and more and better jobs, and its successor Europe 2020 Strategy.
EU involvement in Eurostars is not only targeted at reducing barriers for research intensive SMEs, but also to strengthen the joint programme structure, featuring scientific, management and financial integration of national programmes.
As such, “Eurostars-2” aims at increasing the accessibility, efficiency and efficacy of public funding for R&D performing SMEs in Europe by aligning, harmonising and synchronising the national funding mechanisms also through promoting policy learning between participating MS. It will therefore: ensure excellence and impact of the projects selected through international (EUREKA-wide) competition and the application of a single evaluation and selection process; further improve operational excellence and accountability for the programme by reducing the time to contract while maintaining an optimal frequency of yearly calls; ensure a critical mass of support for SMEs succeeding in the evaluation process; facilitate the participation of R&D performing SMEs without previous experience in transnational R&D activities.
“Eurostars-2” therefore offers the unique combination of centralised management (for which a dedicated implementation structure is already in place, the EUREKA Secretariat) with decentralised funding and project follow-up at national level.
While MS are the "founders" of the programme, the EU's role and contribution is key for the alignment and synchronisation of the relevant national research and innovation programmes for a more effective use of available resources.
By pooling together national resources otherwise scattered along different national programmes and often lacking interoperability, “Eurostars-2” will contribute to the achievement of the European Research Area (ERA) and to European competitiveness, job creation, economic change and sustainable development in line with the Europe 2020 objectives.
This not in the least because EU involvement is adding a clear leverage effect to investments at national level. Current data from EUREKA on the first Eurostars programme (2008-2013) or “Eurostars-1” point to a substantial leverage effect, with EUR 100 million EU funds leveraging EUR 400 million national funds (EUR 100 million more than initially foreseen by MS), and raising private co-financing to EUR 500 million. “Eurostars-2” is meant to lead to the same leverage ratio, but with a higher investment as a starting point.
For “Eurostars-2”, the budget will be significantly higher than “Eurostars-1”. Given the intense interest in SMEs raised by the programme and the interest from Eurostars countries, the Commission intends to triple its contribution (EUR 287 million). In order to enhance “Eurostars-2” and to support a greater number of research and development performing SMEs with growth potential, MS are committed to substantially increasing its volume. This responds to SME’s increasing demand from when the programme first started and reflects the absorption capacity of the “Eurostars-2” target group. Consequently, the EU financial contribution has been increased in view of this.
Eurostars has been attracting an increasing number of applications over the years. This has led the Eurostars countries to invest even more money than what was initially committed at the programme’s start (from EUR 300 to 400 million), and to fund around 800 projects during the programme’s five-year duration. Such an injection of funds is an indicator of the clear benefit it brings to participating countries.
More than 70% of Eurostars project applicants are R&D SMEs and SMEs, accounting for approximately 63% and 9%, respectively. The main partner of any Eurostars consortium must be an R&D SME in order to satisfy the Eurostars eligibility criteria. Consortiums are typically set up with R&D SMEs, SMEs, and research institutes and universities. At least 50% of the total project costs related to R&D activities must be carried out by the participating R&D-performing SME(s); however, this percentage can include minor contracting. The new or improved product, process or service is meant to reach the market in two years from the end of the project.
The bottom-up approach of “Eurostars-2” enables participants to launch their projects in any technological and market sector as long as it has a civilian purpose and is aimed at the production of a new product, process or service.
The Commission's proposal for “Eurostars-2” is currently on the table of the Council and Parliament for the co-decision. The first call under the new programme is expected in the first quarter of 2014.
News & Events
Finance Days initiative: Promoting EU financial instruments
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The EU supports SMEs and other businesses with a range of programmes that facilitate loans, guarantees (including counter-guarantees), venture capital and other equity financing. These financial instruments are implemented by EU Entrusted Entities (mainly the European Investment Bank (EIB) and European Investment Fund (EIF)) and delivered to SMEs by financial intermediaries such as banks, guarantee societies and venture capital funds. To publicise and promote the financial instruments available, the European Commission is organising the EU Access to Finance Days for SMEs, a series of awareness-raising events taking place across the Member States.
‘Initiated by DG Enterprise and Industry, the EU Finance Days initiative aims to raise awareness of the possibilities to access finance for SMEs, including innovative ones, all over Europe,’ says Jean-David Malo, Head of the Financial Engineering Unit at DG Research and Innovation.
Events are being organised in all Member States starting in autumn 2013. The launch event took place in Rome on 18 October, with the next one happening in Vilnius on 5 November. Invitations to the events will be sent to organisations representing SMEs, financial institutions and potential intermediaries of EU programmes, policy makers representing national and/or regional authorities, chambers of commerce and business associations. As well as publicising and promoting the current and future financial instruments, these events will also disseminate best practice and improve the dialogue between the EU institutions and SME finance stakeholders.
There are two primary sources of financial instruments for SMEs at EU level: the Programme for the Competitiveness of Enterprises and SMEs (COSME) and Horizon 2020.
COSME, which will run from 2014 to 2020, is the first programme of the European Commission exclusively dedicated to supporting SMEs, and its main aim is to improve access to finance for SMEs, support their internationalisation and improve their access to markets. 60% of COSME's estimated budget of EUR 2.3 billion will be dedicated to financial instruments, providing guarantees and venture capital, and encouraging the flow of credit and investment into the SME sector. In this way, it will help to bridge the market gap in the provision of SME financing as well as providing EUR 3.5 billion of additional funding for SMEs each year.
COSME support will be delivered to SMEs via reputable financial intermediaries, such as banks, leasing companies, mutual guarantee societies or venture capital funds. This support will be delivered in one of two ways. First, COSME will provide a guarantee facility for loans of up to EUR 150 000, targeting in particular SMEs that would otherwise have difficulty accessing finance. It will also provide an equity facility, which will stimulate the supply of venture capital, with a particular focus on the expansion and growth phase of SMEs.
COSME is the successor of CIP (2007-2013), the Competitiveness and Innovation Framework Programme. It will largely continue the successful activities of the current CIP programme.
COSME is complemented by Horizon 2020, the programme for research and innovation, which will also run from 2014 to 2020. It has a budget of just over EUR 70 billion, and is the successor of FP7, the European Institute of Health and Technology (EIT) and an important part of CIP.
Horizon 2020 will also provide access to finance to SMEs in its programme ‘Access to Risk Finance’ (ARF). Under this programme, a budget of around €2.5 billion will be dedicated to debt and equity financial instruments, with a particular focus on SMEs and small mid-caps. Like in COSME, a debt facility and an equity facility for innovative / RDI-driven SMEs and small mid-caps will be provided. The debt facility will provide uncapped guarantees and counter-guarantees to reputable financial intermediaries such as banks and guarantee societies, in order to allow them to provide loans to innovative / RDI-driven SMEs and small mid-caps of a nominal value range from €25,000 to €7.5 million. The equity facility will stimulate the supply of venture capital with a particular focus on the early stage phase of SMEs. Both facilities are expected to be launched in early 2014. In addition, a technology transfer facility pilot and a co-investment pilot with business angels are foreseen to be launched later on.
Mr Malo highlighted that at least one-third of the budget dedicated to financial instruments within the ARF is expected to be devoted to support access to finance for innovative / RDI-driven SMEs and small mid-caps, especially because those enterprises are generally considered high risk by financial institutions, making it harder for them to get the financing they need to thrive. Mr Malo says: ‘with our debt facility for innovative / RDI-driven SMEs and small mid-caps, our objective is to deliver a minimum of €6 billion of additional loans for this key target group’.
During the EU Access to Finance Days, the Commission will present the achievements of CIP and FP7 and invite financial institutions to become intermediaries for COSME and Horizon 2020.
The European Commission also has a portal, EU finance, to help SMEs obtain the required financing. As opposed to the Finance Days initiative, which is primarily an awareness-raising scheme, the portal provides easy, complete and up-to-date information on how entrepreneurs and SMEs can access EU financing via one of approximately 1 000 banks and other financial institutions. Mr Malo stresses that this portal is evolving: ‘What we will do within Horizon 2020, but also in very close cooperation with COSME, is building various synergies in order to develop further the EU Finance portal – not only to develop something on the basis of the existing EU instruments, but also to take into account demand on the side of the SMEs in order to create a platform in which the demand and supply can meet.’
Mr Malo emphasises the complementarity of the instruments proposed by COSME and Horizon 2020: ‘It is a perfect illustration that synergies between EU policies are possible in practice.’ But he also added that although financial instruments for SMEs operating at the European level are important, they must be complementary to existing instruments at the national and regional level, which should not be overlooked. Another aim is to elicit a change in behaviour of financial intermediaries, especially to make them more open to supporting innovative SMEs. ‘What we are doing is important because it may have a catalytic effect, but it is not sufficient. The involvement of Member States, the involvement of financial intermediaries – banks, guarantee societies, and so on – are crucial if we want to improve the ecosystem, tackle the barriers, ease the access to finance for SMEs in Europe and therefore contribute to the objective of more growth and jobs within the Union.
News & Events
How REACH can support SMEs in their search for safer chemicals
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The REACH Regulation has an impact on most manufacturers, importers, users and retailers of chemicals. Many of them are SMEs. The European Chemicals Agency (ECHA) manages the implementation of the regulation. It is the main source of information for companies dealing with chemicals and those who can provide safer alternatives to hazardous substances.
All chemicals are potentially hazardous, and depending on how they are used, can give rise to risks that affect people or the environment. Under REACH, all chemicals produced or imported into the EU in quantities of more than one tonne per year must be registered. The aim of REACH is to improve the protection of human health and the environment from the risks presented by the use of chemicals, while also enhancing the competitiveness of the EU chemicals industry.
‘REACH provides a general legislative framework through which industry is made responsible for collecting information on their chemicals,’ explains Dr Jack de Bruijn, ECHA’s Director for Risk Management. ‘Depending on the hazard profile of the chemicals and the way they are used, companies placing them on the market have to do a risk assessment. Based on this assessment, they need to provide information to their customers on how those chemicals can be used safely by workers and consumers, and also how they should be treated in terms of their emissions to the environment.’
Dr de Bruijn adds that the risks depend on both the hazards of the chemical and the way it is used. There are 30 000 to 40 000 different chemicals in industrial use in Europe. This means that a similar number of hazard profiles and risk assessments must eventually be produced. This generates a large body of important safety advice, which enables customers and companies to make more informed choices about whether to buy chemical products, whether to continue using products, or whether to search for a safer alternative. This is one of the most important aspects of REACH.
REACH for SMEs
Under REACH, all companies that deal with chemicals are obliged to register them. Some of the manufacturers and importers of chemicals are SMEs, especially for substances and mixtures produced or imported in smaller quantities. However, SMEs will be mostly affected by REACH as downstream users of chemicals – the companies that buy the chemicals from manufacturers and importers. These SMEs use the chemicals to produce mixtures for professional or consumer use (e.g. paints) or for making articles that are subsequently sold on the EU market.
Due to REACH, SMEs now have much more information than ever before about what is in the mixtures or chemicals that they are buying. Thus, they can make informed choices about whether to devise safer techniques and create alternatives, or use less hazardous chemicals in their products.
‘This is the key consequence of REACH for SMEs,’ suggests Matti Vainio, Head of Unit in the Risk Management Directorate of ECHA.
In addition, Dr de Bruijn stresses that the information generated by industry thanks to REACH can help SMEs to exploit new business opportunities. In particular, with all the upstream information available, it will be easier to identify chemicals that may cause high risks, and for which there might be a high demand for safer alternatives. For example, ECHA publishes a list of substances of very high concern, and updates it twice a year. The list includes substances that are: carcinogenic, mutagenic or toxic to reproduction; persistent, bioaccumulative and toxic; and very persistent and very bioaccumulative. Substances that may have other serious or irreversible effects on human health and the environment, such as endocrine disruptors, are also included on this growing list.
Dr Vainio believes that developing safer alternatives to these chemicals is an area in which SMEs could have an advantage over larger companies: ‘SMEs can react quicker, which is to their advantage. Yet at the same time, SMEs are quite small and so their research and development capability is quite limited, so getting a lot of information from upstream can be relatively more important for SMEs, simply because having to generate that information themselves is relatively difficult for them.’
Reaching out for REACH
Dr Vainio notes that ECHA provides a lot of information on chemicals on its website which SMEs can make use of. Another option is to use the public consultations organised by ECHA. If, for example, specific regulatory action is being planned on a chemical, a consultation is held in which interested people can provide information on the availability of safer alternatives that the authorities may not be aware of.
‘What is clearly happening is that the REACH Regulation is becoming a global benchmark,’ concludes Dr de Bruijn. ‘There is a lot of interest worldwide in the way the regulation is functioning and other countries are adopting regulations that are based on the same principles, resulting in benefits for the international market. Hopefully in the longer term, European companies would have more and more advantages because they are much more accustomed to the system.’
Success Story – SILENTWOOD
SILENTWOOD: Improving noise reduction
The SILENTWOOD project has developed sophisticated noise-reducing wall panels and doors. These multilayered wood-based panels with enhanced acoustic insulating properties for applications on doors and wall panels aim to substantially reduce the financial losses caused by noise pollution, but also to contribute to the health and well-being of citizens.
‘To achieve our goals, we worked in parallel in three complementary directions,’ says Tomas Rodriguez, Head of Technical Delivery Unit at INSPIRALIA, the Spanish RTD performer which spearheaded the three-year project that was developed in cooperation with eight partners from five Member States.
He explains that the first was the selection and development of the core materials to absorb the sound, to insulate thermally and to provide an overall structure with high strength and low weight. The second entailed the design of the internal structure of the panel and door applications to ensure efficient acoustic performances. The third direction involved the development of accurate computer simulation tools to predict the mechanical, thermal and acoustic behaviours. ‘In particular, the last one is crucial as these tools enable easy optimisation while avoiding time-consuming and costly practical tests,’ he adds.
Developing doors with high sound reduction indices
Mr Rodriguez emphasises that the innovation and uniqueness of SILENTWOOD products lie in the fact that the noise-reducing wall panels and doors provide the high acoustic and thermal performances desired within the weight and thickness of a normal door/panel. This is in stark contrast to the current solutions that are costly and require bigger thickness.
Mr Rodriguez outlines SILENTWOOD’s other objectives. ‘The project directly addresses society’s growing awareness of the detrimental effects of noise on health and on the quality of people’s lives.’ The project responds as such to stricter European standards for the construction of private housing and public infrastructures, which reflect the importance of these concerns. ‘Reaching a sound reduction above 35 decibels today is deemed necessary for educational establishments, medical premises and hotels.’
The Spanish, Italian, Polish and Slovene SMEs and SME Associations lacked the necessary R&D and international project management expertise to proceed with such a project. They agreed to form a strategic alliance with INSPIRALIA and two other private European R&D service providers (RTD performers). ‘INSPIRALIA, together with the SP Technical Research Institute of Sweden and the Castilla-La Mancha Business Association of Wood Products, further developed the concept based on the SME’s need for affordable high performance doors and panels,’ says Mr Rodriguez.
‘In addition to our technical expertise in simulation and materials demonstrated in other EU projects, it was INSPIRALIA’s desire to help the SME and SME Association partners in becoming more competitive in their markets.’
‘One of the main challenges was the coordination and planning between the three RTD performers,’ stresses Mr Rodriguez. ‘Since the technological work was carried out in parallel during the first two years, it was very important to monitor any problems or potential delays to avoid a trickle-down effect. On the other hand, this organisation allowed us to work as a close team, which improved our complementarity and responsiveness.’
‘EU funding has been crucial in bridging the gap between research and innovation,’ admits Mr Rodriguez. ‘The SME Associations have now received the means to carry out the research work. This work will in turn provide their associate members with the long-awaited competitive edge that they need to foster in the door/panel application market, despite the economic downturn.’
Innovative doors and panels set to make their mark
SILENTWOOD’s added value lies in both short- and long-term development. ‘The SME Associations own the newly engineered wood-polymer composite and innovative multi-layered structures which can achieve high acoustic, thermal and mechanical performances. The partners have acquired new knowledge that will enable them to have sustainable growth, developing the SILENTWOOD technology and products even further.’
The final product is primed to establish itself in the European market, believes Mr Rodriguez. ‘The doors/panels are 30% to 50% cheaper than current applications with similar characteristics, and they are already acoustic- and fire-resistance certified. This is a strong selling point in the medium-to-high quality door/panel application market.’ The wood-based doors and panels represent about half of the overall wood doors and windows market, generating over EUR six billion turnover in the EU alone.
‘The partners are currently studying alternative applications for niche markets and the possibility to develop 100% bio-based doors/panels in order for SILENTWOOD products to obtain a unique positioning in the door and panel application market,’ continues Mr Rodriguez. ‘This will address the growing ecological consciousness.’
In addition to spurring growth and jobs in the doors/panels application sector, SILENTWOOD will provide direct economic and health benefits to the EU. Mr Rodriguez puts the project’s value in perspective: ‘About 20% of the EU’s population suffer from noise pollution. This leads to financial losses in excess of EUR 35 million and to noise-related health problems such as cardiovascular, respiratory and musculoskeletal disorders, all of which could be avoided by using our noise-reducing applications.’
Since SILENTWOOD’s completion in April 2013, the SME Associations have been working feverishly to ensure time-to-market readiness by creating and protecting the product trademark, preparing a mutual agreement for the exploitation, development and production of panels and doors, as well as targeting the upcoming trade fairs to present their finalised products.
Participants: Spain (coordinator), Italy, Poland, Slovenia, Sweden