2.3.2018   

EN

Official Journal of the European Union

C 81/1

Rapporteur:

Dimitris DIMITRIADIS

1.1.

In a number of opinions, the EESC has consistently expressed its positive attitude towards EU polices that aim to support small and medium size enterprises (SMEs) (1). However, SMEs are an extremely heterogeneous category, meaning that a special effort is required to properly target the different subgroups and particularly small family and traditional businesses (SFTBs).

1.2.

The importance of this subgroup lies in the fact that the vast majority of jobs in EU regions are provided by this type of business. While reaffirming its previous conclusions and recalling the recommendations made in in its previous opinions (2), the EESC aims to have a closer look at and provide an analysis of the challenges that SFTBs are facing. This is intended to provide an opportunity to influence policymaking constructively at EU, national and regional level.

1.3.

The EESC encourages the European Commission (EC) to consider ways of supporting and promoting SFTBs, as these businesses are the key element in the creation of new activities and in income generation in resource-constrained areas. They are adding value in the process of regional development, particularly in less developed regions, since they are deeply rooted in the local economy, where they invest and maintain employment.

1.4.

The Committee believes that there is a lot of potential for development in many regions which are still lagging and that this underutilised potential could be realised through local SFTBs. This challenge should concern not only the European Commission but also other players which should be intensively involved, including local governments and local intermediaries like business organisations and financial institutions.

1.5.

The EESC calls on the Commission to pay attention to the fact that SFTBs have been negatively affected by recent economic and industrial developments and trends. They are losing competitiveness and are facing increasing difficulties in performing their operations.

1.6.

The EESC is concerned that support policy instruments do not focus on SFTBs and it is unlikely that they will benefit significantly from them. In general support to SMEs is geared towards increasing research and innovation in SMEs and towards start-ups. Without calling the importance of these policies into question, the EESC wants to emphasise that a very small fraction of all SMEs will benefit from them and SFTBs are typically not among them. The EESC welcomes the EC’s intention to revise the definition of an SME, which was initiated by DG Grow and has been provisionally scheduled for the beginning of 2019 (3).

1.6.1.

The current definition of an SME is already outdated, and for this reason the Committee believes that the planned revision could be helpful in providing a more adequate understanding of the nature of SMEs and in designing better policies for them. The EESC invites the EC to include an assessment of how the current definition is applied when implementing SME policy measures at EU, national and regional level in the consultation process, with particular focus on SFTBs.

1.6.2.

The EESC believes that as a minimum the revision of the definition should:

1.7.

The EESC believes it is important that SFTBs be recognised as a specific subgroup since they typically suffer the most from market failures. Therefore the Committee recommends designing tailor-made support policies which target them. To address the most pressing problems such policies have to at least be geared to:

2.1.

A number of topical industrial developments and trends — digitalisation, Industry 4.0, fast-changing business models, globalisation, the sharing economy and more innovative sources of competitive advantages — are currently the focus of EU policy making. At the same time, it must be recognised that people should be able to live anywhere in the EU, including in many regions that Industry 4.0 is not likely to reach easily.

2.2.

Without undermining the importance of these new trends and while supporting the political efforts aimed at promoting them, it is necessary to recall that the vast majority of jobs in EU regions are currently provided by very traditional SMEs (6) and small family businesses (7), most of them with a long history and their own traditions, experiences and many success stories from the past. This group of businesses typically includes the following subgroups:

2.3.

As stated earlier by the EESC, SFTBs are the backbone of many economies around the world and are growing at an impressive rate. They play a considerable role in regional and local development and play a distinctive, constructive role in local communities. Family businesses are better able to withstand difficult periods of recession and stagnation. These enterprises have unique stewardship characteristics since their owners care deeply about the long-term prospects of the business, largely because their family’s fortune, reputation and future are at stake. Their stewardship typically manifests itself as an unusual devotion to the continuity of the company, and entails a more assiduous nurturing of their employee community, as well as seeking out closer connections with customers to sustain the business. The EESC previously called on the EC to implement an active strategy to promote best practices in family businesses among Member States (8).

2.4.

In recent years, many SFTBs have faced increasing difficulties in performing their operations, because:

2.5.

There are just under 23 million SMEs in the EU, with a higher share of SMEs as a proportion of the total number of enterprises in the southern countries of the EU (10). Not only do SMEs represent 99,8 % of the total number of enterprises in the EU’s non-financial business sector (11), but they also employ almost 67 % of the total number of employees and generate almost 58 % of the total value added in the non-financial business sector (12). Micro-businesses, including one-person firms, are by far the most widely represented in terms of number of firms.

3.1.

A common rule is that support for SMEs is mainly streamlined to increase research and innovation in SMEs and SME development (13). While the capacity to innovate and the capacity to go global are recognised as the two most important drivers of growth, SMEs generally exhibit weaknesses in relation to both (14). Half of the identified typologies of instruments during the last financing period pursue objectives almost exclusively in terms of innovation. They are instruments that support technological and non-technological innovation, eco-innovation, the creation of innovative companies, support for R & D projects, knowledge and technology transfer.

3.2.

During the period 2007-2013 (15), ‘ERDF support to SMEs … amounted to approximately EUR 47,5 billion (76,5 % for business support and 16 % of total ERDF allocation for the period)’. Furthermore, ‘around 246 000 beneficiary SMEs were identified’ out of 18,5 million enterprises. The comparison between the number of beneficiaries and the total number of enterprises clearly indicates that this amount is completely insufficient and proves that the EU has failed to support this very important category of enterprises. The EC does not touch upon this important issue due to a lack of resources and the great diversity in the characteristics of these companies.

3.3.

During the same period a relatively large number of policy instruments were applied with a high degree of variability, ranging from 1 to 8 000-9 000 beneficiaries. Creating instruments that are applicable to a very small number of beneficiaries is clearly inefficient. That poses the question of whether it is worth designing so great number of instruments. Moreover, their effectiveness and efficiency must be questioned, by weighing up the human and financial resources involved in their design against the effects produced (if any). At the same time case studies highlighted a process of self-selection or ‘soft targeting’, in which a specific set of beneficiaries (generally characterised by greater absorptive capacity) was targeted through the very design of a given policy instrument.

3.4.

A comprehensive review (16) of a total of 670 policy instruments across the 50 operational programmes (OPs) implemented during the programming period reveals that the distribution between different policies is rather uneven. It shows that less than 30 % of all policy instruments targeted the needs of traditional businesses. The EESC has already expressed its support for innovative and high-growth firms (17). But at the same time the Committee regrets that the policy instruments are disproportionally and predominantly geared to SME innovation objectives, since the bulk of EU SMEs do not have — and will not have in the near future — any innovative potential, and their core business does not require them to have innovative potential. It is true that innovative products could be developed at extremely low cost and could have high growth potential, but this type of growth is clearly the exception and not the norm for traditional and family businesses, which work with a totally different philosophy. Some innovation is possible and advisable, and new generations are starting to innovate because they are open-minded. But in most cases innovation is only fragmented and is not part of the core business of these companies (18).

3.5.

SFTBs are not the focus of support policy instruments, as is demonstrated by the fact that a minority of policy instruments (only 7 % of the total public contribution) are geared towards SMEs operating in particular sectors, the most common of which is tourism. This is also illustrated by the fact that about 54 % of beneficiary SMEs are from the manufacturing and ICT (10 %) sectors, with only 16 % from the wholesale and retail trade sectors and 6 % in accommodation and food service activities — which are considered traditional sectors. This is aggravated by the fact that during the last programming period support for SMEs was structured in the light of the deep economic crisis, taking into account the need to shift resources away from innovation to more generic growth.

3.6.

At the same time, the data show that for the five years after the beginning of the crisis in 2008 the number of SMEs increased while value added and the number of employees declined (19). Such statistics suggest that during this period ‘necessity entrepreneurship’ prevailed over ‘opportunity entrepreneurship’. Obviously people were trying to find a way through the crisis and companies were trying to survive, but support has not been sufficient or adequate (20).

3.7.

Many recent studies have provided clear evidence that there are significant differences between the needs of SMEs in northern and southern Europe, with significant differences at national level. This view is also fully endorsed in the European Commission’s Annual Report on European SMEs 2014/2015, according to which the group of countries with the lowest scores are mainly from southern Europe. These countries report extremely low success rates for projects, including the SME component of Horizon 2020.

3.8.

An additional serious challenge to the provision of effective support for SFTBs is the fact that promotion policies are mostly formulated based on the size of the companies to be supported and not on more relevant characteristics that have a greater impact on their activities. This approach might be outdated and too broadly targeted, and it fails to consider the different needs of different groups like SFTBs. In its opinions, the EESC has therefore constantly stressed the need for better targeted and more precisely defined SME promotion policies in Europe, as well as the need to update the definition of SMEs so as to better reflect their variety (21).

3.9.

The EESC is concerned by the fact that only a small share of ERDF support has to date generated documented effects (22) proving that it has a real effect on the economy. This calls into question the real impact of the funds invested to support SMEs, and the EESC insists that a real impact assessment be performed, including an analysis of the support granted to SFTBs.

3.10.

The ERDF is not the only source of support for SFTBs. Other sources like the European Maritime and Fisheries Fund (EMFF) (23), the European Agricultural Fund for Rural Development (EAFRD) (24) or the European Social Fund (ESF) (25), which can be used separately or through the Territorial Instruments (Community-Led Local Development (CLLD) and Integrated Territorial Investments (ITI)), also provide support for SMEs. But they are not targeted at SFTBs, and a very small fraction of funding goes to these enterprises. According to representatives of SFTBs, their needs are not well understood or properly met.

3.10.1.

This could be explained by the fact that when designing the policy support instruments, EU, national and local policymakers and administrations are too rigid in some ways and have failed to take on board the viewpoints of businesses and the social partners, with a view to understanding the real needs of small and very small companies.

3.10.2.

Of course, the blame should not be put only on the administration, but also on intermediary organisations for having failed to effectively communicate the real needs of SMEs. A good example of this is that SMEs seem to show a distinct preference for grants to enterprises, in contrast with the growing emphasis in the policy debate on equity finance, repayable support and indirect support.

3.10.3.

Partnerships between enterprises and research centres and recourse to intermediary actors to provide assistance to SMEs also appear to be less developed than anticipated, despite the great attention these topics attract. It is argued that this mismatch could in part be explained by the crisis, but during an economic recession policy makers could have opted for more ‘traditional’ policy instruments to sustain local economies at a critical time.

3.10.4.

The possibility of using various specific financial instruments is practically out of reach for SFTBs because of the difficulties in implementing them and the lack of experience and knowledge.

4.1.

Small enterprises typically have lower exports as a percentage of turnover than medium and large enterprises, which suggests a relationship between firm size and exporting capabilities.

4.2.

Access to financing is a serious problem for SMEs and start-ups. In an information report the EESC drew attention to the fact that inadequate supply of financing has been constraining SMEs’ activities since 2008 (26). While the situation has been improving recently, progress has been slower the smaller the firm is, suggesting once again the importance of size in shaping firms’ needs and performance. Furthermore SMEs rely mostly on bank loans for their financing, but the banking system is not well tailored for SMEs, particularly SFTBs.

4.3.

Recently, financial support has focused mainly on start-ups — which represent a very small portion of the SMEs in the EU — but the pressing need for capital to finance scale-ups has still not been addressed adequately, nor has the need for the vast majority of traditional enterprises just to finance their regular operations, which have suffered from the recent crisis. There are reports of banking failures putting some small enterprises out of business because of simple cash flow problems.

4.4.

Another very serious difficulty that SMEs experience — in contrast to large companies — relates to accessing information and new markets. It is also more difficult for them to hire and keep a highly skilled labour force and to comply with increasing regulatory and bureaucratic requirements. This disadvantageous situation is aggravated even further for SMEs in less developed EU regions, which face a lack of opportunities to cooperate with larger firms as part of their value chain, fewer opportunities to be part of competitive clusters, an under-provision of public goods, access to fewer facilities and supporting institutions, and often a declining population of customers. All of these factors may also result in greater costs in getting their goods to market.

4.5.

Therefore, for traditional SMEs and those located in less developed EU areas, it is not policy instruments focused on promoting innovation, access to new markets, internalisation, access to capital markets, etc. which are of vital importance, but rather those which help SMEs improve and perform better at their core operations — such as those which facilitate better access to common bank financing, information, a skilled labour force and immediate business opportunities (improvement of daily operations). For these businesses, initiating behavioural change also does not make sense in the short term, because it is first necessary to change the overall context in which they operate.

4.6.

While in some countries business incubators work smoothly, in others their positive effects are quite limited. The key success factor is a culture of sharing organisational resources and support networks, which in principle are not well developed in the less developed EU regions.

4.7.

The increasing importance of knowledge content production as a competitive advantage further increases the heterogeneity of SMEs, discriminating between high growth SMEs and other SMEs whose development is hampered by obstacles traditionally linked to their small size, their location and customer base.

4.8.

The EESC calls on the EC to endorse the ‘Act Small First’ approach and to pay special attention to SFTBs when designing policy instruments.

4.9.

There were many lagging regions in Europe 30 or 40 years ago, regions removed geographically or functionally from the engines of economic growth. Some of these are now prosperous due to open, responsible and uncorrupt local governments, to the efficient work of the business organisations and to the establishment of local well-operating business networks.

5.1.

Access to financing is a notorious problem. Compared to larger firms, SFTBs exhibit greater variance in profitability, survival and growth — which accounts for the particular problems they face in relation to financing. SMEs generally tend to be confronted with higher interest rates, as well as credit rationing due to a shortage of collateral. The difficulties in financing differ considerably between those companies which grow slowly and those that grow rapidly.

5.2.

The expansion in venture funds, private equity markets — including informal markets and business angels — crowdfunding and development of the Capital Markets Union in general have improved access to venture capital for particular categories of SMEs, but SFTBs are unlikely to be able to benefit much from these developments and remain heavily dependent on traditional bank loans. Even for innovative companies, start-ups and mid-size companies these instruments are not always easy to use, and considerable differences remain between countries due to the level of development of local capital markets and the lack of proper legislation.

5.3.

The EC policy to facilitate access to financing by providing guarantees is welcomed. However, the chosen scheme appears to create distortions on the guarantee market and ultimately unintended consequences for the activity of guarantee institutions. Empirical evidence is available (Spain being a case in point) that commercial banks are explicitly suggesting that their existing borrowers ask for a guarantee — to be directly issued to them from the EU in the form of a direct guarantee — so that the bank is able to cover current risks through the guarantee with no need to increase their risk class. ‘Disadvantaged SMEs’ (i.e. those struggling to obtain credit) are being left out. Greater deployment of public money, channelled through counter-guarantees, will increase efficiency in the use of public money and will generate a greater leverage effect in the market and the wider economy.

5.4.

European and local regulatory burdens remain a major obstacle for SFTBs, which tend to be poorly equipped to deal with the problems arising from excessive regulation. This requires access to information on regulations to be made easily available to them and better provision of information on technical and environmental standards. Policymakers must ensure that compliance procedures are not unnecessarily costly, complex or lengthy. Also, there should be systematic and careful scrutiny of new regulations and their implementation by the relevant local business associations.

5.5.

Access to better information is needed, and not only in relation to regulatory requirements. Information on the local business environment and on market opportunities at regional level is also of vital importance to traditional and family businesses. Modern technologies have great potential to narrow the information gap if they are designed in a user-friendly way. It would be very helpful to set up a one-stop shop where all the necessary information which affects firm strategies and decisions is made available in one place, as exists already in some countries. Measures to encourage information networks must seek to customise databases and avoid information overload.

5.6.

Recent measures to ease access to markets have been focused primarily on international markets. Policy in this area seeks to tackle the disadvantages experienced by SMEs due to their lack of access to human resources, to external markets and to technology. But, as discussed above, for small traditional and family businesses this is often of little relevance. Therefore efforts should be geared towards better coordination between organisers of trade missions at regional level and towards providing better assistance in finding reliable business partners. Another possibility in the same area is to boost efforts to increase the ‘share’ which small firms obtain of government contracts in public procurement.

5.7.

A very specific problem that small traditional and family businesses have faced recently is access to qualified labour. The demographic picture is deteriorating in remote areas and in many regions which are lagging in their development, and as a result in many places there is a significant lack of skilled labour. Therefore these enterprises need assistance in identifying and attracting human resources as well as in training them. Training programmes should be off-season and tailor-made. There should also be a system for offering these programmes regularly, since small companies may face high quit ratios.

5.8.

In family businesses, it is common that children from the same family or not work for the company. This is traditional and is good for the business because it facilitates the smooth transition of the company from one generation to the next or to be familiar with the future work. In such cases owners/managers should always bear in mind that the labour conditions must be according to ILO Convention No 182 and ILO Convention No 138 on Child Labour.

5.9.

Training is needed, but not only for the employees of SFTBs. In rural and remote areas bank employees and employers associations often do not have any knowledge of the different programmes and possibilities provided by the EC and the documents and procedures involved. This network of intermediaries is extremely important in terms of the efficiency of support to SFTBs. Information programmes and the exchange of best practices between these intermediaries should be promoted. A single point of contact for all types of financing and programmes should also be organised.

5.10.

An important policy measure should be to enhance the ‘quality’ of owner/managers of SFTBs, since everything in these companies is directly related to this factor. This could be done either by encouraging training and/or by providing easy access to advisory and consultancy services. Lifelong learning should be promoted — online educational tools relating to areas like business planning, production standards, consumer legislation or other regulations could be a step in the right direction.

5.11.

Another measure is to encourage SFTBs to reinvest their earnings. If they are incentivised to do so these enterprises will become more stable, less dependent on bank loans and less vulnerable to crises.

5.12.

It would be very useful to summarise best practices from different countries in SFTB-intensive sectors like tourism, agriculture, fisheries, etc. and to present these to the Member States.

2.3.2018   

EN

Official Journal of the European Union

C 81/9

Rapporteur:

Jean Marc ROIRANT

1.1.

Civil society organisations (CSOs) play a crucial role in promoting active citizenship in Europe. Participatory democracy needs intermediary bodies if it is to involve the public and encourage them to express their views in all civic spaces. A robust, independent and diversified organised civil society is underpinned by adequate public financing.

1.2.

In addition to increasing difficulties in accessing public financing, the shrinking civic space noted in some EU Member States is the most dangerous factor for the functioning of CSOs and for European democracy.

1.3.

In the EESC’s view, a political and legal framework should be put in place at European and national level to nurture the development of European civil society, whose activities are an integral part of values anchored in fundamental rights.

1.4.

Taking their cue from some Member States that have adopted ‘charters of reciprocal commitment’ or ‘pacts’ to this end, the European institutions could take steps to establish genuine European civil society dialogue. Discussions must be resumed on a statute for European associations and a statute for European foundations, and Article 11 of the TEU on structured dialogue with civil society must be implemented.

1.5.

The EU should encourage Member States both to maintain or develop tax incentives for private donations, and to channel part of their tax revenue into CSOs. The EU should also remove obstacles to cross-border donations by coordinating tax laws and procedures, and invest in philanthropy across the EU.

1.6.

The European institutions should promote a positive image of CSOs and preserve their independence, particularly by strengthening their capacity for action and engagement in social innovation and civic participation.

1.7.

The EESC calls for a strategy facilitating the development of a strong and independent civil society in Europe and for the establishment of an EU Ombudsman on civic space freedoms to whom NGOs would report incidents related to any harassment or restriction of their work.

1.8.

Concerning the future multiannual financial framework (MFF), the EESC calls on the budget authorities to increase funding for CSOs, including in the form of operating grants and multiannual financing.

1.9.

The EESC calls on the Commission to propose a European fund for democracy, human rights and values within the EU (1), to be equipped with an ambitious budget, directly open to CSOs across Europe and managed independently, similarly to the European Endowment for Democracy (2), with the participation of representatives of the EESC.

1.10.

In order to foster participatory democracy, the EESC believes that the Europe for Citizens programme should be endowed with a budget of EUR 500 million under the next MFF, as proposed by the European Parliament (3). Similarly, Erasmus+ actions targeting civil society should be increased.

1.11.

The EESC calls on the Commission to monitor the implementation of the code of conduct on partnership with civil society within the Structural Funds. The Commission should also call on national and regional authorities to use the technical assistance provisions, designed to boost capacity-building, for civil society organisations.

1.12.

The EESC calls for a more in-depth discussion on how to ensure further involvement of CSOs in research programmes by fostering links between researchers and civil society and by proposing a new strand on civic participation and democracy under the societal challenges pillar in the future research framework programme.

1.13.

The Sustainable Development Goals and gender equality priorities should be mainstreamed in the future MFF.

1.14.

The EU should maintain and further reinforce its leadership as donor of humanitarian assistance and international cooperation and proactively promote a fully-fledged civil society.

1.15.

The EESC welcomes the suggestion made by the Commission in its proposed revision of the Financial Regulation to take into account as eligible expenses the hours spent by volunteers (a direct response to the EESC opinion on ‘Statistical tools for measuring volunteering’ (4)) and facilitate the inclusion of contributions in kind as co-financing. It also welcomes the Parliament’s report calling for simplification in the oversight of funds, such as cross-reliance on assessment and audits, speeding up responses to applicants and signing of contracts and payments. The EESC calls on the EU institutions to come to an agreement on the proposed text that will allow hours spent by volunteers to be fairly valued.

1.16.

Strengthening civil society also means improving access to financing for the smallest organisations and the most disadvantaged sectors of society. With this in mind, the Commission should provide for a variety of financing arrangements and further simplify administrative formalities, providing training and guidelines on the implementation of contracts and financial obligations, while ensuring consistent interpretation by its departments of the Regulation on the financial rules.

1.17.

The EESC calls on the European Commission to react promptly with relevant measures, including infringement procedures against Member States, when national administrative or legal provisions restrict the access of national civil society organisations to EU funds, including when funding conditions are imposed that restrict their advocacy.

2.1.

In a number of its opinions, the EESC has examined the issues of civil dialogue and participatory democracy, the definition of these concepts, the representativeness of the various stakeholders and the measures needed at European level. In particular, the EESC has stressed that implementing Article 11 of the TEU (5) was vital for the EU in its quest for democratic legitimacy in the eyes of its people.

2.2.

However, the question of how funding can help facilitate active citizenship and participatory democracy has not yet been addressed in a specific opinion.

2.3.

There is now a pressing need to look into the distribution and effectiveness of EU funding in this sphere, at a time when the EU institutions are preparing to discuss the proposal on the post-2020 MFF and stand poised to take a decision on the revision of the Financial Regulation.

2.4.

The issue of funding also has a bearing on granting the various stakeholders in European civil society dialogue a role and status of their own. The EESC has already discussed the need for a statute for European associations on a number of occasions (6).

2.5.

For the purpose of this opinion, the term ‘civil society organisations’ (CSOs) refers to non-governmental, non-profit-making organisations independent of public institutions and commercial interests, whose activities contribute to the objectives of the Charter of Fundamental Rights, such as social inclusion, active participation of citizens, sustainable development in all its forms, education, health, employment, consumer rights, support to migrants and refugees, and fundamental rights (7).

3.1.

Engaged, pluralist and independent civil society plays a crucial role in promoting active public participation in the democratic process and in governance and transparency at EU and national level. It can also contribute to policies that are fairer and more efficient, and support sustainable development and inclusive growth (8). Inasmuch as they have the ability to ‘reach the poorest and most disadvantaged and to provide a voice for those not sufficiently heard (…)’, CSOs make for greater participation and contribute to defining European policies (9).

3.2.

Over and above their civic and social functions, some CSOs are also involved in what is referred to as the ‘social and solidarity economy’ and even make a significant contribution to job creation.

3.3.

A distinctive feature of CSOs is their ability to bring together a combination of mostly highly motivated volunteers and dedicated employees around a range of projects. Volunteering, in the sense of active civic participation that strengthens common European values, such as solidarity and social cohesion, must benefit from an enabling environment (10).

3.4.

Genuine participatory democracy needs intermediary bodies (trade unions, organisations of employers and SMEs, NGOs and other non-profit stakeholders, etc.) if it is to involve the public, promote popular and civic ownership of European challenges and build a Europe that is fairer, more inclusive and based on greater solidarity. A robust and diversified civil society is underpinned by adequate public funding and a framework facilitating access to different types of private funding.

4.1.

At EU level, there are numerous programmes in a range of sectors (education, cultural, social, citizenship, environment, fundamental rights, research, international cooperation, humanitarian assistance, health, etc.) that include specific objectives on the participation of civil society, particularly in the form of projects. The institutions have also introduced operating grants designed particularly to promote networking among the national organisations active in a range of sectors and societal issues. This financial support thus helps to shape ‘European public opinion’.

4.2.

As regards enlargement and external policy, including international cooperation and humanitarian assistance, the EU has developed a proactive policy to promote a fully-fledged civil society, including through targeted measures. The EU is also one of the world’s major donors of development aid and humanitarian assistance, an approach which receives staunch backing from the European public (11).

4.3.

However, as regards internal policy there has been no further reappraisal of relations between the EU and CSOs (in particular under Article 11 of the TEU) since 2000, when an initial Commission discussion paper was published, as part of the administrative reform process, highlighting the need to maintain a high level of public funding for the role of NGOs, devise a consistent approach across Commission departments and improve management of grants.

4.4.

Funding for CSOs comes in the main from the areas of humanitarian assistance and international cooperation. According to 2015 figures, the sum of EUR 1,2 billion was allocated to funding NGOs (roughly 15 % of the ‘Europe in the world’ heading) (12), while appropriations for CSOs in other areas remained somewhat meagre: 0,08 % under the ‘Sustainable growth: natural resources’ heading, 2,5 % under ‘Security and citizenship’ and less than 0,009 % under ‘Smart and inclusive growth’. It is therefore high time to assess these amounts, in addition to the effectiveness of the measures in place.

5.1.

Recent studies and surveys, along with measures developed in some EU countries, also show that the status of civic space is deteriorating at national level in some EU Member States (13). The review of the post-2020 financial framework, and the ongoing revision of some funding programmes, cannot fail to take this new fact into account.

5.2.

The recent Hungarian law on the transparency of organisations receiving overseas funding, passed in June 2017, was condemned by the European Commission, the European Parliament and the Council of Europe. This demonstrates why the Commission needs to ensure that measures to combat terrorism financing and money laundering cannot have unintended consequences for CSOs when it comes to accessing funding and loans.

5.3.

In many European countries, we are seeing the emergence of measures designed to introduce conditionalities into CSO subsidies, which limit their advocacy role and their capacity to be party to legal proceedings (14).

5.4.

In many countries, the financial and economic crisis has meant that public funding for CSOs has been cut back and/or made available in the form of short-term grants. Funding schemes that operate primarily on a project basis may force CSOs to adapt their priorities and distance themselves from their original mission and from societal needs. In some countries, governments have backed organisations that follow their strategic line (to the detriment of others) and fostered an atmosphere of political connivance, and we are seeing an increasing lack of transparency in how grants are awarded.

5.5.

The EESC calls on the Commission to carefully monitor the implementation of ex ante conditionalities when assessing the programmes, as well as with regard to partnership agreements, in particular on employment, social inclusion and non-discrimination, the environment, gender equality and the rights of persons with disabilities, the involvement and enhancement of civil society organisations’ institutional capacity (15) and the transparency of procedures to award contracts, and to suspend payments when these are not respected. The EESC also reminds the Commission to monitor the implementation of Article 125 on the obligation for managing authorities to apply selection procedures and criteria that are transparent and non-discriminatory. The EESC calls on the European Court of Auditors to assess compliance with these provisions as regards selection procedures for NGOs in its upcoming report.

5.6.

The rise in extremism and populism and all anti-democratic acts are a challenge to the entirety of the democratic acquis and create a hostile climate for intermediary bodies. Therefore, there is a need to confirm the importance of the role of CSOs and to increase the EU’s financial support for them.

5.7.

The EESC calls for the establishment of an EU Ombudsman on civic space freedoms to whom NGOs could also report incidents related to harassment or restriction of their work.

6.1.

In the EESC’s view, a political and legal framework should be put in place at European and national level to nurture the development of a diversified European civil society, whose activities are an integral part of values anchored in fundamental rights.

6.2.

The European institutions should promote a positive image of CSOs and preserve their independence, particularly by strengthening their capacity for action and engagement in social innovation and civic participation which is often linked to funding.

6.3.

Taking their cue from some Member States that have adopted ‘charters of reciprocal commitment’ or ‘pacts’ to this end, the European institutions could take steps to recognise and establish partnerships with representative civil society bodies, thereby creating the conditions for a genuine European civil society dialogue and implementing Article 11 of the TEU and other relevant international commitments (16).

6.4.

There is also a pressing need to resume discussions on a statute for European associations — proposed by the Commission in 1992 (17) — together with a statute for European foundations. This would promote recognition of CSOs and cooperation between them at European level, complementing the European Company Statute adopted in 2004 (18).

6.5.

The EESC believes that the EU should encourage Member States to maintain existing and develop further tax incentives for private donations and channel part of their tax revenue into CSOs, while removing obstacles to cross-border donations by coordinating tax laws and procedures, and investing in philanthropy across the EU.

6.6.

Concerning the future multiannual financial framework (MFF), the EESC calls on the budget authorities to increase funding for CSOs, including in the form of operating grants and multiannual financing to ensure that initiatives flourish in the long term.

6.7.

Since the adoption of the Charter of Fundamental Rights, there has been no real support programme for civil society in terms of human rights in the EU Member States. The vital support given to civil society in the countries of Central and Eastern Europe at the time of their accession to the EU has not been kept up through other funding mechanisms. Recent events that have occurred with the rise of terrorism and extremist and/or populist movements have demonstrated the need to invest more in civil society and ensure cohesion among countries as regards the development of civil society.

6.8.

The EESC calls on the Commission to propose a European fund for democracy, human rights and values within the EU (19), equipped with an ambitious budget and directly open to CSOs across Europe, including human rights defenders aiming to promote and protect the EU’s fundamental values. The fund should cover operational costs as well as litigation and watchdog activities, and be managed independently similarly to the European Endowment for Democracy (20), with the participation of EESC representatives.

6.9.

The Europe for Citizens programme is the only European programme that specifically helps reduce the democratic deficit by allowing all Europeans to participate directly in building Europe, but its funding is too limited. At a time when European values and democracy are being called into question, the EESC believes that the programme should be endowed with a budget of EUR 500 million under the next MFF, as proposed by the European Parliament (21). Similarly, Erasmus+ actions targeting civil society should be increased.

6.10.

The majority of CSOs encounter difficulties in accessing the Structural Funds, primarily owing to the co-financing requirements. The technical assistance provisions, designed to boost capacity-building, are consequently under-utilised and frequently reserved for public administrations. The code of conduct on partnership with civil society which is the key instrument has not been properly applied in most countries (22). Even when CSOs are invited to take part in supervisory committees, their role is limited.

6.11.

The EESC calls on the European Commission to react promptly with relevant measures, including infringement procedures against Member States, when national administrative or legal provisions restrict the access of national civil society organisations to EU funds, including when funding conditions are imposed that restrict their advocacy.

6.12.

Through their connections and ongoing contact with the public and grassroots activities, civil society organisations are aware of societal challenges and needs; nevertheless, they play a very marginal role in research. The EU programme for Employment and Social Innovation (EaSI) also includes barriers to access by CSOs. The EESC calls for a more in-depth discussion on how to foster links between researchers and civil society and proposes a new strand on civic participation and democracy under the societal challenges pillar in the future research framework programme.

6.13.

Youth unemployment is still very high, and is one of the most urgent problems facing the EU, with a growing number of young people at risk of social exclusion. Against this backdrop, European funding should do more to support CSOs investing in the development of young people’s skills and competencies through non-formal education.

6.14.

Most funding in the field of culture is not adapted to the needs of CSOs operating in this field, thus barring them from access to the various financial instruments available, such as loans. No real work is being done on the European dimension of culture, at a time when identity-based and populist views are being increasingly voiced. Drawing partly on Creative Europe, the EU should also provide stronger support for independent cultural productions and invest in the development and sustainability of local, non-profit community media.

6.15.

As regards development cooperation, the EU should invest more in cooperation initiatives focused on populations, including the aspects of gender equality, governance, human rights, environmental rights, resilience to climate change, education and social protection, for instance through a thematic approach by country with close involvement of civil society.

6.16.

When designing the future MFF, account should also be taken of the Sustainable Development Goals and gender equality priorities.

6.17.

Strengthening civil society also means improving access to financing for the smallest organisations and the most disadvantaged sectors of society. With this in mind, the Commission should provide for a variety of financing arrangements and make a more concerted effort to simplify administrative formalities. More systematic recourse should be had to sub-granting mechanisms (or cascade funding), as used under the European Instrument for Democracy and Human Rights and in the framework of EEA funding. Grants should be awarded by an independent national operator on the basis of a tender procedure (23).

6.18.

CSOs in the countries of Central and Eastern Europe still have proportionally less access to funds. The Commission should step up its information drives on the various funds available to CSOs and provide more support for partnerships between organisations.

6.19.

It would also be useful to establish more systematic follow-up and support for beneficiary organisations, and for the different directorates-general responsible for implementing the Financial Regulation, in the form of training courses on contractual obligations and audits.

6.20.

Databases containing descriptions of projects that have already been completed and examples of good practice should be available to potential applicants as a means of promoting innovation and partnerships. The Commission should continue its endeavours to reduce the administrative burden imposed by the application process and financial management, including by introducing a single online application procedure for the different programmes.

6.21.

The evaluation of programmes run directly by the Commission should be more transparent but also more detailed, in view of the large number of requests for European funding and the low success rate. Furthermore, feedback would enable CSOs that have been turned down to make improvements and would boost confidence in the selection process.

6.22.

The deadlines for issuing notifications of contracts, signing contracts and making payments should be significantly shorter so as to limit the need to take out bank loans due to lack of cash.

6.23.

The EESC also asks the Commission to re-evaluate co-financing amounts, particularly for very small organisations which find it very difficult to draw on other sources of funding and organisations engaged in advocacy, such as consumer protection organisations, environmental associations, human rights organisations and organisations working to promote citizenship. This is particularly necessary since co-financing rules increase the administrative burden on CSOs, with the attendant risks posed by the variations in contractual and financial rules on the part of donors.

6.24.

The EESC warmly welcomes the suggestion made by the Commission in its proposed revision of the Regulation on the financial rules (24) to take into account as eligible expenses the hours spent by volunteers and facilitate the inclusion of contributions in kind as co-financing. This proposal is a direct response to the EESC’s call, expressed in its opinion on ‘Statistical tools for measuring volunteering’ (25). It also welcomes the Parliament’s report and the Council’s proposal to introduce an exception to the non-profit rule for not-for-profit associations. The EESC calls on the EU institutions to come to an agreement on the proposed text that will allow hours spent by volunteers to be fairly valued.

6.25.

Transparency in access and financial control should be improved by drawing up clear guidelines on Commission checks and, in the case of funding by several donors, taking into account ex ante evaluations and selections of partners, as well as ex post checks and audits carried out by the other donors.

6.26.

Moreover, public access to information on the amounts and purpose of funding should be facilitated by reforming the Commission’s financial transparency arrangements. This should include annual payments instead of multiannual commitments, and should be made more reliable by standardising the databases of the various programmes. At the same time, NGOs should continue to apply the highest self-reporting transparency standards.

6.27.

Finally, the Commission should establish constructive dialogue and follow-up between the different directorates-general and CSOs for the purpose of assessing good and bad practice and developing a more consistent approach.

2.3.2018   

EN

Official Journal of the European Union

C 81/16

Rapporteur:

Tom JONES

1.1.

The EESC believes that despite the decline of balanced populations and traditional economic activity, in many villages and small towns, there is sufficient evidence of good practice to be optimistic about sustainable futures in many, if not all rural settlements. Such settlements can be catalysts for the wider renewal and sustainable development of rural areas.

1.2.

However, this optimism depends on a sustained, holistic effort involving people and financial resources at all levels of government and across all three — private, public and civil — sectors.

1.3.

The EESC fully supports the European Commission’s Smart Villages Initiative, especially because of the promises made regarding cooperation between Directorates. The national and regional Rural Development Programmes (RDPs), which DG Agri is co-managing with the Member States, are vital but can never invest sufficient resources in the initiative without other national, regional or local public investments. The EESC notes and supports the emerging opinion from the Committee of the Regions on Smart Villages (1).

1.4.

Fast broadband — mobile as well as fixed — is crucial for intelligently developed villages and towns to have any hope of economic and social development, and must be fully accessible, as guaranteed under the rural proofing highlighted in the Cork 2.0 Declaration of 2016.

1.5.

Public services in education, training, health and social care, as well as child care, should be accessible, integrated and be innovative in using technological advances.

1.6.

Planning authorities in rural areas should champion an enabling process for renewing redundant village and small-town buildings, ensuring low business rates for starter businesses and compensatory contributions from edge-of-town retail projects. When making such renovated buildings available, account should be taken of the needs of local NGOs as well as those of the private and public sector.

1.7.

Poor transport connectivity is another challenge and transport sharing, community-owned buses and cars are recommended where the private sector withdraws.

1.8.

Where possible, employers should be encouraged to support distance working, and to realise the potential benefits of rural/urban partnerships. The contribution of both agri- and rural tourism, health-related activities and the branding of local farm and craft products, as well as increasing the cultural and historical catalogue of events is very important in this context. Through the enabling support of the RDP, there is scope for business entrepreneurs to attract inward investment and to develop and market added-value products.

1.9.

Governance at the most local level is a national or regional matter. However, villages and small towns need empowering with greater powers and access to financial resources to lead and support the wishes of their constituents.

1.10.

LEADER and Local Action Groups should be fully supported in their efforts to promote local development — by encouraging businesses, both private and not-for-profit to start and grow — and to ensure an engaged and supportive community spirit. With improved cooperation, these efforts could be expanded through Community-led Local Development (CLLD).

1.11.

Above all, people in villages and small towns should commit to a sense of community that encourages leadership from within. Schools and local mentors should promote leadership. Emerging leaders need the full support of advisory agencies and non-governmental organisations that have access to best practices and relevant similar ventures.

1.12.

Emerging intelligently developed villages should be showcased at the regional, national and EU level. The EU institutions and their stakeholders should organise an annual celebratory day, to promote successful, cohesive village and small-town communities.

1.13.

To strengthen and develop a real sense of partnership between cities or large towns and their neighbouring settlements the EESC supports the recommendations of the 2016 R.E.D (2) document, ‘Making Europe Grow with its Rural Territories’, and the Carnegie Trust’s Twin Town pilot project. The principles of sustainable development and the circular economy, should apply to city/rural partnerships.

1.14.

The Committee supports the call, made in the European Rural Manifesto adopted by the 2nd European Rural Parliament in November 2015, for ‘increased cooperation between communities, organisations and authorities. in rural and urban areas to gain the full benefit of social, cultural and economic links which such cooperation can bring; and for vigorous exchange of ideas and good practise between those involved in rural and urban areas.’

1.15.

The EESC recommends that the European Investment Bank constructs tailor-made support schemes for small rural businesses, both private and social enterprises, including cooperatives, as promised in its 2017-2019 programme.

1.16.

The European Council of Young Farmers (CEJA) and other youth representative bodies should be supported to create a pathway for youth forums in local communities which will galvanise action on their needs and aspirations. They need a much stronger say in developing economic and social solutions; and training, mentoring and financial support needs to be tailored to their aspirations.

1.17.

No 11 on the UN list of Sustainable Development Goals refers to cities and communities. Sustainable villages and small towns should be included under ‘communities’.

1.18.

The cultural values to be found in villages and small towns should be given a prominent place in the publicity for, and initiatives during, European Cultural Heritage Year 2018. Older residents can play an important role in promoting traditions and culture and the conditions should be created for them to actively carry out such work.

1.19.

The Committee recommends ‘good practices’ to be shared at all levels. This is done already by ENRD, ELARD, Ecovast and ERP and to be found in the publication ‘The best Village in the World’ (3).

2.1.

Rural areas are an essential part of Europe, providing for the critical businesses of agriculture and forestry. The communities of small towns and villages lie within and are part of these rural areas, and have always been places where people both live and work.

2.2.

Small towns in rural areas provide a centre for a surrounding hinterland of villages and hamlets. In turn, small towns lie in the hinterland of major urban areas. They are all inter-dependent upon each other. They are essential partners in rural/urban partnerships — a concept that has been promoted by DG Regio (4) and OECD — where both partners have equal status about managing and planning their futures. Villages and small towns across Europe have faced many changes — both economic and social — and they are continuing to face the need to adapt to modern-day circumstances.

2.3.

Together with agriculture and forestry villages and small towns are the ‘backbone’ of rural areas and provide jobs, services and education to serve both themselves and their hinterland of villages and hamlets. In turn, small towns are part of the hinterland of larger towns and cities. This forms a relationship between rural and urban areas which is a feature of any region. Urban and rural areas provide services for each other — urban areas are dependent on rural areas for the provision of food and are a ready market for the products of the countryside while rural areas offer recreation and tranquillity for urban residents.

2.4.

There is a strong tradition in many rural areas of a sense of ‘belonging’ to a community. This tradition is diminishing and in many of the remoter rural areas there has also been abandonment and dereliction.

3.1.

Rural communities have faced challenges over the last few decades due to the desire for the centralisation of many services for economies of scale, changes in transport and travel and the way people live in modern times. Local service businesses are moving out of rural communities; many shops, banking and postal services are disappearing and small rural schools are closing.

3.2.

Rural areas conceal unemployment as the figures are small compared to those out of work in urban areas — yet they face an additional problem of access to help from job centres which are urban-based and often suffer from declining rural public transport. Unemployment may be low because so many young people have left in search of training, education or employment, while many who remain work for low wages.

3.3.

The public purse, so important to support rural communities, is facing increasing demands on its budgets — due to the general rise in the cost of living and increases in the cost of service provision.

3.4.

Investment in roads and motorways encourages the use of the private car as the easiest way to get to work. People are now much more prepared to travel longer distances but in turn this has led to people being less dependent on employment or service provision in their local community.

3.5.

People’s shopping patterns have changed. They often shop where they work which is usually in a large town or city rather that at their village or small town. And they shop through the internet, with goods delivered to their house. This has all added to the demise of local shops.

3.6.

Young people are leaving rural areas to find training, education and work in cities. Without maintaining jobs in rural areas it is difficult to attract them back to rural communities. There is an urgent need to place the considered voice of young people at the heart of local democracy. Youth representative organisations should be supported to encourage participation in governance. Equally, economic and social agencies should youth-proof their advice and financial supports.

3.7.

Intergenerational cohesion is challenged by the numerical imbalance between age groups. Availability of tailored employment measures, schools and child-care together with affordable housing in rural areas is crucial to enable young people and families with children to remain in or return to rural communities. People within communities sometimes have different views on local economic activity. There has to be dialogue and understanding for balancing tranquillity with suitable job creation initiatives.

4.1.

The European Commission’s Smart Villages Initiative is vital, especially because of the promises of co-working made in joint Directorates. DG Agri’s Rural Development Programme can never invest sufficient resources into the initiative without other DG and national, regional or local public investment. This pilot initiative, after evaluation, needs to be included in any new Common Agricultural Policy and Regional Programmes and rolled out to include small towns as part of the ‘rural renaissance’.

4.2.

Broadband is essential for all rural areas. The improvement of broadband coverage — mobile as well as static — could help a wide range of activities, not only developing businesses and the ability to ‘work from home’, but also the quality of people’s everyday lives. It could enable online learning, access to better health care and marketing of services available on line. Good practices are available where improved access to the internet in rural areas has benefitted communities. The basic learning to enable especially elderly citizens to use the internet should be made available.

4.3.

Where possible, employers should be encouraged to support distance working, and to realise the potential benefits of rural/urban partnerships. Through the enabling support of the RDP, there is scope for business entrepreneurs to attract inward investment, to develop and market added-value products, such as food, drink, landscape and historical heritage, cultural and health and recreational activities, while ensuring continuity of rural craft and environmental skills.

4.4.

Public services in education, training, health and social care should be integrated, clustered and be innovative in using technological advances, to avoid discrimination and exclusion especially of older and teenage rural dwellers. Dispersed governmental offices could set an example in reducing city/urban saturation and pollution, whilst promoting a sense of rural fairness. Local authorities have a key role to play in their planning for rural areas and to ensure positive action within rural communities to help their continued future to be encouraged and supported. Services may be able to share one building or unused buildings may be to accommodate new business uses, creating new jobs that can provide opportunities for more economic activity. When making such renovated buildings available, account should be taken of the needs of local NGOs as well as those of the private and public sector.

4.5.

Work needs to be done to develop a real sense of partnership between cities or large towns and their neighbouring settlements to share on mutually accepted terms a sense of belonging, branding, and joint investment. Together with other organisations R.E.D. recommended in 2016 a European political strategy for rural territories by 2030 (5). Another example is the Carnegie Trust‘s Twin Town pilot project. The principles of sustainable development and the circular economy, should apply to city/rural partnerships.

4.6.

The 2nd European Rural Parliament in November 2015 adopted the European Rural Manifesto. The ERP network with partners in 40 European countries are pursuing the themes defined in the Manifesto. The ERP works for: ‘increased cooperation between communities, organisations and authorities in rural and urban areas to gain the full benefit of social, cultural and economic links which such cooperation can bring; and for vigorous exchange of ideas and good practice between those involved in rural and urban areas.’ Work is carried out among all the partners on different themes such as: ‘Small towns’, ‘Sustainable service and Infrastructure’ and ‘Integrated Rural Development and LEADER/CLLD’, which will all result in a report to be presented and discussed at the 3rd European Rural Parliament in Venhorst, the Netherlands, in October 2017.

4.7.

The European Investment Bank should construct tailor-made support schemes for small rural businesses, both private and social enterprises, including cooperatives, as promised in its 2017-2019 programme and exemplified by its support for Niki’s Sweets in Agros in the Troodos Mountains of Cyprus.

4.8.

The voluntary sector is very active in rural areas and they help coordinate actions and help people to work together. Social and community enterprises, such as the 300 socioeconomic companies in Denmark being allowed to use the label ‘RSV’, i.e. Registered Socioeconomic Company (Virksomhed) or the Cletwr cafe in mid Wales, are increasingly contributing to replacing lost public and private services. Their work is in line with the ideas of corporate social responsibility (CSR). The support and advice of organisations such as the Plunkett Foundation in establishing and maintaining sustainability of the social and community enterprises is important.

4.9.

Those who live in villages and small towns represent all walks of life, and they all need to have a voice within their local community. The lowest level of public administration — parish councils or (small) municipalities — should be involved in local decision-making, and should be strengthened and empowered to meet this need. People take pride in their local communities and this can be recognised as a resource and be used to encourage others to get involved. Retired business people and those who have worked in the public or civil sectors have many skills to offer. European programmes and local programmes deliver projects which have encouraged local partnerships to develop in their village or small town and many community entrepreneurs have emerged from this process. They have come from all sectors and have developed into ambassadors for their community.

4.10.

Villages and small towns are an important part of the culture of Europe. They often maintain their local customs and traditions. These rural settlements are usually ‘historic’ and their architecture reflects their local building materials and the styles over many centuries. Small town centres have usually retained more local businesses and have not been overwhelmed by the standard facades demanded by chain stores as have the larger town centres. Small rural settlements are also closely linked to the landscapes they are set in and this setting is very much part of the ambience of the village and small town reflecting their very diverse origins — hill top defence positions, river crossing points, spring lines, lakeside, islands or coast etc. The cultural values to be found in villages and small towns should be given a prominent place in the publicity for, and initiatives during, European Cultural Heritage Year 2018. Older residents can play an important role in promoting traditions and culture and the conditions should be created for them to actively carry out such work.

4.11.

These villages and small towns have valuable assets which they can build on to help them maintain or improve their local economies. They are interlinked to local agricultural, forestry and energy producing output as well as agri- and rural tourism, health-related, cultural festivals and environmental protection and education. There are hundreds of examples across Europe, such as Kozard in Hungary and Alston Manor in England, which could be used for others to follow. The report ‘The Importance of Small Towns’ by Ecovast is also a valuable contribution to describing and understanding the importance of the roles played by villages and small towns.

4.12.

Future rural policies enthusiastically agreed at the Cork 2.0 Conference in September 2016 should help the Member States and regions develop supportive rural policies and encourage projects under European programmes. Implementing the rural proofing described at Cork.2.0 is essential to the EU, the Member States and the regions.

4.13.

The EU-sponsored LEADER methodology and Community-led Local Development (CLLD) provide tools to assist in strengthening and empowering rural communities. LEADER and Local Action Groups can support local efforts to develop businesses, both private and not-for-profit to start and grow, and to ensure an engaged and supportive community spirit. LEADER has until 2014 been supported by the European Agricultural Fund for Rural Development, but since 2015 also other Structural and Investment Funds can implement the methodology through multifunding working with CLLD. This does require improved cooperation, and good examples could be found in IRD Duhallow and SECAD in County Cork and PLANED in Wales, who have implemented bottom up CLLD for many years.

4.14.

There are many rural projects under the European Programmes that ably demonstrate a huge variation of ‘good practice’ in small towns and villages. Good practice also demonstrates the need for and value of intermediaries to support entrepreneurs and small groups.

2.3.2018   

EN

Official Journal of the European Union

C 81/22

Rapporteur:

Cillian LOHAN

1.1.

The concept of Climate Justice frames global climate change as a political and ethical issue and not just a strictly environmental one. It’s typically viewed in a global context of spatial and temporal interdependence and recognises that the most vulnerable and poorest in society often have to suffer the greatest impact of the effects of climate change. This despite those very groups being the least responsible for the emissions that have driven the climate crisis. More broadly, in this opinion, Climate Justice recognises the need to consider the fairness of the often disproportionate impact of climate change on citizens and communities in both developing and developed economies.

1.2.

The EESC believes that all citizens have a right to a healthy clean environment, and to expect governments to take responsibility for their national commitments and NDCs — nationally determined contributions under the Paris Agreement on the drivers of climate change and the threats of climate change, with recognition of not only the more obvious environmental and economic aspects but also the social impact.

1.3.

The EESC proposes to start a debate on an EU Bill of Climate Rights that would encapsulate the rights of EU citizens and nature in the context of the challenges of the global climate change crisis. While acknowledging the EU’s leadership in advocating for a robust and fair international climate regime, the EESC encourages the EU institutions and National Governments to examine the application of the principles of Climate Justice at all levels, global, European, national and community. The Semester Process could be used as a tool to deliver on this ambition. Climate Justice is about justice for both people and for the environment on which we depend — both are interlinked. In this context the EESC recalls two recent initiatives: the Global Pact for the Environment and project of the Universal Declaration of the Rights of Humankind.

1.4.

Production and consumption systems must change to adapt to and to mitigate climate change. This transition will have to take place globally and in the sectorial context and the EU can play a leadership role. The most vulnerable business sectors and workers need to be identified and adequately supported. In particular, food systems and their stakeholders need to be supported in the transition. Sustainable food consumption must start at the upstream stage of soil preparation and management of natural systems in order to provide the primary building block of food. The EU should provide clear leadership promoting sustainable management and protection of soils.

1.5.

The power of consumers in achieving the transition can only be harnessed when consumers have the option of sustainable ethical alternatives that do not lead to a significant reduction in convenience or quality in terms of service, usage or accessibility. Viable alternatives for consumers can be developed through the new economic models such as the Digital, Collaborative, and Circular Economy and through the international cooperation on the global, sectorial transition to these models.

1.6.

Support mechanisms, including public money, economic instruments and incentives should be used to ensure that infrastructure and appropriate supports exist for consumers wishing to choose a low carbon lifestyle, including assistance for meeting the higher costs of ethical/long life/sustainable goods and services, while at the same time ensuring that competitiveness is not undermined.

1.7.

Mapping the displacement of jobs in a low carbon economy needs to take place, and opportunities identified as early as possible. This will allow the most effective policies to be designed and implemented to ensure that workers are protected, and their quality of life is maintained in a just transition.

1.8.

The EESC repeats its call for a European Energy Poverty Observatory (1) that would bring together all the stakeholders to help define European energy poverty indicators. Justice for all citizens means ensuring that clean and affordable accessible energy is supplied to everyone.

1.9.

The EESC calls for an end to fossil fuel subsidies and a shift to supporting the transition to renewables.

1.10.

Effective sustainability policies are dependent on ensuring that supports for transition are clearly identified, prioritised, and adequately financed. At the same time the EU must start very comprehensive international negotiations towards a global agreement that can mitigate the drivers of climate change and support a more sustainable global economic model.

2.1.

This own initiative opinion comes in the context of the Sustainable Development Observatory Work Plan for 2017. Climate Justice is a topic that affects us all and yet there is a lack of action at EU level on it. This is an opportunity for the EESC to take a lead role and to put forward some initial proposals, especially with regard to Europe. Many aspects of climate justice need to be explored in greater depth, such as the issue of the global and individual distribution of emission allowances.

2.2.

The EESC wants to take an institutional position in order to provide the view of EU organised civil society in the debate on the impact of climate change and how best to address that impact in a fair and just manner.

2.3.

In the context of the internationally adopted UN Sustainable Development Goals (SDGs), the Paris Agreement and that the impacts of climate change are already being experienced, there needs to be an increased sense of urgency in delivering climate justice with concrete actions.

3.1.

The concept of Climate Justice frames global climate change as a political and ethical issue and not just a strictly environmental one. It recognises that the most vulnerable and poorest in society often have to suffer the greatest impact of the effects of climate change. The concept is typically viewed in a global context of spatial and temporal interdependence, namely with a focus on the responsibilities of countries who have developed based on the exploitation of natural resources.

3.2.

The SDGs go beyond their predecessors (MDGs) recognising mutual accountability, ownership, collective action and the need for inclusive participatory processes. While acknowledging the EU’s leadership in advocating for a robust and fair international climate regime, the EESC encourages the EU institutions and National Governments to take Climate Justice action at all levels, global, European, national and community. The Semester Process could be used as a tool to deliver on this ambition. Thus, in this opinion, Climate Justice recognises the need to consider the fairness of the often disproportionate impact of climate change on citizens and communities in both developing and developed economies.

3.3.

There is a problem of resistance to climate change policies, and the perception that they penalise the average citizen, specific sectors (e.g. agrifood or transport), or communities and individuals dependant on fossil fuels despite the benefits of such policies.

3.4.

Different policy initiatives focus on sectors and areas that are greatly influenced by climate challenges, for example health, transport, agriculture, energy. Climate Justice can provide an overarching integrated approach to ensure that the transition to a low carbon economy is achieved in a fair and equitable manner.

3.5.

It is important to note that Climate Justice is not just about those affected directly by the impacts of climate change but also those affected by the drivers of climate change through dependency on goods, services and lifestyles that are associated with high emissions and low resource efficiency.

4.1.1.

The EESC believes that all citizens have a right to a healthy clean environment, and to expect governments to take responsibility for their national commitments and NDCs — nationally determined contributions under the Paris Agreement on the drivers of climate change and the threats of climate change, with recognition of not only the more obvious environmental and economic aspects but also the societal impact.

4.1.2.

The EU Pillar of Social Rights is to serve as a compass for a renewed process of convergence towards better working and living conditions amongst Member States. It is based on 20 principles, many of which will be impacted either directly by climate change or indirectly by the need to transition to new economic models.

4.1.3.

The EESC proposes to start a debate, in the context of Human Rights and Social Rights, on the drafting of a Bill of Climate Rights. This would encapsulate the rights of citizens and nature in the context of the challenges of the climate change crisis. In this context the EESC recalls the project of Universal Declaration of the Rights of Humankind drawn up by Corinne Lepage, with a view to the COP21 in 2015.

4.1.4.

The rights of nature are now recognised in various countries around the world, through the legislative process. For example, in the Netherlands in 2015 an NGO, Urgenda Foundation, won a climate lawsuit against the government. The Dutch Supreme Court consistently upheld the principle that the government can be held legally accountable for not taking sufficient action to prevent the foreseeable harm resulting from climate change. Similar cases are being prepared in Belgium and in Norway. Moreover, initiatives such as the Global Pact for the Environment launched on 24 June 2017 address the need for a fair global environmental governance by supplementing the ‘third generation of rights’ via a general, cross-cutting, universal reference instrument.

4.1.5.

There is a need to ensure the most vulnerable in society do not have to bear an unfair burden and that the cost of a transition to a climate responsive economic model is spread fairly across society. For example, the Polluter Pays Principle should be applied at the level of those creating the pollution and profiting from it, as opposed to the end user level in cases where no viable alternative exists. Careful and relevant application of this important principle has been previously examined by EESC (2).

4.1.6.

There will be increased migration (including climate refugees) of all types due to displaced people (3). Already we have seen how ill prepared we are in the EU to deal with this, and the issue of disproportionate burdens across Member States. The EESC has already highlighted how unbalanced economic processes can add to destabilisation in this context (4).

4.1.7.

At EU level there is no distinct instrument applicable to ‘environmentally displaced individuals’ as found by a recent Climate Refugee study by the European Parliament. The Temporary Protection Directive is a politically cumbersome instrument to deal with any mass displacement, and the EESC supports the position that the Lisbon Treaty provides a sufficiently broad mandate to revise the immigration policy in order to regulate the status of the ‘environmentally displaced individuals’.

4.2.1.

Food production systems and diets will change to adapt to and to mitigate climate change. All citizens are dependent on the agrifood sector, (e.g. farmers, families, those along the supply chain, consumers) and so the transition to a low carbon society should ensure those affected will be facilitated and supported in the changes. Moreover, this transition will have to take place globally and in the sectorial context and the EU can play a leadership role.

4.2.2.

Climate change brings enormous challenges for European agriculture both as a driver and as a sector on the frontline of the impacts.

4.2.3.

The sector needs to be redefined for its contribution to natural absorptive systems, such as ecosystem services that can alleviate some of the impact of climate change. These should be recognised and public funding, through CAP, should move towards supporting these services provided by the agri sector, as a consequence of their objective of food production. This general concept is supported in the recently adopted opinion (5).

4.2.4.

Sustainable food consumption must start at the upstream stage of soil preparation and management of natural systems in order to provide the primary building block of food. The EESC highlights the the necessity to begin a debate on the need for a Soil Framework Directive, and to provide clear leadership on the importance of promoting the sustainable management and protection of soils (6). Soil protection and its role in ecosystem services are a focus for the current Estonian Presidency of the Council of the EU (7).

4.2.5.

The EESC promotes the concept of a of sustainable production and consumption. Achieving consensus on the need for a change in attitudes towards meat consumption will depend on identifying opportunities and supports required to ensure a just transition for those dependant on this sector of the agrifood industry.

4.2.6.

This is a sector affected also by the drivers of climate change, in particular its dependence on fossil fuels from food production, through processing, to transport and packaging. Policies need to be formulated in recognition of the ‘locked-in’ nature of the existing agri-food model, and must map an achievable route to a sustainable, climate-friendly future for farmers.

4.2.7.

Environmental policies need not be in conflict with the immediate needs of the farming sector, when considered as applications of support mechanisms to facilitate the transition to a low-carbon society.

4.3.1.

The power of consumers in achieving the transition can only be harnessed when consumers have the option of a sustainable ethical alternative that does not lead to a significant reduction in convenience or quality in terms of service, usage or accessibility. Viable alternatives for consumers can be developed through the new economic models such as the Digital, Collaborative, and Circular Economy and through the international cooperation on the global, sectorial transition to these models.

4.3.2.

Too often the polluter pays principle is misapplied and levies are forced on consumers, when they have no viable alternative available. Consumers must have the option of an alternative before pricing can be an effective instrument to drive behaviour change in the required direction.

4.3.3.

The plastic bag tax is a good example of consumers facing a small tax, but having alternative options available to them — namely to bring their own bag or to use a box provided by the retailer. When applied like this, large-scale behavioural change can be achieved.

4.3.4.

In contrast, taxing of fossil fuels (petrol for example) at the consumer level can cause discontent and diversion of disposable income into fuel. It can further drive a secondary illegal market, while preserving the profits of the producer of the pollutant in the first place. This is made worse by the lack of ring-fencing of such taxes in most cases. Citizens feel that climate change policies are associated with unfair penalising of those who have no alternative but to operate within the fossil fuel economy.

4.3.5.

Support mechanisms, including public money and economic instruments should be invested to ensure that infrastructure and appropriate supports exist for consumers wishing to choose a low carbon lifestyle, including assistance for meeting the higher costs of ethical/long life/sustainable goods and services. This may take the form of public-private partnerships. The automobile industry is a good working example of manufacturer back financing arrangements to improve access to new cars for consumers. Similar types of support systems could be offered for other sectors, for example white goods, retro-fitting a home or business.

4.3.6.

There is a climate contradiction in using public money to support and invest in systems and infrastructures that increase end user dependency on the drivers of climate change, while concurrently working to limit and manage the impacts of climate change. Consumers are on the front line of the impact of this. A choice between paying more for the polluting options or going without is not a ‘just’ choice to offer to citizens.

4.3.7.

There is a perception that a sustainable life style, and sustainable consumption choices are only compatible with a high disposable income. Ethical, climate friendly, sustainable choices are not accessible to all equally. Pricing that incorporates the climate costs (such as resource intensity) of goods and services should be supported by a policy framework that challenges this perception and increases accessibility for all consumers.

4.3.8.

EU consumer protection legislation pre-dates the 1999 UN recognition of sustainable consumption as a basic consumer right, and therefore makes no mention of it (8) The EESC repeats its call for a policy on sustainable consumption. This is especially relevant in the context of the SDGs and the Circular Economy initiative.

4.3.9.

Without the alternative choice the consumer is left with no option, but forced into poverty/poor decision making/unhealthy choices/unsustainable choices and develops a dislike for ‘environmental’ policies that are seen to be penalising the end user. Meanwhile, those who profit from this system are not paying, but are making more money, and so the inequality increases — under the guise of environmental policy contradicting the principles of sustainability.

4.4.1.

It is critical to protect all workers in the transition, both those with either low or non-transferable skills and those in highly qualified positions. The most vulnerable sectors and workers need to identified and adequately supported. The automation of jobs, as part of the low carbon economy, might lead to eradication of certain jobs (9).

4.4.2.

Retraining and education are some of the means to achieving this protection. Workers whose jobs disappear as a result of climate change or as a result of the need to end dependency on the drivers of climate change should not be the ones to pay the price for this change.

4.4.3.

Early identification of the skills needed to allow full participation in these new economic models is one part of the solution, but equally these should be mapped in the context of existing employment and dependencies on the current unsustainable model.

4.4.4.

It is important to protect and preserve communities where possible, and to facilitate the transition with the least amount of impact on well-being, both socially and economically, of those affected.

4.4.5.

New opportunities are clearly identifiable in the new economic models proposed, including the Functional, Collaborative and Circular Economy. In this regard, the EU should begin the necessary international negotiations to work towards the achievement of a global economic model.

4.5.1.

There is a cost to health created by climate change, and the drivers of climate change. This can be measured in death and illness associated with air pollution for example and represents a cost to society as well as a cost to public healthcare systems. Public healthcare systems need to consider the role that climate change and the drivers of climate change play in their sector.

4.5.2.

There is a correlation between health and well-being and access to nature (IEEP). Many Member States face health and societal challenges such as obesity, mental health issues, social exclusion, noise and air pollution, which disproportionally affect socioeconomically disadvantaged and vulnerable groups.

4.5.3.

Investing in nature not only addresses climate change in terms of divestment from pollutants, but also investment in carbon storage in natural ecosystems. The consequential health benefits are twofold: prevention of increased ill health and promotion of an active lifestyle leading to improved health of citizens and communities. Recognition of this aspect assists in ensuring policy decisions are balanced, informed and evidence based.

4.6.1.

Renewable energy production in terms of a % of electricity consumption has more than doubled between 2004 and 2015 in the EU (14 % to 29 %). However, in heating, buildings and industry, and in transport the energy requirements are still enormous. Progress is occurring, but from a very low base, for example the share of renewable energy in fuel consumption in transport has increased from 1 % to 6 % in the same period.

4.6.2.

Energy poverty is an issue across Europe and although its meaning and context can vary from country to country, it is another example of the need to ensure climate change policies are focussed on protecting the most vulnerable.

4.6.3.

The EESC repeats its call for a European Energy Poverty Observatory (10) that would bring together all the stakeholders to help define European energy poverty indicators. Justice for all citizens means ensuring that clean and affordable accessible energy is supplied to everyone.

4.6.4.

Policies that support addressing the energy poverty problem in EU can also be solutions for establishing a clean energy infrastructure and supply, by shifting subsidies and coordinating political will.

4.6.5.

Policies that support fossil fuel subsidies, directly or indirectly, amount to a reversal of the polluter pays principle — the polluter is paid in these cases. Many of these subsidies are invisible to the end user but ultimately derived from public money. A recent opinion (11) has already set out the case for the cessation of environmentally harmful subsidies (EHS) in the EU, and a further opinion Mapping EU Sustainable Development policies (12) highlights the need for implementation of existing commitments to remove EHS and vigorous promotion of environmental tax reform.

4.6.6.

Support should be available to all, subsidies should focus on renewables, whereas subsidies for the drivers of climate change should be phased out urgently, and exemptions should be applied in a more just manner, explicitly not to those who can most afford to pay, and not to those profiting from the pollutant. Fossil fuel subsidies are currently at a rate of $10 million per minute globally according to the IMF. Eliminating these subsidies would raise government revenue by 3,6 % of global GDP, cut emissions by more than 20 %, cut premature death by air pollution by more than half and raise global economic welfare by $1,8 trillion (2,2 % of global GDP). This figure highlights the unjust nature of the current system.

4.6.7.

Effective sustainability policies are dependent on ensuring that supports for transition are clearly identified, prioritised, and adequately financed.

2.3.2018   

EN

Official Journal of the European Union

C 81/29

Rapporteur:

Alfred GAJDOSIK

Co-rapporteur:

Thomas WAGNSONNER

1.1.

The European Economic and Social Committee (EESC) supports a development policy that sees development as a process carried out between countries on equal terms, based on respect and sovereign decisions. Financing and implementing sustainable development goals (SDGs) agreed at United Nations (UN) level requires globally coordinated efforts. The EESC would point out that the UN’s Economic and Social Council could play an even stronger role as a suitable forum for dealing with tax matters. This would ensure both the gearing of Agenda 2030 to the SDGs and the participation of all countries on an equal footing.

1.2.

Against the background of international agreements on the reform of international tax law, e.g. through the OECD BEPS (Base Erosion and Profit Shifting) Action Plan, the effects of such international reform efforts on the SDGs should be assessed and taken into greater consideration when international tax policies are being further developed. The EESC notes that achieving the SDGs requires financial resources. However, many countries face major challenges when it comes to generating public revenue through tax receipts. This is due to developing countries’ income tax and sales tax systems being difficult to implement; global tax competition relating to corporation tax, as well as the design of Double Taxation Agreements (DTAs), might also be part of the problem. Capacity constraints and inadequate information transmission are further factors.

1.3.

The EESC warmly welcomes the fact that the European Union (EU) and its Member States have made considerable efforts in the context of international reform to address the weaknesses of the international tax system. These efforts are welcome and need to be supported and implemented effectively and then subject to regular monitoring. The reforms have been led primarily by the major developed countries within the OECD. It is worth examining whether the UN, because of its global membership, particularly of developing countries, would not be better suited as a forum for developing international tax policy worldwide. However, the EESC notes the lack of resources and staff at the UN Tax Committee. The UN should therefore be provided with sufficient means.

1.4.

EU international tax transparency measures and the BEPS Action Plan will also have an impact on developing countries. The EESC welcomes the fact that the European Parliament (EP) and the European Commission have already issued their views on the points where tax and development policies intersect. The Platform of Tax Good Governance launched by the European Commission is to be welcomed. The toolbox presented on the platform as a Staff Working Document on the ‘spillover’ effects of DTAs is an excellent basis for Member States to use for reflection on the review of double taxation agreements with developing countries.

1.5.

The EESC notes that a 2015 European Parliament report recommended a series of improvements, yet to be implemented. In this connection, the EESC would draw attention to its own earlier opinions with statements on, in particular, country-by-country reporting and the fight against money laundering, with recommendations on public ownership registers. The EESC points out that a list of uncooperative jurisdictions for tax purposes is being compiled. It calls for greater efforts to be made to carry out the European Parliament’s recommendations and itself recommends that criticism from non-government organisations be addressed. It makes sense to promote the worldwide introduction of these measures through international tax agreements, so as to improve the information available to tax authorities in developing countries. The goal should be to be able to achieve the same standards worldwide, with developing countries having an equal say when these standards are being drafted.

1.6.

The EESC calls for coherence to be ensured between Member States’ international taxation policies and the objectives of development policies, so as to avoid conflicts between individual countries’ taxation policies and joint development priorities.

1.7.

The EESC sees impact assessments of Member States’ international taxation policies as a way of testing the impact of DTAs and tax inducements on developing countries. This should be encouraged and made common practice. Where there are potential conflicts with European development policies, such analysis would also make sense for the European Union. Existing DTAs should be revised and new ones to be negotiated should be concluded while taking these considerations on board.

1.8.

The OECD Model Tax Convention, which is currently most widely used, was developed first and foremost with a view to developed countries’ interests. Therefore, the EESC recommends that, when negotiating DTAs with developing countries, EU Member States take more account of the needs of developing countries. The EESC notes that, based on the OECD convention, the UN also developed a Model Double Taxation Convention to regulate taxation between developing and developed countries in order to give source countries more taxing rights.

1.9.

The EESC has been supportive of private investment fostering development, when such development is in line with the SDGs and when basic economic, environmental and social rights, core International Labour Organisation (ILO) conventions and the Decent Work Agenda are upheld. Legal certainty is a key factor in supporting an investor-friendly business climate, which is also conducive to foreign direct investment. Since taxation matters are tied in with sustainable development goals, businesses should duly pay their taxes in the country where their profits are made through the creation of added value during production processes, raw-material extraction and other such activities.

1.10.

The EESC notes that the EU and its Member States, in the New European Consensus on Development, have committed themselves to cooperating with partner countries in making progressive taxation, anti-corruption measures and redistributive policies more widespread, as well as combating illicit financial flows. Taxation policy should, however, be a more important element of European development policy. The EESC welcomes the European Commission’s commitment to regional forums and civil society organisations operating in the area of taxation in developing countries. Civil society organisations in these countries have a monitoring and supporting role to play, including in tax matters, and should therefore be more involved and be given more support. Support for appropriate tax capacity-building measures, including peer learning and South-South cooperation, would have a lasting impact on development projects.

1.11.

Good governance in taxation should be an integral part of companies’ corporate social responsibility (CSR) in the context of corporations’ reporting obligations.

1.12.

The EESC recommends that good tax governance clauses be enshrined in all relevant agreements between the EU and third countries and regions in order to promote sustainable development.

1.13.

The EESC recommends that, when new and revised free trade agreements are being concluded between the EU and developing countries, the opportunity be taken to analyse bilateral tax agreements as well. This should entail impact assessments on the repercussions of Member States’ international tax policies on development policy goals.

2.1.

A number of studies (1) raise the question as to whether Member States’ international tax policies, in particular many provisions in bilateral DTAs, are consistent with EU development policy objectives. In addition, developing countries are net exporters of capital to the developed world, which can to a considerable extent be put down to tax-dodging capital flows. This has the greatest impact on the lowest-income developing countries, because their domestic financing sources are virtually non-existent.

2.2.

The EU and its Member States combined are the largest donors of official development assistance and carry considerable weight in the shaping of international taxation agreements. They have undertaken to achieve the UN SDGs, although only a few Member States have reached the foreign aid target of 0,7 % of GDP. The impact of Brexit on the future financing of European development cooperation is unclear. More action is planned to promote private investment in connection with development policy objectives. ODA (Official Development Assistance) resources are dependent on the policies of donors.

2.3.

SDGs for developing countries include the mobilisation of domestic resources, international support for building up tax collection capacity, a reduction of illicit financial flows and participation in institutions of global governance. It follows that a stable public revenue base, efforts to combat illicit resource outflows, and an equal say for all countries in the design of global taxation rules are important pillars of sustainable development. Particularly children, women and other vulnerable groups in society in developing countries benefit a great deal from development (2).

2.4.

Money from public development aid is not enough to fund sustainability goals. Domestic resources are needed to attain the goals, as was already the case with the Millennium Development Goals (3). In order to mobilise these resources, tax collection has to be improved and more tax revenue has to be secured through sustainable economic growth and a broader tax base.

3.1.

Taxation is a more stable source of finance than other types of revenue, but many developing countries find it more difficult than developed countries to generate sufficient tax revenue.

3.2.

In recent decades, liberalisation of global trade has been strongly pursued through the reduction of import and export tariffs, with the aim of fostering economic development, investment and the prosperity of the population at large. These effects, positive in principle, can also help broaden the tax base, insofar as tax authorities are able to make use of them. However, through this, developing countries’ revenue from major, readily accessible sources has also been shrinking. Growth and investment also need to be reflected in the revenue structure of developing countries, however.

3.3.

To offset revenue losses, developing countries often introduce sales taxes, which may be regressive in effect. A tax system based on different types of taxes reduces dependence on individual tax types and guarantees stable domestic revenue.

3.4.

Taxation of land and property is often difficult to implement in developing countries. However, income taxes only yield relatively little tax revenue in developing countries because of incomes being low. Income tax is collected above all from public sector employees and people working for international companies. Moreover, there is often a large informal economy.

3.5.

The Mbeki Report counted revenue from tax avoidance as illicit financial flows (4). They appear to exceed the inflow of resources from development cooperation (5). Greater international cooperation between authorities, fostering transparency as well as strengthening legislative and regulatory measures, is important to stem these illicit flows. Strengthening property rights in developing countries is also an important disincentive for capital outflows.

3.6.

Corporation tax plays a more important role in developing countries’ tax revenue structures than it does in developed countries. As a consequence the former are harder hit by tax avoidance strategies. At the same time, both nominal and actual corporation tax rates have been falling worldwide since the 1980s so as to attract investors. For companies, corporation tax is an important indicator of the business climate. Thus international tax competition has developed, which is more problematic for developing countries because of their tax revenue structures than it is for developed countries. The spillover effects of tax competition are an issue that has already been raised by the International Monetary Fund (IMF) (6). In addition, many of the developing countries see few big firms investing in their countries which represent a significant share of overall corporation tax receipts.

3.7.

It is difficult for tax authorities to calculate transfer prices using the arm’s length principle for cross-border transactions between companies within a group. Authorities in developing countries have limited capacity to do this, and tax-induced transfer price manipulation remains an important problem.

3.8.

DTAs set taxing rights between signatory countries, regulate information exchange between their tax authorities and thus provide legal certainty. They can therefore attract foreign direct investment and ultimately promote growth. DTAs can, however, have an impact on the taxing rights of source countries. Withholding tax rates for royalties, interest and dividends are generally lower than the source country’s domestic tax rates. Some provisions, such as a restrictive definition of permanent establishment, can limit taxing rights. Developing countries are, of course, interested in further investment, but may lose taxing rights. Tax Information Exchange Agreements may therefore be a better option if a country predominantly seeks to obtain tax information from other jurisdictions.

3.9.

The starting point for negotiations is most often the OECD Model Tax Convention, which is geared more towards the interests of industrialised countries (7). The UN Model Convention is designed to be an alternative for developing countries, better reflecting their interests (8). In general, this makes provision instead for giving source countries more taxation rights than the residence country of the producing company.

3.10.

Developing countries may be deprived of tax revenue when companies establish special-purpose entities in different countries in order to play off a number of DTAs against one other so as to reduce taxes. It may also prove difficult for the source country to tax services and indirect transfers of assets on the basis of DTA provisions. The desire for opportunities for technology transfer aimed at promoting sustainable growth in developing countries should be taken into account.

3.11.

There have been studies on revenue losses for developing countries. The Dutch non-governmental organisation SOMO has estimated the annual revenue losses from withholding tax on interests and dividends resulting from DTAs between the Netherlands and 28 developing countries at EUR 554 million (9). An Austrian study concluded that impact assessments of DTAs should be carried out because they can lead to revenue losses even if investment is increasing (10). According to estimates by the Unctad in the ‘World Investment Report 2015’, multinational corporations bring around USD 730 billion into developing countries’ budgets. It nevertheless states that when inward investment is channelled through offshore investment hubs, an estimated USD 100 billion annual tax revenue is lost for developing countries (11). Such revenue losses are at odds with the SDGs outlined above.

4.1.

More efforts are being made to support developing countries in tax matters, such as through the Addis Tax Initiative. International taxation policy falls within the remit of the Member States. DTAs are concluded bilaterally; EU legislative initiatives are essentially limited to instruments to complete the internal market. There is cooperation between the European Union and its Member States on Policy Coherence for Development (PCD) (12). The impact of the international tax system on development has also been recognised by the European Commission, and it is likewise looking at this issue (13). To ensure policy coherence for development, it is necessary to examine the effects on developing countries of tax policies in the EU that are incompatible with development policy objectives and, where appropriate, to take proper action.

4.2.

At United Nations level, work is being done on taxation issues through the Financing for Development process, Ecosoc and the UN Tax Committee, as well as specialised agencies such as Unctad. At the request of the G20, far-reaching reforms were agreed on within the OECD with the project to combat BEPS. Key concerns here included eliminating ‘treaty shopping’, harmful tax practices by governments (such as ‘patent boxes’ and opaque ‘rulings’), hybrid mismatches in the tax treatment of debt, and inefficient transfer pricing and reporting. Given the importance of corporate income tax for developing countries, the BEPS Action Plan is expected to have a positive impact for them.

4.3.

Numerous non-OECD countries, including African states, have committed to the Inclusive Framework of the OECD BEPS Action Plan. 103 countries have committed to a new Multilateral BEPS Convention adopted in June 2017, which simplifies the interpretation of bilateral tax conventions within the meaning of the BEPS Action Plan. A ‘Platform for Collaboration on Tax’ was launched by the United Nations, OECD, IMF and World Bank with the intention of stepping up international cooperation on tax issues. This initiative can help create greater consistency between OECD work and UN forums. Whether the desired effect is achieved is a matter to be monitored.

4.4.

The EESC recognises the OECD’s efforts in the further development of a better international tax regime. However, civil society organisations (14) are critical of the fact that developing countries do not have voting rights in the OECD. They were only invited to participate after the BEPS Action Plan had been drafted. The European Parliament has made a similar remark; it has called for the relevant UN bodies to be strengthened so as to allow international tax policy to be designed and reformed on equal terms (15). In an IMF Working Paper, experts also expressed misgivings about the repercussions of the BEPS Action Plan on developing countries (16).

4.5.

In order to assess the impact of the reform and make any adjustments necessary, the relevant UN bodies, in particular the UN Tax Committee, should be strengthened and given more resources. In any case, the European Commission should monitor the effective implementation of the Multilateral BEPS Convention signed in June 2017 and pursue the commitment to step up international cooperation on tax issues between the UN, the OECD and international financial institutions.

4.6.1.

The package of measures to combat tax avoidance addressed issues relating to international tax policies, i.e. going beyond the scope of the EU (17). Information contained in the country-by-country reporting framework (18) adopted by the EU, G20 and OECD constitutes an important tool for tax authorities. A worldwide publication of country-specific data may put the general public, including workers and responsible investors, in a better position to assess to what extent companies pay taxes in the countries in which they make their profits. The EESC notes that a 2015 European Parliament report recommended a series of improvements, yet to be implemented. In this connection, the EESC would draw attention to its own earlier opinions with statements on, in particular, country-by-country reporting and the fight against money laundering, with recommendations on public ownership registers. The EESC points out that a list of uncooperative jurisdictions for tax purposes is being compiled. It calls for greater efforts to be made to carry out the European Parliament’s recommendations and itself recommends that criticism from non-government organisations be addressed. It makes sense to promote the worldwide introduction of these measures through international tax agreements, so as to improve the information available to tax authorities in developing countries. The goal should be to be able to achieve the same standards worldwide, with developing countries having an equal say when these standards are being drafted.

4.6.2.

Automatic exchange of tax-related information was provided for in the European Union through changes to the Mutual Assistance Directive (19). However, developing countries still have to conclude bilateral mutual assistance agreements with European countries. Doing this requires reciprocal data exchange and data security, often posing a capacity problem for developing countries.

4.6.3.

The Commission Communication on an External Strategy for Effective Taxation (20) addresses the issues raised in this opinion. A common EU list of uncooperative jurisdictions for tax purposes is currently being compiled (21). This EESC has welcomed this step. Non-governmental organisations, however, have been more sceptical about such a list (22). The EP is likewise calling for a worldwide definition of tax havens which also includes EU Member States and their overseas territories (23).

4.6.4.

The Recommendation on Tax Treaties (24) addresses important issues relating to DTAs and urges the Member States to strengthen their tax treaties to combat treaty abuse and treaty shopping. On the other hand, it does not call for any impact assessment of DTAs, in particular as regards their implications for development policy coherence or spillover effects. The Platform of Tax Good Governance, which is to be welcomed and which is working on issues of international taxation with the involvement of civil society organisations, has submitted a working paper to this end (25). Member States should take this into consideration.

4.6.5.

Tax avoidance strategies are often related to opaque property ownership. Following the amendment of the Fourth Anti-Money Laundering Directive (26), no publicly accessible registers of ownership have been created for trusts or other companies carrying out investments. Such registers would help developing countries to investigate cases of suspected money laundering and tax fraud.

4.6.6.

The proposal on a Common (Consolidated) Corporate Tax Base (C(C)CTB) is the subject of another EESC opinion (27). In relation to participation in international tax conventions and the relevance thereof for tax authorities in developing countries, such an agreement — and the resulting information — can serve as a good example, with an impact on DTAs with third countries. Figures for within Europe would also provide reference points for comparative calculations in developing countries. The goal should be to achieve the same standards worldwide, with developing countries having an equal say when they are drafted.

4.6.7.

The EESC recommends that good tax governance clauses be enshrined in all relevant agreements between the EU and third countries and regions in order to promote sustainable development.

4.6.8.

The EESC recommends that, when new and revised free trade agreements are being concluded between the EU and developing countries, the opportunity be taken to analyse bilateral tax agreements as well. This should entail impact assessments on the repercussions of Member States’ international tax policies on development policy goals. Doing so could also contribute to implementation of the recommendations set out in the European Parliament’s report.

5.1.

In line with the anti-tax-avoidance package and for the purposes of Member States’ and the EU’s Policy Coherence for Development (PCD), the international tax policies and DTAs of Member States are to undergo regular impact assessments (28). To ensure better coordination of the EU’s development policy with Member States’ tax policies, the European Commission should ensure that Member States which are negotiating a DTA with a developing country take due account of coordinated EU development policies. Accordingly, the European Commission’s recommendation on the implementation of measures against tax treaty abuse is to be welcomed (29). With a view to development objectives, greater consideration should be given to the needs of developing countries. Here the EU’s commitment at UN level, namely to the UN Tax Committee, should be strengthened and steps taken to promote capacity-building in relation to a global forum with equal involvement of all countries.

5.2.

Transition periods must be provided for to allow developing countries to be included in measures enabling automatic information exchange while capacity is still being created.

5.3.

Good governance in taxation should be an integral part of companies’ CSR in the context of corporations’ reporting obligations.

5.4.

With plans for private investors to be more closely involved in European development policy, issues of tax concessions for development engagement are more pertinent (30). Since taxation matters are tied in with sustainable development aims, businesses should duly pay their taxes in the country where their profits are made through the creation of added value (31). This should be ensured when encouraging private sector commitment.

5.5.

Moreover, in general, care should be taken to ensure that the implementation of sustainable development objectives is not undermined by granting tax concessions.

5.6.

The EESC reiterates its comments on public beneficial ownership registers of bank accounts, businesses, trusts and transactions (32) and considers it makes sense for the introduction of these measures to be promoted worldwide through international tax agreements. Moreover, these measures should in particular be taken into account through efforts to build up capacity in order to support moves to counter illicit financial flows from developing countries. Since there is a concern that many European companies operating in developing countries might not fall within the scope of country-by-country reporting, the EESC would refer to its remarks on this subject (33). It would recommend that there also be an assessment of the impact of other relevant rules on developing countries, particularly of rules whose scope is defined by annual turnover.

5.7.

The EU and its Member States, in the New European Consensus on Development, have committed themselves to cooperating with partner countries in making progressive taxation, anti-corruption measures and redistributive policies more widespread, as well as combating illicit financial flows (34). While technical and personnel capacity for this is being built up in developing countries so they can fully participate in international conventions, there should already be opportunities for reciprocal information exchange in order to secure the goals defined in any consensus reached. The European Commission’s commitment (35) to promote regional forums (36) through the UN Tax Committee has been recognised and should be stepped up. An effort should be made to ensure that these forums adopt strong stakeholder participation and consultation practices. Civil society organisations in developing countries have a monitoring and supporting role to play, including in tax matters, and should therefore be given support.

5.8.

More account should be taken of a country’s tax system in development cooperation. Capacity-building is designed to help the beneficiary countries do more to help themselves and to foster the efficiency of tax systems as well as state legitimacy. Experience has been particularly positive with direct exchanges between tax authorities with similar challenges (peer-learning) and with cooperation from countries with similar development requirements (South-South cooperation). This creates opportunities for coordination on similar challenges and allows for the exchange of best practice suited to capacities.

5.9.

The EESC emphasises the need for policy coherence for development in tax matters, since measures taken within the EU have international effects on developing countries. Therefore, these effects must be taken into consideration and the developing countries affected must be involved.

2.3.2018   

EN

Official Journal of the European Union

C 81/37

Rapporteur:

Helena DE FELIPE LEHTONEN

1.1.

As early as the Barcelona Declaration of 1995 (1), economic and social organisations and civil society as a whole were highlighted as playing a key role in fostering the gradual construction in the Mediterranean of an area of peace and stability, shared prosperity, and dialogue between the cultures and civilisations of the various Mediterranean countries, societies and cultures. At present, civil society organisations in the Mediterranean are forums for inclusion, participation and dialogue with public authorities, including local authorities, with the aim of promoting economic, social and cultural rights in the Mediterranean region. The EESC considers it necessary to strengthen the role of ESCs where they exist and to encourage countries without ESCs to set them up by intensifying synergies between the various actors involved. In order to promote these rights, the ESCs and economic and social organisations need to develop partnerships so as to make them more realistic and effective.

1.2.

Women are victims of gender stereotypes which reproduce political, economic and educational barriers with serious consequences for society’s development. The EESC calls for steps to be taken to narrow the enormous gaps between legislation and reality. To this end, the Committee believes there is a pressing need to provide resources to train and educate those responsible for ensuring that this legislation is implemented effectively. In order to strengthen rights, the EESC recommends involving local authorities in the various activities carried out by organisations, economic and social actors, civil society and their gender equality networks working in the relevant societies. This work should be backed up with contributions from universities and specialist research centres.

1.3.

The threat of violent extremism must be countered by addressing its multiple causes that go beyond security. Economic and social organisations must play a leading role in this endeavour in collaboration with institutions and networks dedicated to intercultural and interfaith dialogue with a view to achieving a greater impact and including cultural heritage, artistic expression and creative industries in their activities. The EESC urges the European Commission and the Member States of the Union for the Mediterranean to promote these intercultural dialogue activities among social partners as well, thus strengthening specialised bodies that have worked in the Mediterranean for many years, such as the Anna Lindh Foundation (2). In terms of heritage, the EESC calls for increased cooperation in the protection of cultural heritage that is under threat because of armed conflict and violent organisations.

1.4.

Economic, labour and social rights are essential for economic development and a democratic society. These rights include free enterprise, freedom of association and of industrial action, collective bargaining, and social protection in areas such as health, education and old age. As already pointed out by the ILO when it was set up and in the Declaration of Philadelphia in the sense that it was necessary to subordinate economic organisation to social justice. And that this should be the central aim of national and international policies. The Declaration of Philadelphia stresses that economics and finance are resources that serve people.

1.5.

The media play a crucial role in shaping mutual perceptions and views and are a key driver for improving intercultural dialogue and fostering respect, tolerance and mutual understanding. The EESC therefore welcomes the launch of projects that seek to ensure respect for diversity and promote information that is free of bias, stereotypes and distorted perceptions. At the same time, it encourages greater use of tools for monitoring, training and awareness-raising in order to tackle racism and Islamophobia in the media, and urges the promotion of cooperation mechanisms and joint platforms for professional development relating both to professional ethics and defending freedom of expression.

1.6.

Education is the main vehicle for socioeconomic mobility and as a result for potential improvements in quality of life. By contrast, unequal educational opportunities put the region’s stability and security at risk. The EESC therefore calls for joint efforts to improve the quality of primary and secondary education, higher education and vocational training through the exchange of experience on curriculum development and innovative methodology. Furthermore, the EESC considers it essential to close the knowledge gap between the two shores of the Mediterranean and, to this end, proposes the promotion of joint knowledge and research networks to facilitate the transfer and circulation of knowledge and the mobility of teachers, students, academics and researchers as well as support for the translation of their work, especially from and into Arabic.

1.7.

Non-formal education is a vital additional element given the valuable role it plays in shaping more inclusive and pluralistic societies. The EESC believes that the synergies between formal and non-formal education should be stepped up and that this type of education should be promoted as a tool for developing a culture of peace and lifelong learning. The EESC therefore calls for more resources to be earmarked for non-formal education and for the transfer of experience and know-how between Europe and the Southern Mediterranean to be promoted.

1.8.

With a view to developing an inclusive and competitive economy, support is needed for the digital and technological integration of people. To this end, the EESC underlines the need to promote local and regional projects that empower citizens with regards to the use of new technologies, entrepreneurship and digitalisation, together with the need to strengthen initiatives aimed at citizen participation, promotion of digital training and the creation of decent jobs, such as urban initiatives on social and digital innovation (Labs).

2.1.

In 2011, political systems were shaken by a hope for change among young Arabs. Unexpectedly, these systems were fundamentally called into question. Tunisia, Egypt, Libya and Yemen deposed their political leaders but the concrete political circumstances would end up taking them in very different directions: from the steadfast transition in Tunisia, sustained by its dynamic civil society, to the change of regime in Egypt, through the open conflicts in Libya and Yemen. Syria has remained embroiled in a bloody war, which has now taken on a regional and international dimension. For example, there have been tragic population displacements and unprecedented migratory movements that have destabilised the entire Euro-Mediterranean area.

2.2.

Beyond a change of regime, the aim was to create a fairer and more inclusive system, offering political freedoms, social justice, opportunities and dignity. Expectations were frustrated because they were not translated into the social sphere. Specific political circumstances, both inside and outside these countries, helped to frustrate them. Six years on, legitimate calls for economic, social and cultural rights remain valid but unheeded, and continue to be a potential source of instability for the region.

2.3.

The EESC therefore considers achieving peace and democracy throughout the region, as well as respect for the fundamental and human rights of all its citizens, to be an absolute priority.

2.4.

Fundamental rights: unwaivable and inalienable

2.4.1.

The EESC encourages all countries of the southern and eastern Mediterranean to sign up to the International Covenant on Civil and Political Rights (3) and the Charter of Fundamental Rights of the European Union (4). At the same time, it stresses the importance of the principles and values of secularism, as well as the protection of the rights of persons belonging to national or ethnic, religious and linguistic minorities (5).

2.4.2.

The EESC underlines the crucial importance of advocating a decent quality of life for all. The EESC stresses the need to ensure that people have access to sufficient food and drinking water at affordable prices and sufficient access to energy in order to prevent the energy exclusion of individuals and communities. It also underlines the need to promote a decent environment and to develop healthcare provision.

2.4.3.

Given the special circumstances in the region, the right to adequate housing should be ensured at both national and international level or, in the absence thereof, to decent refuge/shelter for individuals and families. At the same time, the EESC believes that the right to the inclusive and proper reconstruction of devastated areas should be guaranteed, regardless of whether this is the result of natural disasters or armed conflict.

2.5.

The right to decent work: a way of ensuring social stability and progress

2.5.1.

The EESC believes that societies in neighbouring countries need to pool efforts to promote greater inclusiveness and cohesion. Likewise, their economies should undergo reform and innovate in order to create decent jobs — a key element of sustainable development.

2.5.2.

At the same time, the EESC stresses the need to guarantee the rights which must underpin these principles. In this respect, the right to decent work in these countries must be safeguarded, regardless of social background, religion and nationality.

2.5.3.

The EESC believes that steps must be taken to promote decent work as a way of ensuring social stability, as advocated by the ILO Declaration on Fundamental Principles and Rights at Work and its follow-up (6) and in the International Covenant on Economic, Social and Cultural Rights (7) as a means of avoiding poverty and encourages the signing of these documents. It is therefore essential to safeguard fundamental labour rights such as the right of association, the right to set up a trade union or to join a trade union of one’s choosing, the right to strike, effective recognition of the right to collective bargaining, as well as the right to certain health and safety conditions at work and to receive an income.

2.5.4.

Likewise, as proposed by the ILO, the right to housing should be developed in order to protect the whole population, and especially the most vulnerable segments of the population. It is also essential to combat violations of basic rights such as child exploitation or forced labour, as well as to promote access to work for women and people with disabilities.

2.6.

Entrepreneurship: a key driver of economic development

2.6.1.

The European Union believes that the five key factors for ensuring peace, stability, security and prosperity in the Euro-Mediterranean area are: economic development through modernisation and diversification of economies; strengthening the business eco-system and innovative entrepreneurship; creation of jobs through skilled training especially for young people; development of the private sector, especially SMEs; and energy and environmental sustainability (8). Attention is drawn to the creation of quality jobs as a basis for economic prosperity and the enhancement of female entrepreneurship and entrepreneurial synergies on both shores of the Mediterranean.

In turn, the EESC considers that such factors are inseparable from social development, as stability, security and prosperity are always based on integration and social cohesion.

2.6.2.

As a key element in the development of these economies, the joint communication advocates the need to allow for private entrepreneurship and ensure that it can operate under fair conditions. A legal framework must therefore be safeguarded that provides guarantees for the right to private property and its inviolability, subject to the legal framework.

2.6.3.

The Committee also attaches importance to efforts by the public authorities to protect free and fair economic competition, which ensures that entrepreneurs can work under equal conditions. It is therefore essential to ensure equal treatment in access to finance and the availability of microfinance services as well as a public administration that is free from corruption and has a public-service remit.

2.7.

The right to create and innovate: the guarantee of a diversified economy with added value

2.7.1.

The ministerial declaration of the Union for the Mediterranean on the digital economy (9) suggests promoting the inclusive and cross-cutting effects of new technologies in the fields of culture, society, the economy, government and security.

2.7.2.

The EESC also supports the approach of the joint communication on the need to diversify and develop the economies of the Mediterranean region in a sustainable and inclusive manner.

2.7.3.

When it comes to designing new programmes, the EESC stresses the need for the EU to set up programmes for the Euro-Mediterranean area in order to encourage innovation that enables the region to make progress economically, while also preserving the individual and collective right to create and innovate. This implies the recognition of the right to intellectual property, the right to share and disseminate innovation and the right to have access to new technologies.

2.7.4.

The EESC recognises digital inclusion and free internet access as both an individual and collective right, which is inherent in innovation.

2.8.

The right to high-quality education: a pillar of human development

2.8.1.

Education is the main vehicle for socioeconomic mobility and for potential improvements in quality of life. The United Nations Programme for Development (UNDP) (10) has highlighted that, although primary education has reached universal standards and significant progress has also been made in secondary education in many countries in the region, the quality of such education is poor. The World Bank has implemented programmes for this region in cooperation with other agencies, and the European Commission should also carry out work in this area. At the same time, it is pointed out that the significant inequality of opportunity in education is harming the social contract in Arab countries.

2.8.2.

The roadmap of the Union for the Mediterranean (11) stresses the need to strengthen education as a key tool for creating sustainable and skilled jobs, especially for young people who are out of work and are at risk of developing bad work habits; research and innovation as a basis for modern economies; and sustainability as a cross-cutting approach to ensure inclusive social and economic development.

2.8.3.

Strengthening social capital is crucial for the stability and security of the region. There is therefore a need to promote primary and secondary education, higher education, access to science and to scientific knowledge, employability, health, youth empowerment and mobility, gender equality, discussion forums and social inclusion.

2.8.4.

Notwithstanding some problems in accessing education and making it universally available, and despite the need to improve the quality of primary and secondary education, the overriding issue is bridging the gap between training and employment. In this regard, it is vital to promote structures that link up the labour market and the education system, with a view to ensuring that young people are fully integrated into society. To this end, the EESC believes that the exchange of experience on curriculum development and innovative methodology must be encouraged, promoting the transfer of experience and practices in order to develop competences and skills suited to working environments. It is also essential to promote and attach greater value to vocational education and training given the challenge of creating 60 million jobs in Arab countries over the next decade.

2.8.5.

The social partners and other specialist organisations have highlighted the central role of non-formal education (NFE) as a key tool and long-term solution for combating radicalisation and extremism, and for its contribution to the integration of at-risk groups, particularly young people and women.

2.8.6.

The EESC welcomes the recognition that non-formal education (NFE) is an important way of complementing formal education, and believes that synergies between them should be stepped up. For example, it believes that there should be greater political commitment to NFE and that it should be provided with a bigger budget, given that it promotes mature and socially integrated young people, teaching them about active participation and the development of democratic values, and is an effective instrument for strengthening a culture of peace.

2.9.

Academic and educational mobility: bridging the knowledge gap

2.9.1.

The mobility of young people is a key element of meeting the challenges facing the Mediterranean. As a matter of fact, migration in Arab countries is an indication of the social exclusion of young people with high-level qualifications. There is therefore a need to promote migration that is beneficial for both countries of origin and destination. This will require greater recognition of diplomas and qualifications and steps to facilitate academic mobility and improve the legal framework for conditions of entry and residence in the EU applicable to nationals of neighbouring countries, for the purposes of research, study, pupil exchanges, training and voluntary service.

2.9.2.

At the same time, one of the biggest gaps that currently exists between the two sides of the Mediterranean is the knowledge gap. The EESC therefore believes that measures should be taken to promote the production and circulation of scientific and academic knowledge, and proposes the creation and promotion of joint Euro-Mediterranean knowledge and research networks. It is also essential to promote the translation of any relevant academic and scientific work, especially from and into Arabic.

2.9.3.

At the same time, the EESC is keen to encourage mobility of students, teachers, researchers, academics and scientists through placements, exchanges and practical experience, as a crucial way of promoting academic quality, employability of young people, and strengthening the effective implementation and the achievement of results by the Erasmus Plus Programme in the countries of the Euro-Mediterranean region, as well as the circulation of knowledge and intercultural dialogue.

2.10.

The media and intercultural dialogue: the key to tolerance

2.10.1.

The pluralism, independence and professionalism of the local media ensure social progress and help the media act as a catalyst for change in the neighbourhood countries.

2.10.2.

The EESC underlines the need to promote dialogue and cooperation amongst the media in the Euro-Mediterranean area, with a view to improving and strengthening professional standards and their legislative frameworks. It is also crucial to help guarantee and protect freedom of the press and freedom of expression.

2.10.3.

The role of the media in improving intercultural dialogue and encouraging respect, tolerance and mutual understanding must be recognised. Given the increasing prevalence of anti-Western speech in the South and populist xenophobic speech in Europe, it is more vital than ever to take steps to combat this type of narrative in a way that can counter the views that pit peoples, cultures and religions against one another on the basis of a binary, black and white approach that is non-inclusive.

2.10.4.

In this connection, the EESC welcomes the launch of projects that seek to ensure respect for the diversity that exists in Europe and advocate tolerance and information free of bias, stereotypes and distorted perceptions, such as the Islamophobia media observatory in Spain (12), which promotes information free of racism. It in turn encourages the launch of cross-cutting projects to this end.

2.10.5.

Beyond the security sphere, lack of opportunity, particularly for young people, may be one of the underlying reasons for instability and can be added to the causes of radicalisation. There is clearly a need to prevent and combat extremism and racism by promoting intercultural dialogue. For example, synergies between the institutions and networks dedicated to intercultural and interfaith dialogue should be stepped up and complementarities found in order to achieve a greater impact.

2.10.6.

Mediterranean ESCs, economic and social actors and civil society must all be involved in preventing radicalisation and violent extremism. Mechanisms are therefore needed to support exchange and cooperation with an allocated budget, as well as to tackle issues relating to justice, gender inequality, hate speech, youth unemployment and illiteracy, as part of a wider de-radicalisation effort that also includes the promotion of intercultural dialogue. In this connection, the work of the Radicalisation Awareness Network (RAN) (13) and its Centre of Excellence should be underlined.

2.10.7.

The EESC believes that exchanges between intellectuals, artists and cultural operators in the region must be encouraged, since they are key agents of social change, promoting shared projects that help develop dialogue and shared knowledge. At the same time, the Committee calls for increased coordination and cooperation to protect cultural heritage and to highlight and promote awareness of the different cultural and artistic disciplines and sensitivities that coexist in the Euro-Mediterranean area, as a valuable part of cohesion and mutual understanding.

2.11.

Civil society and synergies between social stakeholders: forums for inclusion and debate

2.11.1.

The economic crisis and xenophobia in the northern Mediterranean, but also the demand for freedom of expression and the fight for human rights in countries on its southern shores, impact decisively on efforts to secure economic, social and cultural rights in the societies of Euro-Mediterranean countries.

2.11.2.

In this regard, the European Parliament’s human rights report of November 2015 (14) states that greater support for civil society is needed. However, civil society organisations in the countries of the South still have low visibility, in spite of their efforts and the risks they occasionally take as well as the role they play in promoting social change. The Mediterranean ESCs can play a role in this regard by providing a space to meet, discuss and disseminate information.

2.11.3.

The EESC notes that the voluntary sector is a sphere that contributes to inclusion. At the same time, the EESC believes that the European Commission should increase support for projects carried out by organised civil society through its economic and social organisations, its associations, and the networks that these comprise, and that partnerships and synergies between the different stakeholders involved should be stepped up.

2.11.4.

The EESC believes that the Euro-Mediterranean ministers should cooperate with the Euromed Summit of Economic and Social Councils and Similar Institutions on specific projects, without prejudice to the provision of support for civic and cultural associations.

2.12.

Women: at the centre of economic, social and cultural rights

2.12.1.

During the three Euro-Mediterranean Ministerial Conferences on Strengthening the Role of Women in Society held in Istanbul (15) (2006), Marrakesh (16) (2009) and Paris (17) (2013), governments promised to implement the commitments adopted: equal rights for men and women when taking part in political, economic, civil and social life; tackling all forms of violence and discrimination against women and girls; and working on changing attitudes and behaviour to achieve gender equality so that women are empowered, not only in terms of rights, but also in reality.

2.12.2.

Despite the legislative changes adopted in southern Mediterranean countries, the UNDP believes that we are still far from achieving women’s equality with regard to economic, social and cultural rights.

2.12.3.

The EESC notes the significant disparity between official declarations, proposals from institutions and even current legislation, and the everyday reality as experienced by women in their communities, and underlines the need to bring national laws into line with constitutions and to close legal loopholes that still allow discriminatory practices against women.

2.12.4.

In this connection, the EESC emphasises the need to provide resources to train and educate those responsible for overseeing the effective application of legislation: judiciary, security forces, businesses, educators, media, institutions such as the ESC, etc.

2.12.5.

In order to strengthen rights and obtain better results, the EESC recommends bringing together local authorities and civil society organisations working in the field of gender equality, given that they have at their disposal better data on the problems and needs of the population. This joint work by different stakeholders could be supported with contributions from academia (universities and specialist research centres). One example is the Euro-Mediterranean Women’s Foundation (18) (FFEM), which, together with the Federation of Leagues of Women’s Rights, the regional authority of Marrakesh, Cadi Ayyad University, the regional committee on human rights and other local bodies, has carried out an awareness-raising campaign against child marriages.

2.12.6.

The EESC therefore calls on ministers of the Union for the Mediterranean’s Member States to ensure that these areas are taken into account at the next ministerial conference and that sufficient funds are provided for these initiatives and campaigns.

2.12.7.

The EESC maintains that failing to take the above points into account will have a major impact. Child marriages, early interruption of education and hence the devaluation of women in the labour market and in politics, are some of the factors that have a negative impact on efforts to secure rights, especially those of women and girls.

2.3.2018   

EN

Official Journal of the European Union

C 81/44

Rapporteur:

Brenda KING

Co-rapporteur:

Lutz RIBBE

1.1.

Like all other parts of the world, Europe is facing three major issues: (1) the depletion of the earth’s natural resources, including climate change and biodiversity loss; (2) social inequalities, including youth unemployment, people left behind in regions with declining industries; and (3) public loss of trust in government, the political establishment, and the EU and its governance structures, as well as other institutions.

1.2.

These three major issues need to be understood against the background of digitalisation (a major megatrend) and globalisation, as these have substantially impacted Europe’s labour markets, and will continue to have an even stronger impact in the future. Digitalisation especially can either facilitate addressing the three issues or exacerbating them. Whether digitalisation will have a positive or negative impact depends how it is politically managed.

1.3.

Based on a thorough analysis of the interplay between these three major issues and digitalisation, the EESC calls on the Commission to prepare a long-term strategy for Europe’s sustainable development, with the aim of fostering measures that strengthen its economy in order to realise social and environmental benefits. This opinion aims to put forward issues and input to be considered in the preparation of the long-term strategy.

Some people resist change. In the midst of continual technological breakthroughs, some people have vested interests in maintaining the status quo. Other people may feel insecure about trying to adapt to an ever changing society. For others, the changes are not fast enough (e.g. proponents of green energy). Policy-makers should take these fears into account and directly address the problem, instead of resorting to the status quo. The first step would be to start an open debate on the issues and strengthen participatory democracy, including the European Citizens Initiative.

1.4.

‘No action’ is not an option. Political will is needed to steer change in the right direction. There is a need for stronger interlinkages between economic development, environmental protection and social policies. The European Economic and Social Committee (EESC) maintains that implementation and realisation of the Sustainable Development Goals (SDGs), together with the Paris Agreement, and well-managed transitions to the low carbon economy and the digital economy, will resolve the major issues facing Europe and make Europe a winner of this new industrial revolution. We recommend that the Commission as a matter of urgency develop the policies outlined in its ‘Next Steps’ (Commission Working Document) (1), and focus more on integrating the SDGs and the Paris Agreement fully into the European policy framework and current Commission priorities with the objective of setting out a vision for a fair and competitive Europe to the year 2050.

1.5.

The need for strong political input must not be misunderstood. While an appropriate regulatory framework is indispensable to shape the transition, Europe needs an agenda that affects the whole of society by: aspiring to fair globalisation; aiming to increase competitiveness and making Europe a leader in the new technologies; aiming not to leave anyone behind; eradicating poverty and creating an environment which restores people’s trust in political systems as well as multilateral forms of governance (2). Apart from leading the way in various policy areas, policy approaches must also strive to activate the huge potential of civil society. Social entrepreneurship, citizens’ initiatives and community work are only some examples of how sustainable development can be realised via a bottom-up approach, especially when it comes to the necessary shift towards a low-carbon or circular economy. The case of decentralised renewable energy is the best benchmark in this context.

1.6.

In the near future, the Commission and the EESC should carry out further work together on the key strategic policy areas analysed in this opinion, for instance:

1.7.

A comprehensive and coherent strategy is needed to realise this policy mix. The EESC recommends that such a strategy be geared to the long term, and that it be explicit, horizontally and vertically integrated, manageable and participatory. Therefore the EESC considers it crucial to ensure that the transition to 2050 is designed and conducted with the full involvement of civil society representatives. In order to strengthen participatory democracy, the Commission should reflect on its right of legislative monopoly.

(1)

How to deal with planetary limitations and the overall ecological challenge, including climate change and biodiversity loss?

(2)

How to respond to increasing social inequalities in a globalised world?

(3)

And how to overcome the erosion of public support for governments and institutions?

3.1.1.

The platform economy, artificial intelligence, robotics and the internet of things — global developments in these areas are wide-ranging and accelerating, and will sooner or later affect all areas of the economy and society. Digital technology is becoming available for large parts of society, but some groups may not have access to these extremely powerful digital tools.

3.1.2.

The convergence of digital technologies with nanotechnology, biotechnology, materials science, renewable energy generation and storage, and quantum computing has the potential to create a new industrial revolution (4). In order to bring Europe to the lead in the new worldwide technological and economic competition, massive investments and new initiatives are needed.

3.1.3.

Digitalisation has many benefits. It gives rise to new products and services that benefit consumers. It has the potential to help achieve some of the Sustainable Development Goals (SDGs) by raising global income levels, improving people’s quality of life, creating opportunities for more inclusive democratic models and increasing the number of quality jobs as well as the EU’s overall competitiveness — just as the previous industrial revolutions did. There are also threats — studies point out the possibility that digitalisation may destroy many more jobs than it will create.

3.1.4.

Digital technology will bring production and consumption much closer together, minimising over-production. This has the potential to reduce the EU’s environmental footprint. The direct trading of economic goods — be it through peer-to-peer-transactions or a sharing economy — can decrease resource consumption. For example, digital technology supports the diffusion of shared transport services and driverless vehicles, which can increase the environmental sustainability of our mobility systems.

3.1.5.

However, digitalisation is not sustainable per se. There are barriers to market entry and economies of scale that may prevent citizens from harnessing its potential. Digitalisation could increase inequality, particularly given its potential to disrupt labour markets and its propensity to create polarisation with many low and middle-skilled jobs susceptible to automation. Robotisation and the platform economy may pose a serious threat to many European workplaces, and they create new risks as most of the relevant technologies operate on the basis of data, including especially personal data.

3.1.6.

The new opportunities to generate wealth often only benefit a certain category of people: the well-educated with good social skills and high risk tolerance. The main beneficiaries of digital innovations tend to be the providers of intellectual, financial and physical capital: innovators, shareholders, investors and highly-skilled workers. It is feared that digital technology will become one of the main reasons for stagnating or even decreasing incomes.

3.1.7.

An active and encompassing policy is needed for seizing the opportunities of digitalisation, with reference to the three major problems described above. The risks derived from digitalisation must also be monitored and managed. The EESC should continue working actively on these issues.

3.2.1.

Being committed to the global fight against climate change (i.e. the Paris Agreement) and in favour of natural resource protection, Europe urgently needs to fundamentally reduce the environmental footprint of its economy. The ecological crisis is already hitting us. Globally, population growth, long-term economic growth based on fossil fuels, and the unsustainable use of resources and land are putting increasing pressure on the environment. A key challenge, also reflected in the SDGs, is to ensure that economic development and growth respect the planet’s limitations, be that in relation to climate protection, resource use and management, and air and water quality, or to the protection of terrestrial and marine biodiversity.

3.2.2.

Deep decarbonisation of the economy necessitates the urgent transformation of many economic sectors. The shift from fossil fuels to renewables requires more energy flexibility and know-how. The general development of ‘prosumer’ (5) energy should also form an important and sustainable part of EU energy policy (6). Transport systems require structural changes through electrification and car-sharing. Housing and infrastructure need to be revamped. An advanced bioeconomy may be a major factor that will drive the greening of the economy.

3.2.3.

Europe needs to shift away from the current linear economic model of ‘take, make, consume and dispose’ towards a circular model that is restorative by design, relies where possible on renewable natural sources, and keeps the value of products, materials and resources in the economy for as long as possible. Digitalisation can be important in this context (see 3.1.4).

3.2.4.

The transition to a low-carbon, circular and eco-friendly economy is an opportunity for the EU to increase its competitiveness and resilience. It can improve the quality of life and well-being of Europe’s citizens. It also decreases dependence on imports of fossil fuels and critical raw materials and creates a stable basis for economic prosperity.

3.2.5.

However, decarbonisation and the ecological transition will involve social challenges (7), since workplaces in industries with a high ecological footprint will decrease. It must be accepted as a strategic political task to fully seize the potential that decarbonisation and the ecological transition imply for creating new jobs and improving social security, so that the net balance is as positive as possible.

3.2.6.

The shift towards a low-carbon and circular economy has been driven by bottom-up initiatives led by citizens, local authorities, consumers and innovative enterprises, in relation to both energy and food. However, instead of relevant initiatives being promoted and critical mass being generated across Europe, with a positive outcome for the labour market and social security, further progress is often hampered by administrative and regulatory systems. It is not widely realised that bottom-up initiatives can be a powerful tool to overcome the social problems of decarbonisation and the ecological transition. In order to reveal this potential it is necessary to remove the structural barriers that prevent resource-poor people from accessing the resources they require (especially capital and relevant information).

3.3.1.

While globalisation and technological progress have dramatically increased global trade and global wealth, the combination of globalisation and technological progress has also contributed to an increase in social (and environmental) inequality. According to Oxfam, just eight individuals, all men, own as much wealth as the poorest half of the world’s population.

3.3.2.

In Europe, the inequality gap is widening. According to a recent OECD study, income inequality remains at an all-time high in Europe. In the 1980s, the average income of the richest 10 % of society was seven times higher than that of the poorest 10 %. Today it is 9,5 times higher. Wealth inequality is even greater: 10 % of the wealthiest households hold 50 % of total wealth, whereas the 40 % least wealthy own a little over 3 % (8).

3.3.3.

One reason for worsening inequality in Europe is the decoupling of growth from net income. While euro area GDP grew by more than 16 % between 2008 and 2015 (more than 17 % in the EU-28), the disposable net income of households stagnated, growing by just 2 % for the EU-28.

3.3.4.

In the 24 OECD countries productivity has increased by 27 % since 1995, while average labour compensation has fallen behind, rising by only 22 %. Even worse, the increase in labour income has been significantly smaller for the social group with lower net wages. This wage inequality has worsened over the past 20 years in all European countries except Spain. The trend is most pronounced in Hungary, Poland, the Czech Republic, and the United Kingdom (9).

3.3.5.

There is a risk that this gap will widen with the changing nature of work. For instance, the automation of complex industrial processes through robotics threatens to reduce demand for medium-skilled and even lower levels of high-skilled white collar workers, who currently perform these complex tasks. This is likely to contribute further to labour market polarisation as the new jobs created will fall into either the (even) higher-skilled bracket (developing and maintaining these products/services) or the more service-oriented low-skilled bracket. According to the OECD, 9 % of jobs are at risk of being automated, while for another 25 % the tasks will change significantly.

3.3.6.

Government responses to the impact of digitalisation tend to be reactive rather than proactive, and are largely directed towards mitigating the side effects of digitalisation instead of aiming to harness its potential benefits. Government responses need to better take into account the challenge of workers representation and participation as an important aspect of investment in human capital in an evolving labour market. The EESC could continue analysing thoroughly the impact of digitalisation on the nature of work.

3.4.1.

The rise in inequality, only partially resulting from globalisation and technological progress has contributed to a loss of trust in governments, the political establishment, international organisations, institutions and global governance. Furthermore, it has fuelled a rise in populist movements and decline in traditional political parties. Youth abstention (not to speak of anti-system votes) is especially worrying: only 63 % of Europeans aged 15-30 voted in an election in 2015 (10).

3.4.2.

Many European citizens feel disconnected from political decision-making at national and European level. They believe that traditional democratic processes do not allow them to have an impact on fundamental decisions. The multi-stakeholder approach (e.g. under the UN 2030 Agenda for Sustainable Development) is an inclusive democratic model and a way of overcoming this mistrust.

3.4.3.

The transformation to sustainability cannot and must not be imposed ‘from above’; it will only be successful if it is based on broad support and active participation of a majority of businesses, local and regional authorities, workers and citizens. It must be ‘bottom-up and top-down’ cooperation. Multi-stakeholder alliances were used in framing the 2030 Agenda and are emerging in the area of climate action (11). These can serve as a blueprint for an inclusive democratic governance model which could be applied across policy sectors and facilitate transformational change and innovation.

3.4.4.

The younger generation in particular is demanding non-traditional forms of political engagement, as opposed to conventional political parties and bodies. Energy communities, partnerships between citizens and municipalities to foster energy efficiency (e.g. through contracting models) or waste management, transition town initiatives, community-supported agriculture, political blogs and other online formats, or even local currency initiatives, offer alternative forms of political engagement. These will certainly not replace traditional political work, but they can make an important contribution to political socialisation and social integration.

3.4.5.

Using the potential of the internet is another promising approach to break political logjams. Never has information been more freely available than in a decentralised network without a classical gatekeeper. This results in new challenges for society, as seen with the post-truth or fake news phenomenon. Yet we are also witnessing a boom of alternative, non-hierarchical forms of activism as well as a high use of online social networks among citizens, particularly young people.

3.4.6.

E-government can lead to governance models featuring an unprecedented level of public participation in policy-making. The EU should look to Member States like Estonia, where considerable progress has already been made. Digitalisation enables citizens to participate in decision-making processes at relatively low cost. However, evidence shows that ‘middle-class bias’ (higher representation of members of the middle class in participation forums) also exists in respect of e-participation. The EESC is well placed to engage in a dialogue at civil society level on this issue.

—

getting the best out of the digital revolution to build a new, competitive and sustainable economy;

—

shifting towards a low-carbon, circular and eco-friendly economy while ensuring a fair transition for all;

—

building a robust European social model;

—

ensuring a more citizen-driven and more decentralised democratic system while using the advantages of fair economic cooperation at a global level.

4.1.

The EESC believes that the SDGs, together with the Paris Agreement (COP21), will reinvigorate the vision of ‘the Europe we want’ (12)  (13). The Commission needs to create momentum for implementing these agreements by developing the policies outlined in its ‘Next Steps’ communication and fully incorporating these into the European policy framework and current Commission priorities. ‘The Europe we want’, like the 2030 Agenda (i.e. SDGs), places the individual at the centre of society and the economy, and would give everyone the chance to decide how they want to fulfil their needs in harmony with the social and ecological environment. This concept is not utopian. In reality, Europe now has the technological and economic wherewithal to realise this vision: the internet of things and big data, control of complex processes through mobile applications, ‘prosumption’ though the down-scaling of production and fall in production costs (e.g. renewable energies, 3D printing), new transaction and payment modes (blockchain, bitcoins and smart contracts), cooperatism and the sharing economy as new business concepts, and other innovations.

4.2.

All of these innovations have the potential to make the vision a reality, but this presumes a strategy that provides solutions to three innovation-related challenges. That strategy entails a new concept of well-being ‘beyond GDP’, where economic prosperity, social inclusiveness, environmental responsibility and civic empowerment are pursued in an integrated way.

4.3.

‘No action’ is not an option: If the EU is not willing or able to develop and implement a comprehensive strategy, Europe will not only fall short with regard to the 2030 Agenda and the vision of ‘the Europe we want’. With no action, there is a high risk of failure on each of the major challenges: Europe’s labour order will be destroyed, decarbonisation and protection of resources will cease because the social costs of ecological transition are considered to be too high, and social inequalities plus alienation will increase, posing a risk to democracy.

4.4.

It is critically important that the strategy encompass precise policy recommendations to help address the three major challenges that Europe faces and so make ‘the Europe we want’ a reality.

—

innovation

—

regulation/governance

—

social policy

—

open access

—

education/training

—

research

5.1.1.

Innovation: the new industrial revolution is an opportunity for Europe to become a technological leader and to increase its competitiveness in globalised markets. Economic value generation without high external costs must become the standard business model. We need innovative and profitable companies and enterprises to invest in sustainable production, to create high-quality jobs and to generate economic ground for welfare. For innovation to contribute to a more sustainable Europe, a framework must be developed that rewards economic activities with zero, or a radically reduced, external footprint or limited resource consumption. This will allow sustainable innovators (be they citizens, businesses, cities or regions) to compete effectively with business models with high resource exploitation and/or a large environmental footprint. Pro-active support — e.g. making micro-credit accessible to SMEs, citizens, private households, community initiatives, social businesses and micro-enterprises — must also be provided for innovators offering novel solutions to tackle environmental and social challenges and who act as early adopters (14). A single European patent could help here, provided the filing costs are not prohibitive (15). In relation to SMEs, second-chance measures should be reviewed to reduce the current high level of risk aversion in the EU (16). Policy must also open up room for experimentation right across Europe, especially in the mobility, waste, energy, agriculture, education, or health sectors. New markets can be found by shifting public procurement to digital, low-carbon, circular and eco-friendly services delivered in a socially inclusive way.

5.1.2.

Regulation: a regulatory framework must fulfil three objectives. Firstly, external effects need to be costed as accurately as possible so that business models can be developed that help achieve sustainability goals (17). Secondly, regulations must guarantee that well-developed digital infrastructure is implemented all over Europe, including in rural areas, and provide everyone with access to them (including smart heat, smart electricity grids and electric mobility networks). These should be treated in the legal sense as public services. Lastly, since digitalisation tends to favour platforms there is the risk of monopolies in major digital markets. Active anti-trust policies are therefore necessary (18). The EESC has also suggested that the Commission consider ways in which European platforms can be promoted so that added value remains in local economies (19). An independent European rating agency for digital platforms could play an important role in balancing their market power, operating with the same remit in all the Member States to assess the governance of platforms with regard to competition, employment and taxation (20).

5.1.3.

Social policy: the change brought about by decarbonisation and digitalization (see section 3) challenges social security systems in terms of managing the problem of job losses and the decrease in fiscal revenues. New approaches and models should thus be examined and developed with the aim of ensuring the sustainability of social security systems in Member States, responding to the different circumstances of the future work and supporting workers and communities in sectors and regions affected by the transition. The EESC has considered the challenges of the future of work in its opinion on the European Pillar of Social Rights, and called for a coherent European Employment Strategy addressing: investment and innovation, employment and quality job creation, fair working conditions for all, fair and smooth transitions supported by active labour market policies, and the involvement of all stakeholders, especially the social partners. Also, public investment should support communities, regions and workers in sectors that are already being affected by this transition, as well as anticipating and facilitating future restructuring and transition to a greener and more sustainable economy (21).

5.1.4.

Open access: harnessing the potential of digitalisation for a green and fair economy requires above all a general openness in the economy that allows people to actively participate in and benefit from the opportunities of technological progress (e.g. combining digital energy data with decentralised energy generation). It is therefore of critical importance to eliminate barriers to economic participation through open markets, open data, open-source models, and open standards. Each of these elements is to be regarded as a guiding principle for policy programmes in strategic sectors: energy, transport, logistics and production processes. The concept of data sovereignty needs to be developed and implemented through European law: European citizens must have the right to use their own data for their own purposes, to determine which personal data are used by third parties, to decide how data are used, to be informed about and have full control over data usage, and to delete data.

5.1.5.

Education/training: both the green economy and the digital economy require specific skills, especially since in future digital technology will be an important tool for achieving decarbonisation of European economy (see 3.1.4 and 3.2.3). Training to develop the necessary formal and informal skills, including in areas such as collaborative/community work and entrepreneurship (22), needs to be integrated into general education and lifelong learning policies. More dialogue and analysis need to be conducted on the issue. Targeted use of the Structural Funds is recommended to ensure effective support for addressing the current gap in green and digital skills, especially in regions that are already in transition or will be affected by transition in the future. Resources in European education systems will need to be directed at education and skills development in areas where human skills cannot be replaced by AI systems or where humans are necessary to complement those systems (i.e. tasks in which human interaction is vital or where humans and machines cooperate, and tasks we would like human beings to continue doing) (23).

5.1.6.

Research: a digital, green and fair economy will be the benchmark for future-proofed economic models. A well-targeted research policy, one that is based on an analysis of the environmental and social impact of innovations, especially digital innovations, will be the route to this economy. In this context R & D spending must be available for innovators developing new digital technologies and services that address environmental and/or social challenges. A network of incubators must be developed to support them.

5.2.1.

Innovation: participation is a key element of democracy. Elections and representation are one method of organising participation, but new, innovative approaches are needed to organising participation, including e-participation. It is important to open up traditional policy-making to non-hierarchical, socially fluid, and less formal forms of political activity and to foster civil-society-driven and bottom-up initiatives.

5.2.2.

Governance: the changes require transparent and freely accessible multi-stakeholder dialogues for all EU legislative processes at EU and local level. ‘Civil society’ should not be reduced to organised civil society, but should include all citizens. New alliances are of particular importance for climate action and resource protection (24). In order to strengthen participatory democracy, the European Commission’s near-monopoly on the right of legislative initiative has to be abolished in favour of more initiatives from the European Parliament, combined with bottom-up legislative initiatives, for example by removing technical, legal and bureaucratic problems in the European Citizens’ Initiative (25).

5.2.3.

Open access: crowd-sourcing methods for all EU legislation are an appropriate approach to overcoming structural barriers that make citizen participation in EU decision-making process difficult. When designing this approach special attention should be paid to accessibility, inclusivity and accountability. Open access to policy and politics can be further increased through web-based and user-friendly publication of all EU activities and data.

5.2.4.

Training/education: citizen empowerment programmes are needed to overcome ‘middle-class bias’ (see 3.4.6). Such programmes should be designed to engage those parts of the population that tend to abstain from active participation in politics, the economy and society. Awareness of and opportunities for participation as a basic principle of democracy need to be stressed in general education. It should be pointed out that active participation in political will-building processes is of mutual benefit to society and to the individual citizen, whose interests and points of view are taken into account. More funding is needed for civil society organisations that target these disengaged parts of the population and follow sustainability goals.

5.2.5.

Research: social science needs to focus more on alternative democracy practices. One example is the possible application of prototyping methodology to politics. With this approach, policy solutions would be designed within a reduced time frame, then implemented in a ‘test market’, and their impact assessed soon after on the basis of feedback from citizens and other relevant stakeholders. The impact assessment would serve as the basis for relevant changes to policy solutions before rolling them out.

5.2.6.

More generally speaking, further research is needed on how to review the nexus between (scientific) expertise and policy-making and how to combine the integration of fully transparent, independent expertise into policy-making with the need to strengthen civil participation.

5.3.1.

Innovation: a digital, green and fair economy entails enormous investment both in private facilities (e.g. in renewable energy installations or electric vehicle charging stations) and in public infrastructure (e.g. digitalisation of electricity and mobility systems). The financial sector will thus have to play a central role in making this innovation possible. Financial resources, including public resources, need to be allocated to investments that support sustainable transformation. To meet climate and energy objectives, a stable and predictable investment environment is needed and innovative financial instruments need to catalyse private finance for investments that would not otherwise happen (26)  (27).

5.3.2.

Regulation: policy must aim at building a more sustainable private financial system by including sustainability factors in financial risk assessment, extending the responsibilities of financial institutions to the non-financial impacts of investment decisions, and increasing transparency around the environmental and social impacts of investment decisions (28). Policies should also encourage investors to make voluntary commitments to invest in objects that follow sustainability principles. Greening of banking standards is essential to shift private financing from conventional investments towards low-carbon, climate-resilient investments. Central banks should guide the allocation of capital through monetary and micro- and macro-prudential policies, including sustainability standards.

5.3.3.

Social policy: households will come under pressure as a result of digitalisation and decarbonisation. Fundamental fiscal reform is therefore needed in order to increase the disposable income of households and to combine this objective with the requisites of decarbonisation. The EESC calls for a fiscal system based on internalising environmental costs and using the additional revenue to lower the tax burden on labour. Shifting taxation from labour towards resource use helps to correct market failures, create new sustainable and local jobs, increase households’ disposable incomes, and incentivise eco-innovative investments (29).

5.3.4.

Research: up to now, the impact of digitalisation and reduced fossil-fuel consumption on public finances (fiscal erosion) is still widely unknown. Research should focus on this aspect as well on the general contribution a strategic finance policy can make to sustainable development.

5.4.1.

Innovation and business opportunities: given the global dimension of the three major issues, it will not be enough to make Europe more sustainable through a clear innovation policy. In cooperation with trading partners, Europe must develop innovation concepts that are transferable to other regions of the world. Trade can help here as long as sustainability aspects are key criteria in international trade policy, including multilateral and bilateral trade agreements. A special role should be assigned to the World Trade Organisation (WTO), which should take more account of international environmental policy, such as the Paris Agreement or the Aichi Biodiversity Targets. Once respective standards are in place, European businesses, citizens, community initiatives, municipalities and regions can develop important innovations (products and services) that can be exported in response to the need for decarbonisation and using the opportunities provided by the megatrend of digitalisation. These have the potential to become export successes. Above all, the European Commission should work with the WTO and its key partners to make use of trade agreements to enhance the pricing of CO2 and any other externalities that harm sustainable innovation.

5.4.2.

Regulation: one of the sources of the increased environmental footprint in our economies is the growing distance between places of production, transformation, consumption and, sometimes, disposal/recovery of products. Making international trade compatible with sustainable development requires a smart regulatory approach to liberalisation which takes into account and strengthens local, small-scale production systems. The promotion and support of circular economy policies should ensure that systems are durable, small, local and clean. For specific industrial activities the size of the loops can be large (30). Regulation needs to provide an answer to this problem through bilateral and multilateral trade agreements.

5.4.3.

The EU should urge the World Bank and the International Monetary Fund to play an important role in promoting fiscal and financial system reforms so that an environment is created that helps developing countries to mobilise more of their own resources. This should involve domestic tax reform, but it also means mobilising the international community to fight together against tax evasion, money-laundering, and illicit flows of capital that are resulting in more money coming out of developing countries than the amount that goes in through official development assistance. Specifically, the European Commission should use the 2030 Agenda, informed by the 17 Sustainable Development Goals, as the framework for all EU-funded external policies and programmes (31).

5.4.4.

Social policy: one of the routes for implementing SDGs and for promoting a progressive trade policy that benefits all, is through the implementation of multi stakeholder approaches on responsible business conduct. In these approaches businesses, NGOs, trade unions, and governments define together how the responsibility to respect human rights can be met in practise. There is increasing concern about human rights violations in supply chains especially with regards to ‘conflict minerals’ such as cobalt which is used to make the rechargeable batteries found in cell phones, laptops, electric vehicles, aircraft and power tools. Given the commitment to transition to a low carbon economy, the continued march towards digitalisation and the complexity of responsible business conduct in international supply chains, multi-stakeholder collaboration is key. The EESC therefore welcomes, and is happy to be a partner to, the initiative by the Dutch Government to raise awareness on how multi stakeholder actions can build understanding on meaningful responsible business conduct, especially in complex supply chains that are mined using child or slave labour or in dangerous conditions.

5.4.5.

Open access: new trade agreements must be based on approval achieved via new democratic processes, with increasing citizen participation in joint decision-making. Trade and Sustainable Development (TSD) chapters in existing EU trade agreements are not functioning as well as they should. First, TSD Chapters should incorporate global multilateral agreements (2030 Agenda and Paris Agreement). Second, the civil society monitoring mechanisms should be strengthened and an analysis from a civil society perspective should be included. Third, enforcement mechanisms must also apply to the TSD chapters themselves (32).

5.4.6.

Research: more empirical evidence is needed to assess the impact of the rapid emergence in international trade of new modes of consumption and production that are progressively extending to transnational services, especially with regard to their impact on transnational taxation. This should be the basis for a decision on whether to include them in the general WTO rules or to make them part of bilateral and regional agreements, as has been the case for the Decent Work Agenda.

5.4.7.

We remind the Commission of our previous recommendation that it undertake a full impact assessment on the likely effects that implementation of the SDGs and the Paris Agreement will have on EU trade policy.

6.1.

In section 5 we identified some areas where policy measures are needed to build a more sustainable Europe within a radically changing socioeconomic context. Four criteria can be identified for Europe’s sustainability strategy. It must be:

These four criteria are expanded on below.

6.2.1.

Strategic thinking means developing a long-term perspective based on the vision of ‘the Europe we want’ described in section 4 and establishing the path Europe needs to follow in order to make this vision a reality. It will take up to three decades for the social changes brought about by the global problems and the megatrend of digitalisation described in section 3 to become manifest. Many relevant decisions, including investment decisions, need time to take effect. Three decades therefore looks like an appropriate time frame for Europe’s sustainability strategy. The relevant objectives and corresponding policy measures must be projected on the basis of that time frame (33). This backcasting approach would mean that the reference point is taken as a best-case scenario for 2050 and that all steps that are necessary to realise this best case are to be deduced from this scenario. A best-case scenario focus allows for the development of a positive narrative. Shifting from the carbon- and resource-intensive economy and from the twentieth-century centralised society must not be seen as punitive or as the end of progress, but as a new, positive age offering attractive opportunities for citizens.

6.3.1.

The long-term focus of the sustainability strategy does not imply that there are no policy measures that need to be taken in the short run. Rather, a central element of the sustainability strategy should be to develop the chain of policy measures that are needed to reach the projected objectives for 2050, beginning with political programmes that take effect over the long run, policy plans with medium-term effects, and specific measures geared towards the short term. In order to achieve the highest degree of effectiveness possible, the hierarchy between policy programmes, policy plans and policy measures needs to be clearly identified. In former approaches to sustainability, especially those developed under the Lisbon Strategy and the Europe 2020 strategy, there was a clear lack of explicitness when it came to specific policy measures. In this respect, the European sustainability strategy should take the Gothenburg Strategy for Sustainable Development (34) as a reference, with its clear focus on policy measures that was renewed in the Commission’s Communication A platform for action  (35).

6.4.1.

When it comes to realising the policy approaches described in section 5 and to implementing the different policy measures set out in section 5, one thing has to be taken very seriously: the close intertwining of the three global problems with the megatrend of digitalisation. A successful strategy must therefore avoid silo-thinking and be horizontally integrated, encompassing all six policy areas. Such an overarching long-term strategy could serve as a successor to the current Europe 2020 strategy, combining implementation of the 17 universal Sustainable Development Goals, reflecting a strong commitment to the Paris Climate Agreement, with the work priorities of the European Commission (36).

6.4.2.

A successful sustainability policy must also be vertically integrated. Sustainable development will need support at all relevant policy levels (local, regional, national, European and global). It is therefore necessary to clearly define at which policy levels the relevant steps set out in the strategic framework should be taken. The EESC recommends introducing a framework for governance and coordination alongside the strategy in order to ensure coherence between centralised and decentralised measures, and to involve organised civil society at national and regional levels. The European Semester should be further developed in order to incorporate a mechanism for vertically coordinating the implementation of SDGs.

6.5.1.

Sustainable development needs political management. Based on the measurable objectives projected to 2050 (see 6.2), intermediate targets should be set that serve as milestones. Continuous evaluation is needed in order to monitor whether the chain of explicit policy measures (see 6.3) is producing the intended results. Should the results fall behind the objectives and targets, immediate alignment of policy measures must be ensured.

6.5.2.

In order to assess progress in terms of the long-term strategic framework and the best-case scenario for 2050, a broad scorecard is needed that reflects the complex, multi-sectoral approach described in this opinion. This scorecard should include indicators from all six policy areas in order to reflect the interconnectedness of the three global problems and the megatrend of digitalisation described in section 2. A genuine strategic sustainability approach will only be possible if the highly analytical task is carried out of setting appropriate indicators and including them in a ‘holistic scorecard’. The vertical and horizontal coordination of sustainability policy (see 6.4) also needs to be managed. These three tasks (monitoring and evaluation, alignment of policy measures and coordination of horizontal and vertical integration) require administrative bodies that can be held accountable. One solution could be a directorate-general at EU level and similar bodies at national level.

6.5.3.

The EESC also recognises that in a fast-changing world there is a need to evaluate communities on indicators other than economic growth. The EESC has therefore suggested using a new benchmark: ‘the progress of societies’. This measure considers factors other than economic growth to assess a community’s progress. The progress of societies should be seen as a complementary benchmark to economic growth, providing a broader picture of the situation within a community (37).

2.3.2018   

EN

Official Journal of the European Union

C 81/57

Rapporteur:

Anne CHASSAGNETTE

Co-rapporteur:

Carlos TRIAS PINTÓ

1.1.

The economic model of ‘extract, produce, own, discard’ is being called into question by the huge increase in economic, social and environmental challenges facing Europe.

1.2.

We are witnessing the emergence of a hybrid economy in which the traditional market system is competing with the emergence of a multitude of new models that are transforming the relationship between producers, distributors and consumers.

1.3.

In addition to economic returns, some of these new models — such as the functional economy, the sharing economy and responsible finance — seek (or claim) to address other key challenges for people and the planet that are crucial for sustainable development, such as:

1.4.

Supporting such innovative models represents an opportunity for the European Union to become a leader in innovative economic models that make the idea of economic prosperity inseparable from high-quality social protection and environmental sustainability, and define a ‘European brand’. The EU therefore needs to show ambition on this issue.

1.5.

The present opinion makes the following 10 recommendations to achieve this:

1.5.1.

Improving coordination of action for the sustainable economy within the EU, by creating a permanent body for the new sustainable economy. This structure would be given resources for evaluation and communication, with a view to monitoring the development of new economic models with sustainable development potential and the implementation of the recommendations made in this opinion. This kind of structure would promote dialogue among the various stakeholders at European level. The EESC could contribute to these efforts by establishing a new economy observatory, as it has already recommended in a number of opinions.

1.5.2.

1.5.3.

It is necessary to ensure that the new models do in fact meet sustainability criteria. Under the concepts of the new sustainable economy, certain stakeholders are developing models that are not necessarily sustainable in all aspects. The Commission must take account not only of the opportunities but also of the potential risks and unwanted effects of certain new economic models, e.g. in relation to social issues, employment regulation and unfair tax competition.

1.5.4.

The EU must encourage and support education, training and information provision to improve understanding among all stakeholders of the new sustainable economic models and of the role of sustainable finance. It is important to highlight the compatibility, and the possible tensions and trade-offs, between sustainability challenges and economic profit.

1.5.5.

The Commission should analyse and complement (but not replace) private initiatives for the exchange of good practice and experience between innovators through internet platforms, networks, conferences, etc. The EESC is already supporting such initiatives by jointly managing a new circular economy platform with the European Commission.

1.5.6.

The public authorities of the EU must ensure that the developers of new genuinely sustainable economic models have access to finance during the initial phases of development and as they continue to grow. There is a need for tools and definitions to give them priority access to public funding instruments and/or to help them get funding from socially responsible investors.

1.5.7.

The European Commission could encourage the trialling of new sustainable models through a dedicated innovation fund which would be open to public-private partnerships. To this end, the EESC recommends setting up pilot projects that can create shared value and integrate the networks of the new economy.

1.5.8.

The public authorities of the EU must take account, in existing EU sectoral policies, of the stakeholders developing these new economic models so as to increase their visibility and create a leverage effect that favours their deployment. For example, it could be useful for the mobility package currently in preparation to support new models of car-sharing or car-pooling as a complement to public transport services.

1.5.9.

1.5.10.

It is necessary to rethink the way the financial sector works to make it sustainable, and to redefine the concept of risk to encompass long-term micro- and macro-level environmental, social and governance challenges. All links in the financial value chain (consumers, banks, investors, regulators and governments) need to take part in this reshaping, so that the outcomes in terms of investments and loans can be better aligned to the expectations of responsible consumers. The EESC suggests creating a platform (hub) to provide consumers with objective information for guidance on such matters.

2.

2.1.

The ‘sustainability’ of our economic model — i.e. its capacity to meet the needs of current generations without compromising the ability of future generations to meet their own needs — is an increasingly contested subject (2).

2.2.

In terms of the economy, the mass unemployment persisting in certain countries reflects the problems faced by some population groups in accessing a rapidly changing labour market. Falling purchasing power and weak growth in certain developed countries pose questions about what the aims of our economic model should be.

2.3.

In social terms, widening inequalities raise questions about the fair distribution and sharing of resources (economic and natural). The exclusion of a section of society from the benefits of growth is a reason for re-evaluating our modes of governance with a view to introducing an economic model that is more inclusive and participatory.

2.4.

In environmental terms, climate change risks call into question the dependence of our economic model on fuels with high carbon emissions. The linearity of our production and consumption systems is leading to over-exploitation of natural resources and loss of biodiversity, and the pollution emitted by our economic activities has effects on the environment and on people’s well-being.

2.5.

2.5.1.

These new models — which can draw on new technologies, particularly digital technologies — are changing the relationship between producers, vendors and consumers, who sometimes become ‘prosumers’. They are shaking up certain traditional concepts such as salaried employment, by offering more flexible forms of work and job-sharing. Although they are described as ‘new’, they may in fact represent a renaissance of old practices.

2.5.2.

This opinion looks at all the new economic models that, as well as seeking economic returns, attempt — or claim — to address at least one of the other pillars of sustainable development, namely:

2.5.3.

Innovative entrepreneurs offering new economic models that claim to be more sustainable come under the umbrella of a range of concepts such as the circular economy, the functional economy, the sharing economy, the economy for the common good and responsible finance. They are enriching the established model of the social economy (SE), which puts governance and social and environmental utility at the heart of its activities. The SE cannot be considered a ‘new sustainable economic model’, but it is nevertheless enjoying a renaissance, stimulated by these innovators. While these new models do not always have the same goals (some focus on environmental aspects, others on social aspects), they aim to produce multiple forms of value (economic, social and environmental), and should therefore not be approached on a silo-by-silo basis.

2.6.

The EU should seize the opportunity to take the lead in promoting the sustainable economic model. The European economic model must continue to reinvent itself to take account of long-term challenges and to make the concepts of economic prosperity and sustainability inseparable.

2.6.1.

Consumers in Europe are becoming increasingly aware of the social and environmental impact of their consumption. The rise of the ‘prosumer’, particularly in the renewable energy sector, is helping to shape new relations along the value chain and between producers, distributors and consumers. This also holds true for economic players. In the financial sector, for example, the notion of risk is expanding to encompass ‘extra-financial’ criteria, particularly when valuing assets. In this way, some asset managers are trying to start a process of encouraging businesses to specify, in addition to their statutory obligations, certain corporate social and environmental responsibility commitments. This process is still in its infancy, and should be continued and stepped up on the basis of genuine accountability (3). Expanding sustainable finance is the best way of shifting the European financial system from an approach based on short-term stabilisation to one focusing on long-term impact.

2.6.2.

Europe can derive many benefits from pioneering this new economy.

2.6.3.

The EU can use these new economic models to find solutions to specific problems. Car-sharing can promote more inclusive and more environmentally friendly mobility by updating our modes of transport. Business models designed to get people in difficult situations back into work help to improve access to the labour market for a section of the population.

2.6.4.

2.6.5.

The EU has the means to develop ‘European champions’ in these areas. For some businesses, combining financial profitability and sustainability criteria in their business models is becoming, or already is, a real comparative advantage in terms of winning new markets.

2.6.6.

By putting the concept of sustainability at the heart of its economic modernisation drive and of its policy interests, the EU can rally its Member States again around a unifying project, after the shock of Brexit, and put people back at the heart of the European project.

3.

While the emergence of new models that promise to be sustainable represents a real opportunity for the EU, this ‘burgeoning’ will need to be properly understood and appreciated in order to identify and encourage the agents that are driving the change.

3.1.

The functional economy, for example, replaces the idea of selling a good with that of selling the use of a good: the individual consumer no longer purchases a vehicle, but buys a transport service from a provider. From the sustainability point of view, switching from ownership to use should: encourage suppliers to optimise product maintenance, increase product life, and even use eco-design and recycling; create a pool of consumers who use a product and thus intensify the use of goods that have already been produced and may sometimes be under-utilised; and offer access to such products at prices lower than the price of owning them.

3.2.

There is not yet an established definition of the sharing economy  (4). Broadly speaking, it covers businesses that develop digital platforms on which individuals can exchange goods and services: car-pooling, rental of goods, purchase of second-hand goods, lending, donation, etc. However, this definition is very controversial: some consider it to include peer-to-peer exchange systems that are not based on digital platforms, others would broaden it to cover businesses which rent out goods while retaining ownership of them, and still others exclude any initiative of a company seeking a financial return.

3.3.

The circular economy, for its part, was developed to contrast with the linear model (5). It is based on establishing ‘positive value loops’ that reintroduce ‘end-of-life’ goods or materials into the production loop. In an ideal circular model, goods are ecodesigned, manufactured using renewable or recycled resources or waste from other sectors, reused, repaired, upgraded, and finally recycled. The advantages of the circular economy are that it is less risky and less costly, produces added value, and promotes consumer loyalty and employee motivation.

3.4.

Not all the new ‘sustainable’ economic models fit into the three concepts set out above, but these three concepts do serve to highlight the vagueness of certain terms used to describe new economic models, reflecting discussions about the profile of the sharing economy or its close relation the collaborative economy. There may also be some overlap between the concepts, so that the functional economy and the sharing economy could be seen as links in the circular economy.

3.5.

It is also important to draw attention to the diversity of businesses which are developing these new models, with large companies that are modernising their activities operating alongside start-ups seeking rapid growth, social enterprises that may be part of the SE, voluntary organisations and citizens’ initiatives.

3.6.

Moreover, while some entrepreneurs aim both to make a profit and at the same time to meet environmental, social and governance challenges — putting sustainability at the heart of their project and assessing their impact in order to improve it — others do not share this ‘intention’ of sustainability. Their primary aim is profit, and they believe that their economic model has positive externalities for the rest of society, without verifying or seeking to improve such effects.