Opinion of the European Economic and Social Committee on reconciling ambitious sustainable and social objectives with an enabling environment for micro, small and medium-sized enterprises

(own-initiative opinion)

(2022/C 105/01)

Rapporteur:

Bruno CHOIX

Plenary Assembly decision	25.3.2021
Legal basis	Rule 32(2) of the Rules of Procedure
	Own-initiative opinion
Section responsible	Single Market, Production and Consumption
Adopted in section	30.9.2021
Adopted at plenary	20.10.2021
Plenary session No	564
Outcome of vote (for/against/abstentions)	227/0/9

1.   Conclusions and recommendations

1.1.

Micro, small and medium-sized enterprises make up 99,8 % of all European companies, employing 82,4 million people: they are the linchpin of the economic recovery and key to achieving the EU’s social and environmental objectives. The nature of these businesses — their small scale and local presence — makes it natural for them to take on these challenges, and they perform well here, even during periods of crisis.

1.2.

To achieve this, micro, small and medium-sized enterprises need a regulatory framework that accommodates their particular needs. The European Economic and Social Committee (EESC) calls for the Small Business Act, the ‘Think small first’ principle and the SME Strategy to be properly deployed to help SMEs. Red tape, e.g. in relation to transparency and reporting, must be strictly limited because any constraint involves costs.

1.3.

The EESC supports the Better Law-making approach and recommends systematic involvement of the social partners, professional associations and chambers of commerce at every legislative stage (holding of public hearings, impact assessments, amendments). The Committee urges the Commission to take the findings of impact assessments on board. The ‘one in, one out’ principle must be applied swiftly, effectively and evenly in order to achieve ambitious environmental legislation. Finally, the EESC suggests that the coordination of SME envoys be increased at both national and EU level.

1.4.

The EESC calls on the European institutions to take a methodical look at alternatives to transparency and reporting requirements where they give rise to too heavy a burden.

1.5.

National and regional social dialogue initiatives in microenterprises, the craft sector and the professions facilitate commitment to social issues, dialogue between business owners and employees, and conflict prevention, and they should be encouraged.

1.6.

The EESC believes that the potential of branches of the professions and professional associations, as well as that of chambers, should be better used for promoting innovation in relation to social and environmental matters and governance, and that micro, small and medium-sized enterprises should be better supported. The Committee recommends that the Commission and the Member States rely on their expertise and networks rather than devising new onerous and restrictive rules.

1.7.

The EESC would like access to lifelong learning to be guaranteed for entrepreneurs from the moment they take up their position or take over a business, enabling them to acquire the skills needed for good management, for the establishment of social dialogue and for the green and digital transitions.

2.   Background and general comments

2.1.

Micro, small and medium-sized enterprises lie at the heart of Europe’s economy and, given their presence across the EU, play a key role in supporting local communities with shaky economies and boost the resilience of the system as a whole.

2.2.

Economic recovery is the only way of avoiding depopulation; it allows the employment rate to be kept up and wealth to be redistributed, especially since in Europe this is based on sustainability objectives.

2.3.

Micro, small and medium-sized enterprises are being mobilised towards the green and digital economies. The circular economy, sustainable development and social dialogue are part of the DNA of microenterprises, the craft sector and the professions. The EESC calls on the European institutions to have faith in these entities’ ability to evolve and to support their role as drivers of the green and digital transitions (through targeted funding, technical and planning programmes and appropriate policies). It is important not to hinder their growth.

2.4.

The EESC notes that many businesses and public authorities are innovating to help micro, small and medium-sized enterprises integrate the circular economy into their business models (eliminating waste and unsold goods and promoting repair, re-use and recycling) in keeping with the EU’s objectives.

2.5.

Despite the Small Business Act of 2008, the last thirteen years have shown that legislators, instead of adopting texts that respect the administrative and financial capacity of micro, small and medium-sized enterprises, usually opt for rules applicable to all businesses and then adapt them to the smallest enterprises, placing new burdens on them and undermining their competitiveness, capacity for innovation and ability to create jobs. There is room for improvement in the way the results of the SME Test are taken into account. Generating more and more transparency and disclosure measures could be harmful. Thus, the GDPR (1) has put in place unclear procedures that oblige micro, small and medium-sized enterprises to refer to guidelines or to use external experts, which entails costs. The Machinery Regulation lays down similar obligations, by requesting evaluation procedures through certification by external bodies. The Money Laundering Directive (2) introduces an obligation to report beneficial owners for all businesses, which has to be paid for in several Member States.

2.6.

The 2020 report of the Regulatory Scrutiny Board shows that the impact of legislative proposals on SMEs is not adequately assessed.

2.7.

The EESC welcomed the SME strategy published by the Commission in 2020. It supports Parliament’s resolution (3) stating that good administrative, regulatory and technical conditions must be put in place to help micro, small and medium-sized enterprises improve their performance, especially from an environmental perspective, and that excessive administrative and regulatory burdens are hindering their ability to thrive.

2.8.

The EESC welcomed the communication on Better Regulation, which emphasises that better regulation is the key to sustainable development. This cannot be based on economic growth alone, but also requires a balance between the economic, sustainability and social dimensions.

2.9.

Despite this, several legislative proposals and debates point to new reporting obligations for micro, small and medium-sized enterprises (corporate sustainability reporting (4), pay transparency (5) and due diligence). These obligations may apply to micro, small and medium-sized enterprises directly or indirectly, as a result of requests from large companies in the value chain; they also represent a cost for these enterprises, since they do not have the human and financial resources to meet the obligations, putting their business, business model and thus their very survival at risk, above all during periods of crisis.

2.10.

Yet micro, small and medium-sized enterprises are achieving encouraging results that are even better than national averages, and are doing so without any constraints. The EESC calls for legislation to be conceived for the 21 million enterprises of this type in Europe, rather than designing it for the 0,2 % of businesses that are larger and then trying to apply those principles to the smaller ones. The aim should be to meet the needs not just of business owners but also of their many employees. The EESC would also like alternatives to reporting to be systematically put forward.

3.   Costs and benefits of reporting measures

3.1.

The Commission’s estimation of the costs and administrative burdens often lacks transparency and penalises micro, small and medium-sized enterprises. There are, in addition, the indirect effects of value chain obligations, which the Commission struggles to quantify. As stated in the Communication on Better Regulation, the amendments tabled by Parliament and the Council are only rarely subject to SME Tests. Finally, the transposition of measures into national law is sometimes accompanied by additional costs.

3.2.

In order to meet these growing obligations, entrepreneurs can only either respond themselves, using the time set aside for their business activity, or call on external expertise. Both methods affect the operations of a business and entail additional costs. Costs are proportionally higher in microenterprises than in large companies. On top of this, the EESC warns that the proliferation of reporting measures, though they seem minor when taken individually, have a considerable impact once combined.

3.3.

Yet in areas where there are no reporting obligations, good results are obtained: many micro, small and medium-sized enterprises, encouraged by their professional association or chambers of commerce, invest in the circular economy, as they see a benefit for their growth and reputation (6); the human size of micro, small and medium-sized enterprises facilitates exchanges between employers and employees, which makes gender pay gaps often smaller than the national average (7), etc. Countries that have put in place thresholds for SMEs for some social legislation report a low number of formal complaints, which suggests that the latter can be models without having burdensome measures imposed on them. The definition of an SME should be addressed, as recommended in EESC opinions (8).

3.4.

Micro, small and medium-sized enterprises, including social enterprises, play a full part in the circular economy, offering community-based services which strengthen social ties, creating non-relocatable jobs and wealth in areas without industry and certain public services, and providing business opportunities and employment for socially vulnerable groups. More than half of dual-learning apprentices are trained in micro, small and medium-sized enterprises, enabling such entities to play an active role in youth employment. Their business model and human scale promotes the implementation of artificial intelligence where humans remain in control, and focuses on quality of life at work and participatory governance.

3.5.

The addition of reporting measures is often seen as an unfair burden, which impacts negatively on their business activity and risks denying them access to public procurement or funding, while failing to deliver significant progress on policies that they have often initiated themselves. This accumulation feeds resentment towards a Europe that is considered overly bureaucratic and disconnected from the grassroots level.

3.6.

Furthermore, the EESC considers that social and environmental objectives will only be achieved by targeting the causes of imbalances, not by increasing binding requirements.

3.7.

In order to foster an SME-friendly environment, particular attention must be paid to demographic change, which is significantly reducing both the availability of qualified workers and SMEs’ productivity. Vocational education and training, apprenticeships and skills development should be priorities, including those relating to green and digital skills.

4.   Better Regulation

4.1.

Better regulation requires striking the right balance between the economic, sustainability and social dimensions. The EESC recommends that the European Commission rely more on the social partners, professional associations and chambers of commerce at the European, national, regional and local levels when assessing the impact of any legislation.

4.2.

Each transparency measure has a cost. The EESC draws the Commission’s attention to the need to apply the Small Business Act and the ‘Think small first’ principle, as it has pledged to do. Further to the Better Regulation communication, the EESC calls for any new direct or indirect administrative burden to be kept to the strict minimum.

4.3.

The EESC asks the Commission to consult it when designing surveys so as to take better account of the particularities of SMEs by asking questions that are unbiased and apply to all types of enterprise. The Committee emphasises the need to prioritise short surveys in all the EU official languages so as to make them more useful.

4.4.

The EESC urges the Commission to strengthen the network of SME Envoys and their coordination, nationally and in their exchanges with the Commission.

4.5.

The EESC takes note of the ‘one in, one out’ principle which the Commission has committed to apply. Cutting red tape must be explored with the social partners in order to lighten it without compromising policy objectives or lowering the EU’s high economic, social and environmental standards. To this end the EESC calls on the Commission to provide operational and methodological information enabling unnecessary red tape to be identified. The time frame for applying this principle does not seem to fit with the Commission’s work programme, under which several key documents will be published over the next few months. The EESC calls on the Commission to identify without delay those administrative burdens that can be scrapped. Furthermore, the EESC calls on the Commission, whenever such a burden is withdrawn, to monitor its reduction in national legislation in order to ensure the effectiveness of the principle of equal treatment.

4.6.

The EESC calls for any new proposal, especially one that entails direct or indirect reporting and transparency measures, to be subject to proper impact assessment. The SME Test must be applied by all the institutions, it must include an economic and legal analysis, and its sources must be published. The Test must be carried out whenever there is a new version of a text, both when it is proposed and during negotiations. The EESC recommends that the social partners, including employers’ organisations, be consulted in each impact assessment in order to contribute to the analysis of provisions with regard to micro, small and medium-sized enterprises. The results of impact assessments must be duly taken into account by the Commission when identifying a preferred policy option. In line with the Communication on Better Regulation, the EESC calls on MEPs and the Council to document the impact of their amendments on micro, small and medium-sized enterprises.

4.7.

The report of the Regulatory Scrutiny Board shows that the proportion of proposals containing provisions for SMEs has decreased substantially (from 22 % in the period 2017-2019 to 15 % in 2020). If transparency rules are adopted, the EESC calls on the institutions to provide for thresholds to mitigate the burden on micro, small and medium-sized enterprises. The EESC calls for implementation of the Single Digital Gateway, scheduled for 2023, to be speeded up.

5.   Alternatives to publishing information

5.1.

To avoid rolling out measures that might be considered punitive, the EESC encourages the Commission to incorporate alternatives to reporting obligations for micro, small and medium-sized enterprises in each proposal.

5.2.

Many Member States have special consultative bodies within which the social partners can discuss social and economic measures and their specific application. Many national SME organisations can represent their interests. The EESC would advise the Commission to refer more to SME associations, the social partners, professional associations, and chambers of commerce at European, national, regional and local level. Their experience, expertise and active networks makes them the best placed bodies to support and encourage micro, small and medium-sized enterprises, and to develop mechanisms for attaining social and environmental objectives. It is important to give these bodies the financial and human resources they need to develop support measures.

5.3.

The EESC notes that the Commission has devised a number of instruments that could be useful for micro, small and medium-sized enterprises, but which are not reaching those they were intended for. The Committee recommends stepping up the mobilisation of SME Envoys so that these instruments can be adapted to the needs of micro, small and medium-sized enterprises and to promote awareness and adoption of them.

5.4.

The EESC proposes promoting and building on national and regional measures facilitating social dialogue in microenterprises, crafts and the liberal professions (9), by giving employees and employers comprehensive information/advice on the legal or contractual provisions applicable to them, discussing and issuing useful opinions on issues specific to businesses and their employees, and contributing to conflict prevention based on information and recommendations to employees and employers.

5.5.

The EESC encourages the Member States to support professional associations in the training, advice and support they offer micro, small and medium-sized enterprises in order to meet social and environmental rules. Such initiatives should be prioritised over restrictive provisions.

5.6.

In line with the Committee’s own-initiative opinion Towards circular public procurement (10), the EESC calls on public authorities to support micro, small and medium-sized enterprises to gain an understanding of more sustainable public procurement, particularly local public procurement, while ensuring that specifications respect a balance between qualitative and quantitative criteria.

5.7.

The training of entrepreneurs in micro, small and medium-sized enterprises must be accessible to them on a lifelong basis, in the same way as for employees, including when a business is being set up from scratch or is being taken over. In order to build a pool of entrepreneurs and new owners of existing businesses who are capable of addressing social, environmental and economic challenges, the EESC considers it essential to propose and encourage participation in training cycles tailored to the new skills.

5.8.

The EESC proposes that incentives to reduce the carbon impact of micro, small and medium-sized enterprises be supported through financial assistance, without this being either a constraint on business development or an additional burden.

5.9.

The EESC recommends encouraging voluntary enterprise labelling schemes that are free of charge in which a third party is involved to provide credibility (11), while ensuring that such systems are not a barrier to market access and avoiding their proliferation so as not to create confusion for consumers.

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(1)  Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1).

(2)  Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU (OJ L 156, 19.6.2018, p. 43).

(3)  European Parliament Resolution of 16 December 2020 on a new strategy for European SMEs (2020/2131(INI)).

(4)  Proposal for a directive on corporate sustainability reporting [2021/0104(COD)]).

(5)  Proposal for a directive to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms [2021/0050(COD)].

(6)  An example of a craft business that has put in place circular economy measures without any transparency obligation in the Netherlands: https://www.deb.nl/ondernemersverhalen/slagerij-van-koppen-dacht-na-over-duurzaamheid/

(7)  Les entreprises de proximité au féminin, March 2019: https://u2p-france.fr/sites/default/files/etude_les_entreprises_de_proximite_au_feminin.pdf

(8)  OJ C 345, 13.10.2017, p. 15 and OJ C 81, 2.3.2018, p. 1.

(9)  Joint regional cross-industry craft committees (Commissions paritaires régionales interprofessionnelles de l’artisanat, CPRIA: https://cpria.proximeo-france.fr/) and joint regional committees for the liberal professions (commissions paritaires régionales pour les professions libérales, CPR-PL).

(10)  OJ C 341, 24.8.2021, p. 16.

(11)  Example of Répar’acteurs: https://www.artisanat.fr/reparacteurs#:~:text=Le%20label%20%C2%AB%20R%C3%A9par’acteurs%20%C2%BB,de%20la%20r%C3%A9duction%20des%20d%C3%A9chets

Opinion of the European Economic and Social Committee on advertising for modern, responsible consumption

(own-initiative opinion)

(2022/C 105/02)

Rapporteur:

Thierry LIBAERT

Plenary Assembly decision	25.3.2021
Legal basis	Rule 32(2) of the Rules of Procedure
	Own-initiative opinion
Section responsible	Single Market, Production and Consumption
Adopted in section	30.9.2021
Adopted at plenary	20.10.2021
Plenary session No	564
Outcome of vote (for/against/abstentions)	132/0/5

1.   Conclusions and recommendations

1.1.

The European Economic and Social Committee (EESC) stresses the need for the European Union (EU) to support its advertising industry, which has been hit hard by the COVID-19 crisis. In the face of the digital transition and competition from the Big Four tech companies, advertising is a driver for economic activities and jobs and is more important now than ever before.

1.2.

The need for greater respect for consumers and the challenges of the green transition and the fight against climate change call for a broad debate with a view to the advertising industry accommodating in particular the Paris Agreement objectives.

1.3.

The EESC calls on the advertising industry to commit to reducing its carbon footprint in order, in line with the EU’s objectives, to achieve carbon neutrality in its activities by 2050, and to reduce greenhouse gas (GHG) emissions by 55 % by 2030 with a view to contributing to the collective achievement of carbon neutrality by 2050.

1.4.

The EESC calls on each operator in the advertising industry to commit to reducing their environmental impact in their own business sector. This can be achieved by reducing the energy consumption of digital advertising screens and making them more recyclable, by opting to use paper from sustainably managed forests (PEFC and FSC labels) and inks complying with REACH and GreenGuard standards for paper displays and advertising leaflets, and by reducing the technical, energy and logistical impact of audiovisual productions.

1.5.

The EESC recommends that operators in the advertising industry increase their pro bono contribution to support the environmentally responsible initiatives of those who do not have sufficient financial resources (SMEs, start-ups, cooperatives, etc.).

1.6.

The EESC calls on operators in the industry to give their members more training in the challenges of the green transition. University courses in communication professions should also include such awareness-raising.

1.7.

The EESC recommends that the advertising industry launch a debate about the fantasy created by advertising and related representations. This will help to ensure that, rather than being an obstacle, advertising becomes a real driver for the green transition, enabling products which help to reduce environmental impact to be promoted with factual, accurate information.

1.8.

The EESC calls for the continuation of efforts to strengthen EU-wide regulation of advertising to combat greenwashing and misleading environmental claims, with the aim of achieving harmonisation between EU Member States.

1.9.

The EESC would like to see special attention paid not just to aspects of the green transition, but also to advertising targeting young people, particularly on social media.

1.10.

The EESC considers that there can be no fully responsible advertising if advertising operators in Europe do not take responsibility for disinformation. The European Commission must step up its efforts to fight the monetisation of disinformation (1).

1.11.

The EESC calls on the advertising industry to increase its openness to civil society and to create more frequent opportunities for exchanges with its various audiences so that it can develop in line with society’s new expectations.

2.   Definitions

2.1.

The definition of advertising used here is that of the EU, which described it as ‘the making of a representation in any form in connection with a trade, business, craft or profession in order to promote the supply of goods or services …’. However, this definition does not include advertising for an institutional purpose (improving a company’s reputation) or by public bodies or associations.

2.2.

Responsible advertising is advertising that shoulders its share of responsibility for major societal and environmental challenges, including the need to fight climate change.

3.   Advertising as a driver of economic activity and employment in Europe

3.1.

Advertising is closely linked to growth and jobs. Economic growth is higher when advertising investment is high than when such investment is lower (2). In Europe, according to a 2017 study by the World Federation of Advertisers relating to 2016, the EUR 92 billion of advertising expenditure narrowly defined would have generated EUR 643 billion in additional wealth (3).

3.2.

According to various studies, an investment of EUR 1 in advertising produces a multiplier and spillover effect of 5-7 in additional growth. Applied to Belgium, the multiplier would be 5 (EUR 2,2 billion of advertising expenditure contributed EUR 13 billion to the Belgian economy) (4).

3.3.

Advertising speeds up the spread of new products and services and sometimes innovation, as illustrated perfectly by the lifespan of certain products such as computers and telephones. The faster spread of new products raises questions about the environmental impact of advertising.

3.4.

Advertising boosts competition. Without advertising, we would all be using the same bank, which would set its tariffs as it sees fit. Banking services are generally similar from one bank to the next, with the distinction between them also arising from advertising. The same applies to many other sectors of the economy, including energy and commerce.

3.5.

Advertising sustains many sectors, most notably the media. In many EU countries, it largely funds print media, radio and television. Moreover, it is as much a resource as a relationship of dependence which is sometimes likely to influence the content of productions and raise questions with regard to editorial independence.

3.6.

Advertising has a turnover of EUR 140 billion (2018) in Europe, with 280 000 companies, often small and medium-sized, working partially or wholly for business communication and employing 998 000 people (5).

3.7.

Advertising has indirect effects on many related professions, such as audiovisual production, the arts or photography. A Belgian study demonstrated that 87 000 people had jobs that were funded by advertising revenue or were involved in producing advertising through supply chains.

3.8.

Moreover, if all business communication spending is included, the considerable sums spent each year in the EU to sponsor entertainment, whether sport or cultural activities, should be added.

4.   Impact that goes beyond economic and social aspects

4.1.

It is generally accepted that advertising’s effect on the press has been to allow broader access to the media. Without advertising, newspaper prices would rise sharply, and reducing advertising would lead to the demise of many publications.

4.2.

It is also thanks to advertising that free printed publications are available to the public, thus allowing several million people to read the news on a daily basis.

4.3.

The artistic and creative aspect should be emphasised: a great many film-makers, photographers and designers began their careers in advertising.

4.4.

The incorporation of advertising into certain cityscapes has turned them into popular tourist destinations — examples are Times Square in New York and Piccadilly Circus in London. It is the vibrancy of advertising itself that brands a city and makes certain places alluring. This influence of advertising in the public space can of course be very controversial.

4.5.

Advertising helps to provide a positive narrative about the world, about happiness, about pleasure or beauty. In the context of ongoing crises, advertising narratives help to spread optimistic and inspiring messages. Advertising has also brought us words of wisdom, such as ‘Don’t imitate, innovate’ (Hugo Boss), ‘Take care of yourself’ (Garnier) and ‘Impossible is nothing’ (Adidas). Thus, advertising generally conveys a positive view of the world. This positive view could prove to be a significant driver for the green transition.

5.   The advertising model and its societal and environmental consequences

5.1.

Advertising has direct consequences for GHG emissions. It has an impact on the use of paper, as well as on the consumption of various resources (in particular by the new LCD screens) and of energy by the internet or audiovisual media. The impact in terms of GHG emissions or wider environmental impact (e.g. recyclability of the medium) is never in practice used as one of the main criteria when determining the form of an advertising campaign.

5.2.

Outdoor advertising also has a specific environmental impact. This can be observed in particular when it comes to illuminated and digital display boards, whose energy consumption and impact in terms of light pollution are not insignificant. Based on a standard 200 kg panel, an estimated 8 tonnes of material are needed to manufacture one digital advertising screen (6).

5.3.

By seeking to continually increase the consumption of what it promotes, advertising encourages overconsumption that does not necessarily reflect needs. There are many examples of products and gadgets whose real utility is ultimately limited and sometimes out of proportion to their environmental impact. Some are only used once and then discarded. Advertising models the needs and expectations of individuals according to the interests of distributors, and not necessarily the collective interest.

5.4.

With its strong presence in metropolitan areas, advertising can also help homogenise the urban spaces of European cities. Thanks to identical advertising campaigns, urban landscapes are becoming uniform and losing quality. This is due to the fact that a small number of advertisers are responsible for the majority of advertisements.

5.5.

The messages it conveys are often far from promoting sharing, solidarity and moderation. Advertising conveys an image of happiness based on acquisition. The advertising fantasy says that everything can be bought. To be happy, we need to possess and consume more. However, public surveys do not show a strong statistical link between consumption and perception of happiness: happiness is determined mainly by belief in certain values and the strength of the family and physical social networks. Advertising can also be a source of constant dissatisfaction for consumers, forcing them to consume ever more, and of frustration for all, particularly the most disadvantaged people, who do not have the means to buy the products and services promoted.

5.6.

Unwittingly, European companies spend more than EUR 400 million on disinformation sites (7). It is recognised that the major purveyors of disinformation have financial objectives, notably through referencing methods that enable them to obtain large sums of money from online advertising.

5.7.

The EESC has noted that more and more advertisements on social media are not presented as advertising, but hidden behind influencers, some better known than others. It has been estimated that more than a quarter (26,6 %) of advertisements on social media do not mention the brand and commercial purpose (8). This creates confusion that undermines confidence in brands, which the Digital Services Act can help to combat by requiring the name of the body in whose name the advertisement is disseminated to be communicated (9).

6.   Speeding up the evolution of advertising to make its model more compatible with the challenges of the green transition

6.1.

While the issue of climate is becoming increasingly urgent, it is difficult to understand why the advertising industry has not formally committed itself to compliance with the Paris Agreement. More recently, the European Parliament (EP) adopted a resolution to achieve a 55 % reduction in GHG emissions by 2030, and on 14 July 2021 the Commission published its package of twelve Fit for 55 measures for achieving this goal. All sectors must contribute to the collective effort and, like the other sectors, the advertising industry has less than 10 years to take this major objective on board.

6.2.

Most advertisers have understood the challenges of climate change and the need to listen to society’s high expectations. For several years, they have been working to tackle misleading environmental claims and greenwashing. They now need to step up their efforts.

6.3.

This drive is being promoted by the Commission. In 2012, DG JUST set up a working group (Multi-Stakeholder Group on Environmental Claims). Several reports were published, in 2013 and then in 2016. These reports have increased understanding of the issue of misleading environmental claims and had an impact on the implementation of Directive 2005/29/EC of the European Parliament and of the Council (10) on unfair commercial practices. The Commission is working on updating these guidelines, which are due to be published by the end of 2021. The final text should provide further details on the application of Directive 2005/29/EC with regard to misleading environmental claims. In 2020, national consumer protection authorities carried out a ‘sweep’, coordinated by the Commission, of company websites claiming to sell green products. It was concluded that in 42 % of cases the claims were exaggerated, false or misleading and could potentially qualify as unfair commercial practices under EU rules (11).

6.4.

More recently, the new Circular Economy Action Plan published by the Commission on 11 March 2020 includes for the first time a focus on responsible advertising. Section 2.2 states the Commission’s desire to increase consumer protection against greenwashing. Companies will have to substantiate their environmental claims using Product and Organisation Environmental Footprint methods. Section 3.2 conveys the desire to develop incentives to increase vehicle occupancy rates. (This could be done through advertisements showing fewer drivers alone in their cars.)

6.5.

The EP adopted an own-initiative report entitled Towards a more sustainable single market for business and consumers (12) drawn up by its IMCO (Internal Market and Consumer Protection) Committee in November 2020. This text ‘stresses the importance of responsible advertising that respects public standards on the environment and consumer health’.

6.6.

The EESC has been particularly active, notably in the area of banning misleading environmental claims, for instance with an opinion on Environmental, social and health claims in the single market (13). It has adopted an opinion entitled Towards an EU Strategy on sustainable consumption (14), which stressed the importance of providing a better framework for advertising to facilitate more sustainable consumption. More recently, the opinion on a New Consumer Agenda (15) underlined the need for better consumer information and the need to combat greenwashing.

7.   Ensuring European advertising which can help achieve more sustainable and responsible consumption

7.1.

The EESC calls for an approach that provides incentives based on advertisers holding themselves accountable. This approach is justified both by the progress made by the sector, in particular in combating misleading environmental claims, and progress in the field of regulation. It is also a response to the need to support a sector that creates growth and jobs, in a particularly difficult period. The EESC believes that any hindrance to European advertising models risks benefiting digital advertising systems, which are mainly owned by the Big Four tech companies, even though they are still significantly outside the scope of European tax systems. This model will itself have to change in the future because of the changes in the rules on cookies. However, the EESC recognises that for certain types of products which have a particular impact, such as fossil fuels, stronger forms of regulation may be envisaged.

7.2.

In the context of the current economic crisis, the EESC calls for swift, exceptional financial support to be deployed for the smallest and most fragile players in the advertising sector (SMEs) to enable structures to survive in the current context, in return for structural changes on the points described above.

7.3.

Every advertising business in Europe and advertising agencies operating in the European Union should incorporate the objectives of the 2015 Paris Agreement into their GHG emission reduction policy, particularly the objectives recently set by the EU of a 55 % reduction by 2030.

7.4.

All economic operators in the advertising industry should recognise the objectives of the green transition and incorporate them into their working methods, providing assessments of their GHG balances, reduction trajectories, and action plans to achieve the objectives. This shift in the role of advertising should take place in a flexible way, in particular to encourage and support medium-sized agencies.

7.5.

Operators in the advertising industry must undertake to assess the carbon impact of advertising products in order to develop practices, propose greener production alternatives, and examine the options for reshoring to Europe.

7.6.

Operators must increase their pro bono contribution to support the organisations most active in the field of climate transition and social inclusion. More broadly, governance of advertising regulation must be developed in a way that involves civil society more widely, potentially by reinventing forms of governance.

7.7.

Operators must organise systematic training on green transition challenges and more responsible advertising practices, with internal courses for their staff while helping to train students in marketing and communication.

7.8.

The advertising industry must undertake to continue to strengthen the mechanisms for professional regulation of advertising by extending the supervisory powers of the regulatory bodies in Europe and by involving civil society (environmental NGOs, consumer associations, trade unions, etc.) more effectively in its governance.

---

(1)  European Commission: Guidance to strengthen the Code of Practice on Disinformation. 26 May 2021. https://ec.europa.eu/commission/presscorner/detail/en/ip_21_2585

(2)  Maximilien Nayaradou, L’impact de la régulation de la publicité sur la croissance économique [The impact of regulating advertising on economic growth], summary in Publicité et croissance économique [Advertising and economic growth], Union des annonceurs [French advertisers’ union], 2006. From a thesis defended at Paris Dauphine University in 2004.

(3)  World Federation of Advertising. The value of advertising, Deloitte, 2017.

(4)  Union belge des annonceurs [Belgian advertisers’ union], L’impact de la publicité sur la croissance économique en Belgique [The impact of advertising on economic growth in Belgium], 3 December 2015.

(5)  Source: Eurostat. Advertising and Market Research Statistics.

(6)  French Agency for Ecological Transition (ADEME). Modélisation et évaluation environnementale des panneaux publicitaires numériques. [Modelling and environmental assessment of digital advertising panels.] September 2020.

(7)  Claudia Cohen, Des marques financent, malgré elles, la désinformation [Brands unwittingly finance disinformation], Le Figaro, 5 August 2021.

(8)  Observatoire de l’influence responsable [Responsible Influencing Observatory]. ARPP French professional advertising regulatory authority [ARPP]. 13 September 2021.

(9)  OJ C 286, 16.7.2021, p. 70.

(10)  Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’) (OJ L 149, 11.6.2005, p. 22).

(11)  Agence Europe, Europe Daily Bulletin No 12646, 24 January 2021.

(12)  https://oeil.secure.europarl.europa.eu/oeil/popups/ficheprocedure.do?reference=2020/2021(INI)&l=en

(13)  OJ C 383, 17.11.2015, p. 8.

(14)  OJ C 429, 11.12.2020, p. 51.

(15)  OJ C 286, 16.7.2021, p. 45.

Opinion of the European Economic and Social Committee on reshaping the EU fiscal framework for a sustainable recovery and a just transition

(own-initiative opinion)

(2022/C 105/03)

Rapporteur:

Dominika BIEGON

Plenary Assembly decision	25.3.2021
Legal basis	Rule 32(2) of the Rules of Procedure
	Own-initiative opinion
Section responsible	Economic and Monetary Union and Economic and Social Cohesion
Adopted in section	5.10.2021
Adopted at plenary	20.10.2021
Plenary session No	564
Outcome of vote (for/against/abstentions)	168/3/5

1.   Conclusions and recommendations

1.1.

The European fiscal rules need a revision: deficiencies were already obvious after the 2008/2009 financial crisis and the COVID-19 pandemic poses even more serious challenges to the current fiscal framework. In past opinions, the EESC has welcomed the European Commission’s economic governance review. In this opinion, the EESC reiterates its position on the need for reforms and calls on the Commission to swiftly continue the revision of the EU economic governance framework, which has currently come to a halt. Before the revised framework comes into force, the Commission should put forward guidelines for a transition period, during which time the excessive deficit procedure should not be triggered, and with the possibility to use the ‘unusual event clause’ on a country-specific basis.

1.2.

Any future fiscal framework needs to: (a) strengthen public investments; (b) allow for more cyclical leeway; and (c) permit greater flexibility and country-specific differentiation as far as debt adjustment paths are concerned, while at the same time guaranteeing fiscal sustainability. A revision of the EU fiscal framework is not only necessary for the purpose of short- to medium- term stabilisation of the economy. It is also of vital importance in order to finance the socio-ecological transformation of our economy, guaranteeing full employment, high-quality jobs and just transitions.

1.3.

More specifically, the EESC’s main proposal for the revision of the fiscal framework is to introduce a golden rule for public investments, which the EESC has already put forward in past opinions, in combination with an expenditure rule. In addition to this, the EESC welcomes the proposal made by the European Fiscal Board (EFB) regarding the country-specific differentiation of fiscal adjustment paths.

1.4.

Finally, the EESC points out that fiscal policy is the classic domain of parliamentary politics and its decisions affect the entire structure of state expenditure and revenue. Therefore, both national parliaments and the European Parliament need to be given a prominent role in the future EU economic governance framework.

1.5.

In a similar vein, there is a need to involve civil society to a greater extent in the European Semester at both national and EU level. This way, a balanced economic policy can be established, where all interests are reconciled. This is particularly the case for the governance of the Recovery and Resilience Facility, where civil society involvement has not been satisfactory (1). The partnership principle, which has long been a tradition in the governance of the European Structural and Investments funds, should serve as a blueprint for an effective mechanism of civil society involvement.

2.   Background: new challenges after the COVID-19 pandemic

2.1.

The European fiscal rules need a revision. Before the crisis, the European Fiscal Board’s (2019) (2) assessment of the EU fiscal framework rightly pointed out two main problems: first, fiscal rules tend to be procyclical: following the 2008/2009 financial crisis, fiscal consolidation came too early because of overwhelming sustainability concerns, leading the European economy into a double-dip recession. Second, public investment in the EU has been the first target for spending cuts. Comparing the average government investment rate for 2015–2019 with the pre-crisis average (2005–2009), 20 out of 27 Member States saw their rates decline, for some by as much as 50 %, to such an extent that the value of the stock of public capital, marked by negative net public investment figures, deteriorated between 2013 and 2017 in the euro area.

2.2.

The COVID-19 pandemic poses even more serious challenges to the EU fiscal framework: the economic slump together with policy measures to mitigate the social and economic impact of the pandemic have led to massive increases in government deficit and debt to GDP levels in many Member States (3). Estimations by the European Fiscal Board (2020) (4) show that if the EU fiscal rules were activated unchanged after lifting the general escape clause, the expected debt ratio reduction path would overburden some Member States, with significant negative economic, social and political consequences endangering the economic recovery in the EU.

2.3.

A reform of the EU fiscal rules is not only necessary for the purpose of a short- to medium-term stabilisation of the economy. It is also of vital importance in order to finance the socio-ecological transformation of our economy, guaranteeing full employment, high-quality jobs and just transitions. To achieve the EU climate targets, a profound modernisation of the capital stock is needed. A sustainable economy needs a massive expansion of public investments, otherwise European economies will be facing climate-related fiscal risks (5). At the same time, fiscal sustainability needs to be ensured. In previous opinions, the EESC has already underlined the need to introduce a golden rule for public investment in the EU fiscal framework (6). These demands remain valid: for Europe to meet its 2030 climate and environmental targets, the European Commission recently estimated the overall funding gap to be around EUR 470 billion a year until 2030 (7). As rightly emphasised ‘mobilising the necessary scale of finance will be a significant policy challenge’, and clearly public investment will have a critical role to play, not least also in order to trigger private investment. The reform of the EU fiscal framework has to take these considerations into account.

2.4.

The EESC underlines that Member States must face the challenge of reducing debt to GDP ratios after economic recovery takes hold to retain enough fiscal space to counter the next economic crisis. The expenditure rule proposed in this opinion (see paragraphs 3.3.2 and 3.3.3) would indeed ensure that Member States consolidate their public finances in good times.

2.5.

The EESC underlines that a revision of the EU fiscal framework needs to take into account the current macroeconomic context. Both the IMF (8) and the European Commission (9) state that debt to GDP ratios should stabilise in the short to medium term thanks to low interest rates and increased growth rates. The sustainability of sovereign debt depends on the (real) GDP growth rate, annual primary balance and the (real) interest rates on outstanding sovereign debt. The EESC urges the European Commission to take these factors into consideration when assessing Member States’ debt sustainability.

2.6.

Moreover, the EESC stresses that sustainable public finances depend to a large extent on reliable public revenues and fair taxation, including, for example, the fight against tax fraud and aggressive tax planning. In addition, the announced new own resources should contribute to enhancing fair taxation, as well as to social and climate justice. Transparency of revenue and spending, open contracting and the constant involvement of civil society in the oversight of public financial management is also necessary to ensure sustainable public finances.

2.7.

In past opinions, the EESC has welcomed the European Commission’s economic governance review and highlighted the need for a revision (10). The EESC has also proposed that the question of reforming EU economic governance should be debated at the Conference on the Future of Europe. Adapting the TFEU’s economic governance provisions to the EU’s current economic reality should not be taboo. The EESC reiterates this call, particularly in the face of the COVID-19 crisis. To prevent a return to the old fiscal rules and manage a shift towards a prosperity-focused economic governance, the EESC urges that the review process be resumed as soon as possible (11).

3.   Specific comments

3.1.   Rebalancing EU economic governance

3.1.1.

Fiscal policy should be part of a broader multi-level and balanced governance framework. The EESC advocates a prosperity-focused economic governance, where people’s social and economic wellbeing is prioritised so that no one is left behind, while ensuring public debt sustainability. Therefore, the Committee calls for a balanced economic policy that stresses the importance of and gives equal weight to a range of key policy objectives such as sustainable and inclusive growth, full employment, decent work and just transitions, a fair distribution of income and wealth, public health and quality of life, environmental sustainability, financial market stability, price stability, well-balanced trade relations, a competitive social market economy and sustainable public finances. These objectives are consistent with both the objectives set out in Article 3 of the Treaty on European Union and the current UN Sustainable Development Goals (12).

3.1.2.

In order to support Member States on their way to a sustainable and inclusive economy it is not only necessary to allow for more fiscal leeway under certain conditions. In addition to this, incentives for reforms must be promoted. The current EU economic governance framework consists of three pillars: (a) fiscal surveillance; (b) macroeconomic surveillance; and (c) social and employment policy coordination. Thus, it already has a strong focus on reforms. A variety of empirical studies emphasise that despite reforms, the bulk of past country-specific recommendations have focused on boosting competitiveness and consolidating public budgets (13). The EESC urges the EU institutions to be more balanced in future country-specific recommendations: fiscal benchmarks, as well as EU climate goals and the European Pillar of Social Rights should serve equally as important reference points for country-specific recommendations. Special focus should be put on reforms that support the transition towards a green and digital economy (such as active labour market policies and lifelong learning schemes, including programmes to reskill and offer career change support) and on reforms that guarantee that EU funds are absorbed effectively (such as building up technical capacities in public administrations to manage investment projects, effective and open public procurement systems and reforms to remove other non-monetary barriers to an effective investment policy).

3.2.   Strengthening public investment

3.2.1.

The EESC underlines that the EU fiscal framework needs to be reformed in a way that better protects public investments (14). The multiplier effect of public investment is particularly high, and cuts in public investment therefore have a particularly negative impact on economic growth and employment. Cuts in public investment in particular, and in government spending more generally, are particularly damaging in times of economic slumps and recessions (15). In addition, many studies also identify public investment as a growth booster in the long term (16). A long-term increase in public investments also provides a more secure basis for private-sector planning (17).

3.2.2.

These facts justify an approach that treats public investments preferentially as far as the assessment of Member States’ compliance with EU fiscal rules is concerned. The EESC advocates a ‘golden rule’ for public investments (18), to safeguard productivity and the social and ecological base for the wellbeing of future generations, while at the same time ensuring fiscal sustainability. In general, the EESC suggests implementing the traditional public finance concept of the golden rule within the revised fiscal framework (19). This means that net public investments need to be excluded from the calculation of the headline deficits. If an expenditure rule is implemented as called for by the EESC (see points 3.3.2 and 3.3.3) net public investments should also be excluded from the public expenditure ceiling, while investment costs would be distributed over the entire service life, instead of a four-year period, as is currently the case. Net public investment increases the public and/or social capital stock and provides benefits for future generations (20). Future generations inherit the servicing of the public debt, but in exchange, they receive a corresponding and increased public capital stock.

3.2.3.

The EESC underlines that the golden rule leads to preferential treatment of public investments under the EU fiscal framework. It does not release governments from the obligation to justify and win majorities for relevant investment projects. Transparency and parliamentary accountability must, in any case, be retained, also to ensure that only those public investments that serve the common good are made.

3.2.4.

As a very first step, the EESC recommends a fundamental revision of the ‘investment clause’. Firstly, the EESC suggests that the ‘investment clause’ in the Stability and Growth Pact should be interpreted more flexibly. So far, it has been rarely invoked primarily because of its restrictive eligibility criteria (21). These eligibility criteria should be loosened: in principle, public investments should justify a temporary deviation from the adjustment paths, independently of the position of the Member State in the economic cycle and even if these investments lead to an excess over the 3 % of GDP deficit reference value.

3.2.5.

Currently, deviations from the medium-term budgetary objective (MTO) or the adjustment path towards it are only allowed if they are linked to national expenditure on projects co-funded by the EU (22). The EESC suggests a broader definition of investments. At the same time, the definition of investments needs to be clear and practicable to prevent ‘creative accounting’. The European Commission’s guidance to Member States in the context of the Recovery and Resilience Facility and the definition of investments therein constitutes a good starting point (23), as it includes investments in tangible assets but also investments in health, social protection, education and training, and investments aimed at the green and digital transition.

3.2.6.

The EESC welcomes the taxonomy for sustainable activities. It establishes in a clear-cut manner what qualifies as an ‘environmentally sustainable economic activity’, which in turn makes it possible to define ‘environmentally sustainable investments’ (24). Therefore, the EESC recommends taking the well-developed EU taxonomy for sustainable activities as a basis for an evaluation of the sustainability of public investments, in a combination with a golden rule. Moreover, the EESC awaits with interest the Commission’s proposals on green budgeting.

3.3.   More cyclical leeway for fiscal policy

Reforming cyclical adjustment methods or introducing an expenditure rule

3.3.1.

The EESC underlines that the European Commission’s method for cyclical adjustment is opaque, and a source of procyclicality. The European Commission’s method determining the structural balance has proven to be problematic because the calculated potential output is strongly influenced by the current economic situation. In phases of economic downturn, for example, potential output is quickly and sharply revised downwards, although this does not have to reflect real conditions (25). The downward revision of potential output has severe consequences for the calculated structural deficit and the consolidation efforts identified correspondingly. Making the calculation of the potential output less sensitive to cyclical fluctuations can open up considerable fiscal room for Member States for countercyclical economic policies. This reform proposal could be implemented easily and should be taken into consideration merely as a minimum requirement for making the EU fiscal rules more fit to deal with cyclical fluctuations. However, even if reformed, the structural deficit will remain an extremely complex concept and its calculation is nearly impossible to explain to citizens and stakeholders. Because of the technical problems and the opaqueness of the concept, alternative options should be considered.

3.3.2.

An alternative reform option is to abandon the contested concept of structural deficit altogether and, instead, to implement a public expenditure rule in a revised fiscal framework (26). Unlike the cyclically adjusted deficit, public expenditure is observable in real time and are directly controlled by the government. Public investment should be favoured by separating current and investment budgets, subjecting only the current budget to limits for nominal expenditure growth. This way, the golden rule approach could be combined with an expenditure rule (27).

3.3.3.

Nominal public expenditure would be calculated net of interest payments and net of cyclical government expenditure. The limits could be determined by the medium-term growth rate of real potential output plus the European Central Bank (ECB) target inflation rate of 2 %. If cyclical factors cause tax revenue to decline (in a recession) or rise (in a boom), the rule promotes stability by ensuring that government expenditure only increases within the stipulated limits. Expenditure in excess of the established limit should only be allowed if it is budget-neutral, i.e. if spending is cut by the same amount elsewhere or if tax revenue increases. In the case of general tax cuts, expenditure growth rates would have to incorporate these withdrawals of resources. The proposed combination of an expenditure rule and a golden rule for public investment could constitute an effective tool for limiting public spending to sustainable levels, while at the same time allowing the automatic stabilisers to operate and enabling governments to take discretionary measures.

Flexible and country-specific debt adjustment paths

3.3.4.

The EESC supports the proposal made by the European Fiscal Board (2020) (28) to introduce country-specific elements in a simplified fiscal framework. In particular, the EESC welcomes the suggestion regarding the differentiation of the fiscal adjustment in the Member States, while maintaining debt sustainability. A country-differentiation of debt to GDP reduction strategies should be based on a comprehensive economic analysis taking into account factors such as the initial level of debt and its composition, the interest rate-growth differentials as a matter of sustainability, inflation perspectives, the projected costs of ageing and environmental challenges, unemployment and poverty levels, income and wealth distribution, internal and external imbalances and, primarily, whether the fiscal adjustment (e.g. the required primary budget surplus) is realistic (29).

3.3.5.

The EESC recalls that the fiscal reference values are not defined in Article 126 TFEU itself but by Protocol No 12 in the Annex to the Treaty. Therefore, these values can be changed by unanimous vote in the Council without a formal Treaty change procedure. The EESC encourages the EU institutions to consider raising the 60 % debt ceiling while taking into account the current macroeconomic context and ensuring fiscal sustainability.

3.3.6.

Finally, it is worth adding in this context, that relying solely on national automatic stabilisers in recessions is not fully in line with the idea of countercyclical policy. Fiscal deficits caused by reduced output and employment do not fully compensate cyclical losses and are not enough to fully counter a cyclical downturn. They are only passive and partial countercyclical responses and need to be supplemented by active discretionary temporary responses to cyclical downfalls to be reversed in upswings. In the past, a range of Member States have decided to continue decreasing debt to GDP ratios with negative economic consequences while fiscal stimuluses would have been more appropriate. In a future fiscal framework, provided that a favourable interest rate environment continues, larger primary deficits should be allowed, while keeping debt to GDP ratios constant or decreasing and ensuring debt sustainability. This is why exceptional clauses must remain a cornerstone of any future EU fiscal framework and should be adapted accordingly.

Deactivation of escape clause

3.3.7.

The EESC welcomes the activation of the fiscal framework’s general escape clause and warns against ‘returning to normal’ too quickly as this might cause a contractive impulse, leading Member States to cut spending in order to reach MTOs, as was the case after 2010 causing a double-dip recession. This would counteract the aim of the Next Generation EU programme and could trigger a new recession.

3.3.8.

The EESC supports the European Commission’s decision to continue applying the general escape clause in 2022 and to deactivate the clause in 2023, provided that the level of economic activity reaches the pre-crisis level (30). What is more, the EESC supports the European Commission’s assertion that ‘country-specific situations will continue to be taken into account after the deactivation of the general escape clause’ (31). Finally, the Commission should put forward guidelines for a transition period until the new fiscal framework is in place, during which time no excessive deficit procedure should be activated, and with the possibility to use the ‘unusual event clause’ on a country-specific basis. Moreover, the EESC calls on the Commission to swiftly continue the revision of the EU economic governance framework, which has come to a halt. Instead of a ‘return’, the EESC recommends a ‘turn’ towards a revised economic governance framework as indicated below (32).

3.4.   The international role of the euro

3.4.1.

Our common currency — the euro — enjoys a strong international reputation and has been recognised for its global significance as a reserve and trading currency. The euro’s reputation as a stable and trusted currency is dependent on clear, comprehensible and enforceable fiscal rules that strengthen public investments to allow for the modernisation of the capital stock and generate more cyclical leeway in economic downturns, while at the same time ensuring debt sustainability. The EESC is therefore convinced that a revision of fiscal rules must not undermine the stability of the euro as the main ‘anchor’ currency of the Union in any way. Particular emphasis should be given to the financial market’s perception of the euro’s long-term prospects as a globally important currency during the debate on the revision of the fiscal rules. In general, the Euro’s reputation depends on economic, social and political stability.

3.5.   Strengthening the role of parliaments and civil society in EU economic governance

3.5.1.

The EESC points out that fiscal policy is the classic domain of parliamentary politics and its decisions affect the entire structure of state expenditure and revenue. Therefore, both national parliaments and the European Parliament need to be given a prominent role in the future EU economic governance framework. The role of the European Parliament should be strengthened in the European Semester through an interinstitutional agreement. At the same time, the principle of subsidiarity and the division of competences in the Treaties must be respected. National parliaments must hold governments accountable for the fiscal policies they pursue. Therefore, they need to be effectively involved in the European Semester and the implementation of national recovery plans.

3.5.2.

In a similar vein, there is a need to involve civil society to a greater extent in the European Semester at both national and EU level. This way, a balanced economic policy can be established, where all interests are reconciled. This is particularly the case for the governance of the Recovery and Resilience Facility, where civil society involvement has not been satisfactory (33). The partnership principle, which has long been a tradition in the governance of the European Structural and Investments Funds, should serve as a blueprint for an effective mechanism of civil society involvement.

3.5.3.

In the event of significant deviations from indicators representing the economic policy objectives, negotiations between the EU institutions and the Member States should follow. The two sides should develop solutions together and on an equal footing. Instead of threatening the Member States concerned with financial sanctions, the introduction of positive incentives could ease the problem. The promotion of inclusive and sustainable growth must be the key criterion in recommendations (34).

3.5.4.

The EESC criticises so-called ‘macroeconomic conditionalities’ in the common provisions regulation applying to the European Structural and Investment Funds, in the regulation on the Recovery and Resilience Facility and in the intergovernmental treaty on the European Stability Mechanism which, generally speaking, allow the disbursement of EU funds to be stopped if Member States breach the EU fiscal rules or contribute to macroeconomic imbalances. After the deactivation of the escape clause, these macroeconomic conditionalities might cause a contractive impulse, leading Member States to cut spending in order to reach fiscal targets. This would counteract the political aim of territorial cohesion and the broader aims of the Next Generation EU Programme.

3.5.5.

For a sustainable recovery, an accommodating monetary policy remains vital. The European Parliament could use its annual resolutions on the ECB and its quarterly ‘monetary dialogue’ hearings with the ECB to vote on secondary objectives and to develop a process that is more democratic, with guidelines on macroeconomic and industrial policy. This would allow greater involvement of social partners and citizens, along with national parliaments. In this manner, the ECB would receive renewed legitimacy for an expanded set of goals. It could work efficiently, deploying its full toolkit to work towards a clear and politically defined set of policy objectives, guided by democratic institutions. The ECB is a public institution and can be enlisted to help Member States to fund themselves in times of rising interest rates, from either a price stability or an employment perspective, by targeting interest rates and spreads and through targeted monetary tools.

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(1)  EESC Resolution on the Involvement of organised civil society in the National Recovery and Resilience Plans — What works and what does not? (2021) (OJ C 155, 30.4.2021, p. 1).

(2)  European Fiscal Board (2019): Assessment of EU fiscal rules with a focus on the six and two-pack legislation.

(3)  European Commission, European Economic Forecast Spring 2021.

(4)  European Fiscal Board (2020): Annual Report 2020.

(5)  Finance Watch (2021), Fiscal Mythology Unmasked. Debunking eight tales about European public debt and fiscal rules.

(6)  OJ C 353, 18.10.2019, p. 32; OJ C 123, 9.4.2021, p. 12 and OJ C 429, 11.12.2020, p. 227.

(7)  Commission Staff Working Document (2020), Identifying Europe’s recovery needs, SWD(2020) 98 final.

(8)  IMF Fiscal Monitor Reports, April 2021.

(9)  Debt Sustainability Monitor, European Commission, February 2021.

(10)  OJ C 429, 11.12.2020, p. 227.

(11)  OJ C 123, 9.4.2021, p. 12.

(12)  OJ C 429, 11.12.2020, p. 227.

(13)  Crespy, Amandine and Vanheuverzwijn, Pierre (2019), ‘What Brussels means by structural reforms: empty signifier or constructive ambiguity?’, in: Comparative European Politics, Vol. 17, Iss. 1, pp. 92-111; Hacker, Björn (2019): A European Social Semester? The European Pillar of Social Rights in Practice. Brussels, ETUI.

(14)  See also European Fiscal Board (2019).

(15)  European Commission (2016), Report on Public Finances in EMU 2016, Institutional Paper No 045; J-M Fournier (2016), The positive effect of public investment on potential growth, OECD Economics Department, Working Paper No 1347.

(16)  IMF Fiscal Monitor (2020), Policies for the Recovery.

(17)  H. Bardt, S. Dullien, M. Hüther and K. Rietzler (2020), For a sound fiscal policy. Enabling public investments, IW policy paper No 6/2020, Institut der deutschen Wirtschaft (IW), Köln.

(18)  OJ C 429, 11.12.2020, p. 227.

(19)  A. Truger (2020), Reforming EU Fiscal Rules: More Leeway, Investment Orientation and Democratic Coordination, Intereconomics, 55(5).

(20)  See also P. Bom and J. Ligthart (2014), What have we learned from three decades of research on the productivity of public capital?, Journal of Economic Surveys, 28(5), 889-916.

(21)  J. Valero (2019), New investment clause fails to win EU Member State support, Euractiv. See European Commission (2015), Making the best use of the flexibility within the existing rules of the stability and growth pact, COM(2015) 012 final.

(22)  European Commission (2015).

(23)  European Commission (2021), Guidance to Member States. Recovery and resilience plans, SWD(2021) 12 final, part 2/2.

(24)  OJ C 62, 15.2.2019, p. 103.

(25)  A. Truger (2015), Austerity, cyclical adjustment and the remaining leeway for expansionary fiscal policies within the current EU fiscal framework, Journal for a Progressive Economy, 6, 32-37.

(26)  OJ C 429, 11.12.2020, p. 227.

(27)  OJ C 429, 11.12.2020, p. 227.

(28)  European Fiscal Board (2020).

(29)  European Fiscal Board (2020).

(30)  European Commission (2021): Economic policy coordination in 2021: overcoming COVID-19, supporting the recovery and modernising our economy, COM(2021) 500 final.

(31)  European Commission (2021): One year since the outbreak of COVID-19: fiscal policy response, COM(2021) 105 final.

(32)  OJ C 429, 11.12.2020, p. 227.

(33)  EESC Resolution on the Involvement of organised civil society in the National Recovery and Resilience Plans — What works and what does not? (2021) (OJ C 155, 30.4.2021, p. 1).

(34)  OJ C 429, 11.12.2020, p. 227.

Opinion of the European Economic and Social Committee ‘Glass in Europe at a crossroads: delivering a greener, energy-efficient industry, while enhancing competitiveness and maintaining quality jobs’

(own-initiative opinion)

(2022/C 105/04)

Rapporteur:	Aurel Laurenţiu PLOSCEANU
Co-rapporteur:	Gerald KREUZER

Plenary Assembly decision	25.3.2021
Legal basis	Rule 32(2) of the Rules of Procedure
	Own-initiative opinion
Section responsible	Consultative Commission on Industrial Change (CCMI)
Adopted in section	29.9.2021
Adopted at plenary	21.10.2021
Plenary session No	564
Outcome of vote (for/against/abstentions)	142/1/3

1.   Conclusions and recommendations

1.1.

The European glass industry is an innovative and highly strategic sector from which the EU benefits greatly. Glass products are indispensable to the transition towards a climate-neutral circular economy: for renovating buildings, producing more renewable electricity, decarbonising means of transport and making sustainable packaging. Glass also contributes to Europe’s digitalisation revolution. In short: glass is the future.

1.2.

The EESC asks EU policymakers to put the glass sector and all its subsectors at the heart of current policy priorities such as the ‘Fit for 55’ package, the Circular Economy Package, the Digital Agenda, the strategic value chains agenda and the EU’s international trade policy and associated instruments.

1.3.

The EU’s Renovation Wave would be a tremendous source of business opportunities for glass, triggering investments, while contributing enormously to the reduction of CO2 emissions from buildings. We call upon EU and upon national policymakers to at least uphold the current proposed goals and where possible strengthen them.

1.4.

An energy transition within the sector is necessary in order to make the inherently energy-intensive process of producing glass carbon-neutral. This energy transition will result in major cost increases in doing business due to higher operational costs and capital requirements.

1.5.

The EESC strongly recommends that EU policies support the glass industry in order to enable this transition, with financial support for both capital and operational expenditure, with renewable energy capacity building, with an affordable energy supply and by ensuring that the industry is not exposed to unfair competition from outside the EU market.

1.6.

The EESC supports all EU policies and national recovery plans that facilitate the transport revolution to smart and climate-neutral cars and the massive expansion of public transport systems. High-tech glass has an important role to play.

1.7.

The EESC strongly recommends that the EU classify glass as a permanent material, due to its inert, reusable and infinitely recyclable characteristics.

1.8.

The EESC demands a switch from non-linear materials to fully circular, reusable and recyclable glass to reduce dependency on imports of fossil fuels, the extraction of virgin raw materials and resource depletion. The Committee suggests that the EU should recognise the benefits of glass in contributing to sustainable packaging systems.

1.9.

The EESC strongly recommends wider implementation of circular economy principles, coupled with public and private financial support and partnerships such as the Close the Glass Loop initiative, to encourage the take-up of glass recycling. This will enable Europe to avoid glass waste, reduce energy consumption and CO2 emissions and create new jobs in the glass recycling sector.

1.10.

The EESC urges the EU to recognise that glass is indispensable for the production of green energy. Glass is a key component not only of photovoltaic solar panels but also of wind turbines and can be used in other ways to produce green electricity. The EESC calls upon the Commission and the Parliament to develop new EU policies regarding climate goals and strategic value chains in order to restart the production of photovoltaic cells in Europe and safeguard the production of other strategic glass products and the value chains they belong to (e.g. windscreens for transportation manufacturers).

1.11.

The EESC requests that investment in education and training be supported to provide new and young employees entering the sector to replace the ageing workforce with the necessary knowledge and capabilities, as well as to enable current workers to keep up with innovation and transitional changes in the industry.

1.12.

The EESC calls on the EU to protect our glass industries against the risk of carbon leakage. Increasing climate ambitions and rising carbon costs require strengthened rather than weakened carbon leakage protection. The competitiveness of glass products in export markets and in the EU itself can be partly ensured by effective carbon leakage measures through the Emissions Trading System (ETS). This system should be maintained to support the industry in the transition to meet the EU’s climate neutrality objective. The introduction of the Carbon Border Adjustment Mechanism (CBAM) and the taxonomy package must be carefully considered. The Committee asks that the CBAM include a solution for exports and that carbon leakage measures be strengthened by complementing the CBAM with full benchmark-based free allocation at least until 2030, in line with WTO rules.

1.13.

A green and digital transition in Europe, and in the glass industry in particular, has to be a just transition. To ensure maximum support for this transition, the EESC calls for workers to be included. Therefore, social dialogue at every level should be supported by EU legislation.

1.14.

In order to monitor developments in the glass industry, in terms of CO2 reduction, production and other relevant variables, the EESC would welcome more focused support and analysis for the sector as a whole and its subsectors and for each Member State.

2.   General description of the glass industrial sector

2.1.   Production

Glass production in the EU reached 36,8 million tonnes in 2020 according to Glass Alliance Europe. The EU is one of the largest glass producers in the world. It comprises five subsectors:

a)	60,4 % — Container glass

b)	29,2 % — Flat glass

c)	3,2 % — Domestic glass

d)	5,3 % — Fibres (reinforcement and insulation)

e)	2,1 % — Special glass

2.2.

Employment

In 2018, the glass sector employed approximately 290 000 workers across the EU-27 (1). This figure covers glass manufacturing, recycling and processing since some sectors, like flat glass in particular, have complex value chains. The glass-processing sector also includes a considerable number of SMEs.

2.3.   Health and safety

2.3.1.

The European glass industry offers quality jobs to a wide range of profiles: from unskilled blue-collar to high-level engineering jobs.

2.3.2.

Working as a blue-collar worker in the glass industry can be physically hard and sometimes still dangerous. Health and safety measures require investment and often have a positive impact on productivity. Measures to prevent occupational diseases are continuously being improved, as is the case for the prevention of silicosis, as part of the European Network for Silica (NEPSI) social dialogue on respirable crystalline silica. The culture of safety and prevention has contributed to the quality of the jobs in the sector.

2.4.   Age, education and training

In contrary to central and eastern Europe, western European countries’ workforce is mostly older (50+) and very experienced. It is increasingly difficult to attract new and younger workers. Replacing older and experienced workers means training new workers and enabling current workers to keep up with innovation and changes in the industry.

2.5.   Glass is a very innovative sector

2.5.1.

Health and well-being trends are opening up new opportunities and markets for sustainable, healthy, reusable and infinitely recyclable closed-loop glass packaging. The glass sector is working on design innovation and more ‘disruptive’ routes for decarbonising the production process, heralding a major transformation in the production of glass.

2.5.2.

Glass used in construction and the automotive sector is becoming more sophisticated by integrating foils, gases, coatings, cameras, radars and other materials to enhance safety, insulation properties and transmissibility of data. Photovoltaic cells can be integrated into façade glass or into car panoramic sunroofs to maintain efficiency and generate renewable electricity.

2.5.3.

High-tech glass products are also used in the aerospace and defence sectors. Glass products and composites are also used in spacecraft and satellites as coatings, electronics, sensors, displays, etc. This makes the glass industry not only a high-tech and innovative sector, but also a highly strategic one.

2.6.   Impact of COVID-19

Markets have been depressed in key sectors since the pandemic started, resulting in reduced production with slow recovery in some important glass sectors (flat glass, domestic glass, fibres). In 2020, the sector was down by 1 % to 14 % depending on the subsector. In the flat glass sector, which mainly serves the construction and automotive industries, the EU market shrunk by more than 10 % in 2020. While the uptake in construction has been steadier than anticipated, the automotive glass market remains very depressed to date.

3.   Glass’s contribution to the EU’s climate neutrality, circular economy, well-being and Digital Agenda

3.1.   Climate neutrality

3.1.1.   Renovation Wave

3.1.1.1.

Glass products are at the core of the EU’s Renovation Wave that aims to drastically reduce energy consumption and CO2 emissions from buildings. Glazing with the highest energy performance standards will need to be used in windows to insulate buildings. This would mean massive CO2 reductions since high-performance glazing could cut 37,4 % of CO2 emissions from buildings by 2050 (2). Glass wool, foam glass and other insulating glass fibre derivates are also key to attaining optimal insulation in buildings.

3.1.1.2.

The EU’s Renovation Wave would be a tremendous source of business opportunities. Doubling the window replacement rate could result in the flat glass market growing by over 60 % and could thus trigger investments.

3.1.2.   Production of green energy

3.1.2.1.

Glass is indispensable for the production of green energy. Glass is a key component of photovoltaic solar panels. Wind turbines use glass fibres to make them lightweight but sturdy. Green electricity can also be generated by special mirror glass focusing light onto a central element connected to a generator.

3.1.2.2.

The swift rise and fall of the European solar panel production industry due to unfair competition from Chinese companies can serve as an example of how not to manage new green energy opportunities in an internationally competitive environment. New EU policies regarding climate goals and strategic value chains should aim to revamp the production of photovoltaic cells in Europe.

3.1.3.   Transportation

3.1.3.1.

The glass sector is a large supplier for rolling stock producers. Due to the COVID-19 crisis, some public transport companies have paused or cancelled a number of large orders, with several sites risking closure, which could result in an increase in imports. Timely national recovery plans could be effective in supporting European production.

3.1.3.2.

Even though the automotive industry was already in crisis even before COVID-19, there will likely be a demand for more advanced lightweight, high-insulation glazing. Autonomous cars will intensify demand for more sophisticated specialised glass products to serve as displays, control panels and augmented reality devices, etc.

3.1.4.   Sustainable packaging

Glass provides Europe’s food and beverage, cosmetics and pharmaceutical (e.g. COVID-19 vaccines) sectors with healthy and sustainable inert packaging. The glass sector is leading on a wide range of innovations in eco-design, decarbonisation and energy efficiency processes to transform the way glass is produced. Every year, no less than 10 % of production costs are invested in decarbonisation, energy efficiency and plant upgrades. The latest container glass Furnace for the Future project (3), which has applied to the ETS Innovation Fund, will cut emissions by 60 %. This is one of several initiatives to support the sector’s aim to deliver climate-neutral glass packaging which will transform the sector and offer big opportunities for growth in low-carbon glass packaging.

3.2.   Circular economy: glass as a perfect circular product

3.2.1.

Glass is a permanent, inert material that is reusable and infinitely recyclable without losing its properties.

3.2.2.

Glass is an environmentally friendly alternative for a lot of plastic applications, leading the race in terms of effective recycling and it is 100 % reusable, providing a fully circular system. It is the only packaging that does not need a plastic layer or liner and always remains healthy and safe for food grade packaging, no matter how many times it is recycled, making it the only packaging that can achieve this. Glass is one of the most recycled packaging materials, with 76 % of all glass put on the market these days being collected for recycling. Using recycled glass saves both energy and CO2 emissions. EU-wide incentives to encourage stakeholders throughout the value chain, including consumers, to recycle more and better should continue to be supported.

3.2.3.

In the building glass sector, recycled glass nowadays accounts for 26 % of the raw material input (4). There is the potential to increase recycling by improving the collection, sorting and cleaning of glass coming from old windows or façades.

3.2.4.

The end of life of the first generation of photovoltaic cells can create a new opportunity to revamp industrial policy on solar energy and keep precious materials in Europe through enhanced recycling. A clear EU vision and policy should support this.

3.3.   Well-being

3.3.1.

Glass is all around us. Modern life would not be possible without it. The glass sector is also one of the oldest industries and has profound historical roots in Europe in decorative glass, arts and culture. This long tradition has shaped European know-how, practices and the art of glass-making.

3.3.2.

These days, glass makes medical technology, biotechnology and life science engineering possible. Glass also protects us from X-ray radiation (radiology) and gamma rays (nuclear). Interior design glass and glass furniture like mirrors, partitions, balustrades, tables, shelves and glass lighting enhance our living and office spaces.

3.3.3.

Glass protects the quality and shelf life of our food and beverages. Glass tableware enables fine dining and art de vivre accessories. Glass windows let natural light into our homes and offices. Glass is used in home and office appliances and electronics like oven doors, hobs, TV and computer screens and smartphones.

3.4.   Digital Europe

European production sites already make the thinnest glass available, which is used for displays, smartphones, tablets and other (touch) screens. Glass fibre-optic wires and cables ensure both large-scale and even intercontinental transportation of data as well as micro connections in electronic devices and chips.

4.   Glass as an energy-intensive sector

4.1.

Every year, new furnaces are progressively rebuilt or adapted with innovative low-carbon technologies that are much more energy-efficient. The industry continues to reduce energy consumption by making use of waste heat recovery technologies, Organic Rankine Cycle technology, increasing cullet usage and other symbiotic technologies. New energy management systems and technologies deployed throughout glass plants are helping to increase energy efficiency.

4.2.

The reduction in energy use in the glass sector has been on a steep downward trajectory for almost 100 years and is now reaching its thermodynamic limit.

4.3.

As CO2 emissions in the glass sector are directly linked to the energy used, energy efficiency improvements can be seen in the reduction of CO2 emissions. These improvements have in fact led to steep reductions in CO2 emissions. For example, the French glass industry — which is quite diverse and sophisticated — reduced its CO2 emissions by 70 % between 1960 and 2010.

4.4.

In order to monitor the progress made by the glass industry compared to other energy-intensive sectors, more focused support should be developed for the sector as a whole and its subsectors and for each Member State.

4.5.   Pathways to climate/carbon neutrality

4.5.1.

The glass sector has almost reached its thermodynamic limit, which means that significant reductions of CO2 emissions are no longer possible with current techniques and the combustion of natural gas. What is needed is an energy transition and even greater circularity in glass production in the areas where potential exists.

4.5.2.   Green electricity

Electrification is another promising pathway to decarbonising glass production. A demonstration project — Furnace for the Future — is currently being developed. It would be the first large-scale hybrid electric container glass furnace in the world. There are already small-scale electric furnaces operating in the container glass and domestic glass subsectors. As is the case for hydrogen, the capacity of green electricity needs to be developed.

4.5.3.   Green hydrogen

Hydrogen is a very promising alternative to natural gas. The glass sector is already exploring the option of hydrogen furnaces. It will still take several years before the first hydrogen-driven furnace is operational in a competitive setting and before there is sufficient production and transportation capacity for hydrogen.

4.5.4.   Circularity

When melting glass with natural gas furnaces, up to 80 % of the CO2 is emitted through the combustion of natural gas and 20 % is emitted by virgin raw materials. Replacing the virgin raw materials with recycled glass (cullet) prevents the need to extract virgin materials, reduces waste and CO2 and saves energy. There is the potential to ‘close the glass loop’ (5) and for more glass to be recycled post-consumption. In both the construction and automotive glass subsectors, several initiatives and models are being tested to improve collection. The pre-dismantling of glass and glazing from buildings before demolition and a material-specific collection target should be envisaged to complement the generic target for construction and demolition waste that is ineffective when it comes to lightweight materials like glass. Separate collection systems are needed to ensure high quality so that high levels of recycled content can be used in glass products.

4.5.5.   Hurdles and challenges

The energy transition will result in higher operational costs (OPEX) and capital requirements (CAPEX). EU policies must support industry investments to enable this transition and must ensure that the industry is not exposed to unfair competition from outside the EU market. Furthermore, action must be taken now as furnaces have a lifetime of about 10 to 15 years (container glass) or 15 to 20 years (flat glass). That only gives us two generations of furnaces until the crucial year 2050.

5.   Glass industry in EU policy

5.1.

Green recovery: The Green Deal, the EU Renovation Wave, the push for more renewable energy, sustainable transport policy and circular economy initiatives should be effective drivers for low-carbon glass products.

5.2.

New energy sources: Support and build renewable energy capacity for green electricity and green hydrogen and ensure the availability of biogas. Support wind and solar power in the energy mix.

5.3.

R & D: Increase public support and funding for R & D and demonstration projects (6) such as the ETS Innovation Fund in order to decarbonise production and further develop energy-efficient furnaces. The Fund has been massively oversubscribed in its first call, and this is also expected to be the case in subsequent calls.

5.4.

Market uptake: Mechanisms to support the market uptake of low-carbon glass products are needed to ensure return on investment for low-carbon production investments. Support the replacement of plastics by sustainable glass alternatives in the retail sector, at home, in the hospitality sector, for takeaway meals and on-the-go food and beverages, to help move from linear to circular economy systems.

5.5.

Renovation Wave: Support Renovation Wave measures which have the potential to encourage the use of products avoiding CO2 to boost energy efficiency and renewables in both buildings and transport. Increase the energy efficiency target and make it binding at EU level to encourage the renovation of public buildings and increase the level of ambition for energy saving obligations. Support the increase in funding available for building renovation through a number of instruments, including the New Social Climate Fund.

5.6.

Sustainable transport: Support the transport revolution to smart and climate-neutral cars and the expansion of public transport systems. High-tech glass plays an important role in this.

5.7.

Sustainable packaging: Support the switch from non-linear materials to fully circular, reusable and recyclable glass to reduce dependency on imports of fossil fuels, the extraction of virgin raw materials and resource depletion.

5.8.

Circularity: Support separate collection and recycling infrastructures, capacity building and technologies to maximise the quantity and quality of post-consumer glass for closed-loop recycling back into new glass products. Encourage public and private sector value chain partnerships, such as the ‘Close the Glass Loop’ platform for container glass (7), to work together.

5.8.1.

In particular, efforts need to be made in the field of construction sector activities, including demolition waste, to exploit the potential of end-of-life building glass.

5.8.2.

High reuse rates of glass packages and high recycling rates of glass packaging have been shown to contribute to lowering the environmental impacts of glass packaging systems and increasing resource efficiency. In order to achieve high reuse and recycling rates, in addition to extended producer responsibility (EPR) schemes for recycling one way glass packaging, the industry has introduced voluntary deposit systems on reusable glass packaging and some Member States of the European Economic Area (EEA) have implemented mandatory deposit refund systems (DRSs) on one-way beverage packaging. While mandatory deposit refund systems for one way packaging are seen as an effective means for preventing littering and achieving high recycling rates of beverage packages. the EESC considers that DRS for one-way glass for other glass containers (and not only beverages containers) is not compatible with the well-functioning EPR schemes which are a proven fit for purpose collection for recycling system and which have achieved very high recycling rates.

5.8.3.

For non-refillable container glass, support extended producer responsibility schemes that can collect glass in bulk. These are much more effective than deposit return schemes for one-way packaging, both environmentally and economically.

5.9.

Digitalisation: Support industries and employees that are enabling a digital Europe (fibre optics, touchscreens, displays, sensors) through an effective EU industrial policy and the development of ecosystems, taking into account all the above challenges and reflecting the specific features of the various glass subsectors.

5.10.   Ensuring competitiveness on the European market

5.10.1.

The glass sector energy transition will take time and, during the transition, the very high and rising energy costs are creating an extremely challenging situation in the glass sector, currently representing about 25-30 % of glass production costs, depending on products and price fluctuations.

5.10.2.   State aid

All glass subsectors should benefit from support instruments for CAPEX and OPEX, such as the modernisation fund, the EU structural funds and the ETS innovation fund, among others. Glass should be exempted from the Energy Taxation Directive but included in the block exemption for electricity compensation and should benefit from Carbon Contracts for Difference so that they can invest in low CO2-production processes. In particular, special glass should be added to the climate list for State aid.

5.10.3.

Competitiveness worldwide

5.10.3.1.

Unfair trade practices from third countries need to be addressed swiftly with effective trade policy instruments.

5.10.3.2.

The continuous filament glass fibre sector has suffered from a distorted market due to high imports of dumped and subsidised glass fibres from Asia. There is an urgent need for anti-circumvention measures, for example on imports from Egypt and Bahrain.

5.10.3.3.

The glass sector producing windscreens for the automotive sector also faces harsh competition mainly from Chinese producers. Lower environmental and CO2 emission standards combined with lower wages and poorer working conditions lead to unfair competition that could cause European car assemblers to increase imports from far east Asia, causing more CO2 emissions globally.

5.10.3.4.

Europe is the leading producer of glass packaging in the world. The sector serves the EU’s essential food and beverage sector, the largest sector in the EU. Glass also contributes to the external trade of an estimated EUR 250 billion worth of products that are packaged or likely to be packaged in glass, providing more extra EU export earnings than plastic resins and pellets, organic chemicals and aircraft.

5.11.   Ensuring a just transition

Life-long learning and training should be encouraged and supported to ensure that the workforce adapts to new technologies and processes and to provide more job security, within both the sector itself and the broader job market. Workers should be included in the transition and, therefore, social dialogue at every level should be supported by EU legislation.

5.12.   Legislative stability and certainty

5.12.1.

Carbon leakage: Effective carbon leakage measures through the ETS should be maintained to support the industry in the transition to meet the EU’s climate neutrality objective and to create and maintain a level playing field at European and international level.

5.12.2.

CBAM: The EESC is in favour of a careful introduction of the CBAM, in line with WTO rules, but it should include a solution for exports and it should complement free allocation at full benchmark level at least until 2030 to allow companies to focus on low-carbon investment and to assess the effectiveness of the CBAM.

5.12.3.

Taxonomy: The Committee welcomes the work on the EU taxonomy package aimed at directing private financing towards sustainable activities, but thinks that the role of glass manufacturing and its contribution to climate change adaptation and mitigation should be addressed.

5.12.4.

Circularity: The Committee welcomes the Circular Economy Action Plan and asks that glass be fully recognised as a permanent material which remains productive in our economies and that initiatives to enhance the circularity of glass be fully supported.

5.12.5.

Fit for 55: This package was presented while this opinion was being drafted. It proposes amending a dozen existing proposals (Emissions Trading Directive, Energy Taxation Directive, Renewable Energy Directive, etc.) and introduces a few new ones (like the CBAM proposal). The Committee calls upon the Commission to carefully assess this package’s impact on the glass industry. Given the magnitude of the changes introduced in a lot of different fields, it is crucial to ensure coherence between the various pieces of legislation and avoid potential conflicts. The package should support industry towards its energy transition while ensuring a level playing field with competitors outside the EU that are not facing the same carbon costs.

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(1)  Source: Eurostat and FERVER.

(2)  The source is a TNO report from 2019: Glazing potential: energy savings and CO2 emission reduction — Glass for Europe

(3)  Furnace for the Future: https://feve.org/about-glass/furnace-for-the-future/

(4)  Glass for Europe — 2050: Flat glass in climate-neutral Europe — 2019. https://glassforeurope.com/wp-content/uploads/2020/01/flat-glass-climate-neutral-europe.pdf

(5)  Close the Glass Loop: https://closetheglassloop.eu/

(6)  The glass industry has several decarbonisation strategies, such as switching to renewable energy sources, energy-efficiency measures, low-carbon raw materials, uptake of recycled glass, transport and logistics.

(7)  Close the Glass Loop www.closetheglassloop.eu

Opinion of the European Economic and Social Committee on the EU mobility strategy and EU industrial value chains: automotive eco-systems approach

(own-initiative opinion)

(2022/C 105/05)

Rapporteur:	Arnaud SCHWARTZ
Co-rapporteur:	Monika SITÁROVÁ

Plenary Assembly decision	25.3.2021
Legal basis	Rule 32(2) of the Rules of Procedure
	Own-initiative opinion
Section responsible	Consultative Commission on Industrial Change (CCMI)
Adopted in section	29.9.2021
Adopted at plenary	20.10.2021
Plenary session No	564
Outcome of vote (for/against/abstentions)	235/1/5

1.   Conclusions and recommendations

1.1.

The EESC believes that the European automotive ecosystem can become a frontrunner in developing and deploying sustainable mobility solutions. Therefore, the automotive ecosystem must actively develop strategies to shape the ongoing disruption and megatrends in Europe’s automotive landscape.

1.2.

In order to reduce transport emissions by 90 % by 2050, the EESC wants the EU to strive to make all transport modes sustainable, while making sustainable alternatives widely available and accessible to EU citizens. This objective can be achieved with a smart combination of powertrains that strikes a balance between environmental protection, efficient use of renewables, economic viability, and consumer acceptance, while respecting the principle of technology neutrality.

1.3.

The EESC strongly underlines that individual mobility must remain accessible and affordable for all, especially for commuters without access to quality public transport or other mobility solutions. A societal polarisation between those that can afford to buy a green car and those that cannot must be avoided at all costs. In this respect, the EESC warns that setting up an adjacent ETS system for the transport sector could undermine public support for the de-fossilisation of road transport if lower income groups and those that depend on road transport for their livelihood are not properly compensated.

1.4.

The EESC points out that the European automotive industry has always been a global leader and a driver for growth and jobs. In the transition to the paradigm of a digitalised and decarbonised road transport system, it should retain this position and develop the transformation pathways that allow it to deal with the disruptive trends the industry is currently facing. It should do so by building on its strengths in technology, its skilled workforce, world-class engineering, demanding consumers, sophisticated supply chains, strong SME culture, and constructive labour relations.

1.5.

The successful launch of the IPCEI on batteries has proved that pooling public and private resources clearly contributes to strengthening the automotive supply chain. The EESC is therefore convinced that more IPCEIs in this sector have to be considered, e.g. on hydrogen (in preparation), automated and connected cars, the circular economy, raw materials, etc. Bold action is required to deal with the supply bottlenecks in semiconductors, and setting up a second IPCEI for semiconductors would help tackle this issue.

1.6.

The EESC wants the EU to support a global level playing field. Europe must have the ambition to maintain its strong export position in the automotive industry. Actions must therefore be taken to: — strive for reciprocity in trade relations (market access, public procurement, investments, respect of IPRs, subsidies); — conclude bilateral free trade agreements (including a chapter on automotive/road transport); — fight against unfair trading practices (subsidies, bilateral free trade agreements, differences in the price of carbon, social and environmental dumping); — promote international cooperation on clean cars and low-carbon fuel technologies.

1.7.

The transformation of the automotive industry will have a dramatic impact on the quantity and quality of jobs needed. Active labour market policies are thus required to maintain the employability of the workforce through up- and re-skilling initiatives, for example, (like the Automotive Skills Alliance) in order to equip workers with the skills of the future. For employees that have to leave the sector, a smooth transition to another job must be guaranteed (in addition to early retirement schemes).

1.8.

The EESC calls for a clear mapping of the impact of the sector’s digital and green transition in order to identify the regions and parts of the supply chain that are most at risk. Also, the changing footprint of the industry due to decarbonisation and digitalisation needs to be monitored taking all relevant life cycle stages into account. As the challenges the automotive supply chain has to deal with are massive, the EESC considers it imperative to set up a just transition mechanism for the sector in order to put in place the necessary flanking measures to avoid social disruption and to ensure a socially responsible transition.

2.   General comments

Current situation

2.1.

The automotive industry has always been a cornerstone of European Union’s industry and has important linkages with upstream industries such as steel, chemicals, and textiles, as well as downstream industries such as ICT, repairs, fuels, lubricants and mobility services. The sector represents over 8 % of EU GDP, accounts for 28 % of total EU R & D spending and its exports generate a large trade surplus. However, the future of Europe’s automotive industry will depend on how it is able to make the fundamental adjustments needed to address the unprecedented challenges it is facing today.

2.2.

The European car industry is at the crossroads of a radical new paradigm resulting from the complex transition towards a digital and green economy. On 28 November 2018, the Commission adopted a long-term vision for a climate-neutral economy by 2050. The transport sector was identified as playing an important role in this transition. The European Green Deal of December 2019 sets a strategic framework for achieving climate neutrality. It calls for a 90 % reduction in transport emissions by 2050. In this context, the EU has decided to revise its 2030 greenhouse gas emission reduction target to at least - 55 %. To reach this objective, the Commission unveiled its ‘Fit for 55’ package on 14 July 2021, which revises the Effort Sharing Regulation, the Directive on the Deployment of Alternative Fuels Infrastructure and the Regulation on Setting CO2 Emission Performance Standards.

2.3.

The shift from fossil fuels to low-carbon power as well as the shift from creating added value in mass production of cars towards delivering mobility services, will create deep turmoil for the industry, for the many SMEs in its complex supply chains, and for the 13,8 million workers in the sector. Therefore, the challenge will be to manage this transition towards net-zero in a socially acceptable way.

Disruptive megatrends

2.4.

Globalisation. As sales on mature markets slow, automotive sales are growing in emerging markets. As a result, the economic centre of gravity is moving from the EU and the US to Asia. China is currently churning out 26 million cars per year as against 22 million in the EU. China has also been among the first to start producing electric vehicles and has a mature battery industry. Japan and Korea also have a lead on batteries and are especially strong in semiconductors. Europe also has problematic access to ethically sourced raw materials such as lithium and cobalt (1). Additionally, the automotive sector has to take into account mounting geopolitical tensions.

2.5.

The challenge of sustainable development. According to the vision set out in the EU’s Sustainable and Smart Mobility Strategy, ‘by 2030, there will be at least 30 million zero-emission cars’ on European roads. On 14 July, the EU Commission proposed that only zero-emission vehicles will be allowed to be marketed from 2035. This will require a steep increase in the share of zero-emission vehicles in the vehicle fleet (from 0,2 % currently to 11-14 % in 2030) (2). Delivering on the objectives of the Green Deal will create first-mover advantages, and support Europe’s leadership in low-carbon technologies and its global competitiveness. This also means massive investments in the development of alternative drivetrains (battery-electric, hybrid, hydrogen) and defossilised fuels for conventional drivetrains that will still be present in the fleet for a long time. The pace of uptake of these powertrains and fuels depends on the enabling regulatory framework and the payback periods for these investments. The EU’s Sustainable and Smart Mobility Strategy recognises the need ‘to make all modes of transport more sustainable’. This approach requires the uptake of low and zero emission vehicles as well as renewable and low-carbon fuels for road, waterborne and air transport.

2.6.

Changing consumer mindsets. Mobility behaviour is changing. A new generation of consumers is less interested in owning a car as many live in urban areas with well-established collective transport systems. Instead of owning a car, they will look for another mobility solution (car-sharing, ride-hailing, micro-mobility). Other trends that were already visible have been reinforced by the pandemic, such as online shopping, remote working, videoconferencing, delivery services. They will result in a reduction in personal car mobility, while the use of commercial vans will increase.

2.7.

Increasing connectivity. Digital technologies aim to allow cars to become almost permanently connected. This could create considerable potential for new data-driven business models. Smart cars would be equipped with active safety features, infotainment, traffic information services, vehicle-to-infrastructure communication, etc.

2.8.

The gradual automation of the car. The journey to self-driving cars will lead to ever increasing levels of autonomous vehicle features. Automated driving would require enormous investments in software, communication networks, and hardware (radars, lidars, transponders). It also creates many challenges regarding reliability, the legal framework, price, road equipment, and liabilities.

2.9.

Digitalisation of production. The automotive industry invented the assembly line (Ford), the principles of lean manufacturing (Toyota), and globalised production platforms (VW). Currently it is embracing the principles of Industry 4.0 with advanced robotisation, digitally integrated supply chains, advanced manufacturing systems, and additive manufacturing.

Consequences of the green and digital transformation

2.10.

A smaller, digitalised and decarbonised automotive industry will create an enormous job challenge. BEVs have fewer components and are simpler to produce, while at least 36 % of their added value is in batteries. Based on an extrapolation from a recent study by the German IFO Institute, 620 000 jobs will be at risk in the EU value chain of conventional powertrains. Solutions can be partly found in (early) retirement (3), for example, or more broadly in revolutionising the future of work (4). On the other hand, the transition will also generate new jobs in adjacent industries as power electronics, smart grids, road and charging infrastructure, batteries, new materials, and alternative fuel powertrains.

2.11.

A trend for consolidation, strategic alliances (e.g. Stellantis, alliances between BMW and Mercedes and between VW and Ford) in order to pool R & D in new powertrains, combine the purchasing of components. These mergers and alliances will always result in new company strategies, revisiting of the industrial footprint, outsourcing to regions with lower labour costs, job reduction schemes and increased pressure on suppliers. Furthermore, spinning off mature businesses allows companies to concentrate resources on the new powertrains.

2.12.

Blurring boundaries between the automotive industry and the IT sector. Information technologies will penetrate at all stages of the supply chain. Data will become a new raw material and a source of revenue. A global industry reshuffle is underway with new players making inroads in the industry: mobility providers (Uber), IT giants (Google, Apple, Baidu), chip producers (Intel, NXP, STM), battery producers (Panasonic, CATL, LG), emerging OEMs (Tesla).

2.13.

Added value could shift away from the core of the automotive industry (OEMs) to other parts of the supply chain as the share of information technologies as a percentage of added value will only increase to the detriment of mechanical components.

2.14.

It is likely that more and more added value will be created in mobility services such as ride-hailing, ridesharing, car-sharing and plenty of digital services like navigation apps, infotainment, advertising, and advanced driver assistance systems. This will create new business models: while OEMs see the car industry as a market of 100 million vehicles, digital platforms are looking at it as a market where 10 trillion miles can be sold every year.

2.15.

The job structure of the sector will be completely overhauled. New skills and experience will be needed (electronics, electrochemistry, new materials, information technologies), while in parallel there will be a fall in demand for traditional mechanical skills. Equipping the workforce with these skills will be an important challenge for the automotive industry.

2.16.

All the above-mentioned megatrends will reinforce each other. While there is widespread consensus that game-changing disruption has started, making the social transition towards decarbonised transport more gradual by organising a just transition must become a priority for all stakeholders. Sustainable mobility must be affordable for all to be accepted.

3.   Mastering the transformation

Environment: shifting gears towards sustainability

3.1.

To reduce transport emissions by 90 % by 2050 the EU should strive to make all transport modes sustainable while making sustainable alternatives widely available and accessible to EU citizens. This objective can be achieved through a smart combination of powertrains that strikes a balance between environmental protection, efficient use of renewables, economic viability, and consumer acceptance, while respecting the principle of technology neutrality. This requires a combination of different strategies: — Reduction of tank-to-wheel CO2 emissions (48V, hybrids, electricity, hydrogen, more efficient internal combustion engines, etc.). — Reduction of well-to-wheel CO2 emissions. The development of e-fuels, and biofuels that are in line with the UN SDGs and the sustainability criteria set out in the Directive on the promotion of the use of energy from renewable sources (5) needs support to avoid impact on land-use, biodiversity, and forests. — A coordinated strategy for clean cities (e.g. by decarbonising last-mile transport, innovative micro-mobility solutions, intermodal travelling). — Reduction of life-cycle emissions (manufacturing and recycling). — Reduction of the emission intensity of the transport sector (intelligent transport solutions, shared mobility). For each transport need, a sustainable mobility solution must be available (long distance freight transport via biofuels and synthetic fuels/hydrogen, battery electric powertrains for urban last-mile delivery) in respect of the principle of technological neutrality. — Encouraging retrofitting whereby the ICE is replaced with an electric engine or supplemented (hybridized) with in-wheel hub motors. — Reducing the weight of newly marketed cars (6).

3.2.

The Commission intends to set up an adjacent ETS system for road transport and buildings. Putting a price on road transport emissions will equate to taxing fuel (but with a qualified majority). The revenues will be used to compensate those that are reliant on an internal combustion engine vehicle, either for work or due to a lack of alternative transport options. As the design of such a compensation mechanism will be extremely complex and the higher fuel prices will hurt lower income groups disproportionately, the EESC is not convinced that this is the way forward as it will undermine public support for climate action. Instead, efforts to reduce the lifecycle cost of alternative powertrains, and to reduce the cost of low and net-zero carbon fuels would seem to be a better way to bring low carbon transport within the financial reach of the many.

3.3.

Priority should be given to so-called ‘charging deserts’. Today, 213 000 charging stations are available and 70 % of all EU charging stations are concentrated in three countries (the Netherlands, Germany and France). With a target of 1 million public chargers by 2025 and 3 million by 2030, the gap to be bridged in terms of infrastructure development is enormous (the European Sustainable and Smart Mobility Strategy estimates that the additional investments needed in charging and refuelling infrastructure for low-carbon fuels are equivalent to EUR 130 billion per year, for the next decade). Therefore, the EESC supports the introduction of mandatory targets. As part of the Recovery and Resilience Facility, the flagship project ‘Recharge and Refuel’ only encourages the Member States to accelerate the deployment of recharging and refuelling stations as part of their recovery plans. Special attention should be given to dwellings, the preparation of grids for increased EV integration, the interoperability of charging infrastructure, the development of smart charging services (e.g. through load balancing) and the supply of renewable and low-carbon fuels. As fully electric heavy duty vehicles (HDV) are becoming a reality, they also deserve a dedicated focus.

3.4.

As long as price parity between conventional and electric vehicles (foreseen for 2025-27) is not achieved, financial incentives will be needed to support the market uptake of low-carbon vehicles. These can be financial (subsidies, tax breaks and scrapping systems) or non-financial (priority lanes, toll exemptions, reserved parking spaces), including a coherent regulatory environment for the promotion of investments in low-carbon fuels. Special attention should be paid to greening car fleets as this could be an important lever to accelerate the transition, and also because this will contribute to creating a second-hand market for zero- and low-carbon vehicles.

3.5.

Support for the development of the circular economy in the automotive ecosystem: the recycling, re-use and re-manufacturing of cars and parts. Circular economy principles should also be applied to increase the amount of secondary raw materials available to the industry and reduce the dependence on imports. However, recent studies suggest that recycled materials will only be on an adequate market scale in a decade, when the lifespan of EVs is reached. It is therefore necessary to be realistic and understand that primary extraction is crucial at least in the 2020s. Therefore, the diversification of supply chains, as well as a green and ethical mining strategy, must guarantee the security of supply. Furthermore, the upcoming revision of the End-of-Life Vehicles Directive 2000/53/EC (7) needs to take account of the electrification of vehicles and the need to develop markets for secondary materials.

Economy: Maintaining and developing the full automotive supply chain inside the EU

3.6.

Promoting industrial collaboration. The huge R & D budgets (currently EUR 60 billion per year) that are currently invested in the development of decarbonised, connected, automated and shared mobility require industrial collaboration and public-private partnerships. In this respect, the roll-out of innovation partnerships under cluster 5 (climate, energy, mobility) of Horizon Europe (clean hydrogen, batteries, connected and automated mobility, zero-emission road transport, driving urban transition) deserves full support. Furthermore, industrial alliances under the auspices of the European Commission (like for batteries, hydrogen, raw materials and the one announced for the Renewable and Low-Carbon Fuels Value Chain) provide a broad and open platform to establish strategic roadmaps and the coordination of R & D, investments and the market introduction of new innovations. Finally, pooling public and private resources in IPCEIs will clearly strengthen the European automotive supply chain, reduce strategic dependencies and foster the twin green and digital transition. New IPCEIs have to be considered: connected and automated cars, the circular economy, integration of energy systems, supply of raw materials, the data economy, semiconductors.

3.7.

Challenges of developing a sustainable and circular battery value chain (8) inside the EU Localising the manufacture of batteries and fuel cells must be a crucial EU objective. EU battery and hydrogen alliances deserve to be supported and sufficient resources must be made available to them. These industrial alliances must trigger massive investments in production facilities and provide thousands of jobs in Europe. Care will have to be taken to prevent fractures between the regions of Europe, as is currently visible.

3.8.

The megatrend of connected and automated cars could lead to a shift in value added from selling and servicing vehicles towards new disruptive business models based on data-enabled services and mobility as a service. The automotive ecosystem must be prepared for entering and securing its presence in these new business models. This will require technological and regulatory standards to provide new innovative mobility services such as pay per use, location-based advertising, distance updates/maintenance of vehicles. Building a European mobility data space will also be key in securing European leadership in digital mobility services. It will also be necessary to deploy the requisite digital communications infrastructure and to design roadmaps for increasing levels of automation (including a framework for large-scale testing, access to data, and a new approach to the type approval of vehicles). Furthermore, the long-term impact of increasingly automated vehicles, in particular on jobs and ethical issues, needs to be assessed as this will be important to ensure social acceptance. Finally, as freight transport may intensify in the future (e-commerce), intelligent transport mobility solutions need to be developed based on the multimodal organisation of transport, cost-efficiency (high-capacity vehicle combinations), and sustainable transport modes, using automation and connectivity solutions in the logistics chain.

3.9.

Smart technologies and digital solutions based on the ‘Industry 4.0 paradigm’ must support the integration of production systems and help to make them more flexible. Enhanced production systems (not only integration of the production processes at company level) along the full supply chain will make automotive supply chains more resilient and underpin competitiveness. Digitalisation has to be supported by creating an industrial data space for the sector. However, these technologies also entail increased automation with a negative jobs impact, and that has to be addressed.

3.10.

Supporting a global level playing field. Europe must have the ambition to maintain its strong export position in the automotive industry. Therefore, actions must be taken to: — strive for reciprocity in trade relations (market access, public procurement, investments, respect of IPRs, subsidies); — conclude bilateral free trade agreements (including a chapter on automotive/road transport); — fight against unfair trading practices (subsidies, bilateral free trade agreements, differences in the price of carbon, social and environmental dumping); — promote international cooperation on clean cars and low-carbon fuel technologies.

3.11.

Support for global technical harmonisation within the framework of the United Nations Economic Commission for Europe (UNECE) needs to be strengthened. The supply bottlenecks in automotive semiconductors need to be solved by bold action. Demand for semiconductors will continue to rise as cars are becoming electronic devices. In this respect, the EESC fully supports the proposal in the latest communication on industrial policy to develop a toolbox for reducing and preventing Europe’s strategic dependencies. Also, the goal set in the European Digital Compass of doubling Europe’s market share in global semiconductors from 10 to 20 % needs full support. Setting up a second semiconductor IPCEI will certainly contribute to achieving this goal. The EU Member States should also deliver on their promise to spend 20 % of the COVID Recovery and Resilience Facility on the digital transition. Further actions could include attracting foreign direct investment, and establishing strategic cooperation between automotive companies and semiconductor producers. Finally, the Observatory of Critical Technologies needs to closely monitor the many other strategic dependencies in the automotive industry: raw materials, hydrogen, batteries, renewable energy, cloud technologies, etc.

3.12.

The impact of the new automotive landscape on the aftermarket needs to be addressed. The automotive aftermarket, which employs four million people, is set to be confronted with deep structural change coming from reduced sales, electrification, reduced demand for fuels, online sales, and reduced maintenance. The sector will have to re-invent itself as a provider of mobility services: updating cars, preventive maintenance, ride-hailing, car-sharing, and developing business models in micro-mobility. Conflicting interests regarding access to in-vehicle data must be overcome and an interoperable and standardised platform set up in order to allow the aftermarket to develop data-based services (like remote diagnostics, software updating, preventive maintenance).

Society: Managing change and ensuring a socially fair transition

3.13.

The transformation of the automotive industry will have a dramatic impact on the quantity of jobs needed in the manufacturing of cars and their components, as well as on the job profiles needed for the new paradigm. Therefore, labour market policies should focus on maintaining/increasing the employability of the workforce by means of lifelong learning, and on creating flexible pathways between the world of education and the world of work (e.g. dual learning systems, well-functioning apprenticeship markets and certification of non-formal learning). The internal mobility of workers in companies should be promoted by up- and re-skilling in order to equip them with the skills of the future (decrease in manual work and sharp increase in digital skills with a special focus on software and electronics engineering). European sectoral initiatives such as DRIVES and ALBATTS and the new Automotive Skills Alliance are key tools in addressing the skills challenge.

3.14.

For employees that have to leave the sector, a smooth transition to another job should be organised. They must be offered access to the new jobs that will indeed be created in emerging industries such as IT, 5G networks, power electronics, charging infrastructure, the production of renewables, smart grids, smart roads, mobility services, batteries, alternative fuels, energy storage, electricity production and distribution. This will be very challenging as these jobs will probably be created elsewhere at another time and with other skillsets than the jobs that will disappear. Income security must be guaranteed during the transition. Mass redundancies can also be avoided by means of systems of early retirement, short-time work and working time reduction. A proper social dialogue must be ensured in order to be able to anticipate change in good time and to avoid social disruptions and conflicts.

3.15.

A clear mapping of the impact of the sector’s digital and green transition is needed in order to identify the regions and parts of the supply chain that are most at risk. New social fractures should not appear between East and West, nor between southern and northern Europe. Also, the changing footprint of the industry because of decarbonisation and digitalisation needs to be monitored. The potential progress in the use of sustainable biomass should be looked at closely, as there are also opportunities for the creation of new jobs here, with due regard, at the same time, to the need to stay within the ecological boundaries.

3.16.

All stakeholders (companies, trade unions, cluster organisations, authorities, labour market agencies, regional development bodies) in automotive regions should work together intensively on comprehensive regional re-development plans.

3.17.

Stranded assets in the automotive supply chains must be avoided by ensuring timely and adequate support for the many SMEs that do not have the resources (human and financial) to reshape their activities and move to more promising business models.

3.18.

Individual mobility must remain accessible and affordable for all, especially for commuters without access to quality public transport or other mobility solutions. This can be achieved by providing compensation for the higher price of alternative powertrains, and of low and net zero-carbon fuels that can be used in a conventional car. A societal polarisation between those that can afford to buy a green car and those that cannot must be avoided at all costs.

3.19.

Conclusion. The European automotive industry has always been a global leader and a driver for growth and jobs. In the transition to the paradigm of a digitalised and decarbonised road transport system, it should retain this position and develop the transformation pathways that allow to deal with the disruptive trends the industry is currently facing. It should do so by building on its strengths in technology, its skilled workforce, world-class engineering, demanding consumers, sophisticated supply chains, strong SME culture, and constructive labour relations. The European automotive ecosystem must become a frontrunner in developing and deploying sustainable mobility solutions. Therefore, the automotive ecosystem must actively develop strategies to shape the ongoing disruption and megatrends in Europe’s automotive landscape. As the challenges the automotive supply chain has to deal with are massive, the EESC considers it imperative to set up a just transition mechanism for the sector in order to put in place the necessary flanking measures to avoid social disruption and to ensure a socially responsible transition.

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(1)  https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2312

(2)  Commission Staff Working Document, Sustainable and Smart Mobility, SWD(2020)331, p. 248.

(3)  Dr Oliver Falck, Dr Nina Czernich, Auswirkungen der vermehrten Produktion elektrisch betriebener Pkw auf die Beschäftigung in Deutschland, Mai 2021, ifo Institut; https://www.ifo.de/DocDL/ifoStudie-2021_Elektromobilitaet-Beschaeftigung.pdf

(4)  https://eeb.org/library/escaping-the-growth-and-jobs-treadmill/

(5)  Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018 on the promotion of the use of energy from renewable sources (OJ L 328, 21.12.2018, p. 82).

(6)  Cars under 1 000 kg/over 1 500 kg were respectively 36 %/7 % of those sold in France in 1998 and 15 %/16 % in 2019 (Eurostat).

(7)  Directive 2000/53/EC of the European Parliament and of the Council of 18 September 2000 on end-of life vehicles (OJ L 269, 21.10.2000, p. 34).

(8)  In this respect the role of the European battery regulation is described in detail in opinion OJ C 220, 9.6.2021, p. 128.

Opinion of the European Economic and Social Committee on the societal and ecological impact of the 5G ecosystem

(own-initiative opinion)

(2022/C 105/06)

Rapporteur:

Dumitru FORNEA

Plenary Assembly decision	25.3.2021
Legal basis	Rule 32(2) of the Rules of Procedure
	Own-initiative opinion
Section responsible	Transport, Energy, Infrastructure and the Information Society
Adopted in section	7.10.2021
Adopted at plenary	20.10.2021
Plenary session No	564
Outcome of vote (for/against/abstentions)	210/2/19

1.   Conclusions and recommendations

1.1.

The EESC observes that the rapid digitisation and development of electronic communications has a strong impact on the economy and society at large. Through the responsible use of these technologies, humanity has a historic chance to build a better society. Nevertheless, without due diligence and democratic control, our communities might face serious challenges in the administration of these technological systems in the future.

1.2.

The EESC acknowledges that electronic communications infrastructure can greatly improve the quality of life of citizens and has a direct influence on fighting poverty. 5G technology presents an enormous opportunity to improve human health services through the development of telemedicine and by improving access to medical care. The important role that telemedicine has played during the pandemic is recognised in society.

1.3.

The EESC notes that the debate on the deployment of 5G networks has turned into a controversial and political discussion, but nevertheless, social, health and environmental issues need to be clarified, involving citizens and all relevant actors.

1.4.

The EESC encourages the European Commission to move forward in the process of assessing the multisectoral impact of new 5G and 6G technologies, considering that tools and measures are needed to address risks and vulnerabilities. Therefore, the EESC recommends that European and national funds be allocated towards more in-depth multidisciplinary research and impact studies focused on both humans and the environment, and also towards disseminating these results in order to educate the public and decision-makers.

1.5.

The EESC proposes that the European Commission, consults citizens and civil society organisations and through the involvement of all relevant public institutions can feed the decision-making process with respect to the societal and ecological impact of mobile electronic communications.

1.6.

The EESC considers that the EU needs an independent European body, with up-to-date methodologies, in line with the current technological context and a multidisciplinary approach, to establish guidelines for the protection of the general public and workers in the event of exposure to radio frequency electromagnetic radiation.

1.7.

The EESC recommends that all radio frequency transmission stations and the frequency bands on which they operate be inventoried and this information published for better territorial management and the protection of the interests of citizens, particularly of vulnerable groups (children, pregnant women, chronically ill persons, the elderly, electrohypersensitive people). The health and safety of workers must also be taken into account.

1.8.

The EESC supports the idea that 5G network equipment must be designed, from the factory, with capabilities to provide real-time and public information on the emission power and other relevant technical parameters for the consumers’ organizations and the interested public. These data must be centralised, managed and disclosed by the competent authorities.

1.9.

The EESC believes that monitoring and control of electromagnetic pollution must be carried out on the basis of a rigorous interinstitutional and interdisciplinary scientific approach, supported by the provision of modern equipment for measuring the parameters of electronic communications networks, so that the cumulative effects over longer periods of time are properly highlighted and evaluated.

1.10.

While there is no recognised scientific data showing a negative impact of 5G on human health, the EESC believes that the social, health and environmental aspects of 5G need to be continuously monitored in line with the precautionary principle. It recognises the concern about health effects, including thermal and non-thermal, exposure intensity and long-term effects of such exposure. Some regions/areas will concentrate more exposure than others, and in such cases, specific measures should be considered, including the recommendation to extend the application of the ALARA Principle to limit the effects of electromagnetic radiation generated by 5G networks.

1.11.

The EESC notes that exposure of the population to a variety of electromagnetic fields is almost impossible to avoid. When reviewing the exposure limit values in the European Directive on minimum health and safety requirements for the exposure of workers to the risks posed by physical agents (electromagnetic fields) (1), the social partners should be involved from the outset. Special attention should be paid to non-thermal effects.

1.12.

Health and safety protection measures must be enhanced and consolidated through rigorous monitoring of the radiation levels and by a strict application of safety standards for people working near sources of electromagnetic radiation.

1.13.

The EESC notes the need to update the institutional mechanisms aimed at upholding all human rights in the new context of hyperdigitalisation, hyper-automation and hyperconnectivity facilitated by the implementation of 5G, considering that any technological development must incorporate these universal values which represent a valid and necessary dimension in the assessment of the cost-benefit report.

1.14.

The EESC understands citizens’ concern about ensuring that their property rights are upheld in the distribution of antennas or the right to own their own bodies in the context of 5G networks extending everywhere, from their own homes to orbital satellite. The right to property and people’s choices must be respected. The definition of informed consent should be guaranteed, so that the citizen has a real right to free, fully informed and valid consent.

1.15.

The EESC supports the strengthening of European capacities for cyber risk prevention, education and protection, both by strengthening relevant institutions such as ENISA and by creating technological, institutional and legal instruments to ensure that citizens’ rights are respected. In order to remedy certain security threats, the EU should invest more in building its own technologies and supporting the tech industry and developers. Most importantly, these actions should be tailored to incentivise European SMEs to develop secure and reliable 5G infrastructure.

2.   Introduction

2.1.

5G is not a new technology per se; it is a development of existing technologies (from 1G to 4G) and will exist alongside them. This will result in a mixed network of networks: a greater number of more varied radio frequency bands, a range of devices that exchange data and a plethora of interactions with users. Some of the new equipment and the new technologies employed might have different effects than the previous generations.

2.2.

5G technology should allow for wireless hyperconnectivity, the ability to cover and connect up a huge number of devices and much faster transfer speed measured in Gbps. It will achieve this by means of beamforming spectrum aggregation and multiple parallel connections using both Massive MIMO antennas (the operator’s phased-array base station) and regular MIMO antennas (the client’s own device) and low latency (milliseconds for the operator’s own infrastructure but not with the rest of the internet).

2.3.

A 2019 study by GSMA shows that the new 5G network capabilities are needed for autonomous driving, virtual reality, augmented reality and the ‘tactile internet’; the other applications can be delivered using current technology (4G LTE and fibre optic). 5G technology will also speed up the transition to Industry 4.0 and facilitate the development of applications based on artificial intelligence, and therefore, this technology is considered to be a key and necessary element in the development of a modern, increasingly automated and digitised economy.

2.4.

There are scientific communities around the world who have put forward evidence (2) that there is valid cause for concern regarding prolonged, ubiquitous exposure of the human body and other biological organisms to the range of microwave frequencies used by 5G networks and the 10-20-30 or more gigahertz radio sections and frequencies specific to 5G technologies, as well as the potentially harmful effects on human health, biodiversity and the environment. However, until now, relevant EU and national public authorities have communicated that there is no scientific proof of 5G’s negative impact on human health. The WHO states that ‘to date, and after much research performed, no adverse health effects has been causally linked with exposure to wireless technologies’.

2.5.

Together with the emerging technologies it facilitates, 5G brings uncertainty and as with every new technology, some effects which may be yet invisible. In order to properly address any question about 5G’s impact on public health and to prevent public opinion being the victim of disinformation, civil society considers that suitable anticipatory governance is needed, applying the precautionary principle to the European legislative process for regulating this new technological generation of electronic communications.

3.   General comments

3.1.

Broadly speaking, international institutions, corporations and national authorities are unabashedly enthusiastic about the advantages that 5G technology will bring. However, it is necessary to study if any negative effects could appear as the 5G ecosystem develops and, implicitly, the conditions required for social acceptance of these infrastructures and services which have a significant societal impact.

3.2.

With the rapid development of electronic communications technologies and internet infrastructure, there has been increasing debate among the general public and organised civil society in developed countries regarding the need to and benefits of exponentially speeding up the development of ICT networks. Public authorities need to acknowledge challenges linked to the ways these technological systems could potentially affect the environment, living organisms or people’s civil rights.

3.3.

At European level, concerns about the potential effects of electromagnetic pollution on health are set out in recital 31 of Decision No 243/2012/EU of the European Parliament and of the Council (3): ‘A coherent approach to spectrum authorisation in the Union should take full account of the protection of public health against electromagnetic fields which is essential for citizens’ well-being. While observing Council Recommendation 1999/519/EC of 12 July 1999 on the limitation of exposure of the general public to electromagnetic fields (0 Hz to 300 GHz), it is essential to ensure constant monitoring of the ionising and non-ionising effects of spectrum use on health, including the real-life cumulative effects of spectrum use in various frequencies by an increasing number of equipment types.’

4.   Specific comments

5G technology and the impact on people’s civil rights

4.1.

In recent years, several civil society organisations in the EU and other countries have issued warnings about the harmful effects and complex, serious crises which might be triggered by a lack of democratic control and transparency and by security threats arising from dependence on technologies provided by third-country players.

4.2.

The electronic communications industry and the disruptive 5G-type applications it offers are based on the exploitation of two very important resources. Firstly, the use of the radio frequency spectrum. This is a limited natural resource which is owned by the people and managed on their behalf by governments through national agencies or other public bodies that lease these resources to electronic communications operators.

4.3.

Another essential resource is access to the data and metadata of consumers and individuals. With the development of the digital services market, these data are hugely valuable and give enormous benefits to the companies which utilise them. Some of the challenges in this regard were highlighted in the EESC’s opinion on Data Strategy (4).

4.4.

Taking the above into consideration, it has to be underlined that 5G and data sharing and aggregating, like many other technologies, is a powerful tool that can be used to strengthen civil society, make public services more effective and reliable, and reduce inequalities by boosting economic growth. Hence, the EU and the Member States should take advantage of 5G technology to improve access to high-quality data and develop better digital administration infrastructure (e-administration), thereby bringing public and democratic institutions closer to the citizen.

4.5.

Consequently, the responsible and sustainable development of electronic communications infrastructure should improve the quality of life for ordinary citizens, especially in the regions and less developed countries. The development of these technologies thus has a direct influence on fighting poverty.

4.6.

In order to roll out 5G networks with all speed, the European Union, through Directive (EU) 2018/1972 of the European Parliament and of the Council (5) (Articles 42, 43 and 44), created a regulatory framework facilitating electronic communications operators’ access to property on which equipment and infrastructure facilities vital for the development of these networks need to be installed. Civil society monitors the interpretation of this provision, so that the transposition of the directive does not lead to unconstitutional derogations from the guarantee of citizens’ property rights.

Impact of the 5G ecosystem on the environment

4.7.

Some civil society organisations have flagged up the potential environmental impact of the new 5G networks. Some of their allegations relate to insufficient provision made for environmental impact studies or inappropriate mechanisms and measures to reduce the energy footprint of 5G network infrastructure or promote recycling of electronic waste (6).

4.8.

In order to carry out a proper evaluation of the impact of 5G on the environment and climate, public authorities must take into account aspects like GHG emissions (7), critical raw material availability and consumption, the amount (and sources) of energy used by all objects connected and used within IoT, as well as the amount (and sources) of energy used to transport wireless data and run data centralisation and transit points.

4.9.

With the roll-out of 5G and the internet of Things, billions of new 5G network elements and household goods (electronic and white goods, facilities, etc.) will be added to the category of electronic waste (e-waste) (8), which has to be taken into account in the context of the concept of the circular economy as well as zero waste policies.

Concerns regarding the impact of 5G networks on human health and living organisms

4.10.

5G technology presents an enormous opportunity to improve human health. The development of ICT infrastructure and incorporation of 5G will speed up the advance of telemedicine, including through the concept of the internet of things. 5G will enable complex surgery to be carried out remotely, thus greatly improving access to high-quality medical care, especially to those who cannot afford to travel abroad in order to receive the treatment they need.

4.11.

The development of telemedicine is especially important in times of pandemic, where stationary access to medical care is greatly decreased. Moreover, 4G technology has allowed for the development of teleradiology. ICT infrastructure has enabled patients to be diagnosed remotely (MRI, CT) and receive a quality medical service, regardless of the location. The technology of 5G will further develop that process, allowing people to have better access to diagnostics and direct medical services that are performed remotely.

4.12.

On the other hand, the rapid technological development of the last 20 years has led to an increase in electromagnetic fields and implicitly to increased pollution due to this electrosmog. The impact of electrosmog needs to be addressed with an evidence-based approach in order to evaluate the real risk.

4.13.

Electromagnetic hypersensitivity or electromagnetic intolerance is an illness which has been recognised by the European Parliament (9), the EESC (10) and the Council of Europe (11). It affects a number of people, and with the roll-out of 5G (which needs a much denser electronic network) it is to be expected that this condition may affect more.

4.14.

Globally, studies have been conducted which conclude that the biological effects of electromagnetic radiation do not present any health risks, provided national or ICNIRP standards are met. At the same time, there are also studies conducted since the 1970s up to the present (12) which have concluded that there are dangers for human health (13).

4.15.

In reports on concerns relating to the long-term exposure of people to electromagnetic fields generated by 5G technology produced in 2019 and 2020 respectively, the European Commission and the Federal Communications Commission (FCC) (14) argue that there is no solid or credible scientific proof of health issues caused by exposure to radio frequency energy emitted by mobile telephones.

4.16.

Years ago, the World Health Organization classified the electromagnetic field produced by radio frequencies as a possible carcinogen; it now takes a similar position to that of EU and US authorities. However, with the roll-out of 5G networks, it announced in 2022 that it would conduct another evaluation of the risks of electromagnetic fields for the radio frequency spectrum (from 3 kHz to 3 000 GHz) (15).

4.17.

The final version of Resolution 1815 of 27 May 2011 of the Council of Europe on The potential dangers of electromagnetic fields and their effect on the environment warns about the impact of electromagnetic pollution on human health and includes a set of general and specific recommendations for a consistent medium- and long-term approach to the challenges posed by the proliferation of mobile telephony. This document underscores the need to take all reasonable measures to reduce exposure to electromagnetic fields in line with the ALARA principle (16), which must be applied in the event of ionising radiation.

4.18.

There are studies arguing that the effects of radiation emitted by mobile telephones and wireless communications infrastructure (even non-thermal emissions) pose risks to human health from a neuronal, reproductive, oncologic and genotoxic perspective (17). However, the relevant institutions consider, based on their own assessments and methodologies, that the radiation emitted by mobile telephones and wireless communications infrastructure is safe for humans.

4.19.

As mentioned above, there are studies that have examined the impact of electromagnetic radiation on human and animal health. However, very little is clarified and even less is communicated regarding the complex impact that exposure to non-ionising electromagnetic radiation might have as a non-thermal effect on flora and fauna. The best known studies refer to the significant and immediate impact on pollinators and birds, but scientists are very concerned about the long-term impact of electromagnetic emissions on living ecosystems.

Allegations regarding ICNIRP guidelines (18)

4.20.

The European Commission and the vast majority of national governments around the world use ICNIRP guidelines when setting limits for public exposure to electromagnetic field radiation. The ICNIRP guidelines updated and published in 2020 also took account of beamforming and frequencies — parameters that are specific to 5G, but the frequencies aggregation and the increased density of connexions were not taken into account.

4.21.

Despite the fact that ICNIRP goes to considerable lengths to communicate the scientific methods used to establish the protection guidelines, it only recognises the thermal effects produced by electromagnetic radiation as being potentially harmful.

4.22.

The STOA study carried out by the European Parliament (19), in line with the recommendations set out in the Council of Europe’s Resolution No 1815 of 2011, argues in favour of abiding by the precautionary principle, reviewing the thresholds proposed by ICNIRP and adopting technical and administrative measures to reduce the impact of electromagnetic pollution produced by electronic communications.

4.23.

The measures proposed seek to ensure a more responsible architecture for communications infrastructure (placement of antennas and other specific equipment), to ensure that the general public is informed about the potential effects of electromagnetic pollution and the options available to them to reduce the impact of exposure to electromagnetic radiation, to develop capacity to monitor electromagnetic fields, etc. European and national funds should be provided in order to carry out more in-depth multidisciplinary research and impact studies on humans and the environment, and also to disseminate the results to educate the public and decision-makers.

5G cybersecurity — Tools, measures and their effectiveness

4.24.

The EESC has already highlighted many of the cyber security challenges in its Secure 5G deployment — EU toolbox opinion (20). Unresolved cyber vulnerabilities in 4G will be amplified in 5G. These reside at the technical level of architecture, topology and protocol, as mapped by ENISA (21), and, according to the NIS Report (22), cannot yet be countered with efficient measures.

4.25.

In order to remedy certain security threats, the EU should invest more in building its own technologies and supporting the tech industry and developers. Most importantly, these actions should be tailored to incentivise European SMEs to develop secure and reliable 5G infrastructure.

---

(1)  Directive 2013/35/EU of the European Parliament and of the Council of 26 June 2013 on the minimum health and safety requirements regarding the exposure of workers to the risks arising from physical agents (electromagnetic fields) (20th individual Directive within the meaning of Article 16(1) of Directive 89/391/EEC) and repealing Directive 2004/40/EC (OJ L 179, 29.6.2013, p. 1).

(2)  https://ehtrust.org/environmental-health-trust-et-al-v-fcc-key-documents/

(3)  Decision No 243/2012/EU of the European Parliament and of the Council of 14 March 2012 establishing a multiannual radio spectrum policy programme (OJ L 81, 21.3.2012, p. 7).

(4)  TEN/708 — (OJ C 429, 11.12.2020, p. 290).

(5)  Directive (EU) 2018/1972 of the European Parliament and of the Council of 11 December 2018 establishing the European Electronic Communications Code (OJ L 321, 17.12.2018, p. 36).

(6)  https://www.greenpeace.org/static/planet4-eastasia-stateless/2021/05/a5886d59-china-5g-and-data-center-carbon-emissions-outlook-2035-english.pdf

(7)  https://www.hautconseilclimat.fr/wp-content/uploads/2020/12/rapport-5g_haut-conseil-pour-le-climat.pdf

(8)  https://www.itu.int/en/ITU-D/Climate-Change/Pages/Global-E-waste-Monitor-2017.aspx

(9)  European Parliament resolution of 2 April 2009 on health concerns associated with electromagnetic fields (2008/2211(INI)) 28. https://www.europarl.europa.eu/doceo/document/TA-6-2009-0216_EN.html?redirect

(10)  EESC’s Opinion on Secure 5G deployment — EU toolbox: TEN/704 — (OJ C 429, 11.12.2020, p. 281).

(11)  Resolution 1815 (2011) final version, Art. 8.1.4 http://assembly.coe.int/nw/xml/XRef/Xref-XML2HTML-en.asp?fileid=17994

(12)  https://bioinitiative.org/updated-research-summaries/

(13)  Defence Intelligence Agency — Biological Effects of Electromagnetic Radiation (Radiowaves and Microwaves) — March 1976.

(14)  The FCC’s position has been challenged in court by US civil society organisations: https://ehtrust.org/eht-takes-the-fcc-to-court/

(15)  According to the International Telecommunication Union (ITU) Radio Regulations.

(16)  As Low As Reasonably Achievable — the ALARA principle is used when establishing programmes to safeguard against ionising radiation.

(17)  For example, the European REFLEX study (2004) that was carried out on behalf of the EU by 12 academic institutions with a total budget of over EUR 3 million, with a EUR 2,059 million contribution from the European Commission.

(18)  International Commission on Non-Ionizing Radiation Protection.

(19)  https://www.home-biology.com/images/emfsafetylimits/EuropeanParliamentSTOA.pdf

(20)  OJ C 429, 11.12.2020, p. 281.

(21)  https://www.enisa.europa.eu/publications/enisa-threat-landscape-report-for-5g-networks/at_download/fullReport

(22)  https://ec.europa.eu/newsroom/dae/document.cfm?doc_id=64468

Opinion of the European Economic and Social Committee ‘Next Generation Trade and Sustainable Development — Reviewing the 15-point action plan’

(own-initiative opinion)

(2022/C 105/07)

Rapporteur:

Tanja BUZEK

Plenary Assembly decision	25.3.2021
Legal basis	Rule 32(2) of the Rules of Procedure
	Own-initiative opinion
Section responsible	External Relations
Adopted in section	28.9.2021
Adopted at plenary	20.10.2021
Plenary session No	564
Outcome of vote (for/against/abstentions)	236/2/5

1.   Conclusions and recommendations

1.1.

Trade needs the right policy framework to drive growth, decent job creation, sustainable development and support a sustainable economic recovery from the COVID-19 crisis, allowing companies to rebuild and re-organise their disrupted supply and value chains. 2021 is a turning point to re-think EU trade governance and the EESC supports its open, sustainable and assertive new path.

1.2.

Trade and sustainable development (TSD) chapters express the EU’s commitment to a ‘values-based trade agenda’ fostering economic, social and environmental development simultaneously. Tackling non-compliance and improved implementation of TSD commitments are crucial to achieving high labour and sustainability standards through trade tools. Both at the bilateral and the global level, the EU should set ambitious TSD benchmarks with like-minded trade partners ready to lead.

1.3.

The EESC welcomes the early review of the 15-point action plan, and expects it to overcome its limited and ‘siloed’ framework set up in 2018. TSD chapters not living up fully to their legally binding commitments leads the EESC to propose an ambitious review, featuring a revamped sanctionable enforcement approach with stronger civil society monitoring, using innovative instruments and enhancing the leverage for TSD. This ‘next generation TSD’ must be an integral part of the EU trade strategy, applying to current and future negotiating mandates alike.

1.4.

A fresh take starts with breaking down the silos. Successful TSD implementation and enforcement require a vivid, structured and more collaborative interaction of players. Exchange between institutions, international bodies, and most importantly, of them all with the Domestic Advisory Groups (DAGs) and among the DAGs. As the recognised body at international level, the International Labour Organization (ILO) should take part in monitoring the implementation of ILO Conventions in free trade agreements (FTAs).

1.5.

Major problems often stem from the very beginning. The EESC stresses the importance of securing pre-ratification commitments of international core conventions or binding and enforceable roadmaps within the TSD chapter itself, with clear timelines on their ratification. The first ever TSD enforcement case under the current model has confirmed that vague terminology was insufficient.

1.6.

All three dimensions of TSD are intertwined and must not be tackled in silos. The EESC welcomes the active role of business in pursuing efforts to ensure sustainable trade and sees a positive role for them in promoting climate action opportunities, for instance for the clean tech industry with special attention on SMEs. TSD chapters must develop deeper links with the ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration), promoting the ratification of its Conventions, and with the Organisation for Economic and Cooperation Development (OECD) Guidelines for Multinational Enterprises, especially down the supply chain.

1.7.

Effective change on the ground requires going beyond classic TSD chapters and considering the great leverage of additional policy instruments. The EESC calls for conditional public procurement allocation to companies from countries that comply with ILO core standards and the Paris Agreement. It also calls for ambitious EU legislation on mandatory due diligence as another key flanking measure. Foreign investors should have to comply with due diligence before benefitting from an international investment agreement. Measures should be complemented with action against money laundering, tax crimes and avoidance, and the fight against corruption to achieve sustainable trade.

1.8.

Sustainable development must reflect evolutions and drive them, keeping labour and environmental standards equally high on its agenda. The Green Deal, circular economy initiatives and the Carbon Border Adjustment Mechanism (CBAM) complement relevant TSD topics, as biodiversity already has. To set concrete obligations, environmental commitments need to operationalise into international standards.

1.9.

There is no ‘silver bullet’ to enforcement but it starts with stepping up effective enforceability. The EESC has long called for a revamped Panel of Experts mechanism with the possibility of financial penalties or sanctions and an active role for DAGs in its activation. In putting level playing field and sustainability on the frontline, to the benefit of businesses and workers alike, the EU-UK Trade and Cooperation Agreement (TCA) could be a template.

1.10.

EU trade partners show fresh ‘out of the box’ thinking on new trade instruments. Taking an innovative approach to labour dispute settlement, the EU should look at the suspension of preferential tariffs for companies that breach agreed international standards. For a progressive economic link, the EESC supports a staged tariff reduction for partner countries’ implementation of TSD commitments, with the possibility of withdrawal in the event of breaches.

1.11.

There is no sustainability without civil society. Creating the DAGs was not an end in itself. To be taken seriously, they need information, resources, and access to advise the parties on implementation and enforcement as well as a stronger institutionalised framework. Beyond the DAGs, the EESC calls for the reinstatement of the expert group on FTAs.

1.12.

The EESC is one of the DAGs’ strongest advocates and will continue to support their work. Debates over strengthening the DAGs have recently intensified and the EESC encourages the Commission (EC) and other stakeholders (1) to work with the DAGs on improving their composition, the organisation of their work, their scope and role in enforcement mechanisms, and their institutional channels as laid out in detail in chapter five of this opinion.

2.   Introduction

2.1.

An active trade policy needs to effectively drive sustainable development and is to the benefit of businesses, workers, consumers and people in general, provided that it creates new market opportunities and decent jobs and levels the playing field. It also bears inherent risks that only an inclusive trade policy, where civil society, stakeholders and the wider public may raise concerns, can mitigate effectively.

2.2.

The EESC has long called for sustainability to be one of the drivers for trade policy, given the crucial role trade must play in achieving the UN Sustainable Development Goals (SDGs). This year’s new EU trade strategy sets the framework for the years to come. The EESC provided recommendations on the trade aspects in a separate opinion (2), while welcoming its sustainability focus and calling for an ambitious strengthening of TSD chapters and their effective enforceability.

2.3.

Building on previous EESC work, this opinion provides a civil society assessment of the current approach to inform the ongoing TSD Review. It draws from an innovative mindset for trade to deliver on EU sustainable development values: TSD chapters for future generations.

3.   Trade and sustainable development: A values-based EU trade agenda

3.1.

By systematically integrating TSD chapters into its FTAs, the EU highlights its commitment to a ‘values-based trade agenda’, which fosters economic, social and environmental development simultaneously. Tackling non-compliance and improved implementation of TSD commitments are crucial to achieving high labour and sustainability standards through trade tools.

3.2.

Starting from an embryonic form in the 2011 EU-South Korea FTA, TSD chapters have consistently evolved in all ensuing EU FTAs. They have a mere consultation-based dispute settlement mechanism and DAGs for institutionalised civil society monitoring. They contain commitments to respect multilateral labour and environmental agreements and to prevent parties from relaxing or lowering labour and environmental protection levels to attract trade and investment. As bilateral fora for dialogue and cooperation they can also serve as platforms to advance the multilateral agenda for sustainable trade.

3.3.

While the EU has taken steps to bring sustainability to the core of its trade ambitions, current negotiations are not living up to this. Injecting life and giving teeth through ‘out of the box’ thinking, the TSD review must step out of its old ‘non-paper status’ and, as integral part of the EU trade strategy, also apply to currently negotiated agreements and be included in revised negotiating mandates.

4.   15-Point Action Plan — an evaluation

4.1.

The EP, the EESC and a large group of stakeholders engaged in a growing public debate around the EU TSD approach’s effectiveness, only to be cut short in early 2018 with the EC launch of a 15-point action plan. Grouped under four main headings, it set the limited and ‘siloed’ framework for TSD evolution in the past years, evaluated below against the backdrop of its delivery and shortcomings.

Working Together

4.2.

Partnering with Member States and the EP: The EC Expert Group on TSD strengthened the link with Member States, however its very structure leads to loss of important expertise and information in the process. Its work deserves better communication of findings and recommendations and requires stronger and regular connections with the DAGs and the EESC. DG Trade’s engagement needs to expand to TSD leading departments in Member States, possibly by involving other relevant Directorates-General (DG) like EMPL and CLIMA for their own networks, and work with international organisations as part of this information and feedback flow. Updating the EP on TSD relevant issues should include DAGs on an equal footing and must not happen in-camera. The EP must play a role in TSD monitoring and implementation and be fully informed of activities and involved in decisions of the TSD Sub-Committee and other relevant joint governance bodies. This is of particular importance in the context of the level playing field mechanism of the EU-UK TCA.

4.3.

Working with international organisations: Advocating a more proactive and systemic approach, the EESC calls for the involvement of international bodies like the ILO even during the negotiation and throughout the implementation of FTAs, including at all stages of roadmaps. As the ratification case of Vietnam underpins, the ILO could play an essential role in the pre- and early implementation phase. Requiring stronger collaboration between the EC, the ILO and the EESC is instrumental for shaping ILO technical assistance and capacity-building projects in partner countries. Action needs to go hand in hand with a stronger integration of the ILO with the DAGs’ monitoring role and annual DG EMPL High-level meetings could be opened to the EESC and possibly DAG presidencies. The approach on Multilateral Environmental Agreements (MEAs) seems underexplored and could be extended to other relevant international organisations like the OECD, and, with the growing importance of SDG financing, the World Bank and the International Monetary Fund.

Enabling civil society including the Social Partners to play their role in implementation

4.4.

Facilitate the monitoring role of civil society including the Social Partners: The EESC welcomes the EU Partnership Instrument project financing some of the EU DAG members’ participation in meetings, and preserving the DAGs’ political independence. It calls on the EC to renew the funding and to collaborate with the DAGs on its design. It recommends greater flexibility in the future logistical and technical support. The use of video-conferencing could complement, but not replace, physical meetings. Future funding should provide for annual meetings bringing all DAG members together to discuss cross-cutting TSD issues. Beyond providing financial resources, addressing structural and organisational challenges is required to fully empower DAGs as laid out in chapter five.

4.5.

Extend the scope for civil society, including the Social Partners, to the whole FTA: The EESC has long and strongly recommended that DAGs should advise on all aspects of EU trade agreements, while keeping a special focus on TSD implementation and the impact of trade on sustainable development more widely. This new scope will be tested first in the EU-UK TCA. The EESC suggests extending current DAGs’ scope in all existing FTAs, by means of revised agreement texts or via harmonised practices under the DAG rules of procedure.

4.6.

Take action regarding responsible business conduct: The EESC welcomes the active role of business in pursuing efforts to ensure sustainable trade and the EC’s commitment to promoting responsible business behaviour. It however regrets that neither the EESC nor relevant DAGs have been involved in the oversight of the projects with the OECD and the ILO. The EC should develop indicators to assess tangible project outcomes beyond awareness-raising and include a more targeted and in-depth review down the supply chains.

Delivering

4.7.

Country priorities: The EESC agrees with a strategic and more focussed approach, however partner countries differ considerably, even within a regional agreement such as EU-Central America. Priority setting and evaluation must proactively, and at different junctures in the process, seek civil society consultations, notably involving the DAGs. Geographical units in DG Trade and EU Delegations should interact more with the DAGs to obtain input and to provide systematic feedback. It requires a regular assessment of the EC’s progress or regression towards these priorities.

4.8.

Assertive enforcement: The Korean labour dispute case teaches important lessons. First, for the EC to be more proactive and swift in activating TSD dispute settlement procedures, giving DAGs an active role. Second, the importance of having international labour law experts in the panels, consulting with the ILO on its jurisprudence and binding interpretation. Third, the Panel report confirms the need for binding and sanctionable roadmaps with clear timelines on ratifying ILO conventions. The vague terminology ‘continued and sustained efforts’ grants Parties too much margin for manoeuvre. While Korea did ratify three out of four missing ILO Conventions (not C105 on abolition of forced labour), questions do remain on whether the Korean legislation amendments fully implement the provisions of C29, C87 and C98. The case thus remains open and the EESC reinforces its call for follow-up action. However, compliance problems not only exist in partner countries. The EESC notes with concern, that there seems to be a lack of instruments for robust enforcement in the EU and its Member States.

4.9.

Encourage early ratification of core international agreements: The EESC supports the ratification of international core conventions before concluding and signing an FTA, to benefit from the maximum negotiation and diplomatic leverage. The latest case of Vietnam showcased these positive effects as the country ratified ILO C98 and C105. However, there is no progress on the ratification of C87. Thus, the EESC stresses the importance of securing pre-ratification commitments of core international agreements or binding and enforceable roadmaps within the TSD chapter itself, with clear deadlines for their ratification.

4.10.

Reviewing the TSD implementation effectiveness: The EESC concurs on the need for regular reviews and assessments of TSD implementation. It however regrets the small visibility of DAGs’ work and the disregard for their recommendations in these processes, notably in the annual implementation reports. Future reports should reflect better DAGs’ work programmes and joint declarations with partner DAGs. In particular, the EESC regrets the lack of progress to date in making current TSD chapters effectively enforceable. In the case of the Comprehensive Economic and Trade Agreement with Canada (CETA), the EESC, the EU DAG and the Canadian DAGs had repeatedly called for firm progress on the early review, which the Parties had committed to in the Joint Interpretative Instrument (JII) intended to bring more effective enforceability of labour and environmental provisions. This review process should closely involve both parties’ DAGs.

4.11.

Handbook for implementation: The EESC welcomes developing tool books on implementation, to help FTA partners better understand TSD commitments and guide their implementation. With regard to labour issues, social partners need to be seen as key partners on the ground. Formal comparative databases must go well beyond progress on agreement wording and focus on the actual level of implementation of TSD provisions.

4.12.

Step up resources: The EU should target some of its Aid for Trade resources to support non-EU DAGs and civil society organisations’ participation and capacity-building, regarding sustainable trade and investment endeavours.

4.13.

Climate Action: If trade is not the driver of climate policy, it should play its part in enabling the global climate agenda, with a positive role for business in promoting opportunities for the clean tech industry with special attention on SMEs. Making the Paris Agreement an ‘essential element’ for all future comprehensive trade agreements, meaning to suspend them in case of non-compliance, is a positive step that should be extended to cover ILO fundamental and up-to-date Conventions.

4.14.

Trade and Labour: The EESC welcomes the widened scope of labour issues included in TSD chapters and encourages further updates of commitments. TSD Chapters must have deeper links with the ILO MNE Declaration and with the OECD Guidelines for MNEs. The EC should promote the ratification of the ILO Conventions included in the MNE Declaration. Advanced EU legislation, notably sustainable corporate governance and mandatory due diligence, should provide continued context for the further development of TSD chapters. However, to make a difference on the ground, these commitments require more proactive enforcement and improved enforceability.

Transparency and Communication

4.15.

More transparency and better communication: The EESC joins all institutions and stakeholders stressing the importance of transparency and communication. The publication of comprehensive minutes provides a useful entry point for civil society engagement. EC Civil Society Dialogue meetings are an important channel, however, they must improve towards a more structured follow-up. To this end, the EESC recommends breaking silos and ensuring communication channels mutually reinforce each other — with the EP, Member States and civil society.

4.16.

Time-bound response to TSD submissions: The EESC welcomes the 2020 launch of a complaint system by creating the Single Entry Point, and in particular, the dedicated Unit under the Chief Trade Enforcement Officer (CTEO) dealing exclusively with TSD complaints. It is too early to assess the effectiveness but the EESC expects the continuous shaping of this mechanism to involve and follow civil society recommendations.

5.   A Next Generation TSD

5.1.

Since the 2018 action plan, the trade world has moved on and so had the TSD debate. The Green Deal is an overarching policy goal also for the EU trade agenda. Institutional players like the EP and Member States call increasingly for ambitious TSD reform. The COVID-19 pandemic has disrupted trade flows in an unprecedented manner unveiling major problems in global supply and value chains, often linked to non-compliance with TSD commitments. The first ever TSD-related dispute settlement case put the current system to its institutional litmus test. The new CTEO created high expectations for greater focus, resources and new legislative tools to better implement and enforce TSD commitments. Meanwhile EU trade partners like Canada and the U.S. have adopted strong enforcement instruments in their own FTAs or, like New Zealand, have tabled ambitious proposals in EU trade talks, ensuring trade works for all.

5.2.

TSD is not just a debate over values, it is a matter of survival both at the EU and global level. Advocating a holistic approach, the EESC supports EU efforts to push the sustainability agenda at the multilateral level and calls for strategic alliances with key trading partners on priority issues such as carbon leakage or due diligence. It reiterates the need for EU leadership on an ambitious reform of the World Trade Organization (WTO) and breaking down taboos i.e. on social aspects of trade. As positive re-thinking, the EESC welcomed the U.S. proposal to address the global problem of forced labour on fishing vessels in ongoing WTO fisheries subsidies negotiations (3).

5.3.

The EESC has constantly asked for the integration of more powerful TSD chapters, feeling the 15-point action plan was not delivering. In the same vein, the 2021 Trade Policy Review considers further actions on the effective implementation and enforcement of TSD chapters, including among others ‘the possibility of sanctions for non-compliance’.

5.4.

There is now sufficient experience gained and lessons learned to re-think the current approach and the EESC suggests introducing a fresh mindset of initiatives on enabling TSD chapters to live up fully to their legally binding commitments. This debate needs to keep environmental and labour standards equally high on the implementation and enforcement agenda.

Policy instruments providing additional leverage to the TSD implementation

5.5.

In May 2020, France and the Netherlands released a Non-paper, asking the EU to improve its analysis of ‘socioeconomic aspects of trade effects, and to increase its ambition regarding the nexus between trade and sustainable development in all its dimensions’ (4), in light of the European Green Deal. The EESC welcomes taking a more analytical approach towards trade effects and strongly supports the recommendation to incentivise effective implementation of TSD commitments with a staged tariff reduction, including the possibility of withdrawing specific tariff lines in the event of a subsequent breach, and the clarification of conditions countries must meet for these reductions.

5.6.

The EESC further encourages to look outside the classic trade toolbox for flanking measures which would secure effective change on the ground. The EU should adopt an ambitious EU Directive on mandatory due diligence that acknowledges responsibility based on current standards and offers a clear and secure legal framework for European businesses and non-EU businesses operating within the EU. The EESC has strongly advocated for due diligence obligations in trade agreements with regard to global supply and value chains in order to guide management decisions that aim at sustainable companies, economically, ecologically and socially (5).

5.7.

To advance its sustainable development agenda, the EC also needs to look into chapters and areas other than the traditional TSD chapters like investment, establishing links and synergies. Foreign investors should have to comply with due diligence before they can benefit from the coverage of an international investment agreement. Similarly, Parties to an FTA should guarantee that companies resident on their territories comply with due diligence requirements (6).

5.8.

In order to have sustainable trade, the EU must imperatively introduce provisions on cooperation between the parties in the fight against money laundering, tax crimes and tax avoidance. Corruption equally undercuts sustainable development efforts and requires including comparable high standards on its elimination.

5.9.

The allocation of public procurement should be conditional, with contracts awarded to companies from countries that comply with the ILO’s core standards and the Paris Agreement. EU FTAs must also promote best practices on how to include environmental and social criteria in public procurement (7).

5.10.

While the environmental angle in TSD chapters has advanced the most over the past decade, two challenges remain. First, climate obligations under the Paris Agreement come down to nationally determined implementation, making it difficult to pin down breaches. Second, the lack of international environmental standards, i.e. for clean air or water, makes it hard to set obligations. It is important to work towards operationalising environmental commitments to come up with standards, also linked to due diligence. In light of the COVID-19 pandemic, biodiversity has emerged with more urgency than ever. The Green Deal, EU circular economy legislative initiatives or the CBAM (8) become relevant topics in the context of TSD.

5.11.

Taking a more comprehensive view unveils serious sustainability issues with FTAs that cannot be solved within TSD chapters. Agriculture, one of the EU’s main negotiating chips, has clear sustainability impacts, for instance. The EESC puts particular focus on bringing EU food security and sustainability to the heart of the analysis (9). Aiming at a more efficient and fairer food supply chain, the EESC calls for a smooth implementation of the Directive on unfair trading practices in the agricultural and food supply chain.

Stepping up effective enforceability

5.12.

The EESC has long called for a revamped Panel of Experts to be able to trigger a treaty State-to-State dispute settlement mechanism, with possibilities for financial penalties or sanctions, and remedies for the aggrieved party (10). DAGs should have an active role in the dispute settlement framework. The CTEO team should investigate cases brought forward by a DAG, and inform and follow-up on any enforcement action and Panel of Experts reports.

5.13.

The EESC welcomes the new TCA approach putting the level playing field and sustainability in the frontline, and applying a dispute settlement mechanism with access to remedies for any breach. This ‘hybrid’ model combines the Panel of Experts approach with an enforceable leg for persisting lack of compliance with non-regression or domestic enforcement on labour, social, environment or climate provisions. This includes temporary compensation agreed between the Parties, or unilateral suspension of obligations by the complaining Party in any area (e.g. trade tariffs, air traffic rights, access to fisheries waters) under certain conditions.

5.14.

An independent labour secretariat to address transnational labour issues under an FTA, including labour market impacts, and to monitor and investigate compliance of its labour chapter, and a collective complaint mechanism should complement enforcement of TSD chapters (11). As the recognised body at international level, the ILO should be involved in monitoring the implementation of ILO Conventions in FTAs. Its role should also be strengthened and institutionalised when it comes to the correct interpretation of ILO instruments in case of a dispute involving international labour standards. The ILO should be systematically involved to give guidance to the Panel of Experts on these matters.

5.15.

The EESC suggests looking into innovative approaches to labour dispute settlements that would allow ad hoc international panels to impose remedies on a company breaching agreed international labour standards. The EU and Canadian CETA DAGs (12) flagged up the example of the USMCA (13) Rapid Response Mechanism under which penalties include suspension of preferential tariffs based on an escalating scale of severity and repeat offence. The aim remains to encourage, wherever possible, remediation through bilateral collaboration and dialogue between parties. However, putting consequences in place deters firms from falling out of compliance.

5.16.

Assessing enforcement based on successfully litigated cases only provides a partial picture, especially as litigation is always a last resort. The possibility of sanctions also stands as a ‘robust encouragement’ for compliance, whether used or not. Eventually, the ‘non-cases’ and their evolution tell compelling stories that the EC should consider for conducting its comparative study on countries’ different approaches. Mere comparison of the agreements’ wording and how they progress on language would bring little meaningful insight on its own. It also requires a qualitative assessment of implementation results, for instance, by drawing from civil society experiences in advising the negotiation and monitoring the implementation of such provisions.

Empowering framework for civil society involvement in DAGs

5.17.

DAGs are a key achievement of new-generation FTAs, but they need a stronger institutionalised framework to fulfil monitoring tasks successfully, be it on TSD or on whole EU FTAs.

5.18.

Major concerns are linked to some DAG bodies in partner countries not being active, representative or even lacking independence from governmental influence. The problem often originates from set-up processes being left undefined in the agreement, the parties’ liberty to choose existing bodies and the lack of consequences when commitments are not implemented. The EESC particularly fears that the deletion of ‘balanced’ in the TCA with regard to DAG composition could severely impact its operation.

5.19.

In the framework of regional trade agreements such as those for EU-Central America and EU-Colombia/Peru/Ecuador, or any future EU-Mercosur FTA, concerns remain over the setting up of individual DAGs in each partner country. This strict ‘domestic’ approach constitutes a severe obstacle for any meaningful engagement between the domestic partner DAGs as well as with their counterpart EU DAG.

5.20.

Hence, TSD chapters need to create specifically tasked DAG bodies with clearly defined independence, representativeness and a balanced composition. Parties must be accountable for their set-up and functioning. Regional agreements should establish joint regional bodies with adequate secretariat support. EU Delegations and the EESC should support the set-up and running process, including guidelines and best practices. Equally, the EESC suggests looking into better matching representative organisations across EU and non-EU DAGs, notably for environment and business stakeholders.

5.21.

To strengthen the EU DAG collaboration with their civil society counterpart in partner countries, annual joint DAG-to-DAG meetings are imperative and should be included in the FTAs themselves. The EESC sees added value in creating joint civil society bodies and contributes greatly, in particular in supporting civil society in partner countries. Its special role is to be maintained in the Joint Consultative Committees (JCCs) as an essential space for dialogue for civil society on both sides of Association Agreements such as EU-Chile (14).

5.22.

The role of the EESC in shaping and ensuring DAGs are effectively operational is key and should be reinforced. In July 2021, the EESC set the way forward by organising the first ever #AllDAGs meeting that brought together all members of the current 11 DAGs to discuss concrete improvement steps. Present in all DAGs, the EESC forms one vital part of DAG presidencies, composed of a chair and two vice-chairs, selected from among the three groups and all members of a DAG. The collaboration within the joint DAG presidencies benefits from both EESC and non-EESC expertise to lead the work of the DAG and this practice should continue. In particular, for the DAGs on Ukraine, Moldova and Georgia, EESC membership coming from neighbouring EU countries has proven extremely valuable. Beyond the role of its members, the EESC also helps the DAGs by providing DAGs with valuable secretariat support.

5.23.

Enhanced visibility and structured institutional channels are crucial to deliver. DAG presidencies should have a standing invitation to the Parties’ TSD Sub-Committee meetings and the EP monitoring groups of the respective agreements. The expert group with Member States on TSD, and the CTEO, should be closely linked to the work of DAGs, via reporting and exchange structures. This should be complemented by an exchange of information with the ILO on labour-related TSD implementation, and with MEA secretariats on environment and climate. The EU External Action Service (EEAS) and EU Delegations in partner countries should hold regular briefings with DAGs and in targeted countries be supported by dedicated labour and environment attachés.

5.24.

The EESC stresses the need to boost cooperation with civil society, from shaping to monitoring trade tools and agreements. It calls for the reinstatement of the expert group on FTAs which provided an unequalled, necessary and regular engagement on trade issues. DAGs are also an untapped wealth of know-how on cross-cutting TSD issues that should be used to its full potential.

5.25.

The growing challenges for DAGs require systemic solutions with adequate resources in place, both human and financial. DAGs themselves should be more involved in related decisions.

5.26.

Rationalising DAGs is no goal in itself. Any potential new approach, such as focusing structures more on individual topics, has to guarantee their effective functioning to address challenges in the specific agreement’s implementation and involve DAGs themselves in shaping it. Recurrent meetings of all EU DAG members would help find common solutions to cross-cutting issues and provides a platform to discuss pragmatic and practical ways before the next renewal of DAG membership in spring 2023.

---

(1)  In 2020, a Friedrich-Ebert-Foundation (FES) study analysed DAG shortcomings, and a group of DAG member organisations, coordinated by CNV Internationaal, is currently compiling a non-paper with recommendations on how to strengthen them.

(2)  OJ C 374, 16.9.2021, p. 73.

(3)  OJ C 374, 16.9.2021, p. 73.

(4)  Non-paper on trade, social economic effects and sustainable development, 2020.

(5)  OJ C 429, 11.12.2020, p. 136 and OJ C 429, 11.12.2020, p. 197.

(6)  Ebd.

(7)  OJ C 374, 16.9.2021, p. 73.

(8)  Upcoming opinion NAT/834 on the CBAM.

(9)  Upcoming opinion NAT/822 on Strategic autonomy and food security and sustainability.

(10)  OJ C 364, 28.10.2020, p. 53.

(11)  OJ C 227, 28.6.2018, p.27.

(12)  EU and Canada DAG joint declaration, September 2020.

(13)  United States-Mexico-Canada Agreement

(14)  An upcoming opinion REX/536 will explore the framework for civil society involvement throughout the entire life cycle of trade and political agreements, due to be adopted in spring 2022.

Opinion of the European Economic and Social Committee ‘Towards a holistic strategy on sustainable rural/urban development’

(own-initiative opinion)

(2022/C 105/08)

Rapporteur:	Josep PUXEU ROCAMORA
Co-rapporteur:	Piroska KÁLLAY

Plenary Assembly decision	25.3.2021
Legal basis	Rule 32(2) of the Rules of Procedure
	Own-initiative opinion
Section responsible	Agriculture, Rural Development and the Environment
Adopted in section	4.10.2021
Adopted at plenary	21.10.2021
Plenary session No	564
Outcome of vote (for/against/abstentions)	220/0/1

1.   Conclusions and recommendations

1.1.

The EESC is convinced that the future of Europe will depend on how we deal with rural areas and that more cooperation with urban areas is needed to ensure that no area or citizen is ‘left behind’ in the just transition to a climate-neutral, sustainable and prosperous European Union. This would be in line with the objectives of the European Green and Social Deal, the Next Generation EU recovery package, the Territorial Agenda 2030 and the 17 Sustainable Development Goals.

1.2.

The EESC believes that the EU should reduce disparities between regions by promoting policies that ensure a just and sustainable transition in all spheres and guarantee a good quality of life in rural areas.

1.3.

Due to the challenges relating to climate change and pandemics, the EESC emphasises the urgent need to act now and to implement a paradigm shift to demonstrate the added value of working together and of promoting mutual respect and understanding, for the benefit of all citizens.

1.4.

The EESC therefore calls on policymakers to develop and implement a comprehensive and holistic EU strategy for balanced, cohesive, equitable and sustainable rural and urban development, by leveraging the role of local communities, boosting traditional industries and creating new economic activities and job opportunities in rural areas, while fostering synergies with urban areas.

1.5.

In order to level the playing field between rural communities and the urban environment, the EESC makes the following recommendations: 1. rural policies need to be adequately resourced, and technological communication, transport infrastructure (especially public transport, which is absolutely necessary for everyday life and employment), and quality and efficient education and healthcare delivery systems must be provided. These should be fully aligned with the relevant urban services (‘equal health’); 2. the supply of jobs, training and housing should reflect and harness rural natural resources, while also creating innovative business opportunities; 3. rural parliaments and Community-led Local Development (CLLD), as models of participatory democracy, should be supported by political leaders and should involve all rural citizens, including the social partners, women, older people, people with disabilities, minorities and, especially, young people; 4. cultural heritage assets should be protected and promoted (1).

1.6.

The EESC makes the following recommendations for rural/urban development: 1. governments must be transparent and fair when providing services to citizens in all areas; 2. civil society organisations, including LEADER and local action groups, should develop local rural and urban partnerships to create economic, social and environmental opportunities and foster a better understanding of interdependencies; 3. the governance model of Food Policy Councils could serve as an inspiration for effective cooperation between all stakeholders at the local level. Opportunities for home working, the need for rural housing and access to land use have all been disrupted by new environmental impacts and challenges and by the pandemic; 4. encouraging and supporting the exchange of good practices and risk cases between regions is to be welcomed; 5. access to high-quality education in rural areas can be one of the contributing factors to local economic development and can help rural communities adapt to a fast-changing environment.

1.7.

In particular, the EESC makes the following recommendations to the European Commission and national and regional governments: 1. the Commission's recently adopted long-term vision for rural areas (2) needs to be further developed to ensure a rural and urban commitment to a fair approach. It is important to show the added value of rural and urban organisations working together, as in the Farm to Fork Initiative and a socially inclusive Green Deal; 2. the European Commission should commit itself to creating a group of rural and urban stakeholders, building on the Smart Villages Initiative, to develop good practices in partnership models; 3. to support engagement, there should be investment for local pilot projects and pan-European incentives/conditionalities and prizes for progressive examples that demonstrate inclusive agreements.

1.8.

The EESC further commits to collaborate with the European Parliament and the Committee of the Regions through commissioning research, consulting organised civil society and promoting a Europe-wide Charter of rural/urban rights and responsibilities.

1.9.

The EESC will incorporate a holistic vision into its future opinions on territorial, urban and rural policies. By way of example, this opinion was discussed among different EESC sections before its adoption.

2.   Introduction

2.1.

Following the recommendations of the EESC opinion on An integrated approach to vulnerable areas in the EU, adopted in September 2020 (3), and of the hearing held on 18 June 2021 (4), the EESC is now seeking a holistic EU strategy on sustainable rural and urban development, analysing the overall framework that links rural policy with all other relevant policies, identifying existing challenges and obstacles, and highlighting the role of civil society, businesses and local communities in developing bottom-up approaches. The EESC will actively contribute to ensuring that this strategy is taken into account when EU policies are designed.

2.2.

It is essential to manage the diversity that exists in rural areas more effectively, on the basis of the opportunities available in each one. There are some rural areas which, due to their proximity to urban areas, can benefit from the ‘agglomeration effect’ through rural-urban interaction, while others that are more remote depend much more on one sector, often agriculture, forestry, fishing or mining, where interaction with cities is less visible.

2.3.

Although rural and urban areas are different types of area, with their own specific characteristics and uneven levels of development, reality shows that they are closely interlinked. These interdependencies are at the same time increasingly complex and dynamic, and involve structural and functional flows of people and capital goods, information, technology and lifestyles. It is therefore crucial to strike a balance between rural and urban areas, two types of area that need each other and which cannot exist without one another.

2.4.

The ideal of the rural way of life as a situation of well-being and quality of life for citizens must be an objective to be achieved, even in remote or disadvantaged areas. The strategy must find the formula to strike the necessary balance between these two aspects and a way of complementing them both, in order to achieve sustainability in the future.

2.5.

The challenges faced by rural areas (such as demographic change, depopulation, the digital divide, low incomes, limited access to certain services, the need for better employment prospects or specific impacts of climate change) can only be addressed from a holistic and renewed place-based perspective that seeks out a reciprocal relationship for development.

2.6.

This new context, which goes beyond the traditional link between rural areas, which have been focused on the agricultural sector and cut off from the urban environment, requires rural development measures to be based on a multi-sectoral and integrated approach across all regions, exploiting synergies and complementing rural, urban and intermediate areas.

3.   Challenges and proposals for action

3.1.

The traditional view, which makes a clear distinction between rural and urban areas, requires new concepts, new interpretations and new approaches, and the local reality has to be taken into account to define the region in question.

3.2.

The future development of Europe's regions should be based on complementarity between rural and urban areas and on the coordination of policies targeting them, with the ultimate aim of achieving social and economic cohesion and environmental sustainability in those areas.

3.3.

The EESC considers that more consistency is needed in rural and urban development strategic approaches to avoid overlaps and discrepancies between strategies (e.g. LAG strategy, Integrated Territorial Investment strategy, local development strategy, regional development strategy) and to facilitate their implementation by local actors in development processes and investments.

3.4.

Rural and urban development must be governed in accordance with the principles set out in the EU's Territorial Agenda 2030, the Leipzig Charter, the UN Urban Agenda, the EU urban agenda, the Pact of Amsterdam, the Cork 2.0 Declaration on a Better Life in Rural Areas and the OECD's Principles on Urban and Rural Policy, in which thematic partnerships and shared management between urban and rural areas are considered.

3.5.

Medium-sized cities play a key role in connecting urban metropolitan areas with rural ones and therefore warrant special attention, when it comes to both land-use planning and the allocation of resources and services. Many European cities (including Toulouse in France, Manresa in Spain, Turin in Italy and Aalborg in Denmark) have already implemented very successful approaches. Networks of cities such as ICLEI (5), Eurotowns (6) and Eurocities (7) are key players in exchanging experiences and promoting best practices.

3.6.

The interaction between the countryside and the city must feature on the political agenda, and we need to make it easier for political leaders and policymakers to understand this and to promote ways of organising matters locally.

3.7.

EU-funded research should also continue to explore ways of promoting equitable, sustainable rural/urban development and of revitalising the economic development of rural areas. Projects such as ROBUST (8), RUBIZMO (9) and LIVERUR (10) should be further developed and should lead to tangible changes.

3.8.

Achieving sustainability (economic, social and environmental) in these areas, both rural and urban, requires a comprehensive policy linked to each area's socioeconomic, cultural and ethnographic situation, promoting cooperation between rural and urban areas and engagement between the different social and economic stakeholders, as well as appropriate governance mechanisms together with local authorities.

3.9.

Remote rural areas are even more exposed to the challenges faced by rural areas and therefore require specific policies and treatment. In addition to resolving problems concerning the difficulty of accessing public services, including health and education, the EESC proposes the creation of programmes that regenerate the local economic ecosystem in cooperation with neighbouring settlements.

3.10.

Many of the challenges faced by rural areas fall outside the scope and funds of the common agricultural policy (CAP), as highlighted in our recent information report on the impact of the CAP on the territorial development of rural areas (11), and it is therefore essential to move towards an integrated approach to action and funding in the different policies that have an impact on rural areas. Funds from national policies should supplement the CAP funds for rural development.

3.11.

Agricultural, food and rural policies must therefore tie in with climate and biodiversity policies, policies aimed at reducing poverty, infrastructure and transport policies, education and training policies, policies for the provision of basic services of general interest (healthcare, housing, etc.), policies promoting the development of new activities based on the circular economy and the bioeconomy, digitalisation policies, and policies combating depopulation, among others.

3.12.

These policies must also be consistent and complementary with European strategies such as the Green Deal (12) and the Farm to Fork Strategy (13) and, particularly, with the New Industrial Strategy (14), which defines the agri-food sector as one of the key EU strategic ecosystems, as well as with policies ensuring food security. Experimenting with new forms of urban-rural cooperation in the context of the European Green Deal is not only a prerequisite but also an opportunity for a just transition and territorially balanced sustainable development.

3.13.

The governance and harmonisation of European, national and subnational funds should be improved in order to address sustainable development better by addressing cross-cutting issues better and always meeting each territory's needs.

3.14.

The EESC draws attention to the need to ensure access to sustainable finance and the development of customised financial instruments for rural and urban development, taking account of the risk structure and the characteristics of the economic mix. Moreover, the taxonomy and fiscal approach for rural areas should take into account development and investment needs.

3.15.

This integrated approach requires coordination between the various administrations and management bodies, including the many European Commission directorates dealing with cross-cutting policies. This cross-cutting coordination requires an approach in which political leaders mainstream rural issues into all policies to ensure that rural needs are taken into account.

3.16.

Successful coordination between administrations should take into account the following aspects: i) identifying the correct scale of intervention; ii) establishing a clear leadership role in policy coordination; iii) strengthening cooperation agreements between regions or municipalities; iv) promoting partnerships between rural and urban areas to make use of functional links; v) improving vertical coordination between levels of government.

3.17.

A direct link needs to be maintained with rural areas through the active role of the EU's regions, which play a crucial part in drawing up and implementing rural development policies at local level. Multi-stakeholder involvement and a ‘bottom-up’ approach are key ingredients for ensuring sustainability and local ownership of rural policies. The EESC calls for account to be taken of the role that local action groups can play and of the Community-led local development model.

3.18.

The EESC also suggests using the governance model of the Food Policy Councils as an inspiration for effective cooperation between all stakeholders at local level.

3.19.

Progress should be made on area-based contracts supported by policies of engagement, which entail defining objectives, joining forces, providing incentives for public and private commitments with an area-based focus, developing mechanisms for interinstitutional and cross-sectoral cooperation, creating a new institutional structure to promote sustainable development, recognising the diversity of rural areas and promoting urban-rural links. In this regard, companies and organisations in the agri-food sector now have the opportunity to sign the code of conduct on responsible business and marketing practices (15) launched by the Commission as part of the F2F strategy.

3.20.

Area-based contracts should be based on fairness and respect. Rural codes of conduct are in place in England, Wales and Scotland to help people understand how to respect rural areas. This could become a European Charter of Rights and (16) Responsibilities for equitable, sustainable rural-urban relations. This Charter should be incorporated into citizenship education for all.

3.21.

The EESC recognises that there are no standard formulas applicable to the different regions and that each subnational unit should focus and specialise, respecting its uniqueness, diversity and multifunctionality of uses, finding solutions based on its own potential, needs, capabilities and aspirations. The use of existing infrastructure and the reflection on the development of new ones must be considered globally, while looking at the trends to invest in the right places.

3.22.

The need to improve job opportunities: i) the COVID-19 pandemic has speeded up digitalisation and greening processes that require efforts to sustain them over time; ii) new employment opportunities must be created and maintained in rural areas, including those related to the provision of rural services, home working, new technologies or renewable energies; iii) strengthening the multifunctional aspects of agriculture, promoting non-agricultural activities and establishing businesses in the clean energy services and industries sector in rural areas can create many job opportunities; iv) promoting entrepreneurship, ensuring fair competition rules for SMEs and paying attention to the needs of younger generations (e.g. remote working); v) keeping jobs and shops close to people. The rural-urban vision offers opportunities to develop a circular economy; vi) promoting decent work and improving working conditions in rural areas, while ensuring that everyone involved has a say in this improvement process; vii) linking consumer demand with regional and rural markets through the marketing of local products and quality labels; viii) the creation of cultural opportunities in rural areas should be widely promoted, including the promotion of cultural events and the protection of rural historical and religious buildings (churches, castles, etc.); ix) digitalisation processes open up new opportunities that could create expectations and appeal for citizens — especially young people — and bring about a change in depopulation trends and the quality of life in rural areas. To this end, the rural environment must have adequate infrastructure to ensure connectivity. Connectivity strategies and digital platforms offer solutions here while a rural digital act would facilitate the development of digital technologies in agriculture and rural areas; x) sustainable agriculture and aquaculture (17) in rural and peri-urban areas should be supported, along with eco-tourism, leisure and educational activities on sustainability, and these activities should be compatible with the protection of biodiversity in order to ensure people's quality of life; xi) Quality and accessible rural education, starting from children's early years, can help improve outcomes in education, while access to public services, such as childcare and schools, is a location-based factor shaping the attractiveness of rural areas, including for highly skilled workers.

3.23.

Economic growth and job creation are important, but must be complemented by a sufficient supply of good-quality services, housing, energy, leisure, education and training, lifelong learning and healthcare systems to ensure that rural areas are not only sustainable but also attractive places to live. The EU urgently needs to develop the foundations for a sustainable and inclusive wellbeing economy that works for everyone (18).

3.24.

In particular, the continued development of affordable public transport should be a priority for the development of rural areas and thus for connectivity with urban areas. The provision of affordable public transport is absolutely necessary for everyday life and employment, related to the accessibility of essential public services such as schools, childcare facilities, doctors or pharmacies and commuting to and from the workplace.

3.25.

This requires new forms of rural service provision: i) integrated service provision (co-working by several services in one space; collaboration between service providers; cooperation between teams of professionals; co-production between public, private and community organisations); ii) an approach based on the provision of alternative and more flexible services (such as mobile services delivering the service to people; radial system models, where services are provided regularly from a central hub; services better adapted to local needs); iii) technological and digital solutions, including in the education and health sectors.

3.26.

A holistic strategy to reach service thresholds in different areas and the exchange of services between different locations within areas are key elements for the design of sustainable urban and rural areas.

3.27.

A strategy needs to be designed which, through improved rural services and new employment opportunities, enables the population to settle and, above all, the necessary generational renewal to be guaranteed.

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(1)  EESC opinion on the Contribution of Europe's Rural Areas to the 2018 Year of Cultural Heritage ensuring sustainability and urban/rural cohesion (OJ C 440, 6.12.2018, p. 22).

(2)  COM(2021) 345 final.

(3)  OJ C 429, 11.12.2020, p. 60.

(4)  Towards a holistic strategy on sustainable and equitable rural and urban development | European Economic and Social Committee.

(5)  https://www.iclei.org

(6)  https://www.eurotowns.org/

(7)  https://eurocities.eu

(8)  https://rural-urban/eu

(9)  https://rubizmo.eu

(10)  https://liverur.eu/

(11)  https://www.eesc.europa.eu/en/our-work/opinions-information-reports/information-reports/evaluation-caps-impact-territorial-development-rural-areas-information-report

(12)  A European Green Deal | European Commission.

(13)  Farm to Fork Strategy.

(14)  Communication-industrial-strategy-update-2020_en.pdf (europa.eu).

(15)  Code of Conduct (europa.eu).

(16)  The Countryside Code: advice for countryside visitors gov.uk.

(17)  See opinion on Strategic Guidelines for the sustainable development of EU aquaculture — NAT/816 (OJ C 517, 22.12.2021, p. 103) and on a New approach for a sustainable blue economy in the EU — NAT/817 (OJ C 517, 22.12.2021, p. 108).

(18)  EESC opinion on The Sustainable economy we need (OJ C 106, 31.3.2020, p. 1).

Opinion of the European Economic and Social Committee on ‘Strategic autonomy and food security and sustainability’

(own-initiative opinion)

(2022/C 105/09)

Rapporteur:

Klaas Johan OSINGA

Plenary Assembly decision	25.3.2021
Legal basis	Rule 32(2) of the Rules of Procedure
	Own-initiative opinion
Section responsible	Agriculture, Rural Development and the Environment
Adopted in section	4.10.2021
Adopted at plenary	20.10.2021
Plenary session No	564
Outcome of vote (for/against/abstentions)	128/0/1

1.   Conclusions and recommendations

1.1.

The EESC proposes a definition of open strategic autonomy applied to food systems based on food production, workforce and fair trade, with the overarching aim of ensuring food security and sustainability for all EU citizens through a fair, healthy, sustainable and resilient food supply.

1.2.

In particular, EU food systems should be more diversified; the agricultural workforce should be strengthened especially by attracting young people and ensuring decent working conditions and remuneration; trade policies should be aligned with EU food sustainability standards and competitiveness (1).

1.3.

Open strategic autonomy and the sustainability of food systems are best guaranteed by developing a tool box that includes risk management measures to help food supply chains to deal with extreme situations and national and EU authorities to take immediate actions.

1.4.

Recent events caused by COVID-19, extreme weather due to climate disruption and cyber attacks demonstrate the need to improve the resilience and sustainability of food systems. Within the Farm to Fork (F2F) strategy, the European Commission (EC) is developing an EU contingency plan for food supply and food security and an associated EU food crisis response mechanism (2). This should help increase the awareness of risks and include the identification, assessment, mapping and monitoring of key risks through the stress-testing of critical systems at EU and Member State level and help to implement measures which will solve the faced problems.

1.5.

The EU needs a system to prevent events like power and network failures or cyber attacks cascading out of control due to dependencies. For example: a city that needs to be under lockdown for several weeks, a power failure that lasts for several days, a food company or retailer being cyber-attacked.

1.6.

In order to improve the coping mechanisms, there is a need to develop existing food systems and at the same time diversify food systems, including business models for farm shops, urban farming, vertical farming and the ‘local-for-local’ approach in general. This requires a wider application of research and innovation by farmers and growers and should help minimise the risks of ‘food deserts’ and production specialisation (3). At the same time, the advantages of the efficient distribution system from farms to processing and markets should be strengthened.

1.7.

To ensure the long-term production of sufficient and healthy food and viable livelihoods it is important that natural resources are used in a sustainable way, preserving soil and water resources, combating climate change and biodiversity losses and protecting animal welfare. The EU should also strengthen local and regional production to combine well-balanced food production and food processing with low carbon foot print.

1.8.

The CAP plays a vital economic, social and environmental role. It should stabilise markets during crises while providing a safety net for farmers and processors protecting the environment, the climate, workforce and animal welfare. The CAP plays a role in maintaining the strategic production capacity, food safety and security.

1.9.

Farms, fertile agricultural land and water are strategic assets and must be protected up to a certain level across the EU: they constitute the backbone of our open strategic food autonomy.

1.10.

The EESC reiterates its recommendation to explore the option of a multi-stakeholder and multi-level European Food Policy Council (4). In the context of open strategic autonomy, such a Council could play, inter alia, a monitoring role and help evaluate and anticipate the risks in the food supply chain.

1.11.

The EU needs to ensure that borders are kept safely open and that workforce together with logistics are kept going for food production and distribution (‘green lanes’) both within the EU and towards third countries. This requires a strong mechanism of coordination between the Member States, the EC and third countries.

2.   Introduction

2.1.

This own-initiative opinion aims to explore the concept of ‘open strategic autonomy’ for Europe in relation to future food security and sustainability, and provide forward-looking views and policy recommendations from civil society. In particular, the opinion offers ‘food for thought’ on issues arising from recent events like COVID-19, extreme weather, cyber attacks and political/social tensions.

2.2.

‘Open strategic autonomy’ should be seen as an opportunity for the EU to ensure the security of its food supply and set high sustainability standards, particularly in the context of the European Green Deal and the UN SDGs. The European challenge of food sustainability needs to be addressed both internally and externally, and this opinion will also look at possible ways to protect and improve availability of sustainable food for all EU citizens, especially in times of crises.

2.3.

The opinion builds on a number of proposals and concrete ideas already put forward by the EESC in its previous work (5). These proposals can be summarised as follows: — foster a comprehensive food policy in the EU, with the aim of nurturing healthy diets from sustainable food systems, linking agriculture to nutrition and ecosystem services, and ensuring supply chains that safeguard public health for all sections of European society. Such a policy, now reflected in the Commission’s F2F strategy, should improve consistency across food-related policy areas, restore the value of food and promote a long-term shift from food productivism and consumerism to food citizenship, — enhance the potential of short food supply chains, agroecology and product quality schemes, — ensure fair prices and ban unfair trading practices, — incorporate the Green Deal’s F2F and Biodiversity strategies as global sustainability standards in all future EU trade deals, — ensure the structured involvement and participation of civil society and of all stakeholders across the food supply chain, including through a European Food Policy Council.

2.4.

Finally, the own-initiative opinion aims to provide valuable insights for the ongoing work on the Green Deal’s F2F strategy, CAP, Trade Policy Review and Strategic Foresight Agenda, bringing EU food security and sustainability to the heart of the analysis.

2.5.

In September 2021, the UN held a Food Systems Summit (FSS), aimed at helping countries to achieve the 17 SDGs, in particular SDG2 — Zero Hunger. The EESC provided a contribution to the debate (6).

3.   Open strategic autonomy, the key elements for the food system

3.1.

According to the EC, ‘open strategic autonomy’ is the EU’s ability to make its own choices and shape the world around it through leadership and engagement, reflecting its strategic interests and values. It enables the EU to be stronger, both economically and geopolitically, by being (7): — open to trade and investment that helps the EU economy to recover from crises and remain competitive and connected to the world; — sustainable and responsible, taking the lead internationally to shape a greener and fairer world, reinforcing existing alliances and engaging with many partners; — assertive against unfair and coercive practices and ready to enforce its rights, while always favouring international cooperation to solve global problems.

3.2.

‘Open strategic autonomy’ needs to be better defined when it comes to food systems. The EESC wants to contribute to the thinking on how the EU can be better prepared for future crises. This should be part of the EU Recovery Plan, for example through the use of the Next Generation EU funds.

3.3.

The EESC suggests a definition of open strategic autonomy based on of food production, workforce and fair trade, with the overarching aim of ensuring food security and sustainability for EU citizens through a fair, sustainable and resilient food supply.

3.4.   Food production

3.4.1.

Food security should be approached from international, national and local perspectives. 55 % of the world’s population lives in towns, where little fresh food is produced — so-called food deserts. The UN expects an increase to 68 % by 2050. Projections show that urbanisation combined with the overall growth of the world’s population could add another 2,5 billion people to urban areas by 2050 (8). Europe’s level of urbanisation is expected to increase to approximately 83,7 % in 2050 (9).

3.4.2.

Within the internal market of the European Union, food is transported daily mostly from rural areas and processing industries to supermarkets in urban areas. However, local, farm and e-shops enjoyed increased popularity among consumers during the lockdowns of 2020/2021.

3.4.3.

The development of short supply chains contributes to Europe’s resilience. Local channels should be consistent with the needs of the populations and the specificities of the territories and climates. Processing capacities should be more developed at the local level.

3.4.4.

The diversification of production will also help to increase the EU’s resilience. An increase in the agricultural land dedicated to organic farming is foreseen in the F2F strategy, and allotments, urban and vertical farming (10) are valid options saving food miles and becoming more and more popular. These initiatives should be linked to other local and regional food production and processing to build a safety net.

3.4.5.

Mapping of vulnerabilities should be at the top of the EU agenda. The Member States and the EC should cooperate in exposing gaps, reducing food waste, developing scenarios and coordinating targeted training and communication.

3.4.6.

Intelligent food stock management should be part of the EU’s open strategic autonomy in food. This should include regular rotation of strategic stocks while avoiding trader speculation, including buying commodities and food under the cost price (11), and strong market reactions by ensuring market transparency.

3.5.   The workforce

3.5.1.

There are not enough young people that are trained and willing to farm. In 2016, for every EU farmer younger than 35 years, there were more than six farmers older than 65 years (12).

3.5.2.

In addition, farmers continue to absorb a disproportionate share of the damage and loss wrought by disasters. Their growing frequency and intensity, along with the systemic nature of risk, are upending people’s lives, devastating livelihoods and jeopardising our entire food system.

3.5.3.

It is essential to increase the agricultural workforce in Europe, protect farming and fertile agricultural land, and provide adequate agricultural knowledge and innovation systems (AKIS). Young people and women must be encouraged to enter farming and attract to stay working in the farms for years.

3.5.4.

Ensuring decent working conditions for EU and non-EU workers in agriculture and in the food sector at all levels of the supply chain is a prerequisite for implementing a sustainable and resilient food system. Adequate financing, fair and higher wages, fair prices, climate adaptation subsidies and seasonal worker rights should be granted.

3.5.5.

A comprehensive EU food policy should, according to the EESC, deliver: economic, environmental and socio-cultural sustainability. It is therefore imperative to ensure that the F2F strategy fundamentally reshapes supply chain dynamics and delivers durable improvements in farmers’ incomes and livelihoods (13). We question whether this necessary fundamental shift will come about if the right political and economic incentives are not put in place?

3.6.   Trade

3.6.1.

EU-27 agri-food exports in 2020 were valued at EUR 184,3 billion, a rise of 1,4 % compared to 2019, while imports, at EUR 122,2 billion, were 0,5 % higher than in the previous year. The agri-food trade surplus in 2020 was EUR 62 billion, up 3 % from 2019 (14). According to the JRC, EUR 1 billion of agri-food exports creates on average 20 000 jobs, of which 13 700 are in the primary sector. At the same time agriculture accounted for about 4,2 % of total employment in the EU in 2016 (15).

3.6.2.

The UK, US, China, Switzerland and Japan were the EU’s biggest agri-food markets, taking more than 52 % of all exports. The biggest sources of EU agri-food imports in 2020 included the UK, Brazil, US, Ukraine and China.

3.6.3.

The EU plays a major role in the global trade of agri-food products and it is essential that its trade policies are aligned with its sustainable objectives. In a previous opinion (16), the EESC proposed that all future EU trade deals incorporate the Green Deal’s F2F and Biodiversity strategies as global sustainability standards. It recognised the importance and value of rules-based trade operating on a level playing field and the major contribution this will make to economic recovery post COVID-19.

3.6.4.

To reduce the dependency on agricultural inputs the EU should support low-input practices, especially in terms of fossil fuels and pesticides and foster the production capacity of agricultural inputs in Europe.

3.6.5.

Innovative systems are needed to protect and enhance the natural resource base, while promoting efficient production (17). New technologies, robots and vaccines are important assets to be developed.

4.   Risk management and stress-testing scenario

4.1.

According to the FAO, humanity and our food security face a range of new and unprecedented threats, such as extreme weather due to climate disruption, diseases and pandemics. Agriculture faces an array of risks, interacting in a hyperconnected world (18).

4.2.

The FAO reports that, during 2020/21, food prices rose to the highest level since 2011 (19). It is often reported that price volatility is driven in part by speculation. The UN and OECD report that, in 2020, between 720 and 811 million people faced hunger. Nearly one out of three people in the world (2,37 billion) did not have access to adequate food in 2020, an increase of 320 million in 1 year (20).

4.3.

The COVID-19 pandemic demonstrates that food security is — even in Europe — not to be taken for granted. All players and activities throughout the food chain are hyper-connected. During the pandemic, countries introduced trade restrictions. Even within the EU, Member States took unilateral measures closing borders, threatening the transport of food and seasonal workers. Thanks to rapid adaptations by farmers and food chain partners, production, processing and distribution kept going. The Commission also took action to keep the internal market functioning. However, many entrepreneurs have been economically hit by the crisis as travel, tourism and food services closed down.

4.4.

Cyber attacks such as ransomware attacks lead to real life crises because today so much is online (‘Internet of things’). The press agency AP reported that the average payment to cybercriminals increased by 311 % in 2020 to USD 310 000. On average, the victims only regained access to their data after 21 days (21).

4.5.

In April 2021, the biggest Dutch supermarket (Albert Heijn) ran out of certain cheese products for several days because of a cyber attack at a major distributor (22). Recently, the world’s biggest meatpacker JBS was attacked. This has intensified security concerns in the US over its national food supply (23). It appears that many cyber attacks go unreported by companies to avoid market reactions such as hoarding and prices sky-rocketing. Companies have also suffered significant impacts from cyber attacks even though they were not the direct target of the attack, such as the closure in July 2021 of several hundred stores in the Cooperative group in Sweden following the ransomware attack on the US Kaseya software supplier (24).

4.6.

Equally worrying was the blockage of the Suez canal by a 200 000 tonne container vessel in early April 2021. Such incidents show the vulnerability of global supply chains. If these chains are disrupted for a few days, it takes a long time to catch up again and this may cause price rises for consumers and companies.

4.7.

In September, the EC published its 2021 Strategic Foresight Report, focused on open strategic autonomy (25). The Commission considers ‘ensuring sustainable and resilient food systems’ as one of the key strategic areas to strengthen the EU’s global leadership. In this regard, the need to invest in innovation to safeguard resilient and sustainable food systems is mentioned (26).

4.8.

Additionally, a recent technical paper by the Joint Research Centre provides background for the resilience dashboards presented in the 2020 Strategic Foresight Report of the EC (27). This includes vulnerability indicators related to access to local services and food import dependence, and proves the geo-political importance of food. A dashboard helps to map vulnerability and to develop targeted stress-testing. However, this is a general approach as there is no one single indicator, and the resilience dashboards are currently under revision.

4.9.

There is a need for supply chains to move from ‘just in time’ to ‘just in case’. Dependence on monopoly suppliers for certain goods can be subject to interference by hostile governments. This is also an issue of supply of inputs to farmers and food processors. The EESC therefore calls for a security review of EU food availability. This should be done through scenario studies.

4.10.

Stress-testing should be used to expose vulnerabilities. For example: what are possible consequences of local/regional/national energy and telecom network failures lasting several days? This is widely understood to be one of the highest-demand risks to any nation’s critical infrastructure including food supply. Direct impacts to food supply include: loss of electricity, water and gas supply; loss of refrigeration and freezing capability; loss of cooking, baking and processing/manufacturing facilities; loss of heating and lighting; the inability to ensure basic food hygiene; and the inability to obtain fuel for distribution vehicles or other uses in the supply chain. However, indirect impacts due to impacts on other critical infrastructure could also have significant consequences. A prolonged absence of telecoms and data comms would present serious and immediate challenges to how companies communicate internally, and with government agencies, suppliers, customers and consumers to facilitate the dissemination of vital information and to operate reordering and payments including through banking link systems.

4.11.

The EESC recommends a further investigation of this scenario.

5.   Recommendations on the way forward

5.1.

Open strategic autonomy as a concept offers opportunities, but also poses risks. The prosperity of the EU depends also on world trade, and therefore on clear rules for trade and set measures.

5.2.

When food gets scarce, or appears to, panic-buying may occur, while the appetite of consumers for thinking about the climate, biodiversity or animal welfare may fall away. So Europe can only become greener if it also gets more resilient.

5.3.

COVID-19 has shown that when supply chains get disrupted for a longer period there are ripple effects throughout the whole economy. It may take several years to get back to normal.

5.4.

Open strategic autonomy in food cannot exist without an open and fair trade policy. The European Union cannot go back to protectionist policies because this would create new vulnerabilities and potentially cause great harm (28). For example: the EU supplies grain to North Africa and the Middle East. Often, international supply chains are more efficient and diversified and therefore more capable of rapid adaptation to new shocks than local ones.

5.5.

The EU should evaluate in which cases and for which products self-reliance is a valuable approach. Awareness about how supply chains operate should be increased among consumers and the general public.

5.6.

The EU, with the UN and its trade partners, needs to address the root causes of food insecurity and contribute to a much needed food system transformation making agriculture more resilient to shocks. Governments have a role to play in supporting supply chains becoming more sustainable, robust and secure.

5.7.

In a recent joint non-paper, France and the Netherlands have called for tougher EU trade conditions, including an EU Responsible Business Conduct (RBC) plan. This should ensure a coherent and harmonised policy while maintaining a level playing field for the EU internal market. An EU RBC action plan should be the overarching strategy for the EU’s approach to fostering fair trade and responsible production and the management of supply chains.

5.8.

Spain and the Netherlands recently produced a joint non-paper on pursuing strategic autonomy while preserving an open economy. One of the points made in that paper was that ‘open strategic autonomy’ should be one of the issues debated at the Conference on the Future of Europe.

5.9.

The EU discussion on due diligence (29) and the F2F code of conduct (30) are also relevant in this context. In this regard, companies and organisations in the agri-food sector have now the opportunity to sign the code of conduct on responsible business and marketing practices launched by the EC as part of the F2F strategy (31).

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(1)  In order for a comprehensive European food policy to be truly relevant for European consumers, it is essential that the food produced sustainably in the EU is competitive. This means that the European agri-food sector is able to deliver food for the consumers at prices that include extra costs for criteria such as sustainability, animal welfare, food safety and nutrition but also a fair return to the farmers, and at the same time maintains its position as the preferred choice for the vast majority of consumers (OJ C 129, 11.4.2018, p. 18; OJ C 429, 11.12.2020, p. 268).

(2)  Contingency plan, EC.

(3)  COVID-19 and the food phenomena, FAO.

(4)  OJ C 129, 11.4.2018, p. 18 and OJ C 429, 11.12.2020, p. 268.

(5)  Among others: OJ C 129, 11.4.2018, p. 18, OJ C 190, 5.6.2019, p. 9, OJ C 429, 11.12.2020, p. 268, OJ C 429, 11.12.2020, p 66, OJ C 440, 6.12.2018, p. 165, EESC opinion on Towards a Fair Food Supply Chain, NAT/823 (OJ C 517, 22.12.2021, p. 38).

(6)  Contribution to the UN Food Systems Summit 2021, EESC.

(7)  Trade Policy Review, EC.

(8)  68% of the world population projected to live in urban areas by 2050, UN.

(9)  Urbanisation in Europe, EC; UN World Urbanisation Prospects 2018.

(10)  Vertical farming, WUR.

(11)  EESC opinion on Towards a Fair Food Supply Chain, NAT/823 (OJ C 517, 22.12.2021, p. 38).

(12)  CAP — Structural change and generational renewal, EC.

(13)  OJ C 429, 11.12.2020, p. 268.

(14)  2020 a year of stability for EU agri-food trade, EC.

(15)  Farmers and the agricultural labour force — statistics, Eurostat.

(16)  OJ C 429, 11.12.2020, p. 66.

(17)  The future of food and agriculture, FAO.

(18)  The impact of disasters and crises on agriculture and food security: 2021, FAO.

(19)  FAO Food Price Index, FAO.

(20)  2021 State of Food Security and Nutrition in the World, WFP.

(21)  Cyberattack on US pipeline is linked to criminal gang, AP News.

(22)  Kaasschaarste bij Albert Heijn na hack leverancier, de Volkskrant.

(23)  Hacking American beef: the relentless rise of ransomware, Financial Times.

(24)  NCSC statement on Kaseya incident, NCSC.

(25)  2021 Strategic Foresight Report, EC.

(26)  Shaping and securing the EU's Open Strategic Autonomy by 2040 and beyond, JRC.

(27)  Resilience Dashboards, EC.

(28)  All future EU trade deals should also incorporate the Green Deal’s F2F and Biodiversity strategies as global sustainability standards. (OJ C 429, 11.12.2020, p. 66).

(29)  Towards a mandatory EU system of due diligence for supply chains, Euractiv.

(30)  Code of Conduct for Responsible Business and Marketing Practices, EC.

(31)  EESC opinion on Aligning food business strategies and operations with the SDGs for a sustainable post-COVID-19 recovery (not yet published in the OJ).