Companies turn to eco-innovation to tackle rising input costs and scarcity of materials

The competitiveness of European businesses is increasingly vulnerable to growing materials scarcity which causes price volatility. A Eurobarometer survey presented at the 10^th European Forum on Eco-innovation in Birmingham, UK, shows that 75% of European businesses have experienced an increase in material costs in the past five years, while 90% expect price increases in the future. To tackle this challenge, small and medium-sized businesses are looking to eco-innovation as their answer. However, many businesses are still not fully aware of the potential effects of natural resource scarcity on their future operations.

Materials are becoming key cost elements for SMEs

The Eurobarometer survey aimed to analyse the attitudes of European entrepreneurs towards eco-innovation. Eco-innovation is a term to describe products, processes or other solutions that can contribute to environmental protection or a more efficient use of resources.

Almost a quarter of managers surveyed said that 50% or more of their company's total costs consisted of material costs. Three quarters said material costs had increased moderately or dramatically in the past five years.

Eco-innovation as a response to the challenge

More than half of the SMEs surveyed said they had introduced technologies to improve materials efficiency in the past five years as a response to the challenge. Eco-innovations related to processes – as opposed to technologies, products, organisation or marketing – were the most popular in the agricultural, water and manufacturing sectors. Companies in the construction sector preferred to invest in green products or services, whereas food service companies tended to implement higher amounts of organisational innovation.   

The pace of eco-innovation must be accelerated
More than 40% of SMEs that have introduced an eco-innovation in the last two years said the investment had reduced material use by up to 20% per unit of output. This modest change will clearly need to be stepped up if the EU is to meet its ambitions for raw materials and resource efficiency. The survey shows that most European SMEs see limited access to materials as an important driver for eco-innovation. At the same time, they identify current and expected future price increases for energy as the most important incentives for eco-innovation. More than 70% of SMEs pointed to the need for good business partners and good access to external information and knowledge, including technology support services to accelerate eco-innovation uptake and development.

Public authorities can encourage eco-innovation uptake

There are a number of obstacles preventing businesses from investing in eco-innovation. The most significant barriers are linked to economic and financial constraints, notably uncertain demand from the market and the lack of external financing.

Public authorities have a crucial role to play in helping SMEs to overcome these barriers and adopt eco-innovation. The Commission supports the uptake of eco-innovation by businesses through various tools including financing. The Commission is planning to put forward an Eco-innovation Action Plan by this summer that will further help business develop and invest in eco-innovation.