Why the EU needs industry for a successful Green Deal

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

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Europe has set itself an ambitious and unique goal: to be the first climate-neutral continent by 2050. From an industrial point of view, this is a challenging and worthy task. But such sustainable goals can only be reached by carefully considering the role of industry and its contribution.

By “industry”, I not only refer to the big multinationals that are omnipresent in our daily lives. I have in mind the thousands of small and medium businesses across Europe which contribute to the well-being of our economy, supply solutions for sustainable and green products, drive innovation and provide jobs for hundreds of thousands of people.

More focus on hidden champions

The European mechanical engineering industry is such an example. Comprised of 90,000 companies and employing nearly four million people across Europe, mechanical engineering is one of the largest industrial sectors in the EU economy.

With an estimated 36 per cent share of the world market, Europe is the largest producer and exporter of machinery and plant equipment. These export champions are often smaller companies that are leaders in their respective markets due to their creativity, product quality and customer-orientation.

At the same time, most of these engineering companies are family-owned enterprises employing an average of less than 250. And mechanical engineering is a truly Europe-wide industry; trade flows and value chains span national borders.

For these reasons, we strongly believe in the strength of the internal market, and we want a Europe which defends its position in world affairs.

The ambitious Green Deal is the right way

Aiming to lead globally by example and striving for climate neutrality are correct ambitions. If managed properly, the targets represent a huge opportunity for industry.

I can confidently say: our industry is a cornerstone for climate protection! The mechanical engineering sector provides climate-friendly, sustainable and competitive technologies which can lead to a circular and climate-neutral future.

Green technologies developed by mechanical and plant engineering will enable us to reduce greenhouse gas emissions by almost 90 per cent in industrial applications; this figure is derived from our study on the contribution of our industry to climate neutrality, conducted with the Boston Consulting Group last year.

However, this potential will not be realised unless we establish the right framework conditions and permit the market to develop.

A tech-neutral approach is essential – we’ll only succeed with the best solutions

From drones and robotics to packaging machines, and many more innovative technologies, our heterogeneous industry is known for its innovative potential and unique qualities. The technologies offered by the mechanical engineering industry often come from bespoke solutions tailored to the specific needs of customers.

One example is a customer request at Hawe Hydraulik, which is the company I chair and which develops hydraulic components for production equipment. Our customer requested an energy reduction of 30 per cent in his production.

So we developed a hydraulic solution that now saves around 70 per cent of energy in machine tool usage. This is only one example of the kind of specific and sustainable solutions our industry can deliver.

As drivers of technological change, we continue to demand a tech-neutral approach to any policymaking. Our companies need freedom to operate and innovate, to develop solutions that are environmentally friendly and competitive. What we need is the right framework to achieve these goals.

We definitely do not need prescriptive, detailed regulation. Centralised control by the EU or its member states will not help us to combat climate change, because it cannot release the full creativity and intelligence of the millions of European entrepreneurs, engineers and workers.

Policymakers should instead use market-based instruments, for example by putting an effective and calculable price on greenhouse gases.

Structure for sustainable finance and due diligence requirements threaten to harm industry

Politically, this year will be crucial, as provisions in the Green Deal become concrete. This will be the defining moment, where many things could go wrong. The ongoing discussions about classifying sustainable finance, and far-reaching due diligence requirements with respect to companies’ value chains, show that decisions might indeed head in a totally wrong direction.

Policymakers must now set the right incentives, reduce bureaucracy and avoid creating barriers for industry. Instead, they need to unlock the potential of thousands of innovative, hidden champions like those of the engineering industry. This is the potential that Europe must liberate, to achieve climate neutrality, a sustainable future and economic stability.

About the author:

Karl Haeusgen is Chairman of the Supervisory Board of the family owned company HAWE Hydraulik SE and President of the German Mechanical Engineering Industry Association (VDMA). VDMA represents around 3300 German and European companies in the mechanical engineering industry. The industry stands for innovation, export orientation, medium-sized companies and employs around four million people in Europe, more than one million of them in Germany.

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