Minister of the Environment of Finland Ville Niinistö, closing speech at Commissioner for the Environment Janez Potočnik's seminar at Aalto University 11 April 2014, in Helsinki, Finland

The actual speech may differ from the written version.

Previous speaker: European Commissioner for the Environment Janez Potočnik – New Environmentalism and the Need for a Circular Economy

Opportunities and prerequisites for a sustainable economy

Today's economic crises and ecological challenges are very much interlinked — both involve wild over-consumption of natural resources, along with a failure to consider the impacts on future generations.

If we continue as today, the amount of minerals and materials consumed globally per year could triple by 2050 (according to UNEP). This scenario would lead to rapidly growing resource costs and lower prosperity for our planet and people overall.

In the global sprint towards sustainability, a comprehensive green economy strategy is essential. Such a strategy would vary between countries and on different continents. It should, however, include robust regulation to reduce polluting activities and policies that address market barriers (such as access to bank financing and the phasing out of environmentally harmful subsidies).

Incentives that accelerate growth in sustainable and dynamic sectors are also needed. The green economy is not just about boosting traditional environmental technologies, but the transformation of the whole economy.

I believe that green economy or green growth strategies would also genuinely increase policy certainty in this economically turbulent era. Forward-looking strategies will give businesses the confidence to fast-track the greening of their operations, and they might also reassure investors that this is the tune for the years to come.

Systemic innovations needed

One prerequisite for our transition to the circular economy is innovative capacity.

Compared with other EU countries, Finland is above the average — almost a leader in innovations. Finland ranks well in both EU and WWF studies analysing which countries provide the best conditions for establishing clean technology start-ups or for environmental technologies.

But the transition to a sustainable economy needs more profound changes over whole systems.

By definition, systemic innovation is an innovation cluster which pursues a change in the entire system (that is, sector, region, household). It is multidisciplinary, change-oriented, collaborative and inclusive; and it is directed against the entire value chain of the business model and the social context. Systemic innovation shakes up the system, and sets it down in a new "position".

Not all systemic innovations are desired, and some may even be outdated. Broad-based agriculture has shifted to intensive agriculture practices, while automotive vehicles have replaced horse-drawn ones. Or take the electric car; it is not really a systemic innovation (i.e. causing systemic change alone).

Systemic change requires both innovation and dynamism, at the political level as well.  It also needs good examples, guidelines and evaluation, and must be convincing.

… to break barriers between sectors and paradigms

Currently, many industrial sectors in Finland and Europe seem to be more or less in the process of systemic change. This is reflected in product designs and business models. As products and value chains are transformed, the borders between the industrial and economic sectors become increasingly blurred.

The growing focus on the bioeconomy can also be seen as an attempt at a large-scale renewal.

In Finland, the traditional forest industry is linked to strong economic and social development, where environmental protection has played a significant role. As this industry reforms, it may undergo a systemic change. Under the new approach, bio-based methods and value-chains are being designed to create new, more value-added and sustainable solutions for our global problems.

To lead the transforming bioeconomy to the better position, more attention should be paid to opportunities for intangible value creation for the sustainable growth and welfare.

Even the circular economy can’t encompass only material flows and circulation at an ever-increasing speed, but must also embrace high value-added services, including the sustainable use and protection of natural resources and processes.

Industrial symbiosis in focus

Transformation towards sustainable economic structures with less environmental problems means that companies need to find less resource-intensive solutions.

Through cooperation, businesses in various supply chains can save and reuse waste, energy, water and material streams. Under this approach, waste or residues from factories and homes become valuable inputs into other processes.

The Finnish Innovation Fund Sitra and Motiva (which is an expert company promoting efficient and sustainable use of energy and materials) have put this to the test. They are creating symbiosis between different businesses in three towns in Finland, so that one's waste is another's raw material.

According to Motiva, expanding the circular economy into different sectors in Finland would save roughly 7 billion euros.

Need for improved legislation

Important steps in moving towards the circular economy and enhanced industrial symbiosis are assessing the present regulatory framework and addressing possible barriers in the current legislation.

Some of the current waste legislative requirements may be seen as an obstacle to achieving the goals of the circular economy.  EU waste legislation contains plenty of detailed and inflexible requirements and a number of concepts that are difficult to interpret. When a material is defined as waste, a company may face a quite heavy administrative burden, and also uncertainties in the regulatory framework.

Unfortunately, no easy solution to this problem exists. But I believe that we should be courageous now, both nationally and in the EU, and openly examine ways to simplify or partially deregulate the waste and environmental legislation, or add more flexibility to it – without compromising the protection of human health and the environment.

With the aim of boosting the circular economy, the recycling targets set in the EU waste legislation are currently under review. To set new ambitious targets for waste recycling, we need reliable information on the current situation and on the recycling potentials.

In Finland the recycling could be increased in packaging waste and biowaste. For these, the additional EU measures would also help to speed up progress at the national level. We also need further efforts to ensure that all recyclable waste is directed to recycling instead of energy recovery.

However, I have to say that the targets set out in the EU Waste Framework Directive for the recycling of municipal waste (50% by 2020 ), and for material recovery of construction and demolition waste (70% in 2020 ) are very challenging for Finland, even as they stand now. According to a recently published comparison of municipal waste recycling rates, Finland is barely at the average level among the EU member states.

The slow progress in municipal waste recycling Finland is partly due to the conflicts between actors and producers in the waste sector. To work this out, the recommendations resulting from a fitness check of the new Finnish Waste Act will include a variety of measures for promoting dialogue and cooperation between all relevant actors in the waste sector. By these measures we want to create the best circumstances for encouraging innovations that will lead to more waste recycling.

In our experience, the recycling of waste can also be strongly promoted through producer responsibility schemes. Finland is currently at the top in the EU in its recycling rates of waste paper and waste tires, thanks to the national producer responsibility schemes introduced already in the 1990s.

These schemes, however, involve a lot of challenges, such as problems connected with free-riders and neutrality of competition. Thus the threats to the functioning of such schemes have to be carefully analysed before they are expanded to the EU level.

Bringing efforts together

Will the EU’s new Circular Economy Package initiative include concrete objectives or targets for resource efficiency?

I believe target setting is important if we want to continue to move towards resource efficiency.  Common targets will focus political attention on this issue, will help to integrate the resource efficiency initiatives - and will reinforce concrete measures that promote resource efficiency.

In Finland, some concrete measures to promote resource efficiency have been already outlined in the proposal for a national material efficiency program, which was prepared in collaboration Ministry of Employment and Economy and the Ministry of the Environment.

However, we are not ready and I think might not see the relevance for a binding economy-wide resource efficiency target. Instead, a non-binding EU-level headline target could be possible to be set and implement with horizontal efforts and cooperation. For this, raw material productivity (gross domestic product/raw material consumption, GDP/RMC), is the best target indicator so far.

Besides a headline target, we need to analyze the question further and consider target setting for the different sectors or the different material resources.  At the same time, the environmental, economic and social impacts of the potential targets should be assessed carefully at the EU and national levels.

Along with target setting, we also need to monitor trends in resource use and efficiency. This should be done by independent statistical services in the member states and the European Community. We need reliable statistics and data to understand the opportunities and prerequisites for a sustainable economy.

In Finland, the statistics on natural resource use are available in very long time series.  At the EU level, measurements of raw material productivity have evolved significantly in recent years.

In the European Union, raw material productivity was reversed after 2010. The baseline scenario for resource productivity, however, will rise again in the long term. If raw materials productivity were to grow faster than expected, it would strengthen, clearly, the economic growth as well.

With no extra efforts, improvements in resource productivity will be slow, and in Finland even slower than the EU average, because of the high number resource-intensive industries in our economy. Still, there are sectors and opportunities for creating entirely new types of production and consumption “systems", which can increase the resource efficiency remarkably.

In conclusion

The concept of the Circular Economy includes a lot of the "old", that is, elements familiar to environmental research and policy. It is close to the concepts of the sustainable management of ecosystems and industrial ecology.

From the environmental point of view, the Commission's preliminary outlining of the circular economy seems to be quite comprehensive and balanced. In some of the earlier examples and ongoing discussions for the circular economy, however, the focus has been fairly limited to the business approach and consumer behaviour.

Enterprises and households do have a great potential for change and, in particular, industry's role in the circular economy is key. But it is important to remember that we all live in a world of alternative costs — waste generation can thus be completely profitable. Therefore, economic incentives for promoting the circular economy should not be ignored.

On the other hand, the opportunities for sustainable growth and well-being related to resource efficiency are obvious — and should thus be identified in more depth in the EU’s headline policies including the review of the Europe 2020 strategy.

By doing this, I believe that we have a great potential for achieving sustainable growth and prosperity.