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Innovation for Sustainable Forest Management What is it & why is it important? Ewald Rametsteiner ERASMUS IP Iisalmi, 16 May 2005 “If you stand still in times of changes you are in fact drifting backwards” ... and changing times we have: - new resources & suppliers (e.g. Eastern Europe) - new technologies - new markets (e.g. carbon, energy) - changing consumer needs & demographics .... a large extent inaccessible Asia - ...so: how is the forestry sector doing? Is it taking advantage? Innovation Successful introduction of novelties Discontinous intentional change in the inputs, outputs and processes of an enterprise Differs from invention – creation of something that has not existed before „Innovation diffusion“ or „innovation adoption“ is used if looked at a sector or economy as a whole Innovation New to the firm – new to the market Radical – incremental Innovations Product Goods Process Services Technological Organisational Innovation research: From linear to systemic understanding Framework Conditions Financial environment; taxation and incentives; propensity to innovation and entrepreneurship ; mobility Linear Innovation Non-linear / complex process Consumers (final demand) Producers (intermediate demand) systemic research ... - structures, processes, interactions - functions system as a whole Political Researchof System Production System Markets / Demand for Forest Products System Public sector research Large companies Government Intermediaries Research institutes Brokers SMEs Education System Governance Higher education Professional education and training Forests Resources / Supply Product Develop Suppliers (intermediate products) Resource raw material producers Idea ment Product Test Infrastructure Banking, venture capital IPR and information Innovation and business support Standards and norms RTD policies Marketing Innovation phases the firm perspective Prior Conditions Knowledge Persuasion Decision Implementatio n Confirmation Innovation Diffusion Innovation Diffusion & Adopter Categories Innovation & Entrepreneurship – Why is it important? Innovation are engines for • economic growth, CN&D EG C&P SD • competitiveness, EC • income creation & firm profit, • employment creation, esp. in rural areas, • changes towards environmental improvement and sustainable development, • meeting changing consumer needs & demographics Innovation General Policy European Union Lisbon Strategy on competitiveness & innovation EU Research Framework Programmes 6 & 7 EU Research Project Lines and infrastructures National Policies and Strategies Ministries or Agencies on Innovation Funding programmes and initiatives Focus on growth promising high-tech sectors EU: Expected gains from reaching 3% R&D by 2010 compared to status quo Growth Jobs Productivity Product quality 0% 5% 10% 2010 2030 15% Innovation Forest Sector Policy European Union Forest-based Sector Technology Platform “Innovation & Sustainable Development” initiative New institutions, initiatives & programmes in new areas (e.g. bioenergy, carbon) MCPFE Vienna Resolution 2 on economic viability & work programme UNECE/FAO European Forest Sector Outlook Study: competitiveness as major issue National policies & strategies Rather new topic, few coherent policies & programmes (exception: Finland) Focus on specific topics, partly covered by policy makers outside forest sector (e.g. biomass) Innovation and economic growth CN&D EG C&P SD EC Neo-classical growth accounting • based on capital and labour input - result: up to 80% due to technological change (=technological innovation) • if R&D, quality of labour etc. is accounted - result: about 30% of growth Endogeneous calculations • Growth effect of spillovers and externalities (not all benefits can be accrued by the inventor) • monopoly rent diminishes over time due to imitators Yes, but…why is economic growth important? Economic growth is measured by gross domestic product (GDP). Economic growth is defined as positive rate of change in real GDP. A satisfactory rate of economic growth is when the economy grows faster than the population, thereby increasing standards of living for individuals in an economy. (i.e. one where positive per capita rates of growth in real GDP takes place.) economic growth improves the overall standards of living of individuals in an economy. economic growth is one way to reduce unemployment & poverty in an economy. Innovation and competitiveness CN&D EG SD The OECD defines competitiveness as "The degree to which a country can, under free and fair market conditions, produce goods and services which meet the test of international markets, while simultaneously maintaining and expanding the real incomes of its people over the long-term". Overall competitiveness, is a result of many factors: macroeconomic environment, ICT, innovation, public institutions – these all have a strong influence on increased productivity. International competitiveness is seen as an important component of economic growth C&P EC Productivity, competitiveness and employment Long-term international statistical trends show that there is a strong correlation between national productivity and the level of unemployment. (higher productivity = lower unemployment) The more productive an enterprise, the more income it can save for new investments and therefore create new jobs. Short-term negative effects of productivity on unemployment are outweighted by long-term benefits. R&D investments account for about 50% of total factor productivity growth, 1% of R&D capacity increase = approx 0,05-0,1 output growth Innovation and firm profitability …is difficult to prove as profits are influenced by a wide range of factors Existing studies find: a positive but modest influence a positive correlation to market share and profit margins Innovation & employment creation CN&D EG C&P SD EC A process innovation is labour saving, if the same amount of output can be produced with less labour. the direct effect on employment is negative if output remains the same. an indirect effect of higher employment is possible if Firms gain more from the increased productivity of labour than from more capital input Market demand increases considerably Innovation & employment For product innovations a positive (direct) effect of successful product innovation on employment is more likely if new products address new needs. If new products act as substitutes for existing ones, there will be positive employment effects only, if product quality is higher than before and labour intensive. A net employment impact of product innovation is more likely to be positive if new products are complements to existing ones. Employment creation: Bioenergy Number of direct and indirect jobs created for 1000 toe consumed: - forestry: - wood waste: - oil: - gas: 4.2 – 6.3 2.3 – 3.7 1.4 1.2 Source: Eurobserver 2004 …and this mainly in rural areas! Environment & sustainable development New markets: carbon sinks New markets: bioenergy New trends: wood construction New business/marketing models and tools: forest certification CN&D EG SD C&P EC Consumer needs & socio-demographics Changing attitudes: nature Changing lifestyles: urban life Changing socio-demographics: urbanisation, family, age structure, mobility,.. Changing consumption: experience of nature, outdoor, excitement, silence? CN&D EG SD C&P EC Market Expectations of forest owners/managers and forest policy actors in Austria 2002 Einschätzung der Wichtigkeit von Märkten 4 3 4= hohe Wichtigkeit 3= mittlere Wichtigkeit 2= geringe Wichtigkeit 1= keine Wichtigkeit 2 Forest policy expectations medium term 1 Gentechnisch Erholung/Tou Vertragsnatur veränderte Klimaschutz rismus schutz Pflanzen Bioenergie Trinkwasser langfristig - Wichtigkeit in 20 Jahren 3,6 3,8 2,2 3,4 3,1 3,5 3,4 mittelfristig - Wichtigkeit in 5 Jahren 3,2 3,5 1,8 3,3 2,8 3,2 3,3 Holz Concluding remarks Innovation is seen as driver of economies Innovation effects are difficult to quantify The current focus on process innovation is not enough Drucker: „as every businessman knows, efficiency alone does not bring business success“ Innovation is risky and prone to fail ..but not to innovate is risky too (or too risky)
