Toward a European Innovation Principle

The European Commission is increasingly committed to recognising and endorsing a more innovation-oriented EU acquis through the adoption of an Innovation Principle (IP). The Commission aims to design the IP as a legal tool to provide the best conditions to enhance innovation practices as the main means to achieve the EU policy objectives. The EU institutions are deeply engaged in reframing the EU regulation in order to realise the EU’s environmental, social and ecological objectives by the implementation of innovation through all the stages of policy making and policy enforcement. 

The IP has been developed in gradual steps via a very risk-aversion approach, within the context of the EU better regulation agenda. Originally, the IP was advocated by the pharmaceutical industry as a counterbalance against the precautionary principle. The latter is detailed on art. 191 TFEU and is related to a risk management approach, whereby if there is the possibility that a given policy or action might cause harm to the public or the environment and if there is still no scientific consensus on the issue, the policy or action in question should not be pursued. Only when further scientific knowledge is achieved and more information becomes available the EU institutions and agencies are authorized to assess and evaluate the given policy proposal. 

Both the EU regulatory framework on chemical products and foodstuffs are subjected to this principle that is more and more challenged as a far severe obstacle that could hamper the innovation in many economic and social sectors across Europe. In such circumstances, the Commission needs to find a right balance between the IP and the precautionary principle in order to provide an innovation-friendly environment for the European companies and, at the same time, adopting all the adequate measures to guarantee that the IP will not breach the current rules on consumer-protection and market competition. Tension between the two principles is also related to the necessity to guarantee a level-playing-field for the European companies involved in innovation processes, as a base to safeguard the innovation-potential of the European internal market.

Therefore, given the upstanding role of the precautionary principle in the current EU regulation, the EU Commission is increasingly motivated to shape very gradually the exact contours of the IP in the context of an increasing EU’s awareness of the importance to enhance an European innovation ecosystem by providing legal certainty and policy objectives.

As a matter of fact, there is much evidence in support for the introduction of an IP in the EU legislation. There are ample signs confirming the strong positive relationship between investment in research and innovation (R&I) and gross domestic product (GDP) growth, and more generally between innovation and growth. These findings already suggest the need to promote innovation-friendly regulation, and thereby strengthen the salience of innovation in the policy process. Furthermore, several studies and academic works have shown the complexity of the interaction between innovation and regulation. More precisely, EU regulation matters at all stages of the innovation process, from research and development to commercialization. Regulation can be a powerful stimulus for innovation, but can also harm innovation when not properly designed, while different types of regulatory approaches can have different impacts on innovation.

Many innovation indicators reveal how the EU is lagging behind several other countries around the world in the development and enhancement of an indigenous innovation ecosystem, given the several innovation goals achieved by several BRIC countries. In presenting a new agenda for research and innovation, the European Commission has observed in 2018 that “EU companies spend less on innovation than their competitors. Venture capital remains underdeveloped in Europe, resulting in companies moving to ecosystems where they have better chances to grow fast. Investment across the EU falls short of the 3% GDP target. R&D intensity is still uneven among EU regions, with investment and research heavily concentrated in Western Europe. And 40% of the workforce in Europe lacks the necessary digital skills”.

Additionally, regulation, besides promoting innovation and its diffusion, can also provide direction to innovation, steering it towards societal needs. Good examples are environmental and data protection rules, which heavily affect the pace and direction of innovation in several domains. In fact, it is widely established that not all innovations are equally relevant for sustainable growth, whereas several innovations could be socially undesirable or could even generate negative externalities, affecting the EU trajectory toward the green economy. 

Since 2016, the EU institutions have tackled these issues and necessities by outlining the IP through a new approach, which would address the current and future innovation-needs. As a result, the IP has been broken up into three main components: “Foresight and Horizon scanning”, the Research and Innovation Tools (included in the Better Regulation Toolbox) and the Innovation Deals. All these ‘elements’ were framed by the Directorate General for Research and Innovation (DG RTD-DG), the European Commission’s administrative body responsible for EU policy on research, science and innovation and for assessing the impact of innovation practices and processes on the job market and on the achievement of major social and economic goals.

The Research and Innovation Tool is the first component of the IP, and its main task is to provide guidance to assess the impacts of the EU legislation on all forms of innovation. It is envisioned as a principle applicable to ex ante impact assessment, as well as ex post evaluations and Regulatory Fitness and Performance (REFIT) initiatives. The REFIT program aims to simplify the EU regulation in order to remove unnecessarily burdens on citizens, businesses and society through the assessment of the EU regulation’s outcomes on small and medium-sized enterprises. 

The REFIT program expired in October 2019, and since May 2020, it has been replaced by the Fit for Future (F4F) platform. The F4F is designed as a high-level expert group that brings together representatives from the member states, the Committee of the Regions, the European Economic and Social Committee and several stakeholder groups. This platform has the duty to examine whether existing laws can achieve their objectives efficiently and how digitalisation and the increased use of electronic tools can reduce burdens for citizens and business and provide evidence-based opinions on the topics identified in the annual work programme.

The Research and Innovation Tool comprise four main activities. The first one involves broadening stakeholder consultation to capture the research and innovation angle of EU initiatives and F4F reports. Then, the second action concerns the assessment of potential impact of EU initiatives on research and innovation. The other activities are related to the evaluation of the impacts of the legislative design on research and innovation and the improvement of the EU initiatives’ design to make them more innovation-friendly.

On the other hand, the Innovation Deals are non-legislative tools relying on cooperation among the European Commission, the relevant Member States and Business which aim to remove perceived barriers to innovation arising from the implementation of existing EU legislation, by clarifying current rules and making use of existing flexibility in the EU legislative framework. The Innovation Deals are the result of a specific and rigorous analytical process made by different steps: firstly, the deal has to identify regulatory obstacles hindering innovation, then, a group of experts is charged to find solutions to remove such obstacles, while full complying with EU and national law. The Innovation Deals are activated on request by a specific group of stakeholders including businesses, public authorities, and other interested parties.

The third component of the IP is the “Foresight and Horizon Scanning”, also called the ‘Horizon Scanning’. This IP’s element is a technique for detecting early signs of potentially important developments through a systematic examination of potential threats and opportunities, with emphasis on new technology and its effects on the issues at hand. Horizon scanning is often based on desk research, but can also be undertaken by small groups of experts who are at the forefront in the area of concern. In other words, Horizon Scanning aims to identify the areas of scientific research and technological development most likely to bring about change and drive economic, environmental and social benefits for the future.

This Foresight is a fundamental component of the IP as it studies and analyses societal changes that have major implications on EU policies and legislation in an extended period (from five to ten years) which could have a relevant impact on the innovation ecosystem in a specific economic sector. These analyses follow a defined methodological approach based on a combination of qualitative and quantitative methods and techniques (such as scenario analysis and trend analysis). They are highly participatory, engaging experts from different backgrounds as well as stakeholders from the European Commission’s policy Directorates-General (DGs), industry, industrial associations, research organisations, universities and NGOs. The topics selected for the foresight studies are identified through high-level political priorities or together with client DGs.

Horizon Scanning entails the gathering of information on emerging issues and trends across the policy spectrum in the political, economic, social, technological and environmental setting, in order to look further into the future than the timeframe of already planned activities. Such ‘tool’ is also fundamental to foresee future technological development and socio-economic trends, to enhance innovation processes both at the public and private level.

All these three components are essential to provide an effective and future-proof IP, in other words to ensure that the EU legislation is designed and analysed to encourage innovation and to deliver social, environmental and economic benefits for the European citizens. An ambitious R&I investment programme can only deliver its full potential if the regulatory framework supports and enables the implementation of new out-of-the-box solutions to societal problems. The next decades will be crucial to test and enforce a new EU regulation framework centered on an enhanced European innovation ecosystem weighed up with the precautionary principle. The Commission further expressed its commitment to reform the EU legislation in this direction in its Communication on Better Regulation, acknowledging the need “to have regulation that fosters and, at the same time, harnesses innovation to the benefit of the environment, the economy and EU citizens”.