Chapter 2: Estonia

(continued)

2.8 The Local Environmental Business Sector

Profile of Environmental Businesses

Environmental technology providers are generally sales and technical-engineering companies offering limited consulting services. Environmental consulting is only in the early stages of development at present and is predominantly focused in the fields of environmental impact and site assessment. The Estonian companies providing environmental technologies are not highly specialized but offer a wide range of technologies and services. This is a result of the developing market, where the potential niches are not yet covered and specialization would not provide substantial enough levels of revenue to survive. The low demand for environmental technologies by end-users was emphasized by suppliers as well.

There is a tendency for a higher concentration of larger businesses to emerge where a number of small retail trade companies have been forced out of the market. They were either forced to merge with others or to close down their business entirely. As a result, several larger companies have emerged whose main activity is related to the construction or reconstruction of systems such as heating or sewerage systems. These larger companies are able to sell their products more effectively.

Environmental consulting services entered the Estonian market during 1992-1993. A driving force behind the establishment of consulting units was the adoption of the Government Regulation No. 314 on Environmental Impact Assessment (keskkonnaekspertiis) in November 1992. The regulation set the legal framework in place for the EIA procedure and opened up a market for EIA experts. An urgent need for qualified experts thus followed. The MoE in particular took the leading role in organizing EIA training courses for experts, environmental specialists at county environmental departments and local governments.

Provision of EIA has been a licensed business activity in Estonia since 1993. As of January 1, 1998, 174 licenses had been issued for conducting EIA. The license is issued for three years initially and can be extended for another three-year period after expiration. Of the 84 companies initially licensed in 1993, 29 (35 percent) extended their license to January 1, 1998. Table 2.23 outlines the breakdown of EIA license-holding bodies in Estonia. It should also be noted that the licensed experts holding an individual license may also work at a licensed organization, which means there may be fewer than 75 entities working in this field of environmental service.

TABLE 2.23: BREAKDOWN OF LICENSED EIA EXPERTS (JAN. 1, 1998)

Year of license issuance (incl. renewals)

Legal bodies

Physical bodies

No. of valid EIA expert licenses as of Jan. 1, 1998

1993

1994

1995

1996

1997

The most well-established environmental planning and management consulting companies are listed in Table 2.24 They are all relatively new to Estonia and still relatively small. It should be noted that AS Quercus was established in 1992 but ceased operation in 1997 and became a new legal entity, Hendrikson & Ko. OU Georemest is a consortium of three companies including AS Maves, AS Ecopro and AS Kobras.

TABLE 2.24: ESTONIAN ENVIRONMENTAL CONSULTING COMPANIES (EIA, ENVIRONMENTAL AUDITING ETC.)
Company Name	Year established	Number of employees	1996 turnover (USD)

AS PIC Eesti	1988	30	586,100
AS ENTEC	1990	12	173,500
AS Merin	1990	10	314,000
AS Maves	1991	24	495,800
AS Kobras	1991	20	247,900
OU E-Konsult	1991	8	532,200
AS ECOPRO	1992	10-20	330,500
AS Quercus/ OU Hendrikson & Ko	1992/1997	8	206,600
OU Projektikeskus	1993	4	115,700
PT-Keskus	1994	4	132,200
OU Georemest	1996	5	53,700

The five-year experience in EIA procedure has generally proven successful but also has revealed several constraints and mistakes. The leading role in the EIA process has been played by state authorities (competent authorities), who organize the assessments, subcontract licensed experts and act as an intermediary between developer and experts. The developer's only role is essentially to cover the cost. The draft EIA Act, submitted to the government in early 1998, now puts the responsibility of compiling environmental impact statements and encouraging public participation on the developer. This responsibility, once again, encourages the developer to seek a qualified environmental consultant or consulting company.

Environmental auditing is another rapidly developing field of environmental business activity. A major training of environmental auditors was made by the PHARE Programme with the introduction of environmental auditing in Estonia during 1995-1997. By December 1997, some 35 people in Estonia were certified to perform practical audits in the framework of the project and received approval in December 1997 by the Minister of the Environment as lead auditor or auditors. The project included training programs by leading European companies including Carl Bro International, GeoGolder Ltd., and Det Norske Veritas. During the training audits, EMAS and ISO 14000 principles were introduced to senior management levels within those Estonian enterprises audited. While environmental management systems and the corresponding ISO 14001 standard is relatively unknown, the ISO 9000 series, on the contrary, is fairly familiar to companies. The opening up of the European markets has encouraged enterprises to work toward the quality standard. By January 1998, there were 12 enterprises certified under ISO 9000. The Ministry of Economics forecasts that by the end of 1998, the number of certified companies will have increased to 30 (Paju, 1998). However, no Estonian companies are certified under ISO 14001 yet. The company Kunda Nordic Cement is the only enterprise so far to have publicly declared an intent to be certified under ISO 14001 by the year 2000 (Vainlo, 1997).

Information Channels and Needs

The need for information on business opportunities, projects, tenders and employment opportunities, as well as the development of systematic channels for its dissemination was expressed by both end-users and technology providers during the survey. The results show that the information sources are diverse and that the useful information itself is scattered throughout many publications.

The main information sources on environmental business opportunities for end-users are trade fairs and exhibitions, as well as direct contacts with suppliers. Fairs and exhibitions are the contact point between users and suppliers. Hard copy sources play a small role as an information channel for both end-users and suppliers.

Among the few domestic environmental publications, the journal Keskkonnatehnika (Environmental Technology) was the most read environmental publication by businesses. Keskkonnatehnika was established in 1996 by AS Kalendrike and is published quarterly. It is primarily an environmental business journal but contains useful information that may be of interest to other groups. The journal comprises a vast array of topics, such as articles on environmental legislation, introduction of environmental technologies and new terminology. The journal also provides a good opportunity for businesses to introduce themselves, their products and services to the market. Until the end of 1997, the journal was distributed free of charge. From the beginning of 1998, however, a subscription fee was introduced.

The major business publication is Arielu (Business Life), and the main newspaper subscribed to by the business sector is Aripaev, a daily economic paper that claims readership of some 15,000 daily. The second important daily is Sonumileht (News Daily), since the paper is the official publication of the Estonian Business Register (Ariregister).

As indicated by survey respondents and shown in Table 2.25, there is a great need for information on new environmental technologies as well as on domestic tenders for projects. As businesses attempt to expand their market, information on up-coming projects is crucial. While end-users will manage to invest in environmentally sound technologies, the technology providers require more information on upcoming projects in order for them to meet the demand for technologies. Therefore, the current poor supply of information on domestic tendering was the key concern of most respondents.

TABLE 2.25: INFORMATION NEEDS
New environmental technologies	3.58 (39)
In-country environmental regulation	3.50 (39)
Domestic tenders for projects	3.39 (37)
Sources of project financing	3.08 (35)
Environmental quality for industries (e.g. ISO 14000, EMAS)	3.07 (41)
Eco-efficient and cleaner production practices	3.02 (35)
Information on where to find domestic partners	2.94 (39)
European Union environmental regulation	2.79 (39)
Certification requirements for environmental professionals	2.66 (30)
International tenders for projects	2.47 (34)
Contact information to government agencies	2.45 (35)
Information on where to find international partners	2.42 (37)
The following scale was used for ranking importance: 4 - very important, 3 - important, 2 - somewhat important, 1 - not important.

The respondents also indicated there is no systematic way to learn about changes in domestic environmental legislation. The frequent changes and amendments to the legislation are difficult to follow. Special handbooks in various fields of environmental management would be useful, and legislative documents with extensive commentaries would be especially welcome.

It is a good sign that contact information to government agencies seems to be available; this received the lowest rank (2.45). Somewhat surprising is the fact that information on where to find international partners was not regarded as important by the respondents. Information on potential domestic partners was more valued instead. The responses show, however, that there is still an interest in finding foreign partners: 27 out of 39 technology providers (69 percent) and five out of eight end-users (63 percent) responded positively to the question of finding partners. A low priority for attracting foreign investments was revealed by the respondents. This question was, however, answered positively by nine technology providers (23 percent) and two end-users (25 percent).

Obstacles to Further Development

There was a significant difference in the number of responses from both groups to the following questions on the obstacles they view to further business development (see Table 2.26). While half of the end-users avoided the questions, 65-70 percent of the surveyed technology providers answered them.

TABLE 2.25: INFORMATION NEEDS
Access to credit and finance	2.62 (32)
General access to information	2.47 (35)
Market demand for products and services	2.45 (31)
Lack of lobbying groups (e.g. environmental associations, etc.)	2.24 (29)
Tax regulation	2.18 (27)
Foreign competition	2.03 (31)
Legal regulation and registration requirements	1.86 (30)
Environmental regulation	1.71 (32)
The following scale was used for ranking barriers: 4 - a major barrier, 3 - barrier, 2 - limited barrier, 1 - not a barrier.

The respondents regarded access to credit and finance as the main barrier to their development. This issue scored the highest for both groups - end-users and technology providers. They also mentioned the current situation whereby information on the environment is spread among so many different institutions that it is difficult to obtain information or that it is missing altogether. This may be associated with the difficulties of having general access to information, since this issue was scored second highest.

While the limitations of access to credit and finance can be considered obvious, it is somewhat interesting to notice the relatively small role that environmental regulations play in limiting development. The limits placed by environmental regulations and other legal and registration requirements, and tax regulations, were not regarded to be constraints to business development. The low market demand for products and services, was conversely considered more significant by technology providers.

REC * PUBLICATIONS * ENVIRONMENTAL TECHNOLOGY MARKET - BALTICS * ESTONIA