Chapter 1: Regional Overview

1.7 The Environmental Business Sector

Profile of Environmental Businesses

Since 1990, the market for environmental technologies and services has grown steadily in all the surveyed countries, leading to the dynamic development of local environmental businesses. However, compared to other CEE countries (e.g. the Czech Republic, Hungary or Poland) the environmental business community in the Baltic countries is small. This is not surprising given the history of those countries, their small populations and their limited environmental budgets. It is estimated that some 150-200 small and medium-sized enterprises are currently active in the Baltic environmental market, with that number set to increase. The majority of companies are service oriented. Although a number of companies were established before 1990, the majority are quite young, with more than 70 percent established after 1990. Most environmental businesses founded after 1990 are privately owned companies and tend to be small. More than half of the survey respondents employ 10 or fewer full-time employees. Overall the number employed in the environmental business sector is not significant.

Information Needs

When asked to comment on their information needs either in the environmental field or simply in general, the respondents were particularly responsive. Many types of information relating to the environment in the Baltic countries is simply not compiled, not accessible to the public or not accurate.

The greatest need for information indicated by most of the respondents, as shown in Table 1.18, was in the area of new environmental technologies. This was followed by a need for more information on in-country environmental regulations. Since environmental legislation is continually being enacted and revised to meet international agreements and EU regulations, companies and municipalities are finding it difficult to keep abreast and to comply. This is exacerbated by the fact that the legislation is often not transparent enough to be understood.

TABLE 1.18: INFORMATION NEEDS OF ENVIRONMENTAL BUSINESSES
Country	Information Needs

Estonia	Information in high demand: #1 new environmental technologies; #2 in-country environmental regulations; #3 domestic tenders of projects Information in demand: #4 sources of project financing; #5 environmental quality standards for industries; #6 eco-efficient and cleaner production practices
Latvia	Information in high demand: #1 in-country environmental regulations; #2 sources of project financing; #3 new environmental technologies Information in demand: #4 environmental quality standards for industries; #5 domestic tenders for projects; #6 eco-efficiency and cleaner production practices
Lithuania	Information in high demand: #1 new environmental technologies; #2 in-country environmental regulation; #3 domestic tender for projects; #4 sources of project financing Information in demand: #5 environmental quality standards for industries; #6 eco-efficient and cleaner production practices

Another significant information need is related to domestic tenders for projects. Although each surveyed country officially announces tenders according to a set of rules, the respondents felt that the opportunities to bid were often overlooked because of their inaccessibility or too short notice.

Information needs are expected to grow in the areas of environmental quality standards for industries, eco-efficient and cleaner production practices and sources of project financing.

Serving the public with adequate, accurate information is an area that needs to be developed across the Baltic region, however, this is expected to improve with time.

Obstacles to Further Development

Environmental businesses were asked to identify the main obstacles to their further development. Limited access to credit and finance was rated by the respondents as the biggest hindrance to the further development of their business activities. This reflects the current severity of the financial market wherein commercial loans are difficult to obtain.

All surveyed countries are associate members of the EU, and Estonia expects to join the EU as part of the next wave of enlargement. Therefore, environmental legislation will eventually comply with EU standards, which in many cases will mean stricter legislation and increased enforcement, thus significantly influencing the environmental market. For now, "weak" environmental legislation is not seen as a major barrier to the development of environmental businesses. Foreign competition within the environmental market was also viewed only as a minor barrier to business development.

While environmental businesses have little power to eliminate the obstacles that stand in the way of their development, the respective Baltic governments could reduce most of the barriers by introducing instruments and incentives that favor environmental enterprises. However, the enforcement of environmental and tax regulations, and improved access to sources of finance are key factors in creating a market in which environmental businesses can thrive.

Table 1.19 summarizes survey respondents' opinions as to the main obstacles to business development.

TABLE 1.19: OBSTACLES TO FURTHER DEVELOPMENT
Country	Main Barriers to Development

Estonia	#1 access to credit and finance #2 general access to information
Latvia	#1 access to credit and finance #2 tax regulations #3 general access to information
Lithuania	#1 tax regulation #2 access to credit and finance

REC * PUBLICATIONS * ENVIRONMENTAL TECHNOLOGY MARKET - BALTICS * REGIONAL OVERVIEW