Red, white and green

September 24, 2013

Hungary and Italy share the stage at high-level roundtable on green economy and CSR

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PROFITABLE PARTNERSHIP: Hungary and Italy discussed ways to move towards a green economy at the Italian Institute of Culture in Budapest. Photos: Zsolt Bauer

Hungary and Italy have enjoyed an especially close relationship, both diplomatically and economically, since the 1980s. On September 19, 2013, government representatives and leading business figures from both countries participated in a high-level roundtable at the Italian Institute of Culture in Budapest to discuss green economy and corporate social responsibility.

The event was organised by the Italian Ministry for the Environment, Land and Sea (IMELS) and The Regional Environmental Center for Central and Eastern Europe (REC) under the patronage of the Embassy of the Italian Republic in Hungary and in partnership with the Italian Trade Promotion Agency (ICE) and the Hungary Business Leaders Forum (HBLF).

The event venue itself is of historical significance for both Hungary and Italy. Designed by architect Ybl Miklos, the neo-Renaissance palace located at Brody Sandor Street No. 8 housed the Hungarian Chamber of Deputies during the latter half of the 19th century, and has served as Italy's cultural centre in the Hungarian capital city since 1943.

Gathering momentum

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(L to R) Barbieri, Accili Sabbatini, Illes

Opening the afternoon's proceedings in the Sala Federico Fellini was REC Executive Director Marta Szigeti Bonifert, who welcomed participants and guests and thanked the principal organisers. "There are lots of good things to be gained from a green economy, but we have first to buy into them," she said prior to introducing the first two opening speakers: H.E. Maria Assunta Accili Sabbatini, Ambassador of Italy to Hungary, and Enrico Barbieri, Director of the Italian Trade Promotion Agency in Budapest.

"A synergy between public and private interests is maybe the way forward for finding sustainable solutions to the challenges we now face," Accili Sabbatini remarked, adding that environmental awareness is something that already "drives the Italian industrial sector." The Ambassador acknowledged the special partnership between Italy and Hungary and expressed hope that the countries will take steps necessary to "promote and enhance sustainable investments."

"Some Italian companies, with some of the most advanced leadership in the world, are already well rooted in Hungary," Barbieri noted during his opening address. "These companies have achieved high levels of corporate social responsibility and are working hard to ensure sustainable production."

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Illes

Following the upbeat introductions, a pair of keynote speakers prepared the stage for the first of two thematic panel discussions (on innovation and financing, respectively). The first to speak was Dr. Zoltan Illes, Minister of State for Environmental Affairs at the Hungarian Ministry for Rural Development. Referring to corporate social responsibility, the Minister asserted his firm belief that "there is no human activity-no matter how big or small-that is without consequences, and this refers both the physical harm that our actions can cause but also to things we can do that are extremely beneficial for the community and the environment." Illes also shared an example of plastic bottle recycling to illustrate the need for providing the right kinds of financial incentives to make such programmes successful, while at the same time de-incentivizing systemic abuse and corruption.

European Commissioner Laszlo Andor recorded a special keynote video address for the event, which was played for participants just prior to the opening panel discussion. Andor addressed some of the key challenges that Europe faces in making a successful transition to a green economy. "It is fair to say that there have been mixed messages from the private sector, but is undoubtedly true that there are many companies implementing responsible environmental practices. On the side of the civil society, we face the challenge of addressing consumer behaviour and winning over the scepticism on the benefits of green policies. Using fiscal and information tools to raise awareness and communicate the mutual benefits between economic, environmental and social goals play a crucial role in this regard."  The Commissioner added that "the transition towards a green economy requires the commitment of both public and private actors, as well as civil society."

Harnessing innovation

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Szigeti Bonifert (L), Olajos

The first panel discussion on innovation dealt with policies, best practices, low-carbon strategies, responsible businesses, and cooperation with research and academia. Former Hungarian Member of the European Parliament Peter Olajos put a number of thought-provoking questions to a distinguished panel including: Antonio Balestrieri, Senior KICs Project Officer at the European Institute of Innovation and Technology; Istvan Kenyeres, President of the Biopolus Alliance; Sergio Lombardini, Director of Research, Development and Technological Innovation at Versalis S.p.A. (ENI group); and Laszlo Juhasz, Partner and Managing Director with Boston Consulting Group.

Asked about how and at which levels the EU promotes green innovation, Antonio Balestrieri referred to a complex and comprehensive flagship initiative called the Innovation Union (IU). The main goal of the IU is to invest 3% of EU GDP in R&D by 2020, which would create an estimated 3.7 million jobs and increase annual GDP by EUR 795 billion by 2025. "The real challenge is to implement the strategy in order to achieve the results envisioned by Europe," said Balestrieri. "One of the criticisms about Europe's capacity for innovation is that, while we produce a lot of knowledge and a lot of publications, we're historically slower than the US and Asia in transforming our achievements into real products and processes."

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(L to R) Balestrieri, Kenyeres, Lombardini, Juhasz

A creative ecologist by profession, Istvan Kenyeres commented on the increasingly urbanised human population, and complimented Europe on being a "top innovator of urban infrastructure" and the world's foremost developer of "liveable cities". "But," he added, "Europe is also a highly conservative and risk-averse society, and innovation is all about taking risks." Drawing a parallel with the generous provision of start-up capital for SMEs in the United States, Kenyeres argued that Europe "mustn't make its start-ups assume all of the risk."

Sergio Lombardini, a trained chemist, was asked about the complex role of chemistry in our lives, from the benefits it provides and hazards it presents to the possible role it might play in a sustainable green economy. "What I believe, and what my company believes, is that renewables-at least over the medium-term, will have a chance to prove themselves as a substitute in the making of products that are today created from fossil fuels," said Lombardini. "But this also involves using chemistry in the right way, especially where agriculture and food production are considered. In any case, as has been mentioned earlier, it all involves a certain amount of risk."

Drawing a contrast between businesses enterprises that are careful and rational versus those that take a more adventurous approach to new trends, Olajos asked Boston Consulting's Peter Juhasz how various companies have taken to incorporating or resisting green strategies in recent decades. "I think we see by now that a majority of companies have shifted away from a purely defensive approach," Juhasz replied, "and are now trying to identify what kinds of advantages are to be gained. One consequence of this trend is that CSR has grown in importance from simply one department of a business to a CEO-guided strategy-and that's an essential change."

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(L to R) Franciulli, Lakatos, Markovic, Destro

Following the discussion and in-depth Q&A session with the panellists, four more individuals were called to stage to share their thoughts on how their respective companies are heeding the call to innovate. These were: Francesco Fanciulli, CEO for the Central and East European Region, Prysmian MKM; Eszter Lakatos, Kometa 99; Bela Markovic, General Manager of Mapei; and Stefano Destro, General Director of Hydea Consulting.

Francesco Fanciulli spoke about how Prysmian, a manufacturer of power cables, "is seeking ways to deliver more energy, using less space, and in a more efficient way. With regard to energy efficiency, if you want to turn a theory into practice, you need to be able to measure your performance to find out if what you're doing is really efficient." The CEO spoke about how his company has been able to put systems in place that have increased output while simultaneously reducing electricity consumption, water usage and waste volumes.

Representing the food industry was Eszter Lakatos, speaking on behalf of one of Hungary's largest meat-processing companies, Kometa 99. As the company's main activities (pig slaughtering, cutting and boning, slicing and packaging) use lots of energy, there is plenty of incentive to make these processes as efficient as possible while ensuring that the overall operation meets the necessary sanitary requirements. "The reason that Kometa has been able to reduce its energy, water and gas consumption year after year is because we invest in top-quality and up-to-date technology-even if it costs more at the beginning." In the last three years, Lakatos claimed, Kometa invested almost 4 billion forints (EUR 13.37 million) in the company, including a substantial amount on environmental investments.

"It's not really easy to find out and deliver the needs of the building industry without crushing the environment," Bela Markovic began, speaking about Mapei, a hugely successful Italy-based building-materials company founded in 1937. "One thing we're trying to do in Hungary is to train our people to be aware of the environmental and health impact of our materials, and also to make our factories more energy efficient." The company invested EUR 100 million last year in safer products and materials, according to Markovic.

Stefano Destro, through his work with Hydea Consulting, has first-hand experience with what is happening in Hungary with regard to the EU's structural funds. "In the past two rounds of calls there has been a total of EUR 600 million allocated in the country, mostly in two main categories-energy efficiency in buildings and renewable energy sources," Destro explained. "Interest is definitely growing, as we've processed 1,500 applications during this time, representing double the amount of funds available." Solar energy technology is currently generating the greatest enthusiasm, and this includes local communities, he added.

Getting the money to flow

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(L to R) Bozzolo, Zatta, Turker, Czako
The topic of the day's second and concluding panel discussion was financing, and discussion areas concentrated on business models, EU support, regional and national priorities and investments. Session moderator Borbala Czako is a partner with Ernst & Young and has served as president of the Hungarian Business Leaders Forum for eight years, and her panel featured the following participants: Dr. Tamas Szucs, Head of the European Commission Representation, Hungary; Laszlo Wolf, Deputy CEO of OTP Bank; Dr. Cenk Turker, Head of Sustainability, AKBANK, Turkey; Paolo Munini, Head of the European Investment Bank's Private Sector Lending in Central Europe Division; Paolo Bozzolo, Managing Director, UniCredit Bank Austria AG; and Richard Zatta, Head of International Projects and Specialised Lending, Intesa Sanpaolo S.p.A.

 

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(L to R) Wolf, Munini, Bozzolo
Tamas Szucs talked about ways that the EU can help to facilitate a 'circular economy'-that is, an economy in which money flows as easily as possible from financing mechanisms to recipients who are in turn able to generate revenue that ensures the flow of money back to the financing mechanisms. The removal of financing bottlenecks will undoubtedly enable Europeans to take greater advantage of today's most promising innovations. "Green economy and competitiveness are not mutually exclusive," Szucs argued. "Europe holds a 50% share globally in the recycling business, and it is estimated that full implementation of the EU's waste legislation will increase the annual turnover of EU waste management and recycling centres by almost 42 billion euros and create over 400,000 jobs by 2020."

OTP Deputy CEO Laszlo Wolf talked about "building values into the CSR process," but argued that if companies are to take CSR seriously (as opposed to ineffectual and dishonest 'greenwashing' practices) companies must first take responsibility to ensure the health of their core business and then be responsible to their employees. "Once these two needs are met, a company can then be responsible to the environment." Once CSR practices are put into place and become part of corporate culture, Wolf continued, the potential positive impact can be great: OTP, for example, has 12 million clients in nine countries, 1,450 bank branches, and approximately 40,000 employees.

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Szucs (L), Wolf

Moderator Czako then turned to Cenk Turker to ask about Turkey's regional strategy with regard to green financing. "Turkey's economy is the world's 17th largest, and its per capita GDP of 8,000 euros has tripled over the past ten years," Turker explained. "With steady GDP growth of 4% per year, Turkey is a strongly emerging market, but this rate of growth means that sustainable infrastructure is very important. [...] As for green investment, the BRIC countries are a step or two ahead of us, but whereas ten years ago you wouldn't have heard of such a thing in Turkey, we are making steady progress."

Paolo Munini spoke about the role or the European Investment Bank (EIB), the "EU's long-term lending bank," adding that the institution "is the instrument through which EU policies materialise." The EIB, he asserted, has "very specific priorities-primarily to ensure sustainable growth and to create jobs." But it is not always easy to frame policies when economic and social concerns converge so completely. "I don't know any more what environmental sustainability is because there are so many dimensions to it-to be competitive you have to be green, and to be green you have to be competitive, and so forth." Choosing which projects to finance-whether an R&D effort or an SME-is increasingly difficult, "but when innovation appears, we have to be ready with our products," Munini concluded.

Returning to the concept of a circular economy, UniCredit's Paolo Bozzolo cautioned that for banks to be effective lenders, they have to be able to ensure that the money they lend out comes back to them. The failure of money to return to the banks creates a crisis of confidence that, in a worst-case scenario, results in a run on banks and full-blown financial panic. Any bank looking to engage in green lending practices, Bozzolo said, "needs to have people looking into project impacts [...] and investing in long-term equity." You want to "invest responsibly so as not to become loaded with liabilities." It also helps, Bozzolo added, to cultivate a harmonious relationship with the communities in which you operate.

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Pala

The last of the panellists to speak, Richard Zatta from Intesa Sanpaolo claimed that the sector in Western Europe that has benefited the most from investment in the past five years is the green economy. "The three most important things that an investor is looking for in a project are 'transparency, longevity and certainty'-and the key word that joins these three is 'sustainability,'" Zatta explained. "On the other hand, where innovation is concerned, banks tend to be conservative and traditional in their lending approach, as they typically lend out just 10% of their total equity."

Following this panel discussion, participants heard from Alessandra Pala, Project Manager for the South East Europe Transnational Cooperation Programme. "Our programme deals primarily with cooperation between 16 countries," Pala said, "and the highest ever levels of cooperation within the programme have been between Italy and Romania, and Italy and Hungary. This should give you some idea of just strong the links are between Italy and this part of Europe."

Wrapping up

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Romano
Stefania Romano, Head of the Italian Trust Fund within the Regional Environmental Center, was asked to close the event by highlighting some of the main conclusions to be reached at the end of the afternoon, some of which are listed below:
  • Government transparency is one key to the effective implementation of Europe-wide green policy initiatives.
  • Risk aversion is a clear barrier to innovation in Europe, but could be overcome through restructured financing priorities-e.g. more generous funding for start-ups and SMEs.
  • 'Corporate social responsibility' is now integrated into the long-term, bottom-line strategy of many successful businesses.
  • More and more businesses are making long-term, high-quality investments to improve their green performance.
  • A circular banking dynamic is necessary to ensure the long-term health of financial and lending institutions.