4.8 Transformative innovation

This thematic briefing examines past trends in innovation performance through the lens of the European Commission's eco-innovation index in Europe and the European innovation scoreboard. Looking ahead and drawing on data from research and development expenditure within the EU, it highlights the increasing momentum towards transformative innovation in EU policy and institutional frameworks. It also emphasises the need for increased investment and greater directionality in research and innovation (R&I) activities.

Key policies

The European Green Deal (EGD) emphasises the need for a systemic approach in EU R&I policy to address complex societal challenges and meet multidimensional sustainability goals. Green missions and partnerships within Horizon Europe provide a clear direction for R&I activities. Within this evolving R&I policy landscape, EU-funded research highlights the pivotal role of innovation in transforming the EU into a sustainable, competitive economy that enhances societal value while minimising environmental harm.

Past trends (10-15 years)

Improving trends/developments dominate

Eco-innovation — referring to any innovation that reduces impacts on the environment, increases resilience to environmental pressures or uses natural resources more efficiently — grew by 27.5% in the EU from 2014 to 2024, as shown in the EC’s eco-innovation index (Figure 1). This growth was primarily driven by improvements in eco-innovation inputs (including financial and human capital investment in eco-innovative activities); outputs (measured according to the output of eco-innovation activities related to the number of patents, academic literature and media coverage); and resource efficiency outcomes (referring to a country’s resource efficiency and greenhouse gas (GHG) emission intensity). Meanwhile, the European innovation scoreboard reports a 12.6% increase in EU innovation performance since the 2018 baseline year.

Outlook (10-15 years)

Trends/developments expected to show a mixed picture

The current pace and scale of R&I activities fall short of meeting the EGD's objectives. In 2021, only 12% of the population lived in regions achieving the EU R&I investment target of 3% of gross domestic product (GDP), exacerbating a growing innovation divide within the EU.

As illustrated in Figure 2, increased investment in R&I at the Member State level is needed to meet EU policy targets. Additionally, 50% of EU private R&D investment remains concentrated in mid-technology industries, such as the automotive industry, which are characterised by relatively low complexity and profitability. This risks perpetuating a ‘technological trap’, hindering the EU’s ability to compete in high-tech sectors.

In response, the New European Innovation Agenda prioritises scientific breakthroughs and deep-tech innovations to enhance EU competitiveness and tackle key societal challenges. By leveraging the European Innovation Council and the European Innovation Fund, it supports the full innovation lifecycle, from conception to market readiness, fostering the growth of start-ups as well as small and medium-sized enterprises.

Prospects of meeting policy targets 2030/2050

2030: Partially on track to meet targets/highly uncertain

EU Member States recently reaffirmed their commitment to the policy target of increasing investment in R&D to 3% of GDP by 2030. In 2023, the EU spent EUR 381 billion on R&D, equating to 2.22% of GDP — a slight decline from 2.28% in 2020 but an improvement from 2.08% in 2013. Currently, only 5 out of 27 EU Member States have surpassed the 3% R&D intensity benchmark. Achieving the EU policy target by 2030 will require accelerating R&I spending to more than twice the pace observed over the past decade.

2050: No specific policy targets

Robustness

The eco-innovation index and European innovation scoreboard provide valuable insights but offer only a partial view of innovation. Their focus is primarily on science-driven technological advancements. They put limited emphasis on social innovation and the shifts in social and behavioural norms essential for changing entrenched habits, lifestyles and the key societal systems that underpin them.

Charts/maps

Figure 1. Eco-innovation index by EU Member State, 2014-2024 (relative to EU-27=100 in 2014)

Figure 2. Gross domestic expenditure on research and development, 2023