To say that we are living in challenging times is not an exaggeration. The recent global pandemic – which is still not over – has had a huge impact on our societies and economies, and we will be dealing with its aftermath for some time to come. Then, just as we thought that the pandemic was coming to an end, war came to Europe with the invasion of Ukraine. In addition to the immense human tragedy for the people in Ukraine, the global impact in terms of food and energy shortages, galloping inflation and so on is significant.
How can our economies respond to what increasingly looks like a permanent state of crisis? I am convinced that three important levers hold the keys to a prosperous future: innovation, digitalization and sustainability. A fourth, equally important one, is cooperation. In this context, Canada and Luxembourg have much potential for strengthening our economic and social links and for inspiring and learning from one another.
This is obviously not the first time that Luxembourg faces economic challenges. As a small, landlocked country in central Europe with limited natural resources, Luxembourg has a solid track record of innovating its way out of difficulties and building new, solid foundations for its future. The most striking example is perhaps our response to the decline of the European steel industry in the 1970s, when Luxembourg was one of the world’s leading steel producers. To safeguard our economy, we managed to create what is today is the 5th leading financial centre in Europe and the world’s 2nd largest investment fund centre.
Having learned our lesson, economic diversification has been on the government agenda ever since in order to avoid relying too heavily on a single sector. We have systematically fostered the development of a knowledge-based economy with R&D and innovation as a central dimension. Today, Luxembourg is home to major international groups such as Husky, Goodyear, Dupont, and Guardian, which have chosen to locate R&D and innovation centres as well as production facilities here.
The Luxembourg space sector took off in the mid-1980s when the government had the foresight to back the creation of SES, today the world’s only multi-orbit satellite player. In 2016, we launched the groundbreaking SpaceResources.lu initiative focusing on the exploration and utilization of space resources, a move that has turned Luxembourg into a European hub for the new space industry with around 70 specialized companies and research labs. In addition, in just two decades, our startup ecosystem has gone from virtually nothing to a thriving, expansive community that is increasingly renowned at the international level.
In other words: innovative thinking has become part of our DNA. Our role as a government is to put in place the right conditions for innovative businesses to flourish. To stimulate innovation and R&D, we offer equity-free subsidies as well as support mechanisms for facilitating partnerships between industry and Luxembourg’s innovation-oriented public research centres. We have also developed top-notch digital infrastructure, with a unique, business-oriented and high-performance computer as the latest addition.
“The digital transformation of industry and society and the related generation of big data create a huge potential for innovation “
Digitization is indeed crucial for companies of all types and in all markets to remain competitive. The digital transformation of industry and society and the related generation of big data create a huge potential for innovation. This potential is reflected in Luxembourg’s key economic sectors – industry 4.0, financial services, space, logistics, healthtech and cleantech – all have strong data and digital innovation elements. Capitalizing on our internationally recognized strengths in connectivity, data-processing capacity and cybersecurity, Luxembourg is now determined to become Europe’s most trusted data economy and offer companies a safe, secure data testbed.
With its openness to innovation, easy access to top-class research and closeness to technological hotspots in Europe, Luxembourg is indeed an excellent testbed for the development and commercialization of new products and services. Its manageable size and highly diverse population – with 47% of foreign residents, we are the most international country in the EU – makes it a good place for carrying out product and service localization for different EU markets. Although the EU single market offers simple access to 27 countries and 450 million people, consumer preferences and behaviour vary across the continent and it is essential to get it right from the beginning in order to be competitive over time.
However, there is no long-term competitiveness without long-term sustainability. With current geopolitical tensions and the effects of climate change increasingly visible, we are all aware of the urgency to succeed with the twin digital and green transitions. This is necessary to preserve our planet and ensure good living conditions for future generations, but also to make our countries more autonomous.
“While some might perceive ambitious climate targets as a roadblock for competitiveness, it is actually a unique opportunity to innovate and create new competitive advantages. “
The climate targets set by the European Union – reducing CO2 emissions by 50% in 2030 and becoming completely carbon neutral in 2050 – are challenging and require major adaptations of industrial and production processes as well as changes in our everyday habits. While some might perceive ambitious climate targets as a roadblock for competitiveness, it is actually a unique opportunity to innovate and create new competitive advantages.
The current shortages of raw materials and sharply rising energy costs call for finding innovative ways of decreasing our energy consumption and transition to locally sourced, sustainable materials and energy. The drive of the investor community to favour sustainable investments is increasing the sustainable financing sector exponentially – an innovation opportunity already well-captured by Luxembourg, which is a leading centre for green and sustainable finance with the largest market share of listed green bonds in the world.
Digital tools and the capturing and analysis of data are central for optimizing industrial performance, materials and energy use, as well as emissions. Luxembourg pilots the Product Circularity Data Sheet (PCDS) initiative, which provides a pragmatic method for transmitting information about a product and the type of end-of-use cycle for which it has been designed all through the value chain. It shows, for example, whether a product is biodegradable and can be reused, repaired, recycled or used as a material bank for new products. The PCDS is currently being made an ISO / NP 59040 standard – a major step forward towards becoming an internationally recognised standard.
However, digitization also has its environmental costs. Digital technologies account for up to 10% of Europe’s energy consumption and 4% of its greenhouse gas emissions. It is obvious that digitization and sustainability must go hand in hand. Therefore, the Luxembourg government has recently adopted a strategic roadmap combining the twin digital and green transitions in order to foster a sustainable, competitive economy.
“Reducing our energy consumption through a more economical way of life would decrease our dependence on the energy sources that contribute to financing the war in Ukraine.”
We pursue a digitization that helps us reduce rather than increase our ecological footprint and decrease our vulnerability. This can be done by optimizing logistics, transport and communications, notably with the help of digital tools, by making energy grids more stable and flexible to better incorporate renewable energy and by increasing the efficiency of production processes. Much can also be done by encouraging the sharing of equipment and by extending the lifespan of appliances, and by practicing simplicity and restraint, limiting overconsumption and turning to circular solutions rather than the make – use – waste approach. Also, reducing our energy consumption through a more economical way of life would decrease our dependence on the energy sources that contribute to financing the war in Ukraine.
Recent events have taught us the importance of carefully choosing our business partners and of being guided by shared values and ambitions in terms of sustainable development. As two strong democracies, renowned for their openness and commitment to international cooperation, Canada and Luxembourg have much in common. Canada and Luxembourg’s shared focus on R&D, advanced technologies and sustainable solutions as well as our rich startup ecosystems provide numerous cooperation opportunities. With our diverse and multilingual populations – Luxembourg has three official languages: Luxembourgish, French and German, and English is widely used in the business community – we can understand each other and mutually help one another to get a foothold on our respective markets. This is an excellent basis for building a strong future together.