Growth in the markets for L&T’s services is outperforming long-term, general economic growth. A number of trends are affecting demand for L&T’s services:
· increasingly stringent environmental legislation
· growing material and energy efficiency requirements
· changes in public sector service production
· efforts to combat climate change and
· growing environmental awareness.
Regulations support recycling
The aim of stricter environmental regulations is to control climate change by improving energy and material efficiency. Consumers and businesses believe that using waste material as a secondary industrial raw material is an important way of caring for the environment.
The reuse and recovery objectives specified in the EU Waste Directive should be reached by 2020. Finland’s National Waste Plan sets out the objectives for waste management until 2016. The objective is to recycle 50% of Finland’s municipal waste as materials, to use 30% for energy production, and to place only 20% of waste in landfills.
To meet the objectives, an increase in recycling is necessary. This is promoted by regulations on producer responsibility and packaging material recycling. Reforms of Finland’s Waste Act and the Waste Tax Act will promote the recovery of waste materials. Although the reforms’ full impact on recycling rates remains unclear, the changes will be positive from L&T’s perspective.
Strict objectives force an increase in renewable fuel consumption
To combat climate change, EU is committed to clearly cut its greenhouse gas emissions and promote the use of renewable fuels. According to Finland’s climate and energy strategy, the use of bioenergy could be increased, particularly in heat and power co-generation and property heating. One of the objectives is to more than double the use of forest processed chips. The number of power plants using wood-based fuels in Finland is expected to grow in the next few years, providing a healthy basis for long-term demand for wood-based fuels.
The rate at which demand for energy obtained from forests will increase depends on the price development of emission rights and the fossil fuels. National decision-making will also be a key issue, enabling the government to make a difference in terms of which fuels are used for heat and power generation. In order to clearly increase the use of forest processed chips, besides tree crowns, energy wood should be harvested from young forests as part of good forest management.
Outsourcing as a growth driver
The outsourcing of property and plant support services is intensifying. This is due to customer companies preferring to focus on their core business, and properties becoming more complex in technological terms. Economic recession has accelerated outsourcing as the need for cost-efficient services is growing.
The service provider is more closely involved in customer processes and service solutions are specified in co-operation with the customer, to improve productivity. Customers are buying more extensive service packages, with the objective of optimising total costs instead of unit prices. Customer relationship management and service development are continuously gaining in importance.
At about 20%, the rate at which public sector support services in Finland are outsourced is clearly lower than in most other EU member states. However, the retirement of the baby boom generation and the need for greater operational efficiency will accelerate outsourcing.
Special features of non-Finnish markets
Sweden has a much higher rate of public sector outsourcing than Finland. In fact, cleaning and office support services are, almost without exception, provided in extensive packages. Customers expect the service provider to show an innovative approach to developing new support services.
Latvia is slowly recovering from a deep economic crisis. Waste legislation has been harmonised for compliance with the EU Waste Directive. The Waste Act that entered into force in autumn 2010 provided a clear framework for the Latvian environmental management markets and may open up new opportunities in the municipal markets. Riga’s geographic location is crucial to trade in secondary raw materials.
Although, in Russia, there is growing interest in environmental management, legislation does not yet fully support waste management and recycling. Waste volumes are considerable in the Moscow regions. The level of investment in waste processing and final disposal is low, creating huge growth potential in the market.