Innovation is crucial to sustainable economic development and future global prosperity. Investors, managers and entrepreneurs need to be innovative and take business risks. Governments can play an important role by supporting a business environment that encourages innovation. Innovation has been placed at the heart of the Europe 2020 strategy, the EU Commission’s growth strategy for the EU – but is Europe doing enough to encourage innovation? Does Europe dare to innovate?

The EU institutions have established important and far-reaching risk assessment and risk management functions. In situations where policy is required but the science is unclear they base their decisions on the precautionary principle. The aim is to protect human health and the environment. While essential, the precautionary principle should be used wisely to balance possible risks with the benefits that technological progress can offer. Mitigating all risks is not possible. No risk, no innovation: Without risk we would not have innovation in transport, telecommunications or medicine. Risks need to be accepted, understood and managed if society is to overcome important challenges such as ensuring food, water and energy security for a growing global population. Some risks must be taken if Europe is to remain technologically competitive.

Today, there is no universally accepted definition of the precautionary principle. Its use is open to interpretation. Some regions like North America have established a good balance between precaution and proportion, between potential risks and benefits. In Europe, however, there is too strong a focus on the avoidance of technological risks, which has become a serious concern for industry.

In EU regulatory processes, science-based arguments are increasingly losing out to public opinion, while possible opportunities are undervalued. We see numerous examples across a range of technologies and industries, including chemicals, pharmaceuticals, nutrition, materials, consumer products, electronics and crop protection. The most prominent example is the reluctance of the EU Commission to make decisions about the applications of products based on green biotechnology. The resulting legal uncertainty can undermine innovation and investment.

Therefore, the chief executives of 12 companies – including BASF – with a combined annual research and development budget of €21 billion recently proposed the formal adoption of an Innovation Principle in European risk management and regulatory practice. This principle was conceived and developed by members of the European Risk Forum – an expert-led, not-for-profit think tank, which promotes high-quality risk assessment and risk management decisions by the EU institutions. The Innovation Principle is simple: Whenever precautionary legislation is under consideration, the impact on innovation should also be taken into full account in the policy and legislative process.

Where there is real danger and unacceptable risk, precautionary considerations should be uppermost. The Innovation Principle does not set out to support innovation irrespective of its impact on health or the environment. It seeks to support an evidence-based approach, relying on sound science. I believe that a shift of emphasis is urgently needed and that Europe should dare to innovate.

Author: Kurt Bock is chairman of the board of executive directors at BASF. He is participating in the World Economic Forum Annual Meeting 2014 in Davos-Klosters.

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