EUROPEAN COMMISSION Brussels, 11.1.2018 COM(2018) 2 final COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS

Horizon 2020 interim evaluation: maximising the impact of EU research and innovation



1.INTRODUCTION Research and innovation (R&I) are crucial for sustaining Europe’s socio-economic model and values, as well as its global competitiveness. This is increasingly the case in a rapidly changing world, where our success depends ever more on producing knowledge and swiftly converting it into innovation than on exploiting natural resources or lowering wages. Sustainable growth in the future can only come from investing in R&I now. Horizon 2020, the EU Framework Programme for Research and Innovation (2014-2020), is a key EU asset to this end. It aims to stimulate economic growth and create jobs by coupling R&I, promoting excellent science and industrial leadership, and tackling societal challenges. In line with the Better Regulation guidelines, Commission services carried out a comprehensive Interim Evaluation of the programme’s progress in its first three years of implementation. The stakeholder response to the public consultation on the Interim Evaluation was very strong, with more than 3500 respondents and over 300 elaborated position papers. Three additional, self-standing interim evaluations covered the European Institute of Innovation and Technology (EIT); the public-public partnerships (P2Ps) set up under Article 185 of the Treaty on the Functioning of the European Union (TFEU); and public-private partnerships (PPPs, implemented through joint undertakings) launched under Article 187 of the TFEU. Separate independent expert groups also performed one mid-term review of the nine contractual public-private partnerships, and one of the direct actions of the Joint Research Centre. The Interim Evaluation provided the evidence-base for the report and forward-looking recommendations of the independent High Level Group on maximising the impact of EU R&I programmes, chaired by Pascal Lamy (Lamy High Level Group). As required by Article 32 of the Regulation establishing Horizon 2020, the purpose of this Communication is to raise to the attention of the EU Institutions the key findings (Section 2) and lessons learnt from the overall evaluation (Section 3). This includes possible improvements and orientations for the future, including first responses to recommendations made by the Lamy High Level Group on maximising impact. 2.Key Findings from the Interim Evaluation of Horizon 2020 The other EU Institutions endorsed the findings of the Interim Evaluation: the European Parliament (EP), the European Economic and Social Committee (EESC), the Committee of Regions (CoR), and more recently the Competitiveness Council through Council Conclusions of 1 December 2017. The Member States also adopted an opinion through the European Research Area and Innovation Committee (ERAC). The common view is that Horizon 2020's implementation is largely a success. Horizon 2020 is attractive and relevant. Participants come from the best institutions and companies in and outside Europe, covering a wide range of disciplines. Stakeholders express strong satisfaction with the programme, as shown by the sustained interest in its highly competitive calls. More than half of Horizon 2020 participants are newcomers compared to the previous Framework Programme 7 (FP7). Industrial participation has increased, with 23.9% of the budget for industrial and enabling technologies and societal challenges going to SMEs - well over the target of 20%. Horizon 2020 has shown flexibility in responding to evolving political priorities, such as migration, and emergencies such as the Ebola and Zika outbreaks. The programme offers unique collaboration and networking opportunities. One in five Horizon 2020 scientific publications is the result of academia-private sector collaboration. Horizon 2020 results in more interdisciplinary publications than FP7. The contractual PPPs, which bring together the private sector and the Commission in jointly defining research and innovation agendas, have added value by strengthening inter-sectoral cooperation and fostering innovation. Horizon 2020 is on track to contribute significantly to the creation of jobs and growth. Even if Horizon 2020 represents less than 10% of total public R&D spending in the EU, macroeconomic models project its socio-economic impact to be in the order of EUR 600 billion and 179000 jobs by 2030. Moreover, it supports achieving EU policy objectives through its focus on excellent science, industrial leadership and societal challenges. Excellence as the core underlying principle ensures quality. Having excellence as the main criterion for allocating funding has helped the first scientific publications of Horizon 2020 to be cited already at twice the world average rate. Patents produced through the programme are of higher quality and likely commercial value than similar patents produced elsewhere. Horizon 2020 already has supported some 17 Nobel prize-winners. The leap in simplification has paid off. The large-scale simplification measures introduced (e.g. single set of rules, electronic signature of grant agreements, the Participant Portal as the one-stop-shop for interactions with participants, single reimbursement rate, flat rate for indirect costs) have greatly reduced administrative burden and costs, leading to large decreases in time to grant (110 days faster than in FP7). Stakeholders appreciate the simplified funding model, which has not reduced the level of co-funding by beneficiaries. Horizon 2020 has shown clear EU Added Value. It brings economies of scale, scope and speed compared to national and regional-level support to R&I and thereby increases the EU's attractiveness as a place for research and innovation. The programme's additionality (i.e. not displacing national funding) is very strong. Single-beneficiary programme parts like the SME Instrument, the ERC and Marie Skłodowska Curie Actions add EU value through pan-European competition and the structuring effects they exert on national R&I systems. Horizon 2020 is delivering value for money. Horizon 2020's administrative overhead is lower than in FP7, thanks to the extensive delegation of programme implementation to specialised executive agencies and the harmonised implementation through the Horizon 2020 Common Support Centre. Administrative expenditure is below the target of 5%. It is particularly low for the executive agencies and the EIT. The evaluations of Horizon 2020-supported partnership initiatives show how effective they are in leveraging significant additional private and public funding and in aligning R&I priorities across Europe. The interim evaluation of the EIT concluded that it contributes to addressing structural weaknesses in the EU’s innovation capacity. The EIT's Knowledge and Innovation Communities (KICs) add EU value by stimulating close and effective links between education, research and innovation across a diverse set of global challenges. The EIT is the platform to launch and grow KICs, whose educational programmes combine technical knowledge with entrepreneurial and innovation education, direct access to businesses, and international mobility. Public-public partnerships under Article 185, e.g. Eurostars2, Joint Baltic Sea Research Programme (BONUS), have created long-term R&I partnerships and networks between research funders and governments, thus contributing to the European Research Area (ERA). They mobilise significant investment in transnational research projects in important policy areas, with an increasingly global action remit. The key strength for all public-private partnerships under Article 187, e.g. CleanSky2, Bio-Based Industries (BBI), is their ability to engage and leverage strategic industry partners in priority areas of action for the Union, across borders and business sectors, and their direct contribution to competitiveness and EU policy goals. They link activities across the innovation cycle, and help overcome fragmentation in their respective sectors by creating long-lasting pre-competitive collaborative networks that bring together previously unrelated stakeholders. Contractual PPPs, e.g. Factories of the Future (FoF), Energy-efficient Buildings (EeB), were found to have broadly achieved their goals, being flexible and efficiently managed, bringing together major industrial partners in EU-driven strategies, with mutual understanding of deliverables by industry and a high level of transparency, and openness in participation, including of SMEs.

3.Lessons learnt to Maximise the impact of future Framework Programmes The main purpose of the comprehensive interim evaluation was to draw lessons for the future based on an analysis of both strengths and weaknesses. These will help improve the implementation of Horizon 2020 in its last three years (2018 – 2020) and of the EIT and Article 185 and 187 Initiatives. The combined evaluation exercise also provides longer-term lessons learned, which will inform the design of the successor Framework Programme for the period post-2020. The final Horizon 2020 Work Programme for 2018 – 2020 is already testing some of the solutions designed to address the lessons learnt for the longer-term, including a pilot phase of a future European Innovation Council (EIC) and the use of lump sums as an alternative to cost reimbursement in some areas. What follows is a summary of the main lessons learnt and areas for improvement. 3.1.Invest more ambitiously Horizon 2020 is found to be underfunded – its increased attractiveness and continued relevance has resulted in large-scale oversubscription (a success rate of only 11.6% compared to 18.5% for FP7). An additional EUR 62.4 billion would have been needed to fund all proposals independently evaluated above the stringent quality threshold. This underfunding represents an opportunity cost for Europe's promising R&I potential and constitutes a waste of resources for the applicants (who spent an estimated EUR 636 million a year preparing proposals). In response to the Horizon 2020 interim evaluation, the European Parliament, supported by the Committee of Regions, similarly calls, among others, on the EU to avoid budget cuts to Horizon 2020 and to endow the successor programme with at least EUR 120 billion. The ERAC calls for proportionality between budget and ambitions. Similarly, Council Conclusions emphasise the need to prioritise R&I across all relevant EU policies, and provide significant funds for the future programme. The Lamy High Level Group recommends prioritising R&I and allocating more funding to it in EU and Member State budgets. The Group suggests that doubling the budget of the post-2020 programme is the best investment the EU can make in order to align investment with that of the EU’s main competitors and realise the currently wasted potential of unfunded high-quality proposals (i.e. to aim for funding for at least 30% of high quality proposals). The Commission takes note of the call from the High Level Group and other EU institutions to invest more in R&I through the future Framework Programme, in light of the current programme’s strengths and EU added value. EU funding for R&I should be matched by ambitious national and regional funding in order to reach the R&D investment target of 3% of EU GDP. 3.2.Continue simplification Horizon 2020 has made great progress in terms of simplification compared to FP7, but simplification is an ever continuing undertaking, requiring constant improvements. The EU Institutions note and appreciate the substantial progress made in simplification and equally stress the need to continue. The EESC sees it as a way to enlarge the circle of applicants, while ERAC sees continued simplification as a way to design even more user-friendly tools and rules. The Lamy High Level Group's ambition is to make the EU the most attractive R&I funder in the world (#7 Simplify further). This implies radically privileging impact over process, e.g. by minimising documentation, making calls more flexible (including on the choice of instrument and costing), and within R&I consortia adapting to changing trends and new opportunities. The Group suggests weighing the reduction in reporting obligations against having continuous and real-time data on the impacts of projects. The Commission is continuing the simplification drive, including through pilot actions in the last Work Programme of Horizon 2020, Subject to experience with these pilots, the Commission will pursue further simplification to support faster innovation cycles and lower administrative burden. To this end, the Commission will explore possibilities to: simplify the present real cost reimbursement system; increase acceptance of usual accounting practices; increase the use of lump-sum project funding against fulfilment of activities and other simplified forms of funding; reduce the burden for preparing and submitting proposals; reduce the ‘time to grant’; and improve feedback given to applicants. 3.3.Support breakthrough innovation Thanks in part to the EU Framework Programmes, Europe is a global scientific powerhouse. However, it does not perform at the same level in innovation. Horizon 2020's Interim Evaluation has identified some potential for supporting breakthrough, market-creating innovation, but concludes that such support must be considerably strengthened; for example, only a relatively small number of firms receiving grants benefits from financial instruments under Horizon 2020. This may hinder the scale-up to the European and international level of young innovative firms. The European Parliament equally stresses the importance of innovation support in general, and of disruptive innovation and scaling up in particular, while Council Conclusions emphasise the importance of supporting the whole innovation value chain, including high-risk disruptive technologies, while the possible future EIC should support breakthrough innovations and the scaling up of innovative companies. The Committee of Regions and ERAC opinions also make this point. The Lamy High Level Group recommends supporting innovation (e.g. technological, social, business model) across all EU policy domains. This will notably create a common regulatory framework that fosters entrepreneurship, European industrial competitiveness in the global market and its leadership in the current industrial revolution (#2 Build a true EU innovation policy that creates future markets). The Lamy Group suggests promoting and investing in innovative ideas with rapid scale-up potential through a European Innovation Council (EIC) that is empowered to invest in entrepreneurs and businesses - irrespective of size, sector or maturity - with risky innovations that have rapid scale-up potential at the crossroads of different technologies and disciplines. It also recommends (#4 Design the EU R&I programme for greater impact) that the EIC design new proposal evaluation and selection processes to better capture high-risk, high-return projects, introduces greater flexibility in grant management (stop-go decisions) and tolerates failure. The Commission acknowledges the mounting importance of market-creating innovation and will consider ways to further support it in the future building on current actions in the area of the Digital Single Market, Energy Union and Capital Markets Union. Venture capital in Europe is one-fifth the level of that in the US. The new generation of companies in the collaborative and digital economies originate predominantly in the US and Asia. The Commission has already taken action to build up an industrial policy, digitalise EU industry, and develop the collaborative economy. Building on the current achievements in innovation support through the SME Instrument, collaborative projects and public-private partnerships, the future Framework Programme should provide support faster and more flexibly. It should exploit the complementarity of grants and financial instruments, in order to attract and scale up young and quickly growing innovative companies to international and European levels, improve market-uptake of R&I results and accelerate innovation diffusion. The aim should be to put Europe at the forefront of market-creating innovation. To this end, a first pilot phase of a future European Innovation Council is launched in the last Work Programme of Horizon 2020. The experience gained from this first phase, together with strategic support from the recently established High Level Group of Innovators, will provide a basis for further decision making on a fully-fledged EIC.

3.4.Create more impact through mission-orientation and citizen involvement The Interim Evaluation points to the need for greater impact and more outreach to citizens. This is not only important for improving the communication of the contribution of R&I to tackling societal and technological challenges; involving citizens, customers and end-users in the programme agenda-setting (co-design) and its implementation (co-creation) leads to more innovation by stimulating user-driven innovation and the demand for innovative solutions. This will also respond to the opportunity of adopting a more impact-focused, mission-oriented approach in the future. The Work Programmes of Horizon 2020 already pave the way towards mission-orientation, using Focus Areas as a stepping-stone. All EU Institutions stress the importance of getting citizens more involved and maximising impact from the Framework Programme. The Committee of the Regions is very explicit in encouraging the adoption of a new, complementary approach based on missions. ERAC and Council Conclusions point to the need to deliver better and continued outreach to society, and call for exploring a mission-oriented approach. The Lamy High Level Group takes this analysis up in several of its recommendations. It suggests defining R&I missions with a transformative potential and that mobilise many actors and investors to realise them, including through public procurement of innovation (#5 Adopt a mission-oriented, impact-focused approach to address global challenges). The Lamy Group puts forward the UN Sustainable Development Goals (UN SDGs) as a global reference framework for defining such missions. It pleads for involving the public in defining missions and for more citizen science (#8 Mobilise and involve citizens). It argues in favour of a more effective branding of EU R&I, e.g. through wider communication of its results and impacts (#11 Capture and better communicate impact). To boost innovation, the Lamy report recommends that sectoral policies be fully engaged with innovation policy-making. It attaches great importance to seeing a programme driven by purpose and impact rather than instruments, with a fine-tuned proposal evaluation system and greater flexibility (#4 Design the EU R&I programme for greater impact). The Commission, through the final Work Programme of Horizon 2020, is already taking up some of the lessons learnt in terms of impact and outreach to citizens (e.g. through clearer impact statements and reinforced dissemination and exploitation of research results). The future programme should be built from the onset around a clear intervention logic and differentiated proposal evaluation. It will start from clear and, as far as practicable, quantified expected long-term impacts, medium- term results and short-term outputs, in support of EU policy priorities, the UN SDGs and the implementation of the Paris Agreement. Based on the results of the interim evaluation and bearing in mind the scope and thrust of the Work Programmes for Horizon 2020 for 2018-2020, R&I missions (scientific, technological, social etc.) in the next programme should create more impact, achieve better outreach, and encourage a systemic approach. They should address EU policy objectives, capture the public’s imagination (engaging with people about values, making them part of the process, and proud to be European), forge links between disciplines and sectors, and go beyond what is currently possible. 3.5.Increase synergies with other EU funding programmes and EU Policies Synergies already exist between Horizon 2020 and other EU programmes, such as the European Structural and Investment Funds (ESIF), the European Fund for Strategic Investments (EFSI), external relations instruments, the Connecting Europe Facility, and the Common Agricultural Policy. Still, they should be further strengthened and made more efficient and effective. In particular, building on synergies with ESIF and smart specialisation strategies, R&I capacities built over the past decade in lower performing regions could be better used for Framework Programme-supported projects and to increase participation in trans-national R&I networks and activities. The European Parliament opinion gives high prominence to synergies between EU funding programmes, which it deems crucial to make investments more effective, exploiting in particular the smart specialisation strategies. The Parliament calls for enhanced synergies between the future Framework Programme and other dedicated EU funds in support of R&I. The ERAC opinion indicates that synergies between ESIF and the Framework Programme should be developed on a systemic level, already in the programming phase. Council Conclusions similarly call for synergies, coherence, compatibility and complementarity. The Lamy High Level Group recommends designing future funding programmes with complementary, mutually reinforcing and interoperable intervention logics to support capacity-building in regions that are catching up in terms of innovation (#6 Rationalise the EU funding landscape and achieve synergy with structural funds). The Commission will capitalise on the experience gained in jointly implementing the current generation of funding programmes (e.g. the introduction of the Seal of Excellence) and will focus on enhancing synergies from the programme design stage to ensure that the range of instruments and programmes covers the whole innovation chain. This will be done by bringing priorities more in line with each other; making co-funding schemes more flexible in order to pool resources at EU level; and improving the compatibility of rules (for example, making it possible to apply automatically the Seal of Excellence). The future programme will also continue to provide support to policymaking. 3.6.Strengthen international cooperation International cooperation in R&I is vital for ensuring access to talent, knowledge, know-how, facilities and markets worldwide, for effectively tackling global challenges, and for implementing global commitments. While Horizon 2020 has a broad international outreach and openness to the world, third-country participations declined when compared to FP7, so international cooperation needs to be further intensified in order to continuously strengthen Europe's R&I excellence and competitiveness and solve global societal challenges. The European Parliament calls for strengthening international R&I cooperation, including with associate partners and emerging countries, as soon as possible through concrete actions. The Parliament, in addition, highlights the value of science diplomacy. Council Conclusions reaffirm the importance of reciprocity. The Lamy High Level Group gives similar prominence (#10 Make international R&I cooperation a trademark of EU R&I). The group recommends further stimulating international cooperation activities and opening the programme to association by the best and support to participation by all, based on reciprocal co-funding in partner countries. The Commission endorses the importance of strengthening international cooperation in R&I. The final Work Programme of Horizon 2020 seeks to do just that. Criteria and rules should be considered for associating third countries based on excellence in R&I. The Impact Assessment for the future programme may consider several ways of stimulating international cooperation in order to make sure that EU researchers work with the best and most appropriate R&I partners worldwide. 3.7.Reinforce openness There is a need to build on the great progress made in terms of making the scientific publications and data generated by Horizon 2020 openly accessible to the wider scientific community and public. However, so far less than 70% of the publications produced in Horizon 2020 are available in Open Access, with no clear signs of improvement. The European Parliament opinion is in favour of the general principle of Open Access, while ERAC regards the 100% Open Access policy of Horizon 2020 as a clear measure in favour of knowledge circulation. Importantly, the Council Conclusions on the transition towards an Open Science System give valuable guidance for the future, while the Council Conclusions on the Interim Evaluation of Horizon 2020 highlight the role of Open Science in boosting impact and transparency. The promotion of Open Science (and Open Access specifically) are referenced throughout the Lamy High Level Group report as key guiding principles that should be rewarded (#3 Educate for the future and invest in people who will make the change).