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With the launch of its Strategic Plan 2023 (SP2023), the EPO started building a future shaped by sustainability, underpinned by diligent business practices and an even stronger sense of social responsibility. Each of the first four goals of SP2023 feeds into goal 5, which covers four aspects of sustainability:
In 2021, the focus was on keeping the organisation fully aligned with its strategic goals, thanks to the EPO's cascaded balanced scorecard (BSC), and further implementing ISO standards to enhance process efficiency.
With many SP2023 programmes and projects delivering results, managing change has become a key priority for the EPO. Progress with SP2023 is closely monitored in terms of both the milestones reached and their level of impact.
After passing the mid-point of the four-year period of SP2023 in 2021, the flow of deliverables is now constant. By the end of the year, around 71% of SP2023 had been successfully implemented. Progress is well ahead of the baseline in all five strategic goals, despite the pandemic and all its challenges.
Figure 53: SP2023 progress reporting (in percentage of deliverables)
The cascaded BSC remains the management tool that ensures that all departments in the EPO work towards the same strategic goals. Individual performance objectives also include explicit references to the BSC. Key performance indicators measure the impact achieved, while performance against yearly targets is systematically tracked. The BSCs are regularly reviewed to keep them aligned with the ongoing implementation phase of SP2023.
Figure 54: Balanced scorecard with end of 2021 figures
In the interests of greater transparency, the EPO's Annual Review 2020 (published in June 2021) included two new reports covering data protection and communication activities.
The effectiveness of the EPO's Quality Management System (QMS) for the patent process as well as the Occupational Health and Safety Management System (OHSMS) was confirmed by external auditors during the regular ISO 9001 and ISO 45001 surveillance audits conducted in October 2021. Both management systems proved to be working effectively, despite the increasingly demanding circumstances created by the pandemic.
Preparations to expand the scope of the QMS to the entire Office continued at full speed throughout 2021. The aim is to increase the scope of our certification in 2022, including ISO audits covering the entire Office. This will improve the root cause analysis of quality issues and make management information more readily accessible. It will also involve monitoring internal user satisfaction with support services.
Figure 55: Extending the ISO 9001 cycle to all EPO services and processes
At the same time, further steps were taken to integrate the EPO's different management systems. A new network of ISO practitioners was set up to actively support managers in promoting management best practices. Coherent objectives for 2022 were set in terms of standards and included information security objectives for the first time. 2021 also saw a greater focus on risk management. Residual risks are gradually falling, thanks to delivery of SP2023 projects such as the mainframe decommissioning and increased teleworking capacity.
2021 was a successful year in terms of data protection, culminating in the adoption by the Administrative Council of new Data Protection Rules (DPR). This was followed by the Office's implementation of a number of legislative and operational measures aimed at interpreting the concepts and principles and implementing the requirements set out in the rules.
Data protection is now enshrined prominently under Article 1b of the EPO's Service Regulations, reflecting its commitment to protecting this fundamental right. The EPO's new data protection legislation is aligned with the highest global standards, making it an example of best practice among international organisations.
Figure 56: Overview of the five-pillar strategy of the Data Protection Office (DPO)
With the Data Protection Office (DPO) Strategy and Planning 2021-2023, the DPO set out a roadmap for achieving the Office's ambitious data protection vision and objectives.
Created at the end of 2020 and guided by the DPO, the Data Protection Liaisons' (DPLs) network supported the Office in mapping the processing of personal data throughout the organisation. The network will continue to operate until the end of the transition period to reach full documentary compliance.
To enhance data protection awareness across the Office, the DPO launched a number of communication and training initiatives, creating two e-learning modules and publishing a series of guidance documents, position papers and policies to promote effective implementation of the new framework in 2022.
Other legal instruments and regulatory mechanisms were adopted to ensure robust and efficient governance. They include a Circular implementing Article 25 DPR, a decision identifying the delegated controllers, Rules of Procedure for the Data Protection Board, an explanatory memorandum on the processing of mandatory data in the patent granting process (PGP), a cookies policy and a data protection policy, which are all available on the EPO website.
By managing personal data, guaranteeing transparency and accountability, these legal instruments and mechanisms will facilitate the successful implementation of digital transformation. In parallel, they will also mitigate privacy and data protection risks and enhance the trust of staff and the public in the way the EPO handles their data.
Extensive preparatory activities took place at the end of 2021 to ensure that the Data Protection Board, a new statutory body introduced by the DPR with an advisory and oversight function, would be able to start working after the entry into force of the new rules.
These rules provide for specific means of redress, both for internal and external data subjects, with a view to effective exercise and enforcement of rights, freedoms and interests of data subjects. This, in turn, will minimise the financial and reputational risks for the EPO.
The DPO has also published extensive information and guidance for internal and external data subjects on the intranet and on the EPO website. In line with the principles of transparency and accountability, this gives data subjects effective control over their data, along with the ability to exercise and enforce their rights.
Figure 57: Overview of a data subject's rights
The Ombuds Office was created on 1 February 2021. It integrates the Conflict Resolution Unit as a new organisational unit in Principal Directorate Internal Audit and Professional Standards. As an informal, confidential and neutral partner, the Ombuds Office helps build tangible, lasting improvements in service quality by facilitating healthy and effective working relationships, both within the Office and with external partners. It brings the outside perspective into dialogue to empower operational units in putting stalled processes back on track.
The Ombuds Office co-ordinates a network of 12 confidential counsellors appointed for a two-year mandate. Together, this wider team handled 216 interpersonal issues in 2021. The majority of issues were related to communication between parties (33%) and appraisals (19%), and generally involved a staff member and line manager as parties (67%).
The Ombuds Office also co-ordinates requests for management review of individual decisions. In 2021, it handled 109 such management review cases involving 1 798 individual requests (1 364 relating to one case: the salary adjustment procedure). On its creation, the Ombuds Office also started a pilot for its new external service with the intention of launching this new service in 2022.
Modernising the EPO's external governance is a crucial aspect of ensuring the EPO's sustainability. Extensive preparatory work on identifying areas of improvement for the EPO's external governance started in 2021. It resulted in an orientation paper submitted to the contracting states for consultation by the Chairperson of the Administrative Council.
It aims to enhance the transparency and efficiency of the organisational set-up of the European Patent Organisation by adjusting the Administrative Council's Rules of Procedure and modernising the Council's technological infrastructure.
Figure 58: A virtual Administrative Council meeting
In line with the wishes expressed by several delegations, the Council achieved another milestone in modernising the EPO's external governance by adjusting its Rules of Procedure to provide for hybrid meetings (CA/62/21). As with the Council's 2020 decision on e-Council meetings, the Office provided all the support needed to ensure a greater degree of flexibility and efficiency in meetings of the Council and its subsidiary bodies.
After presenting its proposals for the future Observatory to member states at the Annual Meeting on Co-operation in May 2021, the Office channelled their feedback into an Observatory orientation paper. This formed the basis of a public consultation launched on 4 February 2022. The outcome of this consultation was discussed at the Annual Meeting on Co-operation, held in May 2022, before the finalised Observatory blueprint is submitted to the Administrative Council for opinion.
In 2021, the EPO continued its concerted efforts to address the findings of a financial study conducted in 2019 by the external consultants Mercer and Oliver Wyman. The study identified a potential funding gap in the EPO's finances of EUR 5.8 billion over 20 years.
To close this gap, the EPO proposed a bundle of six financial measures, which were approved by the Administrative Council in June 2020 (see figure below). The bundle is expected to have a positive impact of EUR 6.3 billion on the coverage gap, leaving room for manoeuvre if some measures fail to deliver the anticipated savings.
Figure 59: Bundle of financial measures
Increasing pension contributions: The 3.3% increase in pension contributions to the Reserve Funds for Pensions and Social Security (overall impact: EUR 0.3bn) took effect as of 1 January 2020. The Actuarial Advisory Group recommended implementing a further increase as of 1 January 2022. However, after a favourable opinion from the Budget and Finance Committee (BFC), the Office proposed to the Administrative Council to delay this increase in contribution until 1 January 2023 to avoid any potential net decrease in staff salaries in 2022.
New salary adjustment method: The measure relating to the new salary adjustment method was implemented on 1 January 2021 and has already delivered a significant benefit of close to EUR 1 billion. The overall impact up to 2038 is expected to amount to EUR 2 billion.
Biennial inflation-based adjustment of procedural fees (overall impact: EUR 1bn): An adjustment proposal was approved by the Administrative Council and included in the 2022 budget. In line with a consistent policy supportive of European industry, it was decided to exclude the international search fee and the fee for international preliminary examination from the 3% increase to reduce the gap between PCT and European fees for corresponding services.
Digitalisation of the end-to-end patent granting process: This process is well underway and significant benefits are expected for users (overall impact: EUR 1.2bn). This measure has brought digitalisation benefits by creating efficiency gains that partially offset the lost production output of examiners and formalities officers going into retirement. Its contribution was evaluated at EUR 0.6 billion by the end of 2021.
Investment of part of the annual cash surplus in the EPO Treasury Investment Fund (overall impact: EUR 1bn): A total of EUR 250 million was transferred to the fund in 2021.
One-off investment of part of the annual cash surplus in the Reserve Funds for Pensions and Social Security (overall impact: EUR 0.8bn): A EUR 150 million transfer to the Reserve Funds for Pensions and Social Security (RFPSS) was approved by the Administrative Council in 2021. This amounts to an investment of 50% of the expected cash surplus in the RFPSS, instead of the usual 40%. This exceptional measure in an exceptional year takes account of the special circumstances arising from the pandemic.
Both investment vehicles of the EPO (EPO Treasury Investment Fund and RFPSS) continued to perform strongly in 2021. Financial gains generated by these funds in 2021 amounted to EUR 1 344 million for the RFPSS and EUR 233 million for the Treasury Investment Fund. Together with the transfers made by the Office, the net value of the EPO's financial assets increased by just over EUR 2 billion in 2021.
As far as the governance of EPO investments is concerned, a thorough review of the Investment Guidelines and the Treasury Investment Fund asset allocation was performed in 2021, with a view to adjusting the allocation to the ongoing developments in financial markets.
The revised Investment Guidelines also stipulate the progressive introduction of a set of minimum environmental, social and governance (ESG) criteria to align the EPO's investments with its sustainability goals. The resulting document (CA/F 22/21) was approved by the BFC in October 2021 and entered into force on 1 November 2021. The revised strategic asset allocation was consequently implemented in December 2021.
These positive developments are reflected in the overarching indicator for the EPO's financial sustainability - the coverage ratio - which has become the subject of regular monitoring since its inception at the beginning of 2020.
From an initial value of 70%, the coverage ratio had reached 87.9% by the end of December 2021. The improvement of around 18% is largely due to the measures mentioned above, as well as the exceptional performance of the RFPSS and the Treasury Investment Fund in the financial markets throughout 2021. This, in turn, means that the EPO's risk exposure to the financial markets is now higher as a result.
Figure 60: Evolution of the coverage ratio
Budget and finance
In 2021, the EPO achieved a standardised operating result of EUR 47.0 million, or EUR 4.2 million (9.8%) higher than in 2020.
Figure 61: Standardised operating result
Despite the ongoing uncertainty due to the pandemic, income levels remained solid in 2021. Total operating income amounted to EUR 1 942.3 million, a decrease of EUR 44.0 million (2.2%) compared to 2020. Income from procedural fees decreased by EUR 79.1 million (8.5%) versus 2020, largely due to changes in the ratio of searches and examinations.
Income from internal renewal fees was down EUR 8.0 million (1.8%) as the Office continued to reduce its stocks in 2021. However, the decrease in internal renewal fees was more than offset by growth in national renewal fees of EUR 43.1 million (7.2%) versus 2020, driven by the number of grants in recent years.
Figure 62: Standardised operating income
On the cost side, total standardised operating costs of EUR 1 895.3 million decreased by EUR 48.2 million (2.5%) compared to 2020. Staff costs fell by EUR 83.7 million (5.1%) compared to 2020. This was due to provisions for unused leave released from 2020, while the Office's cautious approach to recruitment during the pandemic and newly introduced salary adjustment procedure kept salary costs under control. Non-staff costs increased by EUR 35.5 million (11.9%) versus 2020, primarily due to increases in IT costs related to the Office's digitalisation.
Figure 63: Standardised operating costs
Under the standardised view, applying a discount rate of 3.3%, the Office's negative equity was EUR -2.7 billion as at 31 December 2021 or EUR 1.6 billion higher than on 31 December 2020.
This improvement was primarily due to increases of EUR 2.0 billion in the value of the assets in the RFPSS and the EPO Treasury Investment Fund. This, in turn, resulted from the strong performance of the funds in financial markets in 2021, while the defined benefit obligation increased by only EUR 0.3 billion.
The RFPSS assets closed the year at EUR 11 868 million and the EPO Treasury Investment Fund at EUR 3 621 million, bringing the value of the EPO's total assets to EUR 16 721 million.
The positive trend seen in the performance of the EPO Treasury Investment Fund (EPOTIF) continued in 2021, generating EUR 233 million in profits or a 7.2% return for the year.
In the three and a half years since its launch, the EPOTIF has generated an annualised return of 5.4%, outperforming the long-term target of 4% established when the fund was launched. During this period, the total profit generated by the EPOTIF amounted to EUR 594 million, contributing to the EPO's long-term financial sustainability. The results achieved to date validate the EPO's investment strategy of focusing on long-term returns, regardless of short-term market volatility.
In 2021, the EPO transferred EUR 250 million from its cash surplus to the EPOTIF, taking total transfers since inception to EUR 670 million. This move was in line with the long-term policy of investing 60% of the Office's annual cash surplus in the EPOTIF.
Reducing our environmental footprint is paramount to the EPO. To achieve its goal of going carbon-neutral by 2030, the EPO pursues a holistic approach to meeting its environmental sustainability commitments. In other words, it addresses emissions caused directly by the EPO and indirect emissions originating along the value chain of our activities.
Stepping up to the challenge of climate change to make a real difference means going beyond compliance, however, which is why the EPO decided to align its emissions accounting and reporting with the Greenhouse Gas (GHG) Protocol Corporate standard in 2021. This will complement the Eco-Management and Audit Scheme (EMAS) framework adopted for environmental reporting back in 2009.
Figure 64: Four steps towards achieving environmental sustainability
Accordingly, for the first time ever, this year's Environmental Report features a more detailed breakdown of the EPO's carbon footprint. It not only provides an assessment of emissions from areas such as employee commuting and teleworking, but also transparently discloses the basis for our calculations in the methodology annex.
Overall, the pandemic continued to have a major impact on how the EPO operates in 2021. The lessons learned in 2020 were leveraged to achieve significant progress towards the goal of carbon neutrality by 2030.
The EPO continued to shift towards digital ways of working in 2021, slashing annual paper consumption to a record low of 24.3 million sheets of paper. This marked a decrease of 40.7 million sheets versus 2020 (-62.6%). It also meant that the EPO's paper consumption was almost 100 million sheets lower (-80.4%) than in 2019 when the Strategic Plan 2023 was launched.
In terms of energy efficiency, new tools have been deployed in our data centres, while existing tools have been upgraded to make them more effective and performant. In terms of ICT sustainability, the Office has strived to improve the energy efficiency of its IT operations, particularly the energy consumption relating to the main data centres.
Figure 65: Embedding sustainability in the EPO's operations
Despite increased digitalisation, the EPO managed to lower the combined electricity consumption of its two data centres by 2.3% (73 MWh) in 2021. This was largely achieved by re-platforming the EPO's IT services from the legacy mainframe to a modern Linux infrastructure and by migrating IT services from its old data centre in The Hague to a more sustainable data centre in Luxembourg. More energy savings are expected once the mainframe is fully decommissioned in 2022.
Figure 66: Reducing the EPO's environmental impact
Emissions originating from the operation of the EPO's facilities also dropped significantly in 2021. The switch to carbon-neutral biomethane gas for heating in The Hague represented a major breakthrough and was largely responsible for an overall drop in heating emissions from non-renewable sources of over 1 300 tonnes of carbon dioxide.
The EPO will continue its journey towards carbon neutrality in 2022. To ensure all material aspects of its environmental footprint are covered, the EPO has started collecting data on additional indicators, leading to the definition of high-level plans for each area of its activity. It also focused on raising awareness among staff and stakeholders as to how they can contribute towards supporting the EPO in achieving carbon neutrality by 2030.
By telling the stories of inspiring inventors and leveraging the power of statistics on the economic and social impact of patents, the "Outreach and awareness" programme aims to spotlight their positive impact on society. The programme also seeks to inspire the broader public, younger generations and the local communities of the EPO's host cities. Beyond building a stronger EPO brand, it fully reflects our commitment to excellence and sustainability, as well as increasing our visibility on all kinds of digital channels.
Highlighting the latest trends in European patent applications, grants, technologies, countries of origin and top applicants, the EPO's Patent Index was published on 16 March 2021. The communications campaign accompanying its launch resulted in over 2 000 media reports with an advertising equivalent value (AEV) of EUR 8.5 million (+81% compared to 2020) and reached 1.3 million users via social media. The quality of the media coverage, the increase of the AEV and the high level of user engagement on social media demonstrated the strong impact of the 2021 campaign.
In 2021, the country data from the Patent Index was packaged into a simple, easy-to-use mobile app called "EPO Data Hub". The hub runs on smartphones and tablets, for both Android and iOS. Released in June 2021, it achieved over 2 000 downloads within just a few months.
In July 2021, the EPO also launched a new online data visualisation service. With its fully responsive web design, the Statistics and Trends Centre enables users to explore statistics across 35 technology fields for EP applications and patent grants all over the world over a ten-year period. Users can customise their choice of chart and date ranges and download the source data.
Figure 67: A new Statistics & Trends Centre to explore EP application and grants data
Public interest in emerging technologies has grown steadily in recent years. To turn its patent data into a meaningful understanding of these technologies, the EPO developed the concept of patent insight reports aimed at businesses and the general public.
Anyone can apply the methodology underlying these reports to reveal trends and prospects in other areas of technology. In 2021, patent insight reports on "Cosmonautics" and "Quantum technologies and space" were jointly published with the European Space Policy Institute and the European Space Agency.
The EPO and the European Investment Bank (EIB) signed a letter of intent to formalise their co-operation on a study focusing on SMEs that are innovating in technologies of the fourth industrial revolution (4IR). A more detailed memorandum of understanding on co-operation is under preparation to extend the co-operation between the EPO and EIB beyond this first study.
Figure 68: Patent insight reports published in 2021
Shortly after the COVID-19 outbreak in spring 2020, the EPO launched a web platform featuring a collection of ready-to-use patent search strategies that non-experts could execute in its Espacenet database. It features over 300 search strategies related to vaccines and therapeutics, diagnostics and analytics, IT-related technologies and technologies for the new normal, compiled by EPO experts in the respective fields.
In June 2021, the platform was reviewed and extended to include 35 new search strategies to reflect interest in a broader range of existing medicines that may be suitable for re‑purposing as COVID-19 therapeutics, and a wider variety of existing disinfectant technologies to make public spaces safer. Public interest in this online resource remained high in 2021 with the platform attracting 32 500 visits, versus over 29 000 visits in 2020.
After being cancelled due to the pandemic in 2020, the European Inventor Award ceremony was held in a fully digital format in 2021, enriched by extended reality features. In total, over 20 000 people watched the event, compared to around 600 guests at in-person events in the past.
The media campaign covered 16 countries and generated a record number of press clippings (+60% versus 2019), resulting in an overall reach of 948 million people. On social media, the ceremony achieved a record level of engagement, with 640 000 users actively clicking, sharing or posting content and seven million users viewing videos.
Figure 69: European Inventor Award ceremony in a digital format
In 2021, the EPO published two reports on technologies related to sustainability: a study on low-carbon technologies in collaboration with the International Energy Agency and a report on the future of plastics, released just ahead of the COP26 UN Climate Change Conference. A third study produced jointly with EUIPO assessed the impact of IP rights on firm performance in the European Union.
2021 also saw the launch of a new series of case studies on technology transfer. Released at the end of October, these publications generated over 1 800 media reports, including interviews with EPO management and experts in various tier-one media, and over 280 000 views on social media.
Figure 70: Economic studies published in 2021
Extensive preparatory work started in 2021 to give the EPO brand greater visibility in digital media. As part of a new branding project, the EPO's logo was adapted to facilitate its use on digital mobile channels and a new guide to tone of voice was produced. The impact of the branding project will start to materialise in 2022 with the launch of the EPO's new intranet and website.
Beyond developing local outreach activities in Munich and The Hague, the digital transformation of art was a top priority in 2021. This was reflected in the launch of digital products, such as the documentary celebrating 40 years of art at the EPO, the release of an e-book and the production of a test model for a virtual art exhibition. All these initiatives embrace the values of creativity, innovation and sustainability that are central to the EPO's mission.
Other art management highlights in 2021 included the public presentation of the "Exploring Art at the European Patent Office" documentary on World Art Day in April. In terms of events, the EPO also co-sponsored the Long Night of Museums organised by the City of Munich and the Contemporary Art Weekend organised by the Municipality of The Hague. These initiatives all contributed directly to building bridges with the local communities in the EPO's host countries.
Figure 71: Art outside EPO buildings in Munich illuminated for the Long Night of Museums
Source: VG Bildkunst, Bonn 2022; photographs: Wolfgang Stahl
For further insights into the EPO's communication activities, please consult the Communication Report 2021.