regulations. We also consider the innovation system and socioeconomic effects of the industry. In order to analyse the relationship between the environmental issues and innovation the empirical part of the paper builds on research on SCTI, including the industry value chain, and the innovation system and how it functions. We take account of the views of industry experts on the SCTI innovation system, its environmental impact and the constraints on the sector. Current research at the local level suggests that the environmental impacts of the industry are outweighed by its huge contribution to socioeconomic wellbeing. The transition from national environmental legal frameworks towards EU-wide regulation has had a clear effect on both the strategic goals and the management of the industry and the new regulation combined with a more complex international economic scenario is jeopardizing European manufacturing industries. This applies especially to traditional industries. The case study demonstrates that the capacity of the SCTI to adapt to new scenarios will be vital for its future survival and success.