The EU Competitiveness Compass: a Paradigm Shift or Yet Another Discussion Platform?
With EU competitiveness leading today’s debates in Brussels about innovation and governance, Digital for Planet is pleased to play a continued role in the conversation. Aligned with this mission, below is our synthesis and analysis of the newest EU Competitiveness Compass, and discussion of our role in the projects directly relevant for European competitiveness, innovation, and governance.
President of the European Commission (EC), Ursula von der Leyen recently introduced the EU Competitiveness Compass, intended as the EU’s response to the challenges outlined in the Draghi Report that we analysed here this summer. ‘It is a strategy to make growth faster, cleaner, and more equitable, ensuring that all Europeans can benefit from technological change’, said von der Leyen, as she presented the Competitiveness Compass.
The Competitiveness Compass: A Vision for the EU
The EU Competitiveness Compass (hereinafter, ‘the Compass’) envisions an EU where:
- Innovators swiftly bring products to market, and companies access funding seamlessly through an integrated capital market. Start-ups thrive across the Single Market, with Europe hosting a fair share of global deep-tech leaders.
- Manufacturers and farmers balance competitiveness with a sustainable, low-carbon transition, while workers benefit from quality jobs and strong social protections.
- All consumers enjoy affordable, clean energy.
- Member States leverage their collective influence to act together.
The Compass outlines the steps to achieve this vision. As von der Leyen stated, ‘now we have a plan’.
Three Imperatives for Competitiveness
1. Decarbonisation and Competitiveness
- Decarbonisation, when integrated with industrial and trade policies, drives development. The upcoming Clean Industrial Deal proposal will be the first big legislative initiative of new European Commission, aimed at putting Europe’s industry on a carbon-free and competitive footing. The projected Deal aims to keep the EU attractive for manufacturing—including energy-intensive sectors like chemicals and automotive—while promoting clean tech and circular business models.
- To ensure low and stable energy prices, the prospective Affordable Energy Action Plan will prioritise competitiveness-driven decarbonisation.
2. Closing the Innovation Gap
- To foster innovation, the EC will introduce a European Research Area Act (see e.g. ERA), aiming for 3% GDP investment in R&D. At D4P we work on several R&D projects, which have already produced—and project to continuously produce—tangible results, and we thus can only welcome the emphasis on digitalisation as a driver of competitiveness, provided that this digitalisation is sustainable. (Please see our research and expert advice on digital sustainability here.)
- The EU is betting on AI and advanced technologies, expanding its EuroHPC supercomputers into ‘AI factories’ to support start-ups, researchers, and industry. Still in utero, but growing, an EU Cloud and AI Development Act will spur public-private investment in AI Gigafactories for training large AI models.
3. Increased Security and Resilience
- The EU will strengthen trade partnerships to secure raw materials, clean energy, and sustainable transport fuels while reducing dependencies. Crisis preparation plans will address economic, cybersecurity, and natural disaster risks.
- A Public Procurement review will introduce a European preference for critical sectors and technologies, which is relevant for our INTACT project on cybersecurity, though it remains to be seen if this includes Open Source Software and EuroStack development.
Missing Elements: Clear KPIs and Timelines
The Compass will guide the EC’s work, but competitiveness is a long-term goal. While annual progress will be tracked via the Single Market and Competitiveness Report, clear Key Performance Indicators (KPIs) and measurable benchmarks are lacking. From our experience in EU projects, concrete timelines are essential for accountability. Currently, the only timeline provided is when specific plans will be published—leaving gaps in tracking real progress.
Horizontal Enablers of Competitiveness
Below, we discuss the introduced action on horizontal enablers, which are necessary to underpin competitiveness across all sectors to complement the abovementioned transformational imperatives. While we can mostly just applaud the Horizontal enablers of competitiveness, we know that the devil lies in the details—details that remain to be seen yet.
1. Simplifying EU Regulation
While reducing regulatory burdens could improve competitiveness, we must also acknowledge that most regulations serve important purposes, and even the strictest ones have valid justifications. The most immediate reason is the so-called EU ‘disguised trade protectionism’, which partially stems from the strict EU regulations. While considered a wickedness under World Trade Organization (WTO) ‘bible’, such practices are relatively common beyond the WTO’s ideal of ‘total market integration’, and, importantly, at times offer protection to European producers and consumers.
Secondly, EU and non-EU businesses alike must globally comply with the EU’s strict (very often, the world’s strictest) standards set by its regulation, leading to the adoption of EU standards beyond its borders. Le dicton seems quite clear: ‘follow our standards, or you will not access our markets’.1 This is known as the ‘California effect’, which laid the ground for the famous ‘Brussels effect’ referring to the EU’s ability to set global standards through its large internal market, without needing explicit consent from non-EU partners.2 This occurs as the EU, with its large and influential internal market, establishes stringent regulations in areas such as AI, data privacy, environment, and consumer protection. Corporations adopt EU standards globally, influencing laws at home and in third countries. The General Data Protection Regulation (GDPR), for example, has impacted privacy laws in over 100 countries across the world.
Hence, in the digital sector, the EU is a global leader with regulations like the AI Act, which has set international standards for value-based human-centric regulation, something very much appreciated by our Indo-Pacific partners, which we have learnt in our project INPACE that turns digital partnerships between the EU and the Indo-Pacific into action. Losing this regulatory influence because of the ‘plan to make a plan’ would undermine not only the EU’s global reputation, but also, and, indeed, especially, the ‘effect of the Brussels effect’. That is, the respect of consumers, privacy, the environment, and our planet.
On the other hand, the Multiannual Financial Framework (MFF) proposal offers an opportunity to streamline EU funding, which is currently scattered across multiple programmes. This approach, along with the Simplification Omnibus package, is a positive step. The first Omnibus will simplify areas such as sustainability reporting and due diligence, which is great news for organisations that focus on sustainability, D4P including.
Furthermore, as an organisation deeply involved in European sustainable digital innovation, we also welcome the combination of digitalisation and simplification to ease reporting. According to the Compass, digital tools and AI should be leveraged to simplify government processes, ensuring cross-border interoperability for public sector solutions like e-invoicing, e-signatures, e-submissions, and digital product passports. Reporting should move to digital formats with standardised data where possible. Building on the EU e-IDAS framework, the European business wallet is expected to play a key role in enabling seamless interactions between companies and public administrations.
The EC promises that change will begin with its own efforts. The first-ever Commissioner for Implementation and Simplification will oversee the EC’s work in this area and lead a review of the EU acquis to identify opportunities for simplifying, consolidating, and codifying legislation where needed.
2. Maximising the Single Market
While the Single Market is vital for scaling in a world of economic giants, integration has stalled. Removing barriers and enforcing existing rules could accelerate progress, but Member States may not yet be fully ready. We welcome the EU’s commitment to global standard-setting, essential for shaping policies in key tech sectors like 5G, 6G, AI, renewables, EV charging, and IoT—all highly relevant to our projects, including 6G-NTN and 6G4Society.
3. Financing Competitiveness
As von der Leyen noted, Europe has capital but lacks an efficient market to mobilise it. The European Savings and Investments Union, set for 2025, aims to create a true single market for financing—a promising step for early-stage tech funding. We are eager to see how this impacts Digital Commons and look forward to details on the European Competitiveness Fund.
4. Promoting Skills and Quality Jobs
Europe’s competitive edge lies in its people. The Union of Skills initiative—focusing on adult education, lifelong learning, and future-proof skills—is crucial for both workforce development and attracting global talent, a key topic in our INPACE project. As industries evolve, workers need reskilling pathways and safety nets. While AI’s role isn’t explicitly mentioned, we believe it will be transformative, particularly in manufacturing.
5. Competitiveness Coordination Tool
This tool aims to align EU and national policies to deepen the Single Market and maximise industrial investments. However, its effectiveness remains to be seen—will it drive real change or become just another discussion platform?
Conclusions and recommendations
Until recently, technology and science were seen as apolitical. Now, they are often perceived and used as politicised fields of power, crucial for the strategic autonomy and economic security of countries. This geoeconomic paradigm shift is key to understanding the context and significance of the EU Competitiveness Compass with its challenges, shortcomings, and opportunities. Recall that Geoeconomics refers to ‘economic statecraft’, where countries use economic resources, including science and technology, to achieve geopolitical goals and influence others.3 It merges economics with geopolitics, utilising tools like trade policies, competition law, investment in new technologies, and supply chains for strategic national objectives.
The Compass is thus an ambitious framework. Especially when competitiveness should not be the sole measure of success. The EU’s pursuit of greater competitiveness, while remaining true to its values, may make things more challenging but undoubtedly more meaningful. This is something we have learnt through our work in establishing a trustworthy and human-centric framework for communications (see e.g. our CASTOR project) and future connectivity (see e.g. our 6G4Society project).
Nevertheless, the success of the Compass depends on transforming these high-level goals into actionable, measurable plans, and then, concrete actions. While the EC has promised streamlined processes and greater efficiency, the Compass currently lacks a detailed timeline and specific KPIs.
The EC is set to present its overall approach next month, but the only currently available timeline in the Compass outlines the presentation of new legal acts. As we move forward, we hope the EU can shift from a vision-based approach to one focused on tangible results. As our President Dr Monique Calisti said:
"For the sake of the EU and D4P, we hope that what is coming is less of a marketing pitch and more of a strategic plan filled with concrete actions."
1 Aseeva, A. (2021). From Corporate Social Responsibility to Corporate Social Liability: A Socio-legal Study of Corporate Liability in Global Value Chains. Monograph, Oxford: Hart Publishing, p. 19.
2 Bradford, A. (2012). The Brussels Effect. Northwestern University Law Review, 107(1), 1–67. Available at: https://scholarship.law.columbia.edu/faculty_scholarship/271.
3 Kim, D. (2021). Making Geoeconomics an IR Research Program. International Studies Perspectives, 22(3), 321–340. https://doi.org/10.1093/isp/ekaa009. See also GSB Staff. (2020, October 15). Geoeconomics Explains How Countries Flex Their Financial Muscles. Stanford Graduate School of Business. https://www.gsb.stanford.edu/insights/geoeconomics-explains-how-countries-flex-their-financial-muscle