As a place to do business, the European Union offers much to like—a stable economy, seamless cross-border trade, an educated workforce. But these benefits are often accompanied by challenges such as slower growth, a complex energy market, and rising carbon emissions. Hindrances like these have motivated Europe’s efforts to accelerate its transition to a carbon-neutral, resource-light, socially inclusive economy. At the center of these efforts is the European Green Deal. Approved in 2020, it sets in motion more than 175 directives and regulations that will establish or expand clean energy investment, climate tech innovation, supply chain requirements, carbon pricing, sustainability reporting mandates, and other programs. For businesses, these mechanisms will create fresh growth opportunities, as well as new obligations.
The resulting transformation of Europe’s business landscape isn’t some far-off development for your firm’s next leadership team to deal with. It’s unfolding now. Consider the recent experience of a company operating in France: this business had just completed the setup of a production line for packaging when it discovered that a key material was set to be banned in two years’ time. The looming restriction would require the company to either write off its investment in the production line or make an additional investment to repurpose the asset. And experiences like this may soon be common.
What’s more, many Green Deal policies apply equally to companies with headquarters or operations in Europe and to companies that sell products and services there, regardless of where they’re based. Although leaders at some multinationals may prefer that their EU entities develop compliance plans on their own, we’ve seen instances in which a coordinated, transcontinental approach helped companies gain advantages and mitigate regulatory risks.
Policy effects like these are prompting executives around the world, not just those located in Europe, to revise their long-held beliefs and management approaches. These leaders appreciate that reinventing their business models for a sustainable European economy can preserve value, improve margins, and boost top-line growth. Indeed, PwC research indicates companies that take more action on climate-related opportunities and risks also have better financial performance. Below, we look at how executives are seizing on the Green Deal as an opportunity to make smarter decisions about strategy, capital spending, innovation, and other fundamental drivers of success.