The European Commission has revealed its Competitive Compass, a strategic framework combining the pursuits of competitiveness and climate neutrality through measures to bolster the innovation, manufacture, and sale of technologies, services, and clean products on an EU Single Market.
Former Italian Prime Minister Mario Draghi was tasked with preparing a report on the future of European Competitiveness in President Ursula von der Leyen’s State of the European Union Speech in 2023. Among other findings, the subsequent report warned of an innovation gap with other world powers; encouraged the creation of a joint plan for decarbonization and competitiveness; and called for increased securities and reduced dependencies.
A Competitive Compass was announced on 27th November 2024. As the first major initiative of the mandate, it aims to provide a ‘strategic and clear’ framework for the Commission’s work on competitiveness in line with the Draghi report’s recommendations.
To close the innovation gap, the Commission plans to further the development and adoption of artificial intelligence in key sectors with ‘AI Gigafactories’ and ‘Apply AI’ initiatives. It intends to table action plans for advanced materials, quantum, biotech, robotics, and space technologies.
A dedicated EU Start-up and Scale-up Strategy is set to overcome roadblocks faced by new companies in emerging and scaling up. A 28th legal regime will be proposed to simplify the relevant aspects of corporate law, insolvency, labour and tax law, as well as cut down on the costs of failure.
In doing so, the Commission aims to establish a single set of rules for companies to abide by when investing and operating in the Single Market; and to ‘create a habitat for young innovative start-ups, promote industrial leadership in high growth sectors based on deep technologies and promote the diffusion of technologies across established companies and SMEs’.
Furthermore, the Compass highlights the difficulties associated with ‘high and volatile’ energy prices, and plans to encourage a transition into clean and affordable energy with a Clean Industrial Deal. This is set to take a competitive approach to decarbonization, uplifting the EU as an ‘attractive location’ for manufacturing – even in energy-intensive industries – and promoting clean tech and circular business models.
By introducing an Affordable Energy Action Plan, the Commission sets its sights on lower energy prices and costs; an Industrial Decarbonization Accelerator Act is also anticipated to ‘extend accelerated permitting to sectors in transition’. Tailor-made action plans are expected for steel, metals, chemicals, and other energy-intensive sectors, described as ‘the most vulnerable in this phase of the transition’.
To reduce ‘excessive’ dependencies and ramp up security, the Compass lays out its strategy to introduce a European preference in public procurement for critical sectors and technologies within the internal market, while also securing a global supply of raw materials, clean energy, sustainable transport fuels, and clean tech via a new range of Clean Trade and Investment Partnerships. This is hoped to ‘diversify’ and ‘strengthen’ Europe’s supply chains.
These three pillars will be backed by five horizontal enablers, one of which is simplification. In practice, this expects to reduce the regulatory and administrative burden, as well as develop ‘simpler, faster, and lighter’ procedures for accessing EU funds and coming to EU administrative decisions.
The Commission has designed its upcoming Omnibus proposal to streamline sustainability reporting, due diligence, and taxonomy and allow ‘thousands’ of small mid-cap companies to operate on the European market. Its goal its to cut administrative burden by at least 25% for firms and at least 35% for SMEs.
The second enabler will be to lower barriers to the Single Market. A Horizontal Single Market Strategy is anticipated to modernize the governance framework and replace intra-EU barriers with new rules. Standard-setting processes will also become faster and more accessible, the Commission says, especially for SMEs and start-ups.
With financing competitiveness in mind, a European Savings and Investments Union looks to create new savings and investment products, incentivize risk capital, and streamline the flow of investments across the EU. Refocusing the EU budget will improve access to EU funds in line with EU priorities.
The Commission will present an initiative to build a Union of Skills to match skills and labour market demand; this will focus on investment, adult and lifelong learning, future-proof skills creation, skill retention, fair mobility, attracting and integrating qualified talent from abroad, and the recognition of different training types to prepare employees to work across the Union.
A Competitive Coordination Tool also sets its sights on the coordination of policies at EU and national level; it will work with Member States to implement shared EU policy objectives, identify cross-border projects of interest across the continent, and work towards related reforms and investments.
Several existing EU financial instruments will be replaced with a Competitiveness Fund at the next Multiannual Financial Framework. It plans to offer financial support to implement actions under the Competitiveness Coordination Tool.
“Europe has everything it needs to succeed in the race to the top,” said von der Leyen. “But, at the same time, we must fix our weaknesses to regain competitiveness.
“The Competitiveness Compass transforms the excellent recommendations of the Draghi report into a roadmap. So now we have a plan. We have the political will. What matters is speed and unity.
“The world is not waiting for us. All Member States agree on this. So, let’s turn this consensus into action.”
Francesca Stevens, executive director of EUROPEN, recently joined our brand director Tim Sykes on the Packaging Europe Podcast to discuss strategic challenges the packaging and sustainability sectors face in 2025 – diving deeper into potential threats to European competitiveness and the keys to supporting the Single Market’s integrity.
eBay is also petitioning to protect small businesses on the European Single Market with a single point of Extended Producer Responsibility registration and declaration; exemption or de minimis for micro-companies; and permission for online marketplaces to declare products to EPR organizations. It hopes to ’support and enable’ the growth of SMEs in Europe by lessening the ‘massive administrative burden’ of current EPR expectations.
In other Commission-related news, it recently banned the use of Bisphenol A in food-contact materials like reusable plastic bottles, coatings for metal cans, and water distribution coolers in response to safety concerns.
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