IN A NUTSHELL

• Today we publish an update of the European transformation scorecard, which we launched in March last year. With the help of quantitative metrics against 2030 targets, the scorecard measures the performance of 14 European countries in their transformational journey across 12 sectors.
• Compared to last year’s results, European countries are making progress in certain areas, for example, in greenhouse gas emission reduction as well as promoting the digital economy. However, electrifying the transportation sector remains a significant challenge across large parts of Europe.
• Europe launching important policy reforms, the threat of U.S. tariffs and a potentially more unpredictable U.S. policy environment could help ignite the appeal of Europe as an investment location.
• One of the mechanisms which should support decarbonisation efforts will be the widening remit of the European Emission Trading Scheme which, from 2027, will include the transport and building sectors, as well as greater cooperation with financial institutions for energy efficiency.
• Efforts to promote private sector investment into transformation is urgently required. The European Central Bank conservatively estimates that to fund the green transition will require an annual investment need of at least €1.24 trillion. Adding on the funding for the digital transformation, this increases to at least €1.41 trillion, with a heavy reliance on private sector funding.
• Sweden remains Europe’s north star when it comes to sector transformation. On our estimates, the country is three-quarters of the way to meeting Europe’s 2030 sustainability and digital targets.
• The scorecard results for Europe’s four largest economies, Germany, France, the UK and Italy,reveal little change in sector transformation from the previous year. This means efforts to drive European transformation need to move up a gear. This paper reveals where more policy effort and funding capital are required.

1 / Scorecard Results

Summary: Over the past year, the composite score for most European countries has stalled. This implies stronger policy action and investments are urgently needed for Europe to have a chance of meeting 2030 sustainability and digital targets by the end of this decade.  However, Sweden is the exception to this rule, as not only has its overall composite score increased, but the country has extended its lead and, on our measure, is three-quarters of the way to meeting her 2030 targets.

1.1  Tracking sector transformations

As outlined in our inaugural European Transformation Scorecard report last year,^[1] we focus on 12 sector transformations across 14 European countries.^[2] To help assess progress across these sectors we have identified or developed specific key performance indicators (KPIs) which we believe provide a good proxy for each sector’s transformation, Figure 1. In many instances, the European Commission provides specific targets to be reached by the end of the decade. This then allows us to assess the extent whether countries are on course or have more work to be done to meet their 2030 sustainability and digital goals.

1.2 Scorecard results

The most significant change at the top of the scorecard compared to last year was Sweden. It has seen its composite score increase by five percentage points to 76%.^[3]  This means the country is now three-quarters of the way to meeting many of the goals set out by the European Commission. The country has also extended its lead versus its European neighbours. From a sector perspective, the country shows leadership in the areas of renewable energy sources, R&D spending, the digital economy, and its business-friendly regulatory environment. However, there can be no room for complacency as Sweden still falls short when it comes to decarbonizing its industrial base, electrifying its transportation sector and improving the energy efficiency of its building stock. Focusing on these sector transformations during the remainder of this decade would help to secure Sweden’s leadership and the momentum to meet Europe’s green and digital targets.

Some way behind at 69%, Switzerland is now level pegging with the Netherlands. Their scores are little changed from last year and might suggest the momentum in sector transformation has lost some of its steam. Like last year, Switzerland performs strongly in the areas of R&D spending and the digital economy, but more needs to be done in the areas of greenhouse gas emission reduction, transportation and building efficiency. In the Netherlands, the country leads the way when it comes to the circular economy but has been marked down by relatively poor health outcomes.

Further down the league table, the middle-ranked countries are clustered in a range between 64% and 68%, with Germany and Finland holding on to the same pole positions as last year. However, Denmark has been able to move up the rankings helped by its efforts in electrifying its transportation sector.  

We also find that there are significant disparities when it comes to sector transformations. For example, the UK and Germany are at the top of the leader board when it comes to greenhouse gas emission reduction since 1990 but both countries need to do significantly more when it comes to electrifying their transportation sectors, a theme common across many European countries. In France, the country ranks high on the social and healthcare KPIs, but its overall score is being held back by a low level of R&D spending and the slow progress in promoting the digital economy.

The results for Austria are concerning since the country has seen its composite score at 60% decline three percentage points since last year. While the country, performs strongly in the areas of renewable energy sources, R&D spending, and the social dimensions, the country needs to focus on decarbonising its industrial base, increasing its capabilities in critical technologies and promoting the digital economy.

At the bottom rung of the scorecard, Italy has been able to lift itself out of the bottom three compared to last year. This is in part due to the inclusion of Ireland, but also in reflection of the new supply chain management index, where Italy ranks first. Meanwhile, Spain, Poland and Ireland are ranked as the three worst performing countries in our sample, with all three approximately half-way in meeting their 2030 sustainability and digital goals. Ireland continues to struggle when it comes to reducing greenhouse gas emissions, promoting the circular economy, increasing R&D spending and boosting energy efficiency in the commercial real estate sector. However, the one bright spot is on social metrics, scoring well in both housing affordability and education & training. Meanwhile Spain ranks last when it comes to critical technologies and Poland has been dragged lower by its particularly weak performance in transportation and healthcare.