The Competitiveness Compass for the EU: implications and future outlook

President von der Leyen emphasised urgency: “Europe has everything it needs to succeed in the race to the top. But, at the same time, we must fix our weaknesses to regain competitiveness. […] What matters is speed and unity. The world is not waiting for us.” Reflecting this urgency, the Competitiveness Compass provides a clear indication of where the European Commission is now directing its attention. In recent years, the focus was largely on initiatives such as the European Green Deal and the Farm to Fork Strategy, which prioritised sustainability. However, the emphasis is now shifting toward enhancing the efficiency and competitiveness of the EU and its single market. Despite this shift, sustainability remains integral to the new approach, with continued efforts to reduce CO₂ emissions and improve resources efficiency, including nutrient management. As Europe faces increasing competition from global players, such as the U.S. or China, this communication aims to strengthen the EU’s position by laying down upcoming milestones and developing a more strategic approach to policymaking, built around three pillars: 

1. Closing the innovation gap 

The EU aims to close the innovation gap by investing in sectors like artificial intelligence, biotechnology and space technology. Specifically, it plans an EU Start-up and Scale-up Strategy to encourage new companies to emerge and flourish. 

2. A joint roadmap for decarbonisation and competitiveness 

The European Commission aims to get back to low and stable energy prices, introducing an Affordable Energy Action Plan, which will take a competitiveness-drive approach to decarbonisation via its forthcoming Clean Industrial Deal. Energy-intense sectors like steel, metals and chemicals will also be a focus. 

3. Reducing excessive dependencies and increasing security 

Given the changes in the global scene, the EU will now reduce its dependencies while building new trade partnerships to “secure a supply of raw materials, clean energy, sustainable fuels and clean tech from across the world”.  

Underpinning these actions will be five cross-cutting activities:  

• Simplification by drastically reducing the regulatory and administrative burden on firms  

• Lowering barriers to the Single Market  through its Horizon Single Market Strategy  

• Financing competitiveness by establishing a European Savings and Investment Union  

• Promoting skills and quality jobs  through a Union of Skills   

• Better coordination of policies at EU and national level by introducing a Competitiveness Coordination Tool 

But what does this mean in practice, and how will it impact businesses in the coming months? 

A new vision for EU competitiveness 

The Competitiveness Compass builds upon the recommendations of the Draghi Report and reflects the Commission’s ambition to enhance the EU’s ability to innovate, invest, and scale in a rapidly evolving global economy. “It is a strategy to make growth faster, cleaner and more equitable, by ensuring that all Europeans can benefit from technological change”, said President von der Leyen at the World Economic Forum in Davos. It is important to recognise the broader ambitions of the Competitiveness Compass, particularly in regulatory simplification and economic transformation.  

One crucial ‘horizontal enabler’ of the Competitiveness Compass is simplification of the administrative burden on businesses, a priority for the Commission, which has pledged to reduce reporting and compliance obligations by at least 25% for all companies and at least 35% for SMEs, to enhance growth and innovation potential – this is not possible with unharmonised rules and confusion between different Member States. The Omnibus package, to be published on 26 February, is a key milestone for simplification measures. Designed to reduce unnecessary regulatory burdens and streamline compliance obligations, this initiative, as the first of many, aims to cut through bureaucratic complexity – what President von der Leyen described as an effort "to cut red tape." 

The Single Market Strategy aims to harmonise rules across Member States, making it easier for companies to scale operations without excessive regulatory fragmentation. Known as the 28th legal regime, the new legislation will “simplify applicable rules and reduce the cost of failure, including any relevant aspects of corporate law, insolvency, labour and tax law”.  

As the EU faces massive financing needs to deliver on its already-agreed objectives, ensuring sufficient public and private investment is critical to boost productivity growth and achieve the EU goals on innovation, climate neutrality and defence. The new Strategy on European Savings and Investments Union will enable wealth creation for EU citizens and mobilise capital for projects made in Europe. 

To bridge the skills and labour gap, there are plans for a Union of Skills, “focusing on investment, adult and lifelong learning, future-proof skills creation, skill retention, fair mobility, attracting and integrating qualified talents from third countries and the recognition of different types of training to enable people to work across our Union”. 

Finally, to ensure smoother coordination of policies at both EU and national levels, a Competitiveness Coordination Tool will be introduced. 

The Competitiveness Compass and the agriculture and food sector 

The Competitiveness Compass recognises the agriculture and food sector as one of the sectors set to benefit from the EU’s renewed focus on competitiveness. The Commission’s ambitions for the sector will be further detailed in the upcoming Vision for Agriculture and Food, set to be published on 19 February. This communication will outline “how to ensure long-term competitiveness and sustainability within the planetary boundaries for the agricultural and food sectors, ensuring thriving rural areas, food security and resilience.” In addition, the Competitiveness Compass and related proposals have the potential to strengthen the EU food supply chain by optimising the conditions for production. Advancements in precision farming, artificial intelligence, and biotechnology, for example, should drive higher productivity without compromising environmental and climate goals. At the same time, reducing excessive administrative burdens, fostering investment, and accelerating innovation will be crucial to enhancing the sector’s overall competitiveness. 

What’s next and what’s to look out for?  

Based on the timeline presented in the Competitiveness Compass, key upcoming developments regarding the agriculture and food sector, climate, and sustainability include: 

• Vision for Agriculture and Food: planned in Q1 2025 

• Water Resilience Strategy: planned in Q2 2025 

• European Climate Adaptation Plan: planned in 2026 

• Circular Economy Act: planned in Q4 2026 

ESG Regulations: The Omnibus package will revise, among others, the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD) to streamline and clarify obligations for businesses. The goal is to make compliance more predictable while maintaining the EU’s ambitious sustainability objectives. Companies should stay up to date by engaging in stakeholder consultations and closely monitoring regulatory developments. Additionally, they should assess internal compliance strategies by reviewing existing ESG reporting processes and prepare for more efficient frameworks. 

Engage with Policymakers and Industry Groups: The next few months will be critical for shaping how regulatory simplifications are implemented. Companies that actively participate in discussion, individually or through member organisations, will be better positioned to influence policy outcomes and adapt to these changes.  

The Competitiveness Compass represents a strategic shift in how the EU approaches economic resilience, innovation, and sustainability. While its full impact will unfold over the coming years, companies should start preparing now to ensure they remain competitive in an evolving regulatory landscape. 

Want to know more about the Competitiveness Compass or any of the upcoming developments and regulations? Contact our public affairs team for more details.