By Wytse Kaastra, Matthew Robinson, Babak Moussavi and Josh Elkind
The authors would like to thank Rebecca Tan and Dominic King for their contributions to this article.
Europe’s lead on decarbonization has not translated into competitive advantages. But the continent’s policy aims are increasingly to foster growth in new sustainable markets. In response, companies should rethink their market positioning, accelerate decarbonization, and embrace more radical forms of collaboration.
Europe leads on decarbonization. Two-thirds (67 per cent) of the largest European companies are cutting operational emissions—typically by more than 3 per cent annually.[i] Nineteen per cent have set a date by which their operations will have net zero carbon emissions. But a further 64 per cent of large European companies have set date-bound commitments to be net zero not only in their operations but also in their upstream and downstream value chains.[ii] This is more than twice that of their non-European peers.
Can Europe translate this climate leadership into competitive advantage? Such a coupling is possible: since 1990, the bloc has cut emissions by 37 per cent while growing GDP by over 68 per cent.[iii] But it’s not inevitable. Mario Draghi warns that decarbonization “could run contrary to competitiveness” if the transition isn’t affordable for consumers and profitable for businesses.[iv]
Europe has three key pathways to turn decarbonization into a competitive edge: lowering costs, strengthening geopolitical resilience, and opening new avenues for growth.
It starts with energy. Europe’s reliance on energy imports has left companies facing electricity prices that are 2-3 times those in the US—a massive drag on competitiveness, especially for heavy industry.[v] The faster Europe can shift to clean, secure, domestic sources of power generation, the sooner companies can escape turbulent energy markets and destabilizing price shocks.
This is happening. The EU sourced 47 per cent of its electricity from renewables in 2024[vi] at prices not seen since before Russia invaded Ukraine.[vii] The levelized cost of electricity for solar and wind fell further below that of fossil fuels[viii] while the share of electricity generated from solar overtook coal for the first time ever.[ix] This shift is producing real savings and less exposure to volatile energy imports. The EU avoided €59 billion in gas and coal imports thanks to new wind and solar capacity added since 2019.[x]
The next step is to then translate the transition into long-term growth. It is within this context that the European Commission is betting that simplified ESG reporting and reinforced support for clean industrial production will ensure that decarbonization is an opportunity, not a hindrance. The Omnibus package aims to make Europe a less expensive place to do business by streamlining sustainability compliance requirements and reducing the reporting burden on companies by 25 per cent.[xi] The stated goal is not to roll back commitments, but rather to address the most widely cited barriers to scaling green solutions—the regulatory landscape and permitting delays.[xii] The Clean Industrial Deal aims to reinforce the business case for decarbonization by supporting the transition of energy-intensive industries and mobilizing €100 billion towards clean-tech sectors so that domestically produced net-zero technologies can supply at least 40 per cent of the EU’s deployment needs by 2030.[xiii] Electrification of the power sector will be vital, with at least €1 trillion of cumulative investment needed by 2030 in renewable energy sources, as well as utility-scale batteries and electrolyzers for hydrogen production.[xiv]
These bloc-level imperatives extend directly to individual European enterprises. To carve out a differentiated position, companies need to review and refresh their growth strategy, specifically to address the following three questions.
1. Which sustainable markets will you serve?
In a decarbonized economy, the typical products and services that companies sell will look very different. Many markets remain dominated by offerings that are set to become obsolete. Consider that European companies are increasingly fighting for a slice of the electric vehicle (EV) market. But in Europe, sales of EVs still only comprised 21 per cent of total vehicle sales in 2023.[xv] Put another way, most customers were likely sold a car that will no longer be legal to purchase in 2035.[xvi] The work remains, but so does the growth opportunity; the global market for clean technologies is projected to reach €600 billion per year by 2030.[xvii]
It’s not just EVs. By 2022, heat pumps, much more efficient than traditional gas boilers, had been installed in 16 per cent of Europe’s building stock—which is to say, many more retrofits are still to take place.[xviii] Sustainable aviation fuel is still a relatively low share of the fuel mix in planes, but demand will rise as airlines evaluate their few options for decarbonizing. And green cement and steel remain nascent materials, but they represent the better, cleaner products of the future.
Emphasizing the development and production of sustainable technologies at home will allow European companies to compete with Chinese peers in the future.
Europe has signalled that future growth areas are low-carbon. More than one-fifth of clean and sustainable technologies—such as wind turbines and electrolyzers—are developed in the EU.[xix] Three-fifths of heat pumps sold in Europe are produced domestically.[xx] Even in the UK, now outside the single market, the decarbonization sector’s total economic value added grew by 10 per cent in 2024 while supporting nearly one million full-time jobs.[xxi] Emphasizing the development and production of sustainable technologies at home will allow European companies to compete with Chinese peers in the future.  Organizations like the European Raw Materials Alliance aim to diversify supply chains and make better use of the resources already available in Europe—whether that be via extraction, processing, or circularity.[xxii]
It is within this growth context that companies wishing to remain competitive need to reevaluate their core offerings, and pivot where necessary. Most have got the memo; our research found that 84 per cent of the largest European companies are developing new products and services with more sustainable outcomes in mind.[xxiii] The maturing net zero economy may represent “the economic growth opportunity of the 21st century.”[xxiv] But realizing it demands innovation.
2. How will you accelerate your own decarbonization?
Portfolio shifts are necessary for companies to remain competitive in a decarbonizing market landscape. But they are not sufficient. Economies and markets will transform—but so must the companies that operate within them. The regulatory signals indicate that businesses that decarbonize will have the advantage. Consider the logic of measures such as the Emissions Trading Scheme and the Carbon Border Adjustment Mechanism. By directly tying carbon to costs, companies that wish to operate under the regulatory aegis of Europe are incentivized to decarbonize. And every unit removed from the production process shows up as less embodied carbon in new or existing products themselves.
But more pertinently, cutting carbon often is cutting costs—over the longer term at least. On-site renewables should lead to lower running costs. Closed-loop systems entail less waste and greater efficiency. Building insulation and LED lighting mean less money leaking out of walls and windows.
This requires capital investment. The trick will be to mobilize investment now by promising strong future returns from clean, competitive energy and industrial products. High upfront costs typically remain a barrier to such decarbonization investments, especially in heavy industries.[xxv] Driving costs down to tipping points—like those reached by solar and wind—will unlock scaling and wider adoption. Long-term financing and a mix of public and private funding, including shared costs and green bonds, are essential to accelerate progress.
Again, most European companies are aware of the benefits of cutting carbon—and are more likely than their counterparts in other regions to be taking tangible action to decarbonize. Across 15 of 21 decarbonization levers that we analyzed, at least half of the largest European companies showed evidence of implementation. Action is not yet happening fast enough, with only 21 per cent of companies on track to reach net zero in their operations by 2050.[xxvi] But a critical mass is moving in the right direction.
3. How will you take the way you work with others to the next level?
Companies that attempt to decarbonize alone will incur unnecessary costs that will hinder competitiveness. And such an approach is probably futile anyway; the complexities of modern industry mean companies have interdependencies—and Scope 3 emissions—in other sectors and countries. The energy transition itself is dependent on critical materials that are typically sourced from across borders. Ramping up domestic extraction, processing and recycling can mitigate the risk of supply disruption, but cross-border supply chains are unlikely to be disappearing anytime soon.[xxvii]
Decarbonizing while bolstering competitiveness is especially challenging given the systems-level change that it represents. If entire markets are indeed to be transformed, disparate actors across those markets will need to work together to make that happen. This means collaboration both within and across industries—think of energy or resource providers aligning with automotive firms, or (regenerative) food producers working with retailers, or manufacturers coordinating with policymakers to roll out new infrastructure. And this isn’t just in pursuit of making new things, but also to make sustainable choices more relevant in customers’ lives, thereby collectively bringing about necessary demand shifts. This will necessitate speaking to a wider set of motivators, such as identity, well-being and affordability.[xxviii]
If entire markets are indeed to be transformed, disparate actors across those markets will need to work together to make that happen.
The regulatory landscape in Europe is itself increasingly structured to incentivize collaboration. Think of supply chain due diligence requirements for example. Or consider sector-wide emissions targets that induce the pooling of non-competitive data to create benchmarks and share best practice. It’s no surprise, therefore, that 81 per cent of the largest European companies are members of organizations that drive forward collective sustainability goals.[xxix] Europe’s regulations may not always work as intended, as noted above. But if the Omnibus proposals resolve this, streamlined compliance obligations should not inhibit collaboration and innovation.
Time to get to work
None of this will be easy. Unlocking new growth will require upfront investment, openness to experimentation, and likely even the winding down of previously dominant business lines. But new tools are available—including AI. Accenture’s previous research with the United Nations Global Compact has shown how AI can be a catalyst for achieving bold, sustainable goals.[xxx] In fact, Europe already holds a slight edge in using AI for decarbonization—with 20 per cent of its largest companies deploying AI for this purpose compared to 14 per cent globally.[xxxi] Equally important, businesses must remember that only by integrating advanced digital platforms into a dynamic and interoperable foundation can the full advantages of AI be realized.[xxxii]
Enormous potential remains. By scaling up AI adoption and focusing on its decarbonizing capabilities, European companies can explore and exploit new avenues of sustainable growth faster and more collaboratively. They must seize this opportunity to reignite their competitiveness.
About the Authors
Wytse Kaastra leads Accenture’s EMEA sustainability practice and is the global lead for sustainability services in resources industries.Â
Matthew Robinson leads the sustainability team within Accenture Research.
Babak Moussavi is a senior principal within Accenture Research, focusing on net zero.
Josh Elkind is a research specialist within Accenture Research, focusing on sustainability.
