[Opinion] Time for Europe's industry to master its digital future

Ms Bonefeld Dahl is Director General of DIGITALEUROPE and a member of the European Commission’s Industrial Forum. This article was originally published in the Parliament Magazine

If the EU wants to keep its role as an industrial leader for the digital decade, the time to act is now, writes DIGITALEUROPE’s Cecilia Bonefeld-Dahl.

Speaking at our Masters of Digital summit last month, Commission President Ursula von der Leyen said the next 10 years could be “the decade when Europe becomes a global leader in the digital world”. However, she also admitted that Europe’s own digital industry is punching well below its weight.

The truth is that we lag behind in terms of investments in technologies that will be decisive in 10 to 15 years’ time like quantum computing, AI, or advanced microchips, while European tech companies still struggle to scale and grow. In addition, the EU only has 5 percent of the world’s unicorns – fast growing companies with a market value of billion dollars or more.

The European Commission’s updated industrial strategy, to be launched on 27 April, is our best opportunity to address this. We must use the unprecedented funds from the Recovery and Resilience Facility to boost innovation, accelerate the digital transformation, and support the green transition.

The COVID crisis has exposed the glaring weaknesses of unilateral measures at Member State level. We saw it as the pandemic unfolded: an uncoordinated response led to the closing of factories and the subsequent disruption of value chains.

Our recent SME survey, “Scaling in Europe“, analysed Europe’s most promising small companies. It showed that the fragmentation of the Single Market is still one of the biggest barriers to growth and innovation. Much of the data we generate remains siloed in each Member State and unusable across borders. This is stunting the development of digital innovation in a range of sectors, notably healthcare.

In addition, at EU level laws are often written without considering the needs of smaller players and the barriers they face. Ensuring consistency of rules across Europe for companies to share data in a trusted manner must be a central aim of all future initiatives. For example, the recently proposed Data Governance Act gives Member States excessive flexibility in applying it.

Europe’s digital sovereignty is best achieved by making our continent an attractive place to do business. We need to talk less about autonomy, and more about resilience and capacity-building. Our end goal should be to prevent shortages and disruptions in key value chains and to ensure a geographically balanced production of key supply components for the digital age.

That means striking effective public-private partnerships with the best-in-class in critical technologies such as artificial intelligence, cybersecurity, batteries, microprocessors, semiconductors, high-performance computing, and quantum technologies. Designed effectively, “important projects of common European interest” (IPCEIs) can play an important role without distorting the Single Market.

This should be coupled with closer cooperation with like-minded countries bilaterally and through international institutions, such as the World Trade Organization and G20.

The crisis also exposed the lack of basic digital skills and robust digital infrastructure across Europe. As the pandemic struck, it took weeks, in some cases months, for certain countries and companies to shift activities online.

Digital technologies can do much to keep industrial production running, even in times of physical distancing – think automation, digital twins, connected factories. But we need a workforce trained to develop and maintain such machineries and networks, which requires heavy investment in digital training and upskilling programmes. In the long term, these are much more effective to insulate firms from external shocks than temporary state aid measures.

Upgrading our digital infrastructure is also a top priority. We need to extend high-speed connectivity to all parts of society and ensure that networks are secure. In addition, despite being home to global leaders in 5G technology development, Europe lags critically behind in uptake. We need to speed up rollout across all EU Member States.

An innovative, energy efficient industry is a cornerstone of the EU Green Deal. Studies show that by digitalising Europe’s most carbon intensive sectors we can cut carbon emissions by a fifth by 2030. One example is the construction sector, which accounts for 20 percent of emissions worldwide. Digital technologies have huge potential to cut out waste and reduce energy consumption throughout the whole construction process.

Yet, despite all the talk of the ‘twin’ green and digital transitions, the reality is different. Take the EU taxonomy delegated act – a tool for investors to assess the sustainability of various economic activities – where the digital sector is mentioned only briefly. This is a missed opportunity. To truly realise the potential of digital technologies, it cannot be just an afterthought – it must be mainstreamed into every aspect of the Green Deal.

AI-based logistics management, smart grids, smart mobility solutions as well as intelligent heating, light and appliance control are all well-established technologies. Rather than a raft of new obligations on businesses, we need targeted, digital investments to help our industry make the most of them.

At DIGITALEUROPE, we wish to see a European industry that promotes and takes advantage of digital innovation and gives smaller companies the opportunities they need to grow both here and globally. We are proud of our industrial past, but we also realise there is a need to change the way we do things if we are to be the leaders of the future.

The digital industry can play a big role alongside European leaders in defining an ambitious, forward-looking Industrial Strategy – and then executing it. Together, with this once-in-a-generation opportunity presented to us by the post-COVID recovery funds, it is now or never.