COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Updating the 2020 New Industrial Strategy: Building a stronger Single Market for Europe’s recovery
Date: 2021-05-05
Institutions: Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, European Commission
Subjects: EU growth strategy, EU industrial policy, competitiveness, coronavirus disease, digital single market, economic recovery, epidemic, green economy, industrial cooperation, industrial reorganisation

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 5.5.2021  COM(2021) 350 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Updating the 2020 New Industrial Strategy:  Building a stronger Single Market for Europe’s recovery  {SWD(2021) 351 final} - {SWD(2021) 352 final} - {SWD(2021) 353 final}  
 
 
COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Updating the 2020 New Industrial Strategy:  
Building a stronger Single Market for Europe’s recovery 

1.  THE NEED FOR AN UPDATE: EMERGING CHALLENGES, ENDURING PRIORITIES 

On  10  March  2020,  the  European  Commission  presented  ‘A  New  Industrial  Strategy  for 
Europe’.1 It laid out a plan for how the EU’s world-leading industry could lead the twin green 
and digital transitions, drawing on the strength of its traditions, its businesses and its people to 
enhance its competitiveness. It set in motion a new policy approach to deliver on this, focused 
on better connecting the needs and support provided to all players within each value chain or 
industrial ecosystem.2 To support this, it underlined the fundamentals of industry - innovation, 
competition and a strong and well-functioning single market - while strengthening our global 
competitiveness through open markets and a level playing field.  

The  day  after  the  new  industrial  strategy  was  presented,  the  World  Health  Organization 
announced  the  COVID-19  as  a  pandemic.  The  lockdowns  and  economic  slowdowns  that 
ensued  took  their  toll  on  the  EU  communities  and  economies,  as  well  as  its  industries  and 
companies.  The  Commission  and  others  acted  quickly  to  address  the  impacts  on  Europe’s 
businesses  and  to  ensure  the  free  flow  of  goods  and  movement  of  workers  and  services, 
notably  through  Green  Lanes.  Emergency  measures  on  fiscal  rules,  state  aid  and  short  time 
work3  helped  support  the  most  affected  sectors  and  workers  and  cushioned  the  impact  for 
companies, including SMEs. The European Pillar of Social Rights has continued to be the EU 
and its Member States’ compass in cushioning the social impacts. 

During this period, we witnessed the resilience, ingenuity and adaptability of the EU industry 
but  we  were  also  exposed  to  new  vulnerabilities  and  older  dependencies,  as  well  as  socio-
economic  and  territorial  inequalities  that  need  to  be  addressed.  The  crisis  revealed  the 
interdependence of global value chains and the value of a globally integrated Single Market. It 
also illustrated the need for more speed in the transition towards a cleaner, more digital, and 
more  resilient  economic  and  industrial  model,  in  order  to  maintain  and  enhance  Europe’s 

1 COM(2020) 102 final, https://ec.europa.eu/info/sites/info/files/communication-eu-industrial-strategy-march-
2020_en.pdf. ‘The 2020 Industrial Policy package’ includes also a dedicated Strategy for small and medium-
sized enterprises (SMEs; COM(2020) 103 final) and Specific actions to address barriers to a well-functioning the 
Single Market and improve enforcement of commonly agreed rules, COM(2020) 93 final and COM(2020) 94 
final. 
2 SWD(2021) 351, Annual Single Market Report 2021 identifies the following 14 industrial ecosystems: 1. 
Aerospace & Defence, 2. Agri-food, 3. Construction, 4. Cultural and Creative Industries, 5. Digital, 6. 
Electronics, 7. Energy Intensive Industries, 8. Energy-Renewables, 9. Health, 10. Mobility-Transport-
Automotive, 11. Proximity, Social Economy and Civil Security, 12. Retail, 13. Textiles, 14. Tourism. Further 
ecosystems may be identified and their delineation adapted based on stakeholders dialogues and changing 
realities. 
3 Activation of the General Escape Clause under the Stability and Growth Pace, Temporary framework for State 
aid measures supporting the economy during the Covid-19 pandemic, European instrument for temporary 
support to mitigate unemployment risks in an emergency (SURE), or the Coronavirus Response Investment 
Initiative. 

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drive towards sustainable competitiveness. This is why President von der Leyen announced in 
her State of the European Union address an update of the EU’s industrial strategy: to learn the 
lessons  of  the  crisis,  strengthen  our  economic  resilience  and  accelerate  the  twin  transition 
while preserving and creating jobs.  

The  starting  point  for  this  update  is  capturing  the  real  impact  of  the  last  year  on  Europe’s 
economy and industry.  A first  analysis and needs assessment formed the basis for Europe’s 
recovery  plan,  NextGenerationEU,4  which  –  together  with  the  Multi-annual  Financial 
Framework  2021-2027    will  provide  unprecedented  financial  support  to  EU’s  citizens  and 
companies. Judged by any metric, the conclusions were stark: with a 6.3% contraction in the 
EU  economy  in  2020  accompanied  by  major  turnover  losses  and  a  decline  in  jobs  and 
investment.  

A year on, there are some cautious signs of improvement5 and the EU economy is expected to 
strongly rebound in 2021 and 2022. Prospects for a quick recovery in world trade have also 
improved  and  making  the  most  of  these  trading  opportunities  will  be  a  key  part  of  the 
recovery  for  companies  across  Europe.  However,  the  continued  fall  in  short-term  private 
investment plans and the increasing number of strong firms facing significant liquidity issues 
point to the fact that the recovery will take time and continued support.  

To  best  tailor  that  support,  the  Commission  is  building  on  the  flexible  ecosystem-based 
approach outlined in  last  year’s industry strategy. As part of the first  Annual  Single Market 
Report,6  fourteen  industrial  ecosystems  have  been  identified  at  this  stage  and  their  different 
needs and challenges analysed. It shows that the impact of the crisis  – and the prospects for 
recovery  and  renewed  competitiveness  -  vary  significantly.  While  tourism  was  hit  hardest, 
and  textile,  mobility  and  cultural  and  creative  companies  face  a  slower  and  more  uneven 
recovery,  the  digital  ecosystem  increased  its  turnover  during  the  crisis.  Smaller  businesses 
also continue to be more vulnerable, with some 60% reporting a fall in turnover in the second 
half of 2020.7  

Women, youth and low-income workers were particularly affected by the crisis, partly due to 
the  fact  that  they  represent  a  large  majority  of  employees  in  the  sectors  most  affected.  The 
Commission is paying a particular attention to equal rights and opportunities for an inclusive 
recovery  across  all  sectors.  Europe’s  people  are  among  its  leading  assets,  and  while 
addressing skills gaps and inequalities, the EU should build on all the strengths of its talented, 
well-educated  and  inventive  workers  and  entrepreneurs  as  a  force  for  innovation  and 
competitiveness. 

4 COM(2020) 456 final. 
5 SWD(2021) 351, Annual Single Market Report 2021. 
6 SWD(2021) 351, Annual Single Market Report 2021.  
7 European Commission/European Central Bank (November 2020), “Survey on the access to finance of 
enterprises (SAFE)”. 

2 

 
 
                                                           
Confidence Indicator by Ecosystem 
Source:  European  Commission  analysis 
based  on  the  Joint  Harmonised  EU 
Programme  of  Business  and  Consumer 
Surveys.  
“Agrifood”, 
Note: 
Economy”, 
“Proximity-Social 
“Renewable  Energies”,  and  “Health”, 
represented  using  dotted  lines,  data 
coverage  is  limited,  so  data  have  to  be 
interpreted with caution.  

“Retail”, 

For 

Figure 1: Confidence indicator by ecosystem 

This  analysis  and  our  experience  during  the  crisis  show  that  the  principles,  priorities  and 
actions  in  Europe’s  industrial  strategy  still  hold.  The  need  to  strengthen  Europe’s  open 
strategic  autonomy  and  the  new  partnership  approach  with  industry  and  likeminded 
international partners are even more acute than a year ago. We must continue to focus on the 
fundamentals  outlined  a  year  ago  and  speed  up  implementation  to  enable  industry  to 
accelerate and lead the transitions.  

This  update  neither  replaces  the  2020  Industrial  Strategy  nor  completes  the  processes 
launched  by  it  –  much  of  that  work  is  in  progress,  and  requires  dedicated  efforts.  This  is  a 
targeted update, which focuses on what more needs to be done and what lessons need to be 
learned. It assesses where our Single Market was tested and stretched and proposes measures 
to strengthen its resilience and functioning. It offers a tailored assessment of the needs of each 
industrial ecosystem and how all market players can best work together. And it identifies a set 
of strategic dependencies and capacities and proposes measures to address and reduce them. 
In doing so, this update answers calls from the European Council,8 the European Parliament,9 
Member States10 and other stakeholders to analyse the impact of the crisis on our policies and 
offer solutions where necessary.  

Three  Staff  Working  Documents  accompany  the  Communication.  They  reflect  certain  early 
deliverables of the 2020  Industrial  Strategy  and  offer the  analytical  underpinning to  address 
such requests:  

  The  first  edition  of  the  Annual  Single  Market  Report11  sets  out  the  impact  of  the 
crisis on the Single Market, reports on progress made on barriers and in delivering on 

8 Conclusions of the European Council, 1 and 2 October 2020, EUCO 13/20. 
9 European Parliament resolution of 25 November 2020 on a New Industrial Strategy for Europe, 
2020/2076(INI). 
10 Competitiveness Council Conclusions, 11 September 2020, 16 November 2020. 
11 SWD(2021) 351, Annual Single Market Report 2021. 

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actions  identified  in  the  2020  Industrial  Package;  includes  an  analysis  for  all  14 
industrial ecosystems; and presents a set of key performance indicators;  

  An initial analysis of the EU’s strategic dependencies12 and capacities, with an in-

depth review for a number of technological and industrial strategic areas;  

  An  illustrative  analysis  of  one  key  industrial  sector,  focused  on  the  challenges  and 
opportunities for industry and the EU policy toolbox available Towards competitive 
and clean European steel in support of the twin transition.   

2.  LEARNING THE LESSONS AND ACCELERATING THE TRANSITIONS 

Europe has a lot to build on and a lot to learn from the testing time it continues to go through. 
Over  the  last  year,  we  have  seen  the  resilience  of  our  Single  Market  and  the  best  of  industry. 
Drawing on the pool of excellence in life sciences, it has been at the forefront of global COVID-
19 vaccine development and production, notably thanks to the EU Vaccine Strategy and the EU 
support to ramp up industrial capacity. We have seen companies switch production to help meet 
urgent needs, whether for personal protective equipment, hand sanitisers or vaccine production. 
Other  companies  made  the  shift  to  e-commerce  overnight  or  used  digital  tools  to  find  new 
suppliers  or  supply  chains.  Despite  a  significant  fall  in  energy  demand  and  impacts  on  critical 
energy  operators,  the  internal  energy  market  adjusted  well,  with  no  interruptions  in  energy 
supply13. 

However, this was not  feasible for  all. As lockdown forced many businesses to  a halt, borders 
closed, supply chains were interrupted, demand was disrupted and workers and service providers 
found themselves unable to move across Europe. When lorries stopped at the internal borders, it 
quickly showed how integrated manufacturing and the economy are in Europe today. Blockages 
to  the  free  flow  of  goods,  services  and  people  profoundly  affected  value  chains  and  economic 
activity,  undermined  European  solidarity  and  hampered  a  coordinated  response  to  the  crisis. 
Supplies  were  stuck  at  borders,  air  cargo  prices  soared  because  planes  were  grounded  and 
imbalances in trade flows led to a shortage of maritime containers.  

Important lessons can already be drawn: 

First, the crisis highlighted the essential need to uphold the free movement of persons, goods, 
services,  and  capital  in  the  Single  Market  and  the  need  to  work  together  to  strengthen  its 
resistance  to  disruptions.  Border  controls  and  closures  and  uncoordinated  national  or  regional 
restrictions  as  well  as  containment  measures  restricting  the  free  movement  of  persons,  often 
subject to frequent adjustments exacerbated uncertainty and costs of compliance, causing serious 
delays and leading to major disruptions of supply chains in many industrial ecosystems. Green 
Lanes  and  other  EU  ad-hoc  measures14  significantly  alleviated  the  potential  harmful  impact  of 
unilateral and uncoordinated national measures across the Single Market. The free movement of 
services  was  also  affected  strongly,  including  by  forced  temporary  closures  of  non-essential 
businesses,  travel  restrictions,  and  a  lack  of  clarity  on  applicable  rules  on  movement  across 
borders. This in turn led to difficulties for cross border workers and shortages of harvest workers, 

12  As  a  response  to  the  European  Council  request  of  2  October  2020  to  identify  strategic  dependencies, 
particularly in the most sensitive industrial ecosystems and to propose measures to reduce these dependencies. 
13 SWD(2020) 104, Energy security: good practices to address pandemic risks. 
14 Commission and Council recommendations on common coordinated approach as regard travel restrictions. 

4 

 
 
   
                                                           
to  name  but  a  few  examples.  The  Single  Market  in  Europe  relies  on  a  highly  mobile  and 
available workforce. 

Second, these situations triggered wider awareness of the need to analyse and address strategic 
dependencies,  both  technological  and  industrial.  The  EU  and  its  trading  partners  gain 
resilience  from  world  markets  being open and integrated in  global value  chains,  which help  to 
absorb  shocks  and  drive  the  recovery.15  The  COVID-19  pandemic  showed  that  disruptions  in 
global value  chains  can  affect  specific  essential  products  and inputs, such as medical  supplies, 
that are particularly critical for society and the EU economy. One of the key lessons of the crisis 
is to get a better grasp of Europe’s current and possible future strategic dependencies. This will 
provide the basis for the development of facts-based, proportionate and targeted policy measures 
to address strategic dependencies while safeguarding the open, competitive and trade-based EU 
economy.  The  EU  will  continue  to  showcase  its  preference  for  international  cooperation  and 
dialogue, but also its readiness to combat unfair practices and foreign subsidies that undermine 
the level-playing field in the Single Market. 

Finally,  this  unprecedented  year  showed  that  the  business  case  for  the  green  and  digital 
transition is stronger than ever. In the medium-term, all business activity will need to become 
sustainable and the disruption of many traditional patterns caused by COVID-19 will shake up 
old  habits  and  therefore  will  accelerate  the  green  transition.  Efforts  to  ensure  secure  and 
sufficient  access  to  competitively  priced  clean  energy  throughout  the  single  market  will  be 
central  to  ensuring  that  the  EU  bolsters  its  industrial  strengths  while  making  this  transition.  A 
skilled workforce is key in ensuring successful transitions, supporting the competitiveness of the 
European  industry  and  quality  job  creation.  Digitalisation  has  assumed  a  strategic  role  for  the 
continuation  of  economic  activities  and  has  well  and  truly  changed  the  way  business  is 
conducted.  Economies,  companies  and  their  employees  risk  being  left  behind  as  the  transition 
accelerates.  Digital  and  green  business  models  and  technologies  placed  companies  that  had 
already embraced this transition at an advantage compared to those that had not and companies 
that drive the change will continue to enjoy a crucial first-mover advantage. The rising levels of 
consumer  awareness  of  and  demand  for  this  transition  is  also  an  opportunity  that  needs  to  be 
leveraged. 

The  readiness  for  change  is  high.  Competitive  sustainability  enabled  by  new,  often  digital 
technologies and services remain our goal.  Businesses are the best  placed to  determine how to 
become  competitive  and  leaders  in  their  sector  and  at  finding  solutions  to  their  challenges. 
Where necessary, our industrial policy should then benefit from agile forms of public-private 
partnership and new forms of cooperation between private and public sectors to accelerate the 
delivery  of  innovative  solutions  that  would  not  be  achieved  otherwise.  For  an  inclusive 
transition, a well-functioning social dialogue will be key.  

15  OECD  analytical  work  has  confirmed  that  global  value  chains  not  only  maximize  economic  efficiency,  but 
that  resilient,  supply  chains  are  essential  in  times  of  crisis  to  absorb  shocks,  to  offer  options  to  adjust  and  to 
speed  up  recovery.  Cf.  Shocks,  risks  and  global  value  chains:  insights  from  the  OECD  METRO  model,  June 
2020. 

5 

 
 
 
                                                           
Monitoring industrial trends and competitiveness  

The  Annual  Single  Market  report  defines  a  set  of  key  performance  indicators  (KPI),  based  on 
publicly  available  data  sources,  to  analyse  economic  developments  and  monitor  the  progress 
achieved, focussing on competitiveness, Single Market integration, SMEs, the twin transition, and 
economic  resilience.  The  KPIs  also  provide  a  forward-looking  view  based  on  investment  and  a 
confidence  indicator,  and  an  overview  of  the  performance  of  the  EU  economy,  comparing  it  to 
international partners and analysing the specificity of industrial ecosystems. The analysis of these 
indicators,  which  will  be  performed  regularly  by  the  Commission,  can  help  in  taking  a  strategic 
stance on the EU economy, anticipate challenges, and inform policy and investment decisions. 

Although the effect of the crisis will have long-lasting implications, the EU’s recovery has begun. 
For  several  industrial  ecosystems,  turnover  has  almost  reached  pre-COVID  19  levels,  even  if  the 
dynamics  remains  slightly  subdued.  Positive  signals  also  emerge  from  an  analysis  of  economic 
sentiment,  which  in  April  2021  shows  improvements  across  all  ecosystems  (See  Figure  1). 
However,  it  is  essential  to  continue  monitoring  the  recovery  trajectory  of  all  ecosystems.  In  fact, 
data  show  that  although  public  interventions  have  been  effective  in  limiting  unemployment  and 
bankruptcies, the risk of abrupt surges of layoffs and insolvencies is increased. 

In  full  synergy  with  existing  monitoring  tools  (e.g.  Single  Market  Scoreboard),  the  Commission 
will monitor main indicators of the competitiveness of the EU economy as a whole, in particular: 

-  Single  Market  integration,  based  on  indicators  on  intra-EU  trade  or  price  dispersion  across 
Member States, to help assess policies fostering a favourable business and innovation environment. 

- Productivity growth, based on labour productivity.  

-  International  competitiveness,  based  on  EU  global  market  share  or  extra-EU  trade,  to  support 
policies for open and fair access to export markets  

- Public and private investment, based on data on net public and net private investment as % of 
GDP,  to  notably  illustrate  the  potential  transformation  of  the  economy  in  line  with  the  twin 
transition objectives.  

-  R&D  investments,  based  on  public  and  private  R&D  expenditure  as  %  of  GDP,  to  support 
innovation.    

3.  STRENGTHENING SINGLE MARKET RESILIENCE 

Making the Single Market better equipped for crises 

The  Single  Market  is  the  EU’s  most  important  asset,  offering  certainty,  scale  and  a  global 
springboard for our companies, and wide availability of quality products for consumers. But this 
asset cannot be taken for granted. Particularly in the early days of the pandemic, businesses and 
citizens suffered from border closures, supply disruptions and a lack of predictability.  

Despite  the  usefulness  of  existing  Single  Market  tools,  the  crisis  showed  that  they  can  be 
improved  for  emergency  situations.  As  announced  by  President  von  der  Leyen  in  February 

6 

 
 
 
  
 
2021,16  the  Commission  will  propose  a  Single  Market  Emergency  Instrument  to  provide  a 
structural solution to ensure the availability and free movement of persons, goods and services in 
the context of possible future crises. This instrument should guarantee more information sharing, 
coordination  and  solidarity  when  Member  States  adopt  crisis-related  measures.  It  will  help  to 
mitigate  the  negative  impacts  on  the  Single  Market,  including  by  ensuring  more  effective 
governance. It should also build a mechanism through which Europe can address critical product 
shortages  by  speeding  up  product  availability  (e.g.  standard  setting  and  sharing,  fast-track 
conformity assessment) and reinforcing public procurement cooperation. It will be aligned with 
relevant  policy  initiatives  such  as  the  forthcoming  proposal  to  establish  a  European  Health 
Emergency Preparedness and Response Authority (HERA), and the upcoming Contingency Plan 
for  Transport  and  Mobility  as  well  as  relevant  international  practice  aiming  at  addressing 
emergency situations or ensuring and speeding up the availability of essential products.  

Figure 2 Key elements of the Single Market Emergency Instrument 

A well-functioning Single Market to accelerate the recovery 

The  last  year  reaffirmed  the  need  to  bring  down  the  persisting  and  significant  barriers  that 
hamper  the  good-functioning  of  the  Single  Market.17  The  pursuit  of  a  well-functioning  Single 
Market calls for unrelenting efforts on numerous fronts: 

  Permanent management of effective compliance with existing single market rules; 
  Continuous  investment  in  deepening  integration  in  the  fields  which  offer  greatest 

opportunities; 

  Adaptation of existing policy approaches where justified; 
  New strategies where needed (e.g. to accompany the twin transitions).  

While  the  Commission  will  carry  out  recurring  assessments  of  the  main  barriers  within  each 
ecosystem  as  part  of  its  Annual  Single  Market  Report,  the  services  sector  deserves  particular 
attention because of its size,18 the interplay with goods and its cross-ecosystems nature.  

A new effort to address restrictions and barriers is under way notably through the Single Market 
Enforcement  Task  Force  (SMET)19  and  other  relevant  actions.20  Progress  has  been  too  slow 

16 https://ec.europa.eu/commission/presscorner/detail/en/speech_21_745. 
17 See SWD(2020) 54 final and SWD(2021) 351, Annual Single Market Report 2021. 
18 It represents 70% of the EU’s GDP and an equivalent share of employment. 

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over  the  past  years  in  several  key  areas,  in  particular  services.  The  full  enforcement  of  the 
Services  Directive  will  ensure  that  Member  States  comply  with  their  existing  obligations, 
including the notification obligation in order to identify and eliminate new potential regulatory 
barriers.  

Business services such as engineering, architecture, IT and legal services, contribute up to 11% 
of  EU  GDP  and  are  essential  competitiveness  factors  for  firms.  Yet  they  are  held  back  by 
restrictive national rules such as strict entry and exercise requirements.21 While European goods 
standards have delivered great benefits for companies and consumers, raising quality and safety, 
improving transparency, reducing costs and opening up markets for businesses, European service 
standards  only  account  for  roughly  2%  of  all  standards.  Service  standards  lay  down  technical 
requirements,  e.g.  levels  of  quality,  performance,  interoperability,  environmental  protection, 
protection  of  health  or  safety.  They  can  increase  consumer  confidence  and  further  integrate 
European  service  markets.  They  can  help  overcome  barriers  linked  to  multiple  national 
certification requirements. The Commission will explore the merits of a legislative proposal for 
regulating  key  business  services  supported  by  harmonised  standards,  starting  with  an 
assessment of the most pertinent  business  service areas where harmonised standards could  add 
value.22   

While  EU  legislation  guarantees  a  set  of  mandatory  rights  and  working  conditions  of 
employment  to  be  applied  to  posted  workers  throughout  the  EU,  feedback  from  stakeholders 
consistently highlights  administrative difficulties with  posting workers. Companies  can find it 
cumbersome to send engineers or technical staff to businesses or end-users in another Member 
State,  for  instance  in  the  construction  sector.  The  Commission  will  continue  working  with 
Member States to ensure the Posting of Workers Enforcement Directive is properly transposed 
and  implemented.23  Without  compromising  the  legal  framework  and  the  workers’  protection  it 
ensures,  the  Commission  will  work  with  Member  States  to  devise  a  common  form,  in  an 
electronic format, for the declaration of the posting of workers. This Single Digital Form could 
initially be introduced on a voluntary basis.  

The crisis has also highlighted that effective market surveillance is key, with Member States’ 
authorities  facing  increased  numbers  of  non-compliant  and  dangerous  products.  This  was  the 
case  notably  for  some  personal  protective  equipment  and  medical  devices  in  high  demand. 
Stepping up coordination, investment, resources and digitalisation of authorities –both within the 
Single Market and at the Union borders- is therefore a priority.24 The Commission will support 
and  encourage  market  surveillance  authorities  to  step  up  the  digitalisation  of  product 
inspections and data collection and use of state-of-the-art technologies to trace non-compliant 

19 SMET is the high-level forum where the Commission and Member States collaboratively seek solutions for 
addressing Single Market obstacles rooted in enforcement or implementation deficiencies. In this first year, it 
played an important role in assessing Member States’ measures on borders and measures on travel restrictions 
that restrict the  free movement within the EU. 
20 SWD(2021) 351, Annual Single Market Report 2021, Annex I. 
21 SWD(2021) 351, Annual Single Market Report 2021 and COM(2020) 93. 
22  A  thorough  analysis  to  the  potential  of  harmonised  standards  to  facilitate  cross-border  activities,  market 
potential  and  opening  and  overall  economic  benefit,  including  for  SMEs  and  women  entrepreneurs,  would  be 
carried  out  to  identify  priority  areas.  Impacts  on  working  conditions  and  workers’  rights  will  be  subject  to 
thorough considerations. 
23 COM(2019) 426 final. 
24  Regulation  (EU)  2019/1020  of  the  European  Parliament  and  of  the  Council  of  20  June  2019  on  market 
surveillance  and  compliance  of  products  and  amending  Directive  2004/42/EC  and  Regulations  (EC)  No 
765/2008 and (EU) No 305/2011. 

8 

 
 
                                                                                                                                                                                     
and dangerous products, as announced in the Single Market Enforcement Action Plan.  Investing 
in the digitalisation of product safety and compliance information is also  important to improve 
the traceability and control of traded products. Moreover, dedicated capacity building is needed 
to ensure effective and efficient checks. 

As  a  primary  vehicle  of  innovation  in  the  various  ecosystems,  the  SMEs  need  to  be  borne  in 
mind  in  all  actions  under  this  Strategy.  This  is  reflected  in  a  horizontal  manner  by  increased 
attention to regulatory burden under the Commission’s revised approach to Better Regulation: by 
introducing a ‘one in, one out’ approach adapted to the policymaking in the EU, it strengthens 
the attention of policymakers for the implications and costs of applying legislation, especially for 
SMEs25.   

In the SME Strategy, the Commission emphasised the need to enhance fairness in B2B relations 
to support SMEs which due to asymmetries in bargaining power with larger organisations face 
an  increased  risk  of  being  subject  to  unfair  business  practices  and  conditions  both  online  and 
offline. In particular, the crisis demonstrated the importance and necessity of e-Commerce. For 
the  first  time,  the  Digital  Services  Act  proposes  a  common  set  of  rules  on  intermediaries' 
obligations and accountability across the Single Market, which will open up opportunities for all 
business, including SMEs and ensure a high level of protection to all users. Similarly, the Digital 
Markets Act proposes harmonised rules defining  and prohibiting certain  practices by platforms 
acting as digital “gatekeepers” that could prevent or slow down valuable and innovative services 
from reaching the consumer, to ensure the proper functioning of the Single Market by promoting 
effective competition in  digital markets and in particular a contestable and fair online platform 
environment.  The  Commission  urges  the  co-legislators  to  accelerate  work  in  view  of  swift 
adoption.  

Late  payment  behaviour  was  compounded  during  the  crisis,  which  puts  additional  burden  on 
SMEs. The EU Observatory on late payments, which monitors unfair payment practices26 and 
analyses how late payments spread through the supply chain, will expand its current work on the 
construction  ecosystem  to  others.  To  address  unfair  payment  practices  exacerbating  payment 
delays  and  often  leading  to  long  disputes,27  the  Commission  will  design  and  implement  pilot 
Alternative Dispute Resolution schemes. 

Financial  pressure  and  insolvencies  are  likely  to  increase  in  2021  as  relief  is  phased-out.28    In 
particular, the risk of over-leverage and the need for recapitalisation can become pronounced for 
SMEs.  A  rise  in  bankruptcies  could  significantly  impact  entire  supply  chains.  This  requires 
coordination and design of measures that need to be proportionate to the challenges ahead. The 
Commission  is  determined  to  mobilise  significant  investment,  and  the  SME  window  under 
InvestEU could trigger EUR 45 billion of investment in SMEs by the end of 2023. 

To help address the solvency risk affecting SMEs, the Commission will facilitate an exchange of 
good practices on measures and incentives taken by several Member States to target support on 

25 COM(2021) 219 Better Regulation: Joining forces to make better laws, 
https://ec.europa.eu/info/sites/default/files/better_regulation_joining_forces_to_make_better_laws_en_0.pdf 
26 One of the root causes of payment delays. 
27 According to the Observatory, the EU construction ecosystem has the longest disputes duration in the world 
(average 20 months to solve a dispute). 
28 Estimates suggest that 11.4% of all companies are likely to exit as support dries up if they fail to get access to 
fresh sources of credit. SWD(2021) 351, Annual Single Market Report 2021. 

9 

 
 
                                                           
viable companies. The Commission is working on dedicated capital support to SMEs29 through 
financial  products  of  InvestEU,  and  invites  Member  States  to  contribute  to  EU-wide  efforts. 
REACT-EU further provides targeted support to SMEs. 

There are a number of possibilities for Member States to provide equity support under national 
support  schemes  to  strengthen  the  solvency  and  growth  of  innovative  SMEs  and  mid-caps  in 
line  with  State  aid  rules,  including  the  State  aid  Temporary  Framework.  For  example,  these 
include schemes to provide public guarantees on private investment funds based on the idea of 
the State providing a guarantee to crowd in private funding, rather than providing capital itself. 
Alternatively, Member States can decide to grant certain repayable instruments, which can later 
be converted into grants, depending on the recovery of the companies and their ability to repay. 

The  Commission  will  continue  to  make  progress  to  deliver  a  single  market  for  capital.  For 
example,  the  Commission  is  accelerating  work  on  the  equity  funding  for  SMEs,  including 
expanding  support  for  scale-up  capital,  strategic  investments  and  for  Initial  Public  Offerings 
(IPO). That work will trigger investments in green and digital technologies across all stages of an 
SME’s life, from start-ups to growth and expansion stage, and to exits to public markets. A new 
public  private  IPO  Fund  will  support  SMEs  and  midcaps  through  and  beyond  the  listing 
process.30 The EIB group will publish calls for interested fund management teams in the second 
half of 2021. 

Taxation also plays a critical role in ensuring fairness and growth: the upcoming Communication 
on  “Business  Taxation  for  the  21st  century”  will  set  out  concrete  plans  to  support  both 
objectives, including concrete measures for SMEs. 

EU competition policy has a key role to play in maintaining a level playing field and it is one of 
our  biggest  assets  in  ensuring  a  Single  Market  that  supports  companies  to  innovate  and  grow. 
Preserving competition in the Single Market contributes to the resilience and competitiveness of 
our  companies  on  the  global  markets.  The  Commission  will  also  continue  to  monitor  the 
application  of  the  State  aid  Temporary  Framework  (extended  until  end-2021)  and  the 
implementation of COVID-19 related State aid measures, with a review to progressively phasing 
out crisis support measures when the situation allows, while avoiding cliff-edge effects.  

KEY ACTIONS 
Single Market Emergency Instrument 
Annual Single Market Report 

TIMING 
Q1 2022 
Annual 
Possible common form/template for the declaration of the posting of workers  Q1 2022 
Q4 2022 
ongoing 

Strengthen Single Market surveillance of EU and imported products 
Under InvestEU, work on capital support and equity financing to support 
SMEs 

29 That, in accordance with Article 3(1)(g) of the InvestEU Regulation, were negatively affected by the COVID-
19 crisis and were not already in difficulty in State aid terms at the end of 2019. 
30 “A Public-Private Fund to Support the EU IPO Market for SMEs” – European Commission’s study available 
at:  https://ec.europa.eu/info/evaluation-reports-economic-and-financial-affairs-policies-and-spending-
activities_en suggests a public-private IPO fund with a public investment of about 740 million EUR 
could increase IPOs of SMEs and midcaps in Europe by 10%. 

10 

 
 
                                                           
4.  DEALING WITH DEPENDENCIES: OPEN STRATEGIC AUTONOMY IN PRACTICE  

Openness to trade and investment is a strength and source of growth and resilience for the EU, as 
a  major  importer  and  exporter.  Nevertheless,  COVID-19  impacted  negatively  global  supply 
chains and led to shortages in Europe. As the 2020 Industrial Strategy underlined, the EU needs 
to improve its open strategic autonomy in key areas.31  

The crisis further emphasised the need to strengthen the EU’s  ability to confront a crisis and 
act  as  necessary.  The  disruptions  along  the  supply  chain  of  the  health  ecosystem  were 
particularly challenging, resulting from a combination of surging demand as well as supply and 
workforce shortages, despite the EU’s proactive response to ensure (global) transport routes and 
supply  chains  remain  as  open  and  secure  as  possible.  More  recent  challenges,  such  as  the 
semiconductors shortage faced by the automotive industry, highlight that Europe faces also other 
specific  dependencies.  The  pandemic  accelerated  this  awareness  and  pushed  countries  such  as 
the United States32 to review their positions in global value chains. 

The EU also  has  important  strengths  and capacities. While the EU faces  certain  dependencies, 
other countries also  depend on the EU (“reverse dependencies”). Mutual dependencies may be 
an element of stability in global value chains. The EU also shares foreign dependencies with our 
partners  (“common  dependencies”).  These  provide  opportunities  for  building  up  cooperation 
with likeminded partners to find mutually beneficial solutions. 

Mapping our strategic dependencies and capacities 

Some disruptions caught Europe by surprise, showing the need for a better grasp of where its 
strategic  dependencies  lie,  how  they  may  develop  in  the  future  and  the  extent  to  which  they 
would  lead  to  vulnerabilities  for  the  EU.  Such  strategic  dependencies  affect  the  EU’s  core 
interests,  notably  as  regards  health,33  security  and  safety  and  accessing  key  inputs  and 
technologies necessary for the green and digital transitions.  

In  response  to  the  European  Council  request,  the  Commission  has  carried  out  a  “bottom-up 
analysis” based on trade data that provides first insights on the scope of the issues at stake. Out 
of 5,200 products imported into the EU, the analysis identifies 137 products (representing 6% of 
the  EU’s  total  import  value  of  goods)  in  sensitive  ecosystems  for  which  the  EU  is  highly 
dependent  –  mainly  in  the  energy  intensive  industries  (such  as  raw  materials34)  and  health 
ecosystems  (such  as  active  pharmaceutical  ingredients)  as  well  as  concerning  other  products 
relevant to support the green and digital transformation.  

About half of imports for these dependent products originate in China, followed by Vietnam and 
Brazil.  However,  34  products  (representing  0,6%  of  the  EU’s  total  import  value  of  goods)  are 
potentially  more  vulnerable  given  their  possibly  low  potential  for  further  diversification  and 
substitution  with  EU  production.  About  20  of  these  products  are  raw  materials  and  chemicals 
belonging  to  the  energy  intensive  industries  ecosystem,  with  the  majority  of  the  remaining 

31 A long-term and cross-cutting perspective on strengthening Europe’s open strategic autonomy will also be 
provided by the Commission’s 2021 Strategic Foresight Report. 
32 “Executive Order on America’s Supply Chains” 
33 The Pharmaceutical Strategy for Europe provides for actions to address these issues as regards the supply of 
medicines (COM/2020/761) 
34 The Commission will release an additional detailed analysis on critical supply chains for the energy sector by 
summer 2021. This analysis  highlights that critical raw and processed  materials are essential to ensure energy 
security and the success of the clean energy transition. 

11 

 
 
                                                           
products belonging to the health ecosystem (such as active pharmaceutical ingredients and other 
health  related  products).  The  analysis  also  shows  challenges  and  dependencies  in  the  area  of 
advanced  technologies  such  as  for  cloud  and  microelectronics,  predominantly  linked  to  the 
global market structure. 

Share  of  EU  import  value  by  origin  of  the  identified  137  products  where  the  EU  is  dependent  in  sensitive 
ecosystems 
Source: European Commission based on BACI database 

The analysis also highlights the issue of possible internal dependencies within the Single Market, 
linked  to  a  concentration  of  activities  at  the  level  of  individual  firms.  In  such  instances,  EU 
competition policy and enforcement can play a major role in addressing possible risks related to 
such internal dependencies, by ensuring that markets remain open and contestable.  

The  Staff  Working  Document35  accompanying  this  update  presents  six  in-depth  reviews  of 
strategic  areas,  i.e.  on  raw  materials,  batteries,  active  pharmaceutical  ingredients, 
hydrogen, semiconductors and cloud and edge technologies, providing further insights on the 
origin  of  strategic  dependencies  and  their  impact.  The  Commission  will  engage  with  Member 
States,  industry  and  social  partners,  including  with  the  support  from  the  Industrial  Forum  or 
through  the  Structured  Dialogue  on  the  security  of  medicines  supply36  and  the  pharmaceutical 
strategy, to deepen this analysis and further address the identified strategic dependencies. 

The Commission will launch a  second stage of in-depth reviews  of potential  dependencies in 
key  areas,  including  products,  services  or  technologies  key  to  the  twin  transition,  such  as 
renewables,  energy  storage  and  cybersecurity.  In  addition,  a  monitoring  system  through  the 
Commission’s Observatory of Critical Technologies37 and a periodic review process will cover 
both current dependencies and risks of future (technological) dependencies.  

Building a toolbox to reduce and prevent strategic dependencies 

In  most  cases,  industry  itself  is  best  placed  –  through  its  corporate  policies  and  decisions  –  to 
improve  resilience  and  reduce  any  dependencies  that  may  lead  to  vulnerabilities,  including 
through  diversification  of  suppliers,  increased  use  of  secondary  raw  materials  and  substitution 
with  other  input  materials.  There  are  however  situations  where  concentration  of  production  or 
sourcing in only one single geographical area results in the unavailability of alternative suppliers. 

35 SWD on Strategic dependencies and capacities, SWD(2021) 352. 
36 https://ec.europa.eu/health/human-use/strategy/dialogue_medicines-supply_en. 
37 COM(2021) 70, Action Plan on synergies between civil, defence and space industries. 

12 

 
 
                                                           
 
In areas of strategic importance, the Commission is identifying public policy measures that can 
support industry’s efforts to address these dependencies and to develop strategic capacity needs: 
diversifying supply and demand relying on different trading partners whenever possible, but also 
stockpiling  and  acting  autonomously  whenever  necessary.  Such  measures  should  generally  be 
based on a mix of actions, targeted and proportionate to ecosystems’ needs and identified risks. 
The  Commission  will  work  in  close  cooperation  with  the  relevant  stakeholders  to  identify 
measures  to  reinforce  the  EU  position  in  global  value  chains,  including  by  strengthening  and 
diversifying  external  trade,  creating  new  opportunities  also  for  low-  and  middle-income 
countries.  A  more  circular  economy  and  improved  resource  efficiency  also  contribute  to 
reducing  dependencies  and  strengthening  resilience.  In  addition,  these  measures  should  enable 
the  EU  to  strengthen  its  own  capacity,  building  on  the  strengths  of  a  fully  functioning  Single 
Market  with  open  and  competitive  markets.  It  will  leverage  its  privileged  relations  with  its 
closest  neighbours  - in particular the ones already  engaged in  regulatory  convergence with  the 
EU.  

The  Commission  will,  as  outlined  in  its  Trade  Policy  Review38,  work  towards  diversifying 
international supply chains and pursue international partnerships to increase preparedness.   

In the areas of common dependencies with its partners,39 the EU may choose to pool resources 
and build stronger and more diverse alternative supply chains with our closest allies and partners. 
The transatlantic relationship and the enlargement and neighbourhood policy are cornerstones of 
such efforts as are Free Trade Agreements with other partners and trade blocs. On the former, the 
proposed EU-US Trade and Technology Council could provide a platform for cooperation.  

The  Commission  will  also  examine  further  reverse  dependencies  and  map  areas  where  other 
countries depend on the EU. Deeper understanding of such interdependencies can better inform 
the EU’s policy response. 

The  Commission  will  continue  to  support  industrial  alliances,  in  strategic  areas  where  such 
alliances are identified as the best tool to accelerate activities that would not develop otherwise, 
and where they help to attract private investors to discuss new business partnerships and models 
in a manner that is open, transparent and fully compliant with competition rules, and where they 
have a potential for innovation and high-value job creation. The Commission will pay particular 
attention  to  the  inclusiveness  of  alliances,  for  start-ups  and  SMEs.  Such  alliances  should 
complement  public-private  partnerships40  and  provide  a  broad  and  open  platform  to  establish 
strategic  roadmaps  and  efficient  coordination  of  research,  development  and  innovation 
investment plans for technologies in particular ecosystems. In three of the six areas in which the 
Commission  presents  in-depth  reviews  with  this  Communication,  the  Commission  has  already 
launched industrial alliances: on raw materials, batteries and hydrogen.  

38 COM(2021) 66. 
39 E.g. an analysis of sensitive ecosystems identifies about 20 products imported from China on which both the 
EU and the US are highly dependent (including in the health, energy intensive industries, renewables and 
digital/electronics ecosystems). The same holds true for other close EU trading partners. 
40  Including  the  Strategic  Research  and  Innovation  Agendas  of  Horizon  Europe  partnerships  supported  by 
industry and Member States, which build the basis for ERA Industrial technology roadmaps (COM(2020) 628),  
page 10. There are 49 proposed public private partnerships in the Horizon Europe Programme and nearly EUR 
25 billion of EU contribution, aiming at mobilising at least the same amount from private partners and Member 
States. 

13 

 
 
                                                           
Building on this positive experience, the Commission is preparing the launch of the two alliances 
that  had  already  been  announced  in  the  New  Industrial  Strategy  and  in  the  Digital  Decade 
Communication  in  the  digital  field:  the  Alliance  on  processors  and  semiconductor 
technologies and the Alliance for Industrial Data, Edge and Cloud. Bringing together a wide 
range  of  stakeholders,  these  alliances  will  help  achieve  key  EU  policy  objectives  in 
microelectronics  and  strengthen  Europe’s  industrial  position  in  the  global  cloud  and  edge 
computing  market,  notably  addressing 
increasing  distribution  and 
decentralisation  of  data  processing  capacities  and  the  need  to  enable  federated  and  vendor-
agnostic cloud ecosystem. 

towards 

trend 

the 

The Commission is also considering the preparation of: i/ an  Alliance on Space Launchers to 
bring together all players, big and small, to work towards a globally competitive, cost-effective 
and autonomous EU access to space; and ii/ an Alliance on Zero Emission Aviation to ensure 
market  readiness  for  disruptive  aircraft  configurations  (e.g.  hydrogen,  electric),  leveraging  the 
existing  investments  under  the  Clean  Sky  initiative  and  contributing  to  Europe’s  2050  climate 
neutrality objective, working in full complementarity with the Renewable and Low-Carbon Fuels 
Alliance41 currently under consideration. 

The  Commission  will  continue  to  support  Member  States’  efforts  to  pool  public  resources  via 
Important Projects of Common European Interest (IPCEIs) in areas where the market alone 
cannot  deliver  breakthrough  innovation,  as  has  been  the  case  in  the  areas  of  batteries42  and 
microelectronics.43  Member  States  and  companies  have  jointly  expressed  interest  to  engage  in 
industry, 
such  as  next-generation  cloud,  hydrogen, 
additional 
pharmaceuticals  and  a  second  IPCEI  on  cutting-edge  semi-conductors.  The  Commission  will 
examine these project plans attentively and, where the criteria are met, will accompany them as 
they reach maturity. In appropriate cases, such as in the case of batteries, industrial alliances can 
help to prepare such IPCEIs. 

low-carbon 

IPCEIs, 

The EU budget can also support investments in areas of strategic importance. For instance, the 
national  recovery  and  resilience  plans  can  include  contributions  to  the  Member  State 
compartments  under  the  InvestEU  Programme  and  Member  States  could  use  parts  of  their 
national allocations to invest in such sectors.  

Strategic dependencies can have a particular impact on SMEs, ranging from higher switching 
costs to a lack of vibrant start-up communities and innovative smaller providers. In 2021, with a 
combined budget of EUR 61 million under the Single Market Programme the European Cluster 
Collaboration  Platform  and  Enterprise  Europe  Network  will  take  reinforced  actions  to  assist 
SMEs to address disruptions and vulnerabilities or diversify by connecting them to new local and 
cross-border  partners,  thereby  increasing  SME  resilience.  Digital  solutions,  such  as  industrial 
manufacturing data spaces, would also lead to more flexible supply chains.  

Global  leadership  in  technologies  goes  hand-in-hand  with  leadership  in  standard-setting  and 
ensuring interoperability. Global  convergence on the same international  standards helps  reduce 
adaptation costs and strengthens EU and global value chains. For the EU to retain its influence in 
setting  global  standards,  its  own  standardisation  system,  a  core  of  the  Single  Market,  has  to 
function  in  an  agile  and  efficient  way.  Be  it  on  hydrogen,  batteries,  offshore  wind,  safe 
chemicals, cybersecurity or space data, our industry needs European and international standards 

41 COM(2020) 789 Sustainable and Smart Mobility Strategy 
42 https://ec.europa.eu/commission/presscorner/detail/en/IP_21_226. 
43 https://ec.europa.eu/commission/presscorner/detail/et/ip_18_6862. 

14 

 
 
                                                           
that underpin its twin transition in a timely manner. Establishing global leadership in these key 
priority standards is also a critical matter for the competitiveness and resilience of EU industries.  

The Commission will present a strategy on standardisation. This will support a more assertive 
stance on European interests in  standardisation (in the EU and globally)and in  working openly 
with others on certain areas of mutual interests (e.g. US and Canada on lawful and ethical use of 
AI).  In  this  context,  the  Commission  will  assess  whether  amendments  to  the  Standardisation 
Regulation are required to achieve these objectives. A Joint Task Force between the Commission 
and European Standardisation Organisation (ESOs) will define agreed solutions to adopt in a fast 
manner those standards identified as crucial. The Commission will also pay particular attention 
to anticipating standardisation needs that support the twin transition of industrial ecosystems.  

European companies need to benefit from a level playing field globally and in the Single Market.  
EU competition and trade policies have to remain assertive against unfair and coercive practices, 
while  favouring  international  cooperation  to  solve  global  common  problems.    In  conjunction 
with the present Communication, the Commission is proposing a legal instrument to address the 
potentially  distortive  effects  of  foreign  subsidies  in  the  Single  Market.  It  will  make  sure  that 
potentially  distortive  subsidies  granted  by  foreign  governments  to  undertakings  wishing  to 
acquire  an  EU  company  or  bid  in  public  procurement  do  no  longer  go  unchecked.  The 
Commission will continue to address with our trading partners distortive industrial subsidies.  

Public  spending  through  procurement  amounts  to  14%  of  EU  GDP  each  year.  The  European 
public  procurement  framework  can  help  strengthen  companies’  competitiveness,  including 
through the use of strategic criteria notably for green, social and innovation procurement, while 
ensuring transparency  and competition.  It  is  also important to  increase innovation  procurement 
of  digital  solutions  and  in  R&D  procurement.44  In  addition,  the  Commission  will  develop 
guidance on how to use public procurement effectively  to strengthen the resilience of key 
ecosystems, using a toolbox to help public buyers identify and address strategic supply risks and 
dependencies and diversify the supplier base. 

KEY ACTIONS 
Adopt  proposal  to  address  the  potentially  distortive  effects  of  foreign 
subsidies in the Single Market 
Periodic review of strategic dependencies and monitoring of risks associated 
with strategic dependencies  
Explore  international  partnerships  and  cooperation  to  address  strategic 
dependencies  
Launch  of  alliances  on  processors  and  semiconductor  technologies,    on 
industrial data, edge and cloud  
Reinforced action on SME supply chain disruptions and vulnerabilities 
Adopt a standardisation strategy  
Guidance  on  identifying  and  addressing  strategic  dependencies  through 
public procurement  

TIMING 
May 2021 

Starting 
2021 
Starting 
2021 
Q2 2021 

Q4 2021 
Q3 2021 
Q1 2022 

in 

in 

44 The level of underinvestment in innovation procurement in Europe compared to its major trading partners is 
the largest in digital solutions and in R&D procurement (respectively a factor 3 and factor 5 underinvestment). 
https://digital-strategy.ec.europa.eu/en/news/final-report-available-benchmarking-innovation-procurement-
investments-and-policy-frameworks-across   

15 

 
 
                                                           
5.  ACCELERATING THE TWIN TRANSITIONS 

The 2020 Industrial Strategy included a list of actions to support the green and digital transitions 
of  EU  industry,  many  of  which  are  already  implemented,45  but  the  pandemic  has  drastically 
affected  the  speed  and  scale  of  this  transformation.  It  is  now  clearer  than  ever  that  companies 
pursuing sustainability and digitalisation are more likely to succeed than others. This is why the 
digital transformation of businesses is one of the four cardinal points of the Digital Compass.46 

Co-creating transition pathways across relevant industrial ecosystems 

The Annual Single Market Report 202147 presents a first analysis of the challenges faced by 14 
industrial  ecosystems  as  they  have  been  identified  so  far,  but  also  of  the  transformative 
initiatives  already  undertaken  to  achieve  the  twin  transition  and  increase  resilience.  As  an 
illustrative  example,  the  Staff  Working  Document48  on  clean  and  competitive  European  steel 
looks  in  detail  at  what  the  green  and  digital  transition  means  for  this  particular  sector  and 
explains how EU policy measures support the industry in leading the transition.  

These  analyses  can  serve  to  co-create,  in  partnership  with  industry,  public  authorities,  social 
partners  and  other  stakeholders,  transition  pathways  for  ecosystems,  where  needed.  Such 
pathways will offer a better bottom-up understanding of the scale, cost, long term benefits and 
conditions  of  the  required  action  to  accompany  the  twin  transition  for  the  most  relevant 
ecosystems,  leading  to  an  actionable  plan  in  favour  of  sustainable  competitiveness.  Such  plan 
should  take  into  account  relevant  inputs  such  as  industrial  technology  roadmaps  announced  in 
the Communication on the European Research Area49 and those developed under the Action Plan 
on Synergies between civil, defence and space industries.50  

Priority should be  given to  the ecosystems  and sectors that face the most important  challenges 
meeting  climate  and  sustainability  goals  and  embracing  the  digital  transformation,  and  whose 
competitiveness depends on this, such as energy-intensive industries (including the chemical and 
steel  sectors),51  and  construction,  as  well  as  to  sectors  heavily  affected  by  the  crisis,  which 
benefit from accelerating their twin transition in order to boost their recovery (such as tourism 
and mobility52). 

Supporting the business case for the green and digital transitions 

EU industry has embraced the challenges and opportunities that the twin transition brings. It is 
ready to invest, but  asks  for predictability and a  real  business case, with  a coherent  and stable 
regulatory  framework  access  to  capacities  and  infrastructure,  finance  for  innovation  and 
deployment, raw materials and decarbonised energy, demand-side measures for climate neutral 
and circular products and the right skills. These are necessary for a competitive transition.  

45 SWD(2021) 351, Annual Single Market Report 2021, section 3 and Annex II. 
46 COM(2021) 118 final. 
47 SWD(2021) 351, Annual Single Market Report 2021, Annex III.   
48 SWD(2021) 353, Toward Competitive and Clean European Steel. 
49 COM(2020) 628 final, A new ERA for Research and Innovation. 
50 COM(2021) 70 final, Action Plan on synergies between civil, defence and space industries. 
51 Synergies should be developed  between the transition pathways and the indicative voluntary roadmaps, as 
envisaged under the European Climate Law Regulation. 
52  Taking into account the Sustainable and Smart Mobility Strategy (COM(2020) 789 final). 

16 

 
 
                                                           
The EU’s immediate opportunity to support such business cases lies in its recovery efforts. The 
EU Budget and NextGenerationEU, and notably the Recovery and Resilience Facility, should be 
used as a springboard to speed up the recovery in Europe and reinforce the commitment to the 
green  and  digital  transition.  Based  on  their  relevance  across  Member  States,  the  very  large 
investments required, and their potential to create jobs and growth and reap the benefits from the 
green and digital transitions, the Commission has strongly encouraged Member States to include 
in  the  national  Recovery  and  Resilience  Plans  investment  and  reforms  in  a  limited  number  of 
flagship areas53. The Commission is now carefully assessing the national plans and will monitor 
their  implementation  to  ensure  in  particular  that  at  least  37%  of  funding  is  dedicated  to  green 
investments and at least 20% is dedicated to digitalisation. Many national recovery and resilience 
plans  will  channel  funding  to  green  and  digital  SME  investments.  The  2021-2027  Cohesion 
policy funds will have a strong focus on the twin transition, contributing to the green and digital 
transformation of the EU’s economy. 

The Recovery and Resilience Plans offer an unprecedented opportunity to join forces in  multi-
country projects to build digital and green critical capacities. A number of Member States have 
signalled  their  intention  to  include  in  their  draft  national  plans  multi-country  projects.  These 
projects  could  accelerate  much-needed  investment  in  the  field  of  hydrogen,  5G  corridors, 
common data infrastructure and services, sustainable transport, blockchain or European Digital 
Innovation Hubs. The Commission is assessing options for an effective mechanism to accelerate 
the  implementation  of  such  multi-country  projects,  enabling  notably  possible  combination  of 
Member States and EU financing54.  

The enforcement of competition rules, in particular State aid rules, will ensure that public funds 
for  the  recovery  do  not  replace  but  trigger  additional  private  investments.  The  Commission  is 
also conducting an extensive review of the EU competition rules to make sure that they are fit 
to support the green and digital transition to the benefit of Europeans, at a time when the global 
competitive landscape is also fundamentally changing.  The revision of the environmental and 
energy  State  aid  rules  will  better  enable  Member  States  to  support  business  to  de-carbonise 
their production processes and adopt greener technologies.in the context of the Green Deal and 
the New Industrial Strategy. State aid rules on IPCEIs help catalyse cross-border investment in 
ground-breaking  innovations,  where  the  market  alone  would  not  take  the  risk,  and  only  where 
the positive effects of addressing a clear market failure outweighs the risk of market distortion in 
the  Single  Market.  Whilst  the  recent  evaluation  of  the  current  IPCEI  Communication  showed 
that  the  provisions  work  well,  some  targeted  adjustments  would  be  necessary,  including  to 
further enhance their openness and facilitate participation of SMEs and to provide guidance on 
the criteria to pool funds from national budgets and EU programmes. The new Regional State aid 
Guidelines will enable Member States to support the least favoured regions in catching up and 
reducing disparities, as well as regions facing transition or structural challenges, while ensuring a 
level playing field between Member States. 

In its evaluation of the State aid Broadband Guidelines, the Commission is assessing whether 
those rules are fit-for-purpose and in line with recent technological and market developments, so 
that  they  can  fully  support  the  EU’s  ambitions  in  respect  of  the  deployment  of  broadband 
infrastructure in line with the policy objectives as set out inter alia in the Gigabit Society and the 
Digital Decade communications. Further, the on-going review of the antitrust rules applicable 

53 Annual Sustainable Growth Strategy 2021, COM (2020) 575 final. The flagships are titled: Power Up; 
Renovate; Recharge & refuel; Connect; Modernise; Scale-up; Reskill & upskill. 
54 As announced in the Communication “2030 Digital Compass”, COM (2021) 118 final. 

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to horizontal agreements between companies will cover, amongst others, issues that are key to 
the  green  and  digital  transition,  such  as  research  and  development  agreements,  and  provide 
guidance  on  so-called  “sustainability  agreements”  and  procompetitive  data-sharing  and  data-
pooling agreements. Similarly, the ongoing review of the Vertical Block Exemption Regulation 
and the Vertical Guidelines aims at bringing the applicable rules closer to new market realities 
with  growing  e-commerce  and  online  sales  in  particular  and  provide  up  to  date  guidance  to 
businesses on these matters. The Notice on market definition is also under review, taking into 
account  developments  such as digitalisation and globalisation. With the Trade Policy Review, 
the Commission has set out a plan for trade policy to play its full role in the twin transition. As 
part of its focus on implementation of trade and investment agreements, the EU will use all in-
built flexibilities in its existing trade agreements so that they are fit for purpose and respond to the 
new challenges relating to the green and digital transition. 

To  support  the  financing  of  a  green  recovery,  the  Commission  is  preparing  its  Renewed 
Sustainable Finance Strategy and a legislative initiative on sustainable corporate governance 
providing for due diligence by companies. In addition, the support to green investments will be 
paired with the development of new standards for green finance.  

Before  the  summer  break  2021,  the  Commission  will  come  forward  with  the  ‘fit-for-55’ 
package, presenting a coherent  revision of the key instruments of the 2030 climate and energy 
package, in view of achieving a climate-neutral Europe by 2050. The Commission will present a 
Carbon  Border  Adjustment  Mechanism  for  selected  sectors,  to  better  address  the  risk  of 
carbon leakage, in full compliance with WTO rules. Existing tools to address the risks of carbon 
leakage  of  globally  exposed  energy-intensive  industries  should  continue  to  be  used  until  fully 
effective  alternative  arrangements  are  in  place.  Given  the  diversity  of  approaches  to  carbon 
pricing worldwide, the Commission will continue to reach out to the EU’s international partners 
to find grounds for cooperation in this area. 

The Horizon Europe Programme, with all its tools - partnerships55, the European Innovation 
Council  and  the  Institute  of  Innovation  and  Technology  -  will  support  next  generation  pan-
European  innovation  ecosystem  for  green  and  digital  transition.  The  Innovation  Fund  will 
continue providing critical support for the commercial demonstration of innovative low-carbon 
technologies  in  multiple  sectors.  As  part  of  the  proposal  for  a  revised  ETS  Directive,  the 
Commission  is  considering  proposing  a  European  approach  to  carbon  contracts  for 
difference, using ETS revenues and complementing other forms of support under the Innovation 
Fund.   

Current investments into renewable energy sources, energy storage, grids, interconnections and 
industrial  transformation  in  the  EU  are  too  slow.56  For  the  green  transition  to  bring  genuinely 
sustainable  competitiveness,  industry  needs  access  to  abundant,  affordable  and  decarbonised 
electricity,  and  additional  efforts  are  required  in  this  regard.  The  Commission  will  work  with 
Member  States  to  increase  their  ambition  on  renewable  energies  and  streamline  permit 
procedures.  The  Energy  and  Industry  Geography  Lab,  a  tool  under  development  by  the 
Commission’s Joint Research Centre in  collaboration with  industrial stakeholders, will provide 

55 Covering clean steel, process industries, hydrogen, batteries, zero-emission road transport, clean aviation, zero 
emission waterborne transport, sustainable built environment and advanced manufacturing, among others. 
56  SWD(2020)  176  final,  Impact  Assessment  accompanying  the  2030  Climate  Target  Plan  (table  12);  Agora-
Energiewende & EMBER (2021): The European Power Sector in 2020. The latest National Energy and Climate 
Plans indicate a 72 TWh/year increase of wind and solar power generation between 2020 and 2030, but 93-100 
TWh/year would be required to achieve the 55% climate goal.  

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geospatial  information  for  companies  and  energy  infrastructure  planners.  Industrial  consumers, 
SMEs and communities can also work together for long-term price security to renewable power 
projects and improved environmental footprint. The Commission will consider measures, as part 
of  the  revised  Renewable  Energy  Directive  in  June  2021,  to  support  the  uptake  of  corporate 
renewable Power Purchase Agreements, and remove any unjustified barriers.  

The  market  expansion  and  global  growth  in  demand  for  wind  turbines,  solar  PV  panels,  and 
smart energy technologies is a key opportunity, as greater scale should bring lower energy costs 
for  industry  as  well  as  society  at  large.  The  Commission  welcomes  efforts  to  scale  up 
manufacturing  of  these  technologies  in  the  EU,  such  as  the  industry-led  European  Solar 
Initiative.  The  Commission  is  also  working  on  ecodesign  measures  for  solar  panels,  including 
possible requirements on carbon footprint. 

The European  Raw Materials  Alliance (ERMA) is  establishing a project pipeline for both  the 
rare earths and magnets value chains and on energy storage and conversion materials. If all the 
projects identified by the ERMA were to be implemented, these could allow as much as 60% of 
the EU annually installed wind energy capacity to rely on rare earths magnets made in the EU by 
2030 and for EU supply to cover 20% of projected nickel demand by 2030.57    

Continued  efforts  towards  sustainable  product  design,  a  circular  economy  and  increased 
collection  and  recycling  of  raw  materials,  as  well  as  a  functioning  market  for  secondary  raw 
materials,  will  be  key.  The  Commission’s  proposal  for  a  Batteries  Regulation  provides  an 
innovative regulatory framework for batteries covering their entire lifecycle.  

SMEs  can  profit  from  the  green  transition  but  need  advice  and  financial  support  to  make  the 
most out of it. The Enterprise Europe Network is already putting in place Sustainability Advisors 
to  provide  dedicated  advice  to  SMEs  and  these  will  be  fully  in  place  as  of  2022.  They  will 
promote both SME innovation in decarbonised electricity generation, including the use of solar 
panels  and  on  energy  efficiency.  Digitalisation  is  also  essential  for  SMEs  so  all  relevant 
platforms58  will  act  together  to  support  SMEs  in  their  ecosystems  in  e.g.  adopting  data-driven 
business  models,  and  solutions  against  cyber  threats.  By  2023,  the  Digital  Europe  Programme 
will  inject  EUR  310  million  into  the  European  Digital  Innovation  Hubs  that  will  offer  SMEs 
local support in digital transformation and access to technology testing.  In 2021, the European 
Innovation  Council  will  also  channel  EUR  1.1  billion  in  grants  and  equity  funding,  mostly  to 
start-ups and innovative SMEs.  

The  Commission  will  work  to  reinforce  the  synergies  between  the  sustainable  and  digital 
transitions.  Digital  solutions,  such  as  digital  twins  in  advanced  manufacturing,  can  help 
optimise processes in all ecosystems. The industry-led European Green Digital Coalition will 
measure  the  impact  and  speed  up  the  deployment  of  digital  solutions  to  green  key  sectors.  To 
deliver on the commitments made in the Digital Compass,59 the Commission is going to identify 
additional measures to reach the carbon neutrality target of ICT technologies and to increase 
the uptake of digital technologies to lower the environmental footprint of other ecosystems.  

The  green  and  digital  transitions  cannot  be  realised  without  more  and  fair  data  sharing,  in 
particular  to  optimise  sustainability,  and  to  develop  innovative  products  and  services.  To  help 
unleash the potential of data by companies and the public sector, the Commission will propose a 

57 See chapter 5.1 of SWD(2021) 352, Strategic Dependencies and Capacities for the underlying calculations. 
58 European Digital Innovation Hub (EDIH) network, ECCP, EEN, and Startup Europe. 
59 COM(2021) 118 final, 2030 Digital Compass: the European way for the Digital Decade. 

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Data  Act  in  2021  and  will  continue  to  support  the  establishment  of  sectoral  ‘Common 
European  data  spaces’,  in  full  compliance  with  fundamental  rights,  via  the  upcoming  Digital 
Europe  Programme.  At  international  level,  the  EU  is  engaging  in  the  WTO  Joint  Statement 
initiative negotiations on e-commerce to shape the global rules on digital trade. To promote the 
development  of  safe  and  trustworthy  Artificial  Intelligence,  the  Commission  presented  a 
proposal  for  a  regulatory  framework  on  AI  and  a  revised  coordinated  plan  on  AI  on  21  April 
2021. 

Investment in skills is an important component of investing in people, and will be essential to 
support  the  twin  transition  and  to  contribute  to  a  fair  recovery.  The  European  Skills  Agenda 
supports the green and digital transitions with initiatives like the Pact for Skills. It helps mobilise 
the  private  sector  and  other  stakeholders  to  upskill  and  reskill  Europe’s  workforce.  The  Pact 
supports  large-scale  skills  partnerships  per  ecosystem,  some  of  which  already  put  forward 
skilling commitments (automotive, microelectronics, and aerospace and defence industries). The 
Skills  Roundtables,  organised  by  the  Commission  with  relevant  stakeholders  from  each 
ecosystem, will have covered all ecosystems by mid-2021, and will contribute to the design and 
implementation  of  the  pathways.  The  EU  budget  for  2021-2027  includes  a  number  of 
instruments  that  can  support  upskilling  and  reskilling.60  The  national  recovery  and  resilience 
plans can also contribute, as well as effective active support to employment.61  

  KEY ACTIONS 
Co-creation  of  green  and  digital  transition  pathways  for 
relevant  ecosystems,  starting  with  tourism  and  energy 
intensive industries 
Actions 
renewable  Power  Purchase 
Agreements  in  the  proposal  for  a  revised  Renewable 
Energy Directive 
Consider  European  approach  for  carbon  contracts  for 
difference in the proposal for a revised ETS Directive 
Energy and Industry Geography Lab 

to  promote 

TIMING 
As of Q2 2021   

Q2 2021 

Q2 2021 

As of Q4 2021  

6.  CONCLUSION: COMING BACK STRONGER IN PARTNERSHIP 

The new Industrial Strategy 2020 strategy laid the foundations for an industrial policy that would 
support the twin transitions, make EU industry more competitive globally and enhance Europe’s 
strategic autonomy. It set out a new industrial way for Europe, fit for the ambitions of today and 
the realities of tomorrow. It is still work in progress, building on Europe’s assets as the home of 
industry – our diversity and the talent of our people, our innovators and creators, our values and 
social market traditions. This new industrial strategy is entrepreneurial in spirit and action, and 
as valid as ever. 

The  EU,  its  Member  States  and  industry  are  now  drawing  the  lessons  from  the  crisis  and  are 
ready  to  put  Europe’s  industry  on  a  new  sustainably  competitive  footing.  This  means 
implementing and building on the measures announced on industry, SMEs and the Single Market 
in the March 2020 Industrial package. It  also means securing Europe’s central  asset, its Single 
Market,  ensuring  open  strategic  autonomy  and  accelerating  the  green  and  digital  transitions 

60 Such as the European Social Fund, Erasmus or the Digital Europe Programme. 
61 Commission Recommendation for Effective Active Support to Employment (C(2021) 1372 final).  

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across  the  EU  territory.  Legislation,  co-creation,  investment,  partnerships  and  international 
cooperation all have a role to play. This update to the Industrial Policy Package will help achieve 
those goals.  

To be effective, these efforts must be supported by strong partnerships between the EU, Member 
States, social partners, industrial and other relevant stakeholders, between and within industrial 
ecosystems,  building  on  the  EU’s  open  and  inclusive  Industrial  Forum.  For  the  most  relevant 
ecosystems  and  together  with  other  relevant  stakeholders,  the  Forum  will  support  the 
development  of transition  pathways  and the analysis  of strategic dependencies.  It  will promote 
best  practices  and  solutions  across  ecosystems  and  identify  cross-border  and  cross-ecosystem 
investment needs and cooperation opportunities.  

The  Commission  will  continue  promoting  political  ownership  of  the  industrial  strategy, 
continuing regular dialogues with the European Parliament and the Council.  

The EU will seek international cooperation wherever possible to build a strong global economy, 
based on EU principles including a level playing field, leadership on standard setting and other 
regulatory priorities, and strengthening the resilience of global supply chains.   

21