COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 2023 Strategic Foresight Report Sustainability and people's wellbeing at the heart of Europe's Open Strategic Autonomy
Date: 2023-07-06
Institutions: European Commission, Secretariat-General
Subjects: European social policy, adaptation to climate change, green economy, social impact, socioeconomic conditions, sustainable development, welfare

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 6.7.2023  COM(2023) 376 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 2023 Strategic Foresight Report      Sustainability and people's wellbeing at the heart of Europe's Open Strategic Autonomy  
 
 
I.  Introduction  

The  European  Union  is  forging  ahead  with  unprecedented  action  to  achieve  climate 
neutrality and sustainability. A successful transformation will limit the existential risks of 
climate  change  and  the  environmental  crisis  while  strengthening  the  EU’s  open  strategic 
autonomy  and  economic  security.  It  will  be  key  to  reinforcing  Europe’s  long-term 
competitiveness and social model, and thus its global leadership in the new, net-zero economy, 
also by supporting other regions in building a sustainable future. Ultimately, this will increase 
the wellbeing of current and future generations. 

However,  a  successful  and  fair  socio-economic  transformation  is  not  a  given.  Together 
with its twin, the digital transition, the green transition requires pivotal changes and trade-offs 
that will affect, among others, our economies and societies at an unmatched pace and scale. To 
succeed in this transformation, it is essential to recognise the links between the environmental, 
social, and economic dimensions of sustainability. This will enable Europe to pursue a forward-
looking geopolitical strategy that successfully leverages its most valuable assets – namely, its 
unique social market economy and its position as the largest trading block in the world. 

Against this backdrop, the 2023 Strategic Foresight Report examines the key intersections 
between the structural trends and dynamics affecting the social and economic aspects of 
sustainability, to clarify the potential choices and trade-offs that the EU is likely to face 
in the future. Drawing on an inclusive foresight exercise1 and building on the three previous 
editions2, it explores key challenges that will determine the transformation of our society and 
economy  towards  a  model  that  respects  planetary  boundaries,  and  safeguards  global 
competitiveness, strong social foundations, and resilience. It  also investigates how pursuing 
inclusive  wellbeing  over  the  long-term,  engaging  in  a  pathway  towards  sustainability,  and 
consolidating democracy can be the recipe for Europe to strengthen its global role.  

On this basis, the report proposes ten areas for action to achieve the objectives of a socially 
and economically sustainable Europe with a stronger role in the world in the coming years. 

II.  Key intersections between social and economic sustainability challenges 

We  have  been  experiencing  an  era  of  permacrisis  and  polycrisis,  with  a  conjunction  of 
increasing effects of climate change and environmental challenges, the COVID-19 pandemic, 
and the Russian war of aggression against Ukraine. New conflicts and escalation of the existing 
ones, mass displacements, financial crises, or pandemics are other examples of potential crises 
we might face in the future. Finally, the unprecedented scale of the transitions creates various 

1   This Communication builds on the Joint Research Centre’s Science for Policy Report, Towards a fair and 
sustainable Europe 2050: social and economic choices in sustainability transitions, based on a fully-fledged 
foresight process. It started with the creation of foresight scenarios describing alternative versions of the EU 
sustainable future by 2050. For each scenario, the sustainability transition pathways were derived using a co-
creative backcasting technique. This allowed the identification of new, alternative practices and structures as 
well as the phasing out of existing unsustainable practices and structures by 2050, including the analysis of 
trade-offs, bottlenecks, and synergies along the transition pathways. A cross-cutting analysis of the diverse 
patterns of change identified critical domains enabling the transformational changes towards sustainability. 
The foresight process also included consultations with experts and stakeholders, discussion with Commission 
services,  agencies  and  joint  undertakings,  publication  of  a  call  for  evidence,  discussions  with  institutional 
partners (European Strategy and Policy Analysis System) and Member States.  

2   The  2022  Strategic  Foresight  Report  focused  on  the  interplay  between  Europe’s  twin  transitions  in  a  new 
geopolitical  context.  The  2021  edition  evolved  around  important  trends  affecting  the  EU’s  open  strategic 
autonomy and freedom to act in the coming decades. The 2020 report analysed the EU’s resilience across four 
dimensions: social and economic, geopolitical, green, and digital. 

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challenges  affecting  social  and  economic  aspects  of  sustainability  (Figure  1).  Their 
intersections and combined effects will need to be taken into account to enable viable pathways 
towards Europe’s sustainability.  

Figure 1: Key challenges for the EU’s sustainability transition 

1. The rise of geopolitics and reconfiguration of globalisation  

The global stage is in flux, with various international actors assuming new, often more 
confrontational,  roles.  Russia's  war  of  aggression  against  Ukraine  has  challenged  the 
foundations of multilateralism and the rules-based international order. China is moving into a 
new era, focused on economic influence and diplomatic assertiveness, aiming at  a systemic 
change of the international order. It remains a systemic rival and economic competitor, while 
being a multilateral partner. The US is following a course of deeply integrating domestic and 
foreign  policies.  This  involves  strengthening  its  industrial  base,  protecting  next-generation 
technologies, working with international partners to develop economic partnerships focused on 
global challenges, and mobilising investment into emerging economies3. The US also remains 
the  EU’s  strategic  partner.  At  the  same  time,  the  strategic  course  of  China  and  the  US  is 
galvanising  geopolitical,  economic,  and  technological  global  rivalry.  We  also  observe  an 
increasing quest for influence and representation in international fora by emerging countries. 
They  include  powers  with  different  governance  models  and  values,  hedging  countries 
(displaying a mix of cooperative and confrontational strategies), as well as smaller and fragile 
states  demanding  climate  justice.  This  challenges  effective  international  cooperation  on 

3   Remarks by US National Security Advisor Jake Sullivan on Renewing American Economic Leadership at the 

Brookings Institution on 27 April 2023.  

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transnational issues, such as climate change or the energy transition, even if their urgency is 
only increasing. 

Tensions  in  the  global  order  are  accompanied  by  a  ‘battle  of  narratives’,  increasingly 
turning  into  a  ‘battle  of  offers’,  shaping  both  global  public  opinion  and  government 
action. The EU has put forward the Global Gateway to support smart investments in quality 
infrastructure, respecting the highest social and environmental standards, in line with European 
values and standards. However, the EU’s and, more broadly speaking, Western narratives, are 
increasingly challenged. For example, despite Russia’s blatant violation of essential principles 
of  international  law,  two  thirds  of  the  world’s  population  live  in  states  that  have  adopted  a 
neutral or Russia-leaning stance4. This is partly due to propaganda, mis- and disinformation 
seeking to influence national and global attitudes, increasingly amplified by social media and 
misleading uses of generative artificial intelligence.  

As the EU represents only 6.9% of greenhouse gas emissions and around 5% of the world 
population, global buy-in and cooperation will be key to address these challenges5. At the 
same  time,  in  a  period  of  global  economic  turbulence,  several  emerging  and  developing 
countries face more challenges to cutting carbon emissions, despite being exposed to increasing 
climate-driven  hazards.  They  also  raise  concerns  about  some  of  the  EU’s  recent  green 
initiatives, as those could turn into barriers to their development. This is especially the case for 
many African, Latin American, and Asian countries, where the economic influence of China 
has  been  important,  and  the  EU  approach  based  on  a  partnership  of  equals  needs  to  be 
reinforced. International relations are becoming increasingly transactional, as more and more 
countries navigate in search of the most advantageous partnerships. This results in a surging 
‘battle  of  offers’  (for  example  on  financing,  infrastructure  development,  or  support  for  the 
energy  transition)  and  initiatives,  such  as  China’s  Belt  and  Road  Initiative,  or  the  G7’s 
Partnership for Global Infrastructure and Investment6.  This is also a ‘battle of models’ between 
democratic and authoritarian regimes. 

Globalisation  as  we  know  it  is  fundamentally  challenged.  Multilateral  rules,  norms,  and 
institutions have provided a framework for global economic integration and free trade that have 
lifted millions out of poverty. However, successive challenges and emerging threats show that 
this model of globalisation is coming under strain.  The pandemic has highlighted the fragility 
of global supply chains and has exposed the EU’s strategic dependencies. Rising geo-economic 
confrontation is further re-arranging global trade and investment flows. This increases the risk 
of  trade  restrictions  and  supply  chain  disruptions,  and  hampers  the  flow  of  green  goods, 
services, and technologies. It can also exacerbate the EU’s dependencies, including access to 
critical raw materials needed for the twin transitions, and challenges the EU’s strategic sectors 
(from batteries to microchips). Moreover, the quest for resilient supply chains may also impact 
the environment (e.g. through reshoring of industrial activity, increased interest in extraction 
in contested areas) and the economy (e.g. by exercising pressure on public budgets and local 
jobs in export-oriented sectors). These dynamics gradually affect EU policies, including many 

4   36% of the world’s population live in countries which actively condemned and imposed sanctions on Russia. 
Nearly one third in a country that has remained neutral. Finally, another 32% is in states where the government 
supported Russia’s actions or narrative. Howey, W. (2022), Russia can count on support from many developing 
countries, https://www.eiu.com/n/russia-can-count-on-support-from-many-developing-countries/ 

5   EDGAR - Emissions Database for Global Atmospheric Research, European Commission. 
6   The G7’s Partnership for Global Infrastructure and Investment, of which the EU’s Global Gateway is part of, 
aims to respond to the demand for high quality infrastructure financing in low- and middle-income countries. 

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previously considered as mainly domestic, and challenge sectoral approaches to policymaking.  
In  this  context,  a  reinvigorated  effort  to  uphold  multilateralism  and  reform  the  WTO  gains 
added urgency.  

2. Quest for a sustainable economy and wellbeing 

The EU is at a key juncture which requires a joint push from policymakers and businesses 
to  ensure  a  leading  position  in  the  global  race  to  net-zero  industry.  Sustainability  will 
represent a major source of the EU’s long-term competitive advantage7, increasing its market 
share for related products, services, and technologies, as well as attracting global investments 
and  talent.  The  EU  has  already  dedicated  substantial  efforts  to  support  several  green 
technologies  and  solutions:  from  hydrogen,  advanced  materials,  to  water  cycle  or 
sustainability-by-design. Still, as global competition intensifies, increasing support for research 
and  development,  and  manufacturing  of  strategic  net-zero  technologies8,  implementing  an 
ambitious  economic  security  strategy9,  and  boosting10  investments  in  areas  of  critical 
importance where the EU displays high dependencies will be key to bolstering its open strategic 
autonomy11.  

Rising pressures on the social and economic aspects of sustainability fuel the debate about 
the need for a new economic  model,  focused on  the  wellbeing  of people and nature. A 
predominant focus on economic factors, without due consideration for the quality of growth 
and jobs, has  encouraged unsustainable  production and consumption  practices.  At the same 
time, environmental resources, which are not infinite, form the very foundation of economic 
activity: for example, 72% of the 4.2 million companies in the euro area are highly dependent 
on at least one nature-related service such as pollination, clean water, healthy soil, or timber12. 
Avoiding the disruption of critical natural systems, such as the water cycle, respecting planetary 
boundaries, and halting biodiversity loss, are thus essential preconditions for resilient societies 
and sustainable economies. As this interdependence between the economy and the environment 
is becoming increasingly clear, it also becomes a matter of intergenerational fairness: adapting 
the  economic  model  will  be  the  foundation  for  the  wellbeing  and  material  wealth  of  future 
generations, including the way economic gains are distributed. The European Semester is built 
around  the  four  dimensions  of  competitive  sustainability:  environmental  stability,  social 
fairness, productivity, and macroeconomic stability. However, the above-mentioned issues call 
for additional ways to capture progress and prosperity beyond gross domestic product (GDP). 

7  University 

of 

Cambridge 

Institute 

for 

Sustainability 

Leadership 

(CISL), 

(2022) 

https://www.cisl.cam.ac.uk/competitive-sustainability-index  

8   Net Zero Industry Act, COM(2023) 161 final. 
9   European Economic Security Strategy, JOIN(2023) 20 final. 
10   Investment needs assessment and funding availabilities to strengthen EU's Net-Zero technology manufacturing 

capacity, SWD(2023) 68 final. 

11   Spain,  together  with  other  Member  States,  has  developed  under  the  framework  of  the  EU-wide  Foresight 
Network, a dedicated track to analyse current and future dependencies in four critical sectors (energy, digital 
technology,  health,  and  food),  also  drawing  on  the  methodology  proposed  by  the  Commission  (see  SWD 
(2021) 352 final, SWD(2022) 41 final, WP2023/14). This work provides recommendations on strengthening 
the EU’s open strategic autonomy, including its economic security, and global leadership by 2030. 

12   Elderson,  F.,  (2023),  https://www.ecb.europa.eu/press/blog/date/2023/html/ecb.blog230608~5cffb7c349.en.

html  

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Adjusting GDP for different factors 

Over the last 90 years, GDP has been one of the most widely used economic indicators and remains the 
most important indicator of a country’s economic performance. At the same time, reflections on its 
limitations have started already in the 1970’s. With recent developments such as climate change and 
the pandemic, it has become increasingly clear that GDP is incomplete as a measure of progress, as it 
does  not  fully  reflect  important  environmental  or  social  challenges  of  our  times.  This  calls  for 
developing complementary metrics – and progressively embedding them into policymaking –, which 
allow to better track the EU’s sustainability transition and its performance in global comparison. 

Following up on the past Strategic Foresight Reports, the Commission has launched internal work on 
developing  Sustainable  and  Inclusive  Wellbeing  metrics  for  the  EU  to  complement  GDP.  It  brings 
together different strands of work for the first time, with the aim of informing future EU policymaking. 

One option to develop beyond-GDP metrics consists of assigning monetary values to relevant factors 
of wellbeing and using these values to “adjust” GDP. These can include different aspects of quality of 
life  (e.g.,  health,  education,  and  recreation),  unpaid  care  and  domestic  work,  inequalities,  costs  of 
environmental damage (e.g., pollution and GHG emissions), or natural resource exhaustion. The results 
of  a  pilot  are  reported  below13,  employing  life  expectancy  as  a  proxy  for  the  health  dimension  of 
wellbeing. It shows the health-adjusted GDP (per capita) for the EU, the US, China, and India in 2000, 
2020, and 2040. Work will continue to develop other complementary, beyond-GDP indicators to reflect 
selected  factors  like  inequalities  or  environmental  damages.  The  adjustment  for  inequality  can  be 
obtained by ‘discounting’ average income (GDP per capita) according to the level of income inequality. 
Environmental  damages  can  be  incorporated  by  subtracting  their  estimated  economic  harm.  This  is 
consistent with the global commitment, enshrined in the 2030 Agenda for sustainable development, to 
design measurements of progress on sustainable development that complement GDP. Going beyond 
GDP is also explored in the reform process of the international financial system. 

Figure 2: Adjusting per capita GDP for life expectancy leads to larger upward changes (in %) for the 
EU in comparison to the US, China, and India 

13   Details of the applied methodology, data sources, additional results and a sensitivity analysis are presented in 
Health-adjusted  income:  complementing  GDP  to  reflect  the  valuation  of  life  expectancy,  JRC  Technical 
Report, JRC134152, https://publications.jrc.ec.europa.eu/repository/handle/JRC134152 

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The grey columns show the value of per capita GDP in fixed-year purchasing power parity, and the purple ones the adjusted 
version  of  the  same  GDP  figure.  To  obtain  the  adjustment,  one  fixes  a  reference  level  for  mortality  and  computes  the 
population’s willingness to pay to obtain this level. The figures relate to the survival curve of the world projected for 2050 as 
the reference level. The EU data includes 24 countries (projections are not available for Croatia, Cyprus, and Malta). 

The upward adjustment for the EU’s GDP would be 15.5% in 2040, exceeding that of the US (12.0%), 
China (11.7%), and India (1.3%). The compound annual average growth rate of unadjusted GDP in the 
period 2000-2040 is 1.33% for the EU, while that of adjusted GDP is 1.57%. Furthermore, adjusting 
GDP for life expectancy leads to a higher share of the EU’s adjusted GDP over total GDP of the four 
economies combined in 2040 (corresponding to 19.8%, compared with 18.9% for GDP). 

Decoupling economic growth from resource use will be the pivotal challenge for a new 
economic  model.  Europe  has  been  successful  in  achieving  a  substantial  reduction  of  CO2 
emissions despite continued growth. Breakthrough research and innovation and faster uptake 
of technologies will continue to be essential in achieving sustainability. Yet, technologies alone 
may not be enough. The EU’s domestic footprint14 has already decreased by 13% over the past 
decade, and further innovations are likely to sustain this trend. However, the EU’s consumption 
footprint,  which  considers  the  embedded  environmental  impacts  of  trade,  has  increased  by 
4%15. In the meantime, current global consumption patterns have already led to overshooting 
most  of  the  planetary  boundaries,  and  based  on  current  trends,  these  negative  impacts  are 
projected to keep increasing until 203016. For example, 40% of food is wasted in high-income 
countries17.  Over  time,  cutting  emissions  can  be  achieved  by  reducing  pollution  and  waste 
through  circularity,  resource  and  energy  efficiency,  and  sufficiency  measures18.  Likewise, 
more efficient production and consumption in the agri- and sea-food sectors could reduce the 
impacts on natural ecosystems. 

Changes in behaviours and consumption can make a major difference. For instance, some 
estimates  show  that  globally,  demand-side  mitigation  measures,  including  behavioural  or 
lifestyle changes (incentivising more sustainable and healthier diets or travel, reducing food or 
textile  waste,  cutting  down  on  energy  and  water  consumption  etc.)  or  infrastructure  use 
(renovating buildings, ensuring sustainable transportation etc.) could reduce emissions by as 
much as 40-70% by 2050. 19 In parallel, they could also improve wellbeing. However, not only 
the  design  of  proposed  measures  but  also  their  perception  and  behavioural  effects  matter. 
Shifting to more sustainable behaviours and consumption can be perceived positively and be 
more acceptable, if framed around fairness, and life satisfaction20. Without factoring them in, 

14   Domestic  footprint  quantifies  the  environmental  impacts  caused  by  domestic  production  and  consumption 

through a set of life cycle-based indicators. 

15  Consumption footprint and domestic footprint, European Commission, (2023), https://doi.org/10.2760/218540  
16   Zero pollution – Outlook 2022, European Commission, (2022), https://doi.org/10.2760/39491 
17   United Nation’s World Food Programme, https://www.wfpusa.org/drivers-of-hunger/food-waste/, version of 

12 June 2023. 

18   See  for  example:  Versailles  Statement:  The  crucial  decade  for  energy  efficiency,  (8  June  2023), 

https://iea.blob.core.windows.net/assets/2de1ef68-c97a-4fdb-b8be-
fb12b693893e/IEA8thGlobalConferenceonEnergyEfficiency_JointStatement.pdf  

19   Intergovernmental Panel on Climate Change, (2023), https://www.ipcc.ch/report/ar6/syr/  
20   Binder, M., and Blankenberg, A. K., (2017), https://doi.org/10.1016/j.jebo.2017.03.009  

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proposed measures will lead to public opposition, and subsequently slow down or even prevent 
plans for introducing them21. 

3. Increasing pressure to ensure sufficient funding 

The green transition requires unprecedented investments. Overall, additional investments 
of over EUR 620 billion annually will be needed to meet the objectives of the Green Deal and 
RepowerEU. By far the greatest part of these will have to come from private funding22. Member 
States budgets will also play an important role. The EU is already set to spend EUR 578 billion 
– at least 30% of its budget – on climate-relevant action for the 2021-2027 period. Still, the full 
costs  and  consequences  of  the  climate  and  biodiversity  crisis  are  unknown.  The  increasing 
impacts of extreme weather events already today lead to severe economic losses. For example, 
for droughts they amount to around EUR 9 billion annually23 and for river floodings EUR 7.6 
billion24. Boosting the resilience to climate change in key areas, such as transport infrastructure, 
digital,  energy,  resource  storage,  health,  food,  buildings,  or  manufacturing  plants  will  also 
entail  significant  resources.  Furthermore,  the  increasing  frequency  of  climate  catastrophes 
could  render  insurance  unaffordable  for  households25  and  many  businesses,  and  further 
increase pressure on public budgets. The upcoming European Climate Risk Assessment Report 
will provide further evidence on climate related risks. All this builds as well a strong case for 
prevention: every euro invested in early warning systems returns an average of EUR 131 from 
avoided losses, response costs, and additional societal benefits26.  

Other  strategic  investments  are  also  growing.  Bridging  the  EU’s  investment  gap  for  the 
digital  transition  will  cost  at  least  EUR  125  billion  annually27.  The  price  tag  of  the  new 
geopolitics will also be high: for example, in 2021, Member States’ defence expenditure grew 
significantly to EUR 214 billion, with additional spendings of EUR 75 billion forecast until 
2025 to build adequate defence capabilities28. Finally, the reconstruction of Ukraine will require 
from all the partners EUR 384 billion over the next 10 years29. 

21   France 

& 
C., 
https://www.tandfonline.com/doi/full/10.1080/14693062.2018.1470963  

Martinsson, 

Jagers, 

J., 

S. 

Matti, 

S., 

(2019), 

22   SWD (2023) 68 final and COM/2022/438 final. In addition, the Net Zero Industry Act requires in total EUR 

92 billion over the period 2023-2030. 

23   Combined figures for the EU and the UK; Naumann, G., et al., (2021), https://doi.org/10.1038/s41558-021-

01044-3  

24   Combined  figures  for  the  EU  and  the  UK;  Dottori,  F.,  et  al.,  (2023),  https://doi.org/10.1038/s41558-022-

01540-0  

25   Only about a quarter of climate-related catastrophe losses are currently insured in the EU. See European 
Central Bank, EIOPA, (2022), https://www.ecb.europa.eu/pub/pdf/other/ecb.policyoptions_EIOPA~
c0adae58b7.en.pdf  

26   World Bank, (2021), http://hdl.handle.net/10986/35686  
27   Europe’s moment: Repair and Prepare for the Next Generation, COM(2020) 456 final. 
28   European Defence Agency, (2022), https://doi.org/10.2836/97270  
29   Based  on  a  joint  assessment  by  the  Government  of  Ukraine,  the  World  Bank  Group,  the  European 
Commission, and the United Nations. Source: World Bank, Ukraine Rapid Damage and Needs Assessment: 
February 2022 - February 2023.  

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At the same time, demographic change and the economic transformation will challenge 
public  budgets  at  all  levels.  For  instance,  the  old-age  dependency  ratio  could  grow  from 
34.4% in 2019 to 59.2% in 2070, resulting in a possible increase of age-related expenditures 
by two percentage points to 26% of GDP30. The current EU tax framework, based mainly on 
labour taxes, including social contributions, does not reflect the ongoing changes31. Since the 
share of working-age people will shrink drastically over the coming decades, and productivity 
growth is unlikely to offset this evolution, the ability of labour taxation to generate the same 
amount  of  revenues  as  today  will  very  likely  be  reduced.  Furthermore,  economic 
transformation and globalisation result in the increasing role of intangible assets and the greater 
international mobility of economic activities. Moreover, the green transition itself will have an 
impact. It could contribute to the contraction of the traditional tax base, due to the phase-out of 
fossil fuels, changes in consumption patterns, and growth fluctuations. At the same time, this 
can be counterbalanced to some extent by new sustainable activities, products, and services. 
New forms of taxation (e.g. on carbon emissions, waste, unsustainable or unhealthy products 
and services) could also gain in importance to complement labour taxes and boost sustainability 
of the public finance and of the welfare state. 

Achieving  the  sustainability  transition  will  depend  on  securing  sufficient  and  swift 
funding by the private sector.  Hence, focusing on unlocking private investments will be of 
the essence for the public sector, while avoiding crowding-out effects on private funding or 
triggering  a  subsidy  race  between  economies.  The  EU  has  developed  a  comprehensive 
sustainable finance framework supporting companies and the financial sector in scaling up their 
investments  needed  for  transition  towards  sustainability,  which  includes  a  taxonomy, 
sustainability disclosures, climate benchmarks and green bonds. However, various challenges 
persist. The gap in productive investments between the EU and the US has widened since the 
2008 financial crisis and reached 2% of GDP in 202232. In addition, private investments are 
hampered by the lack of a truly single market for capital and of a fully-fledged Banking Union. 
This impedes the channelling of the high savings in the EU – the surplus of domestic savings 
over domestic investments in the EU averaged almost EUR 300 billion over the last 10 years33 
– towards financing future growth. While banks will continue to play a key role in funding the 
EU economy, more needs to be done to diversify sources of funding. For example, the EU level 
of venture capital investment, although catching up with the US, still falls short, particularly 
when it comes to later-stage funding, and successful European start-ups and scale-ups struggle 
to raise in the EU the capital needed to grow. This results in a lower innovation rate and the 
potential of capital markets for financing the transitions remaining underdeveloped. Additional 
obstacles include expected productivity slowdown and the accumulated debt of firms following 

30   The 2021 ageing report, European Commission, (2021), https://doi.org/10.2765/84455  
31   Business Taxation for the 21st Century, COM(2021) 251 final. 
32   European Investment Bank, (2023), https://doi.org/10.2867/307689  
33  Source: Eurostat, balance of payments (BPM6), current plus capital account. Reference period: 2013-2022. 

Data extracted on 28 June 2023. 

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the pandemic34. This is exacerbated by rising costs of borrowing35, which likewise heightens 
concerns  about  the  ability  of  the  private  sector  to  make  the  necessary  investments  now, 
particularly in renewable energy36. Finally, public instruments to crowd-in private investments 
are sometimes used in a too risk averse way to trigger investments in high-risk, low-return, or 
future-oriented projects.  

4. Growing demand for skills and competencies for the sustainable future  

The transitions will require strong European education and training systems, placing a 
premium on adaptability. The availability of workers with the appropriate technical and soft 
skills  will  be  crucial  for  the  viability  of  the  transitions  and  the  EU  competitiveness.  For 
instance, reducing the STEM gender gap, essential for green and digital technologies, might 
potentially lead to an improvement of EU GDP by up to EUR 820 billion in 205037. Already 
now, the lack of available staff with the right set of skills is an additional factor hampering 
investments  for  85%  of  EU  firms38,  both  in  established  and  new  industries.  Workforce 
shortages are a growing issue in several labour-intensive sectors, such as healthcare, long-term 
care, construction, or agriculture, not least in the face of an ageing European population. They 
are also a concern in sectors key for the transitions. For instance, the EU needs 180,000 trained 
workers in the fuel cell hydrogen industry by 2030 and up to 66,000 in the photo-voltaic39. At 
the same time, basic competences of European youth have deteriorated40, and the pandemic 
worsened the learning outcomes in many Member States41. Moreover, while EU’s workforce 
is the most educated in its history, there are still 60 million low-educated and low-skilled adults. 
On top of it, skills mismatches are not the only cause of workforce shortages. There is also a 
problem  of  the  availability  of  quality  of  jobs,  related  to  poor  working  conditions,  pay  and 
contracts, work-life balance, and the lack of development or career opportunities. Demographic 
trends and the decline of the working age population have a marked territorial impact, with 82 
EU  regions  accounting  for  30%  of  the  European  population  facing  or  risking  a  talent 
development trap42. If left unaddressed, this will hamper European cohesion. 

Our education and training systems are not yet fit for the magnitude and speed of the 
transformations. Skills are becoming increasingly important on top of formal qualifications. 
This  is  coupled  with  shifts  in  values  and  aspirations  of  new  generations  towards  work-life 
balance and meaningful jobs. Digital technologies, including generative artificial intelligence, 
create new teaching and learning opportunities, both for regular schooling and for life-long and 

34   Bank for International Settlements, Credit to the non-financial sector (bis.org), updated 27 February 2023  
35   See the ECB’s composite cost of borrowing indicator, which increased by 1.83 percentage points year-on-year 

in April 2023. 

36   Schnabel, I., (2023), https://www.ecb.europa.eu/press/key/date/2023/html/ecb.sp230110~21c89bef1b.en.html  
37   European Institute for Gender Equality, (2017), https://doi.org/10.2839/538402  
38   European Investment Bank, (2023), https://doi.org/10.2867/307689  
39   The strategic energy technology plan, European Commission, (2018), https://doi.org/10.2777/04888  
40   The underachievement PISA scores in reading (22.5%), maths (22.9%) and science (22.3%) remain far above 
the EU 2030 target of below 15% and have increased when compared  with the 2015 round. See: European 
Commission, (2022), https://www.doi.org/10.2766/117416  

41   Covid-19 learning deficits in Europe, European Commission, (2023), https://doi.org/10.2766/881143  
42   Harnessing talent in Europe’s regions, COM(2023) 32 final. 

9 

 
 
 
 
 
 
                                                           
on-the-job  learning. However,  they  also  pose  challenges  for  existing education and training 
systems. For example, in terms of digital literacy of teachers, pedagogic approaches, assuring 
quality  and  trustworthiness  of  systems  and  their  content,  ensuring  equal  opportunities  (e.g. 
concerning the access to basic technological infrastructure and equipment), or ethical concerns.  

The skills challenge goes beyond mere economic considerations. Digital literacy and skills 
will be key not only for finding quality jobs, but also for actively participating in civic life or 
distinguishing facts from mis- and disinformation, also related to sustainability. Currently only 
54% of EU citizens have at least basic digital skills43. In addition, environmental sustainability 
competences44, together with civic and entrepreneurial skills as well as resilience will equally 
be important for community-based social innovation, agency, and participation. Finally, skills 
matter also for the public sector, as a competencies gap can limit its capacity to act effectively. 
For  example,  69%  of  EU  municipalities  reported  the  lack  of  environmental  and  climate 
assessment skills as a factor slowing down their climate-related investments45. 

Persisting transmission of educational disadvantage between generations will add to these 
issues. For instance, students of low socio-economic status in the EU are 5.6 times more likely 
to underachieve in school than students with a high status46. This shows limits to existing social 
mobility  and  hampers  the  possibilities  to  benefit  from  the  opportunities  offered  by  the 
transitions. It is also one of the factors affecting the EU’s social cohesion. 

5. Increasing cracks in social cohesion 

The European Green Deal relies on the ability to enable people to successfully participate 
in and benefit from the transition. In this respect, there is clear progress. Looking at general 
living standards or health, Europeans enjoy longer and better lives than previous generations. 
Their life spans will continue to lengthen. Since 2004, they have gained 4 years of healthy life 
expectancy47,  with  various  new  life  and  career  possibilities  emerging.  Many  European 
countries are among the happiest places to live48. Nevertheless, the foundations of the existing 
social contract need to be strengthened to withstand various challenges.  

Climate change will affect territories unequally and with disproportionate impacts on the 
poorest and the most vulnerable. Low-income households will be the most exposed to higher 
food49 or energy prices50, as they generally have less room to buffer sharp increases in the cost 

43   Eurostat, (2022), https://ec.europa.eu/eurostat/web/products-eurostat-news/-/ddn-20220330-1  
44   Sustainability competences refers to the interlinked set of knowledge, skills, attitudes and values that enable 
effective, embodied action in the world with respect to sustainability problems, challenges and opportunities, 
according to the context. See: European Commission, (2022), https://doi.org/10.2760/13286  

45   European Investment Bank, (2023), https://doi.org/10.2867/307689 
46   Education and training monitor 2022, European Commission, (2022), https://www.doi.org/10.2766/117416   
47   Eurostat,  https://ec.europa.eu/eurostat/databrowser/view/HLTH_SILC_17__custom_6521084/default/table?

lang=en, data from June 2023. 

48   World Happiness Report, Helliwell, J. F. et al. (Eds.), (2023), ISBN 978-1-7348080-5-6. 
49   The future of food and agriculture, FAO, (2022), https://doi.org/10.4060/cc0959en  
50   In 2021, the energy rate, measured by the inability to keep home adequately warm, affected 6.9% of the total 
EU  population  and  is  likely  to  increase.  See  Eurostat,  https://ec.europa.eu/eurostat/databrowser/bookmark/
8f6604d8-6581-4f7b-adde-7a9e53a28caf?lang=en, data valid as of June 2023. 

10 

 
 
 
 
 
 
                                                           
of living through savings. Compared with other groups, they also spend proportionally more 
on essential goods such as food, electricity, gas, heating, and transportation. The poorest also 
often  live  in  the  more  polluted  areas  of  cities  and  are  consequently  more  vulnerable  to  the 
effects of pollution, particularly on their health. 13.7% of EU citizens say they were exposed 
to  pollution  or  environmental  hazards51.  The  most  vulnerable  segments  of  society  are  also 
disproportionately  impacted  by  climate  related  disasters.  At  the  same  time,  the  adaptive 
capacity of our societies and institutions is unevenly spread across Europe52. Moreover, income 
and wealth disparities are tightly connected to ecological inequalities and to contributions to 
climate change. For example, the richest 10% of Europeans emit over three times more per 
capita than the rest53. However, other factors, such as age, housing type, or agglomeration size 
also determine household emissions, adding complexity to potential fiscal and redistributive 
policies linked to carbon emissions54. 

Inequality  between  Member  States  has  been  decreasing,  however  inequalities  within 
individual Member States are on the rise55.  There is a strong perception in society that 
they have reached excessive levels56.  In 2021, 38.2% of the total equivalised income in the 
EU was attributed to the 20% of the population with the highest income, while the 20% with 
the  lowest  income  received  merely  a  7.9%  share,  albeit  with  major  differences  between 
Member States57. These numbers are reflected in attitudes among Europeans: 81% believe that 
income inequality is  too  high58.  Many Europeans  across regions  and cities facing economic 
stagnation  and  decline  are  increasingly  dissatisfied  by  disparities  in  education  or  job 
opportunities,  social  mobility,  equality,  life  expectancy,  or  connectivity.  At  the  same  time, 
wealth concentration is significantly higher than income inequality and gradually increasing, 
directly hindering equal opportunities and upward social mobility59, but also feeding political 
polarisation60. Statistics show that social transfers do reduce income inequality – in 2021, the 
Gini coefficient for income was 52.2% before social transfers, but decreased to 30.1% after 
taking  them  into  account61.  Moreover,  the  effects  of  climate  change  can  also  have  a  direct 
impact on inflation dynamics. Resulting inflationary pressures, e.g. on food or energy prices, 
coupled  with  a  decrease  in  purchasing  power,  could  further  intensify  inequalities,  as  their 

51   Eurostat, 

https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Quality_of_life_indicators_-_

natural_and_living_environment, data from September 2022. 

52 52 ESPON (2022), CLIMATE, Updating and integrating  climate data sets and maps. 
53   European 

Commission, 

Knowledge 

Centre 

for 

Biodiversity, 

(2023), 

https://knowledge4policy.ec.europa.eu/foresight/who-can-afford-digital-green-transition_en  

54   France  Stratégie,  Pisani-Ferry,  J.  and  Mahfouz,  S.,  (2023),  https://www.strategie.gouv.fr/publications/

incidences-economiques-de-laction-climat  

55   Cohesion in Europe towards 2050, SWD(2022) 24 final. 
56   Fairness, inequality, and intergenerational mobility, European Commission, (2023), 2652 / SP529.  
57   Eurostat, 

(2022),  https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Living_conditions_in_

Europe_-_income_distribution_and_income_inequality, data from November 2022. 

58   Fairness, inequality, and intergenerational mobility, European Commission, (2023), 2652 / SP529.  
59   Eurofound, Darvas, Z. and Midões, C., (2021), https://doi.org/10.2806/129514 
60   Lipps, J. and Schraff, D., (2021), https://doi.org/10.1111/1475-6765.12430 
61   Eurostat, (2022), https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Living_conditions_in_
Europe_-_income_distribution_and_income_inequality&oldid=528159, data from November 2022. 

11 

 
 
 
 
 
 
                                                           
impacts  significantly  differ  for  low  and  high-income  households.  Without  appropriate 
measures, this could widen poverty, including energy poverty, social exclusion, and territorial 
asymmetries across the EU62. 

Intergenerational  fairness  is  also  becoming  increasingly  salient.  Young  Europeans  are 
benefiting from great generational improvements, with 67% agreeing that the EU offers them 
brighter  prospects  for  the  future63.  However,  they  are  also  facing  new  challenges.  They  are 
better educated yet have less disposable income than previous young generations, and they are 
more  likely  to  work  in  unstable  forms  of  employment64.  Consequently,  young  people  have 
replaced  older  people  as  the  group  most  at  risk  of  poverty65.  Children  born  in  2020  will 
experience a two- to sevenfold increase in extreme weather events and the associated health 
risks, compared with people born in 196066. In addition, especially young people are affected 
by  mental  health  issues,  including  eco-anxiety  or  solastalgia67.  This  can  be  heightened  by 
unhealthy use of digital media68 and the repercussions from the pandemic. More than 45% of 
young people admit experiencing such anxieties69. This is also why they expect more decisive 
action: nine out of ten young Europeans agree that tackling climate change would improve their 
health and wellbeing70. Their concerns also extend to public debt, as younger generations are 
likely to contribute more to the welfare state, while receiving less than their forebears in return. 
With the relative proportion of young voters diminishing, the issue of intergenerational fairness 
has also gained political traction. The lack of intergenerational solidarity on climate, economic, 
and  societal  issues  may  contribute  to  their  political  alienation  and  disillusionment  with  the 
capacity of the current political class and system to address generational challenges. 

6. Threats to democracy and existing social contract 

Inequalities are deeply linked with lower trust in national and EU institutions71, as well 
as in liberal democracy at large. Disenfranchisement, growing discontent, and the lack of a 
positive  agenda  combine  into  an  erosion  of  trust  in  public  institutions,  polarisation,  and  an 
enhanced  appeal  of  extremist,  autocratic,  or  populist  movements.  Globally,  the  level  of 
democracy enjoyed by the average citizen  has  fallen back  to  levels last  recorded in  198972. 
Democracy  is  increasingly  challenged  as  the  governance  model  best  suited  to  deal  with 

62  France  Stratégie,  Pisani-Ferry,  J.  and  Mahfouz,  S.,  (2023),  https://www.strategie.gouv.fr/publications/

incidences-economiques-de-laction-climat 

63   Future of Europe, European Commission, (2022), 2554 / SP517 
64   OECD, (2020), https://doi.org/10.1787/c3e5cb8a-en  
65   OECD, (2015). https://doi.org/10.1787/9789264235120-en  
66   Thiery, W. et al., (2021), https://doi.org/10.1126/science.abi7339  
67   Distress felt by people whose direct environment is negatively affected by environmental change. 
68   Marciano, L. et al., (2022), https://doi.org/10.3389/fpubh.2021.793868  
69   Hickman, C. et. al., (2021), https://doi.org/10.1016/S2542-5196(21)00278-3  
70   Future of Europe, European Commission, (2022), 2554 / SP517. 
71   See among others Lipps, J. and Schraff, D., “Regional inequality and institutional trust in Europe”, European 

Journal of Political Research, Vol. 60, No 4, (2021).  

72   V-Dem Institute (University of Gothenburg), (2023), https://www.v-dem.net/documents/29/V-dem_

democracyreport2023_lowres.pdf  

12 

 
 
 
 
 
 
                                                           
growing socio-economic issues73. In the EU, some of the core requirements for a functioning 
democracy are impaired. This is visible through challenges to the rule of law, and an increasing 
silent citizenship, e.g. a consistent decrease of electoral turnout in many Member States in both 
national and European elections74, or the growing lack of interest in general democratic life. 
For example, 47% of citizens agree that their voice counts in the EU while 49% think it does 
not75.  The  personalisation  of  politics,  with  political  leaders  considered  more  important  than 
political parties, is also on the rise. Polarisation of the political debate and the sense of isolation 
are  amplified  by  mis-  and  disinformation,  group  dynamics  in  social  media,  or  algorithmic 
bias76.  Moreover,  places  which  feel  left  behind  fuel  disengagement  and  discontent.  If  the 
development traps of stagnating regions are unaddressed, citizens will be less likely to support 
European  integration  and  values,  in  what  has  come  to  be  known  as  the  geography  of 
discontent77. On the positive side, new forms of political activism and social mobilisation also 
appear. Still, failure to address the health of European democracies will challenge both the roll-
out of sustainable policies and the transition itself.  

The existing social contract is not fully fit for the new socio-economic reality. The current 
social  contract  has  its  origins  in  the  mid-20th  century,  under  different  socio-economic 
conditions.  Europeans’  realities  have  since  evolved  drastically,  with  new  ways  of  learning, 
working,  and  living,  anchored  in  demographic  change  and  migration.  The  implications  of 
longer  lives  will  be  profound  for  individuals,  businesses,  communities,  and  governments. 
Therefore, gaps remain and new tensions could arise in the future. For example, while ‘non-
standard’ forms of work (including self-employment) currently account for 40% of the working 
population78,  social  protection  schemes  are  still  mainly  designed  for  traditional  forms  of 
employment  (e.g.  full-time,  permanent,  dependent  employees).  Changes  are  needed  so  that 
some parts of the workforce, in particular young people, those born outside the EU, and women 
are sufficiently covered by social protection systems. Otherwise, these gaps could threaten the 
welfare of individuals and their families, especially low-income households, and may have a 
detrimental impact on pension entitlements and welfare in later life. They could also undermine 
the financial stability of existing welfare arrangements and can affect overall competitiveness 
through less efficient labour markets, with people less inclined to take risks, switch jobs, move 
in or out of work, start a company or close one down. Finally, for many Europeans, work is 
also no longer paying enough. The most telling indicator is housing affordability: it is now at 
its lowest level both for those seeking to buy a house, and for those renting79. 

In parallel, the geo-economic role of public and private actors is evolving. We observe a 
growing  convergence  of  the  economic  and  the  security  domains,  as  economic  choices  are 
increasingly  driven  by  security  concerns.  Expectations  towards  the  state  are  changing  and 
pursuing  the  transitions,  open  strategic  autonomy,  and  economic  resilience,  will  require 

73   Sitra, Dufva, M., and Rekola, S., (2023), ISBN 978-952-347-302-7. 
74   RECONNECT  EUROPE,  Briatte,  F.  et.  al.,  (2020),  https://reconnect-europe.eu/wp-content/uploads/

2020/05/D6.1.pdf  

75   Future of Europe, European Commission, (2022), 2554 / SP517. 
76   Biased algorithms refer to the tendency for algorithms to produce outputs that lead to disadvantage for certain 
groups,  such  as  women,  ethnic  minorities.  See  European  Union  Agency  for  Fundamental  Rights,  (2022), 
https://doi.org/10.2811/25847 

77   The geography of EU discontent and the regional development trap, European Commission, WP 03/2023. 
78   Report  from  the  Commission  on  the  implementation  of  the  Council  Recommendation  on  access  to  social 

protection for workers and the self-employed, COM(2023) 43 final. 

79   Eurofound, (2023), https://doi.org/10.2806/715002  

13 

 
 
 
 
 
 
                                                           
appropriate tools and competencies. On the other hand, the ongoing diffusion of power, with 
an increasing global relevance of large multinational corporations, challenges the existing role 
of the state in the economy, democracy, or social life.  

III. Key areas for action 

The  issues  presented  above  will  have  direct  impacts  on  the  social  and  economic  aspects  of 
sustainability, challenging the feasibility and viability of the transitions. That is why, achieving 
a sustainable Europe by 2050 requires already now coordinated intervention across all policy 
domains. Building on the outcome of the foresight process, the areas for action outlined below 
present ideas for addressing the challenges identified in the previous sections. 

1. Ensuring a new European social contract fit for a sustainable future. The EU should 
continue to encourage Member States to develop inclusive, high-quality social services that 
enhance  people’s  capacity  to  contribute  to  the  economy  and  society  while  realising  their 
potential and aspirations. It also entails updating welfare policies following a social investment 
approach over the whole life-course. This includes supporting labour market participation and 
inclusiveness, further adapting social protection for non-standard forms of employment and to 
new climate-related risks, ensuring an adequate level of social protection, as well as an active 
inclusion approach onto the labour market. It should take into account the new demographic 
reality,  with  its  challenges  (ageing)  and  opportunities  (longevity).  It  also  means  ensuring 
effective  integration  of  migrants  and  EU  citizens  with  a  migrant  background,  to  generate 
significant fiscal gains for Member States and provide an important contribution to face the 
welfare challenges posed by demographic change. Continuous monitoring of social indicators, 
in  particular  for  the  most  vulnerable  households,  will  be  key  to  combatting  poverty,  social 
exclusion,  and  social  and  territorial  inequalities.  A  new  social  contract  should  include  a 
stronger  focus  on  a  just  and  inclusive  transition,  sustain  regional  cohesion,  and  employ 
intergenerational fairness as well as upward social convergence as guiding principles. It should 
also further focus on living in a healthy environment as a key public good, and on addressing 
root causes of mental  health issues, like social  exclusion, discrimination, and the impact  of 
climate change.  

2. Leveraging the Single Market to champion a resilient net-zero economy. The EU should 
continue  strengthening  its  coordinated  framework  to  achieve  open  strategic  autonomy, 
including economic security. In particular, building on the existing mechanism for screening 
current strategic dependencies, the EU and its Member States should further develop tools to 
assess  future  dependencies  across  strategic  sectors  (e.g.  health,  food,  digital  technologies, 
energy, space, water). The EU should also make better and more strategic use of trade defence 
instruments, the regulation on foreign subsidies, and procurement instruments. Expansion of 
the Single Market will be key to safeguard the future economic power of the EU.  Adequate 
levels of strategic intelligence and anticipatory governance should guide the futureproofing of 
a growth-enhancing regulatory framework, notably for the Single Market80. Renewed focus81 
is needed on tackling barriers, as well as on enforcing existing rules, in ecosystems with the 
greatest potential for the transition. This needs to be matched with robust and fit-for-purpose 
competition rules. Incentivising sustainable business models and ensuring sufficient support 
for the rapid development and deployment of net-zero technologies will also be important. The 
EU should also keep on safeguarding the level playing field for all market participants, ensuring 

80   Fit for Future Platform Opinion on Ensuring a future-proof regulatory framework for the Single Market. 
81 The Single Market at 30, COM/2023/162 final. 

14 

 
 
 
 
 
 
                                                           
strong linkages between market access and high sustainability standards.  Finally, support is 
also needed for rapid manufacturing of essential components for the energy transition, such as 
raw materials or net zero technology equipment.  

3. Strengthening the interlinkages between the EU’s internal and external policies, also 
to boost the EU’s offer and narrative on  the global stage. Geoeconomics is increasingly 
calling for combining agile approaches and strategic partnerships. In this context, the Global 
Gateway should continue to be used to develop partnerships on strategic projects, for instance 
with countries facing challenges with the energy transition or water security. Such partnerships 
should stimulate new local value chains to attract investment and create jobs and opportunities 
for  younger  generations.  Building  on  the  existing  free  trade  agreement  model,  new,  more 
flexible, and targeted  types  of partnership agreements could  be explored with  the  European 
Neighbourhood, Africa, Asia, or Latin America. Synergies and links between these agreements 
and the Global Gateway need to increase. Creating a green transatlantic marketplace facilitating 
access to incentive schemes and preventing discrimination would support green investments 
and  sustainable  production.  Moreover,  through  the  Team  Europe  approach,  the  EU  should 
strengthen its voice in multilateral fora that are key for global sustainability efforts, including 
those shaping the future of sustainable financing (e.g. the Bridgetown Initiative, reforms of the 
World Bank and the International Monetary Fund). It should also continue leading efforts to 
deliver on the Sustainable Development Goals82 and contribute to the discussion on their future 
beyond  2030.  In  addition,  the  EU  should  lead  action  to  preserve  the  global  commons 
(biodiversity,  soil,  fresh  water,  oceans,  etc.),  including  through  financing  or  cooperation  in 
technology  and  innovation  (both  high-  and  low-tech).  New  funding  arrangements  for 
adaptation and resilience, focused on the most vulnerable countries, should be explored. The 
EU also needs to ensure that its climate, environmental, and energy policies are designed and 
implemented in a consistent manner with the EU’s international ambitions and commitments. 
This entails taking into account the perspectives of its trading partners, as well as the impact of 
EU legislation on them. This could be achieved through increased dialogue, communication, 
diplomacy (green, digital, or cultural), and cooperation in their design and implementation83. 
It should also continue proactive engagement on its European Green Deal policies in the World 
Trade Organization.  In addition to developing its own legislative framework, the EU needs to 
forge broad international alliances and agreements on high-impact and sustainability-enabling 
emerging  technologies,  such  as  artificial  intelligence,  in  ways  that  reflect  its  values  and 
strategic objectives and manage the risks. It should also join forces with like-minded partners 
to fight threats and attacks, such as disinformation. Finally, strengthening the Youth Action 
Plan in EU external action could help building support from young generations outside the EU. 

4.  Supporting  shifts  in  production  and  consumption  towards  sustainability.  On  the 
production side, this entails reforms and investments across Member States to decarbonise and 
depollute  the  economy,  especially  industrial  processes  and  energy  intensive  sectors,  reduce 
impacts  on  biodiversity,  and  minimise  the  ecological  footprint  of  consumption.  Cutting  red 
tape, speeding up administrative and permitting procedures, or increasing the accessibility and 
quality of local support are also key. Large-scale action is needed to strengthen EU’s water-

82   EU Voluntary Review on progress in the implementation of the 2030 Agenda for Sustainable Development, 

COM(2023) 700 final. 

83  Setting out a New Agenda for Relations between the EU and Latin America and the Caribbean, JOIN(2023) 

17 final. 

15 

 
 
 
 
 
 
                                                           
 
resilience,  by  addressing  pollution  and  the  increasing  demands  by  agriculture,  energy 
production, industry, or households. Measures to improve the governance of water (including 
appropriate  pricing  and  allocation  mechanisms),  its  efficient  use,  the  development  of 
sustainable alternative sources, the elimination of water pollution, and ensuring equal access 
are key. Pursuing  sustainability will  also  require shifts in people’s  behaviours, in  particular 
those  with  the  highest  carbon  footprints,  in  order  to  minimise  the  ecological  footprint  of 
consumption.  Ensuring  the  right  price  signals  (e.g.,  through  carbon  pricing,  green  taxes, 
eliminating  or  reforming  environmentally  harmful  subsidies,  strengthening  environmentally 
positive  incentives)  matched  with  safeguarding  affordability  and  availability  of  sustainable 
products and services will also be key. To change companies’ strategies and business models, 
the  EU  should  continue  designing  policies  and  regulations  to  further  tackle  planned 
obsolescence, and to promote repair in the after-sale context, and design for circularity. Based 
on  appropriate  analyses,  measures  could  also  include  banning  the  advertising  of  the  most 
environmentally harmful practices or services. Taken together, these elements could constitute 
elements  for  a  future  broader  legal  framework,  taking  into  account  the  long-term  global 
competitiveness of the EU economy Further analysing the distributional and territorial impacts 
in  policy  making  and  communicating  more  clearly  the  results  could  help  to  design  new 
measures in a way that minimises possible negative impacts on poverty and inequality, and 
foresees accompanying policy measures that cushion such negative impacts. Finally, education 
and awareness raising on sustainable and healthy choices and lifestyles should be strengthened 
across all age-groups. 

5.  Moving  towards  a  ‘Europe  of  investments’  by  increasing  private  financial  flows  in 
support  of  strategic  investments  for  the  transitions.  Making  decisive  progress  on  the 
Banking Union and the Capital Markets Union is key to unlock private finance needed for the 
twin  transitions.  Sustainable  finance  tools  such  as  European  green  bonds  will  finance 
sustainable strategic EU investments. Setting up an agile, fast, and responsive framework for 
boosting private investments, as well as ensuring a positive business environment, will be key 
for  ensuring  that  the  EU  remains  an  attractive  place  to  invest  in  the  net-zero  and  circular 
economy.  In  this  regard,  public  funding  should  be  better  used  as  a  catalyst  for  private 
investments, notably for riskier, breakthrough sustainability projects, including their scaling 
up,  and  related  manufacturing  capacities  in  the  EU.  In  particular,  the  European  Investment 
Bank,  the  largest  public  bank  in  the  world,  should  provide  stronger  support  to  strategic 
investments  relevant  for  the  twin  transitions,  such  as  raw  materials,  green  tech,  or 
biotechnology, especially for cutting-edge projects. It is also important to continue efforts to 
ease access to relevant sources of EU funding for European start-ups and small and medium 
companies. Other tools can also help to increase private financial flows: tax incentives, green 
and sustainable public procurement, and public-private partnerships, incentivising suppliers to 
adopt  sustainable  solutions,  pre-commercial  procurement,  collaborations  with  non-
governmental organisations for public service delivery, or with citizens and stakeholders for 
participatory budgeting. Tighter collaboration between the private and the public sector could 
also  be achieved by  upscaling blended  finance strategies, e.g. through better intermediation 
from concessionary finance providers and by increasing the role of EU and Member States’ 
development institutions. Finally, further efforts in incorporating climate-related risks into the 
assessment of financial stability will be important.   

6.  Making  public  budgets  fit  for  sustainability.  Fiscal  policies  and  taxation  need  to  be 
adapted to the twin transitions, spare additional investment towards projects promoting them, 

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and provide the right price signals and incentives to producers, users, and consumers, while 
improving fiscal sustainability. Implementation of the OECD’s reform of international taxation 
is  the  first  step  in  this  direction,  limiting  the  race  to  the  bottom  in  corporate  tax  rates  and 
ensuring that multinational enterprises pay a fair share of tax wherever they operate. The EU 
should continue to pursue global anti-tax avoidance strategies that further support the fairness 
of tax systems. It should also consider how to reduce the tax burden on labour and to shift it to 
other tax bases less detrimental to growth, also to address inequality in a context of population 
ageing and new forms of work. Enhanced efforts to optimise public spending by improving the 
quality and composition of public finances and enhancing the efficiency and effectiveness of 
public  expenditure  will  be  crucial  to  making  best  use  of  public  funds.  This  includes 
strengthening  public  capacities  in  data  collection  and  analysis,  so  as  to  better  design  fiscal 
measures. Fiscal policy should continue to be focused on protecting vulnerable households and 
firms,  while  being  affordable  and  preserving  incentives  for  sustainable  behaviour.  Finally, 
given the uneven impact of fiscal challenges and the need to boost strategic investment and 
ensure appropriate financing for EU common goods, further avenues for common action should 
be explored. 

7.  Further  shifting  policy  and  economic  indicators  towards  sustainable  and  inclusive 
wellbeing. Environmental and social aspects are already taken into account in the decisions of 
both public and private actors, but need to be further mainstreamed. In this context, beyond-
GDP metrics should be further developed and progressively embedded into EU policymaking. 
This will help monitor progress towards wellbeing, facilitate the communication of political 
challenges, and design the strategies to address them in a people- and planet-centred manner, 
while ensuring that economic growth does not destroy its very foundations. Additional work 
should  also  be  pursued  to  improve  monitoring  tools  by  developing  robust  model-based 
indicators (for instance  on planetary boundaries or the social-environment-economy nexus), 
and  better  integrated  assessment  models  for  projections  and  scenario  analysis.  To  further 
inform  policies,  statistical  standards  for  national  accounts  need  to  be  complemented  by 
additional indicators to better reflect the interdependence between economic activity, people’s 
wellbeing, and the environment. This would address, for instance, the various ways in which 
resource  depletion  and  environmental  degradation  undermine  people’s  wellbeing  and 
economic  security  and,  conversely,  the  various  impacts  of  economic  activity  on  the 
environment.  The  EU  will  continue  contributing to  the  discussions  within  the  international 
community  on  how  the  interlinkages  between  the  economy  and  the  environment  can  be 
accounted  for  in  national  accounts  and  in  environmental-economic  statistics  in  a 
methodologically  sound  way.  In  addition,  it  will  continue  promoting  the  use  of  existing 
environmental-economic  accounting  to  inform  policymaking  in  various  fields,  notably  by 
boosting  the  integration  of  existing  economic  and  environmental  statistics,  and  social 
accounting to better address social inequalities in revenue distribution. 

8.  Ensuring  that  everyone  can  successfully  contribute  to  the  sustainability  transition. 
Sustained efforts are needed to increase labour market participation among all segments of the 
population,  notably  women,  persons  with  disabilities,  the  elderly,  young  people,  and  other 
underrepresented groups neither in employment, nor in education or training. Investing in early 
high-quality education should be encouraged to close inequality gaps. In addition to technical 
skills,  sustainability,  digital,  civic,  resilience,  or  entrepreneurial  skills  should  be  given 
increased attention. Encouraging lifelong learning, e.g. through greater on-the-job training and 
vocational training, or innovative ways of teaching would increase the flexibility of learning. 

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This needs to be matched with adapting workplaces and working conditions to new types of 
jobs, generational expectations, and the needs of workers. Cooperation between public, private 
and  civil  society  actors,  through  established  mechanisms  (e.g.,  Pacts  for  Skills  or  Skills 
Academies) should be strengthened. Digital technologies should be used to enrich and adapt 
education and training, and boost learning possibilities for all. To manage demographic change, 
the EU needs robust tools for granular forecasting of skills and workforce needs in key sectors. 
Talent development traps need to be addressed at regional level by stimulating the supply and 
demand for talent with targeted measures and in cooperation with employers and educational 
institutions. Finally, to address specific labour market gaps and demographic challenges, the 
EU needs to attract more global talent and support the creation of talent pools and partnerships 
with third countries. This needs to be coupled with supporting the communities of origin and 
adapting education and training to enhance the integration.   

9.  Strengthening  democracy,  including  by  increasing  citizens’  agency.  Building  broad 
public support for sustainability requires increasing the participation of European citizens in 
democratic  deliberations  and  policy-making  processes,  complementing  representative 
democracy84. Inter- and intragenerational fairness, inclusive participation, and the agency of 
all citizens should lie at the heart of policymaking. For instance, embedding strategic foresight 
into policymaking can help governments adopt public policies based on future distributional 
(including inter-generational) impacts, putting in place strategies to minimise the probability 
that very negative social outcomes materialise. Increased openness of decision-making and the 
capacity to better engage and communicate with citizens will therefore be key. The EU should 
continuously strengthen its capacity to defend democracy and the rule of law85.  To counter 
mis- and disinformation, and foreign interference, more effective instruments and their proper 
enforcement are important. It is crucial to make social media platforms more accountable and 
to  support  independent  media.  The  impact  of  digitalisation  on  democracy  must  be  also 
optimised, while addressing possible negative aspects (cyber-security of elections, hate-speech 
proliferation, and radicalisation). Finally, open, efficient, interoperable, and accountable public 
services will be essential. Therefore, the capacity of local institutions and other actors, such as 
social  partners  and  civil  society  organisations,  needs  to  be  strengthened.  This  requires  vast 
action  to  ensure  that  such  institutions  have  the  necessary  skills,  as  well  as  financial  and 
technological resources to contribute to and reap the opportunities of the twin transitions86.  

10.  Reinforcing  the  EU’s  toolbox  on  preparedness  and  response  to  complement  civil 
protection  with  ‘civil  prevention’.  The  EU  needs  to  strategically  anticipate  potential 
disastrous events and prepare for their impacts, as recently demonstrated by the pandemic and 
Russia’s war of aggression against Ukraine. The continued development of strategic foresight 
and monitoring capacities, including Early Warning Systems, will facilitate the translation of 

84   European Group on Ethics in Science and New Technologies,  (2023), Opinion on democracy in the digital 

age. 

85   Later this year, the Commission will put forward a defence of democracy package to deepen the action under 
the  European  Democracy  Action  Plan  to  promote  free  and  fair  elections,  to  step  up  the  fight  against 
disinformation and to support media freedom and pluralism.  

86   E.g., provided for by a forthcoming initiative, the ComPAct, to enhance the European Administrative Space. 

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early information into early  action,  and should provide a compass to guide Member States’ 
future investments and funding for better preparedness and prevention. European data spaces, 
digital  twins,  and  new  interaction  modes  will  be  crucial  to  better  understand  and  use  large 
amounts of complex information. The EU’s ability to  react quickly and efficiently to crises 
should also be steadily reinforced. For instance, the Single Market Emergency Instrument will 
ensure  the  free  movement  of  goods,  services,  and  people,  with  greater  transparency  and 
coordination in times of crises. To address the resilience of critical entities, the implementation 
of  resilience-related  EU  Directives  and  Council  Recommendations  will  be  key87.  The 
Emergency Response Coordination Centre should be further developed to become a core node 
linking  all  relevant  EU  crisis  management  actors  (e.g.  HERA)  and  strengthen  operational 
preparedness for future emergency situations88. Various existing tools and instruments that are 
key for resilience in areas such as civil protection, migration, health, food, or water should be 
bolstered and synergies and cooperation between them strengthened. The EU should be also 
better prepared to address disaster and climate-related displacements. In addition to resilience 
actions, the EU will need to assess, prevent, prepare for, and manage risks in a systemic, one 
planet and one health approach. In addition, the development of common procedures should be 
supported by reinforcing or establishing new cross-sectoral linkages with relevant authorities 
at all levels, as well as the private sector, including risk managers and insurers. Finally, ways 
to further increase the availability of disaster risk financing should be explored.  

IV. Delivering on the promise of the sustainability transition 

The  sustainability  transition  is  built  on  a  triple  promise:  a  healthy  planet  and  thriving 
environment;  economic  growth  that  is  decoupled  from  resource  use  and  environmental 
degradation; and an assurance that no person or place will be left behind. As the EU proceeds 
with  this  historic  transformation,  building  a  positive  vision  and  preserving  the  sense  of 
opportunity and optimism will be vital to building broad democratic support for the necessary 
changes  and  trade-offs,  in  challenging  circumstances.  This  report  outlines  the  key  areas  in 
which action is highly needed, if we are to achieve the sustainability transition and strengthen 
links between its environmental, social, and economic aspects. 

87   Directive (EU) 2022/2557 of 14 December 2022 on the resilience of critical entities and repealing Council 

Directive 2008/114/EC, ELI: http://data.europa.eu/eli/dir/2022/2557/oj  

88  Strategic crisis management in the EU, European Commission, (2022), https://doi.org/10.2777/517560  

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Placing sustainability at the heart of the EU’s open strategic autonomy is key to enable Europe 
to deliver on these promises. For current and future generations of Europeans, this will mean 
living  healthier  and  longer  lives,  finding  private  and  professional  fulfilment,  and  having  a 
greater say in the future they want. For EU business, using the first-mover advantage of a net-
zero  economy,  with  globally  leading  sustainable  products  and  services.  And  for  the  other 
regions of the world, benefiting from cooperation and sustainable development. 

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