The challenges facing Europe and European leaders at Davos 2025

By Jane Gimber - Partner, Senior Vice President & Director, Financial Services

As world leaders converge at Davos this week, Europe stands at a critical crossroads in its own sustainability trajectory. European Commission President Ursula von der Leyen’s Special Address on Tuesday underscored the challenges facing a world in which major economies are ‘vying for access to raw materials, new technologies and global trade routes’. For Europe, this race is particularly acute due to a lack of access to the domestic resources needed to develop decarbonisation technologies.

The bloc’s strategy of leading by example and exporting its philosophy through regulation are being challenged by the uncertainty of a new Trump administration and ongoing tensions with China. Europe is also recognising the challenges associated with its Green Deal 1.0 that led to over 160 pieces of legislation being tabled in the last five years.

Many are hopeful that an upcoming ‘omnibus’ package will streamline disclosure requirements. A recent meeting of leaders from Europe’s largest political group went even further and resulted in calls for a two-year moratorium across the EU’s sustainability reporting and due diligence frameworks. The final outcome will be the result of political negotiations over the coming months.

Yet challenges extend beyond corporate reporting. Stringent targets to phase out internal combustion engines by 2035, and mandatory rules to eliminate deforestation practices from supply chains have also faced political backlash.

Navigating these complexities will be critical for the EU to move forward credibly towards its 2030 goals, ahead of a looming 2040 GHG emission reduction target (in the form of -90%) that Commission President von der Leyen has committed to bringing forward.

As the United States pursues an agenda of deregulation, Europe is expected to remain committed to its green ambitions. Yet it will do so with a much greater focus on strengthening the competitiveness of European companies vis-à-vis their international counterparts. In his first few days in office, the newly inaugurated President Trump has pulled out of the Paris agreement, opened the path for LNG export projects and put a halt to offshore wind leasing. For many global companies, the uncertainty stemming from the United States will only be made worse by the widening gap that is being created with other major jurisdictions’ expectations on climate.

With the Forum drawing to a close, one of the most pressing concerns for European leaders at Davos lies in navigating this shifting geopolitical landscape. As von der Leyen noted in her address, ‘in the last 25 years, Europe has relied on the rising tide of global trade to drive its growth’. As the world approaches a period of possible low tide, Europe’s position in the race of clean and disruptive technologies will be key.

This article was originally published in FleishmanHillard EU's website