Is the EU on target to achieve its digital transformation ambitions?

The EU has set itself a challenging objective in seeking to achieve almost total digital transformation across the Union by 2030. Under a far-reaching framework to digitise skills, infrastructure, government and business within a ten-year period of widespread technical and regulatory evolution, the EU’s strategy for its Digital Decade was nothing if not ambitious. Almost halfway through, the EU has issued a report on the state of its plans. The news is not great. With insufficient progress made towards achieving 2030 targets, the Commission is seeking to urge greater participation across the Union, but has also indicated that it may be willing to revisit some of the regulatory duplication and administrative burden that has come of introducing so many new laws in such a short period. Could this mean reducing the heavy compliance burden for those organisations in scope for new data, digital, AI and cyber laws? Only time – and the remaining 6 years of the Digital Decade – will tell.

Introduction

The European Commission recently published its second report on progress made towards achieving its objectives for the EU’s ambitious “Digital Decade”. Seeking to guide the EU towards a successful digital transformation, the Digital Decade (2020-2030) is a policy programme designed to measure and coordinate EU Member State efforts to achieve its far-reaching digitalisation objectives.

In the report, the Commission presents an overview of the regulatory and non-regulatory measures it has taken over the past years. The report also takes stock of some notable accomplishments and gaps in achieving the digital transformation goals and provides businesses an indication of the policy direction that can be expected from the incoming European Commission.

Legislative achievements

Key to the EU’s Digital Decade strategy (which encompasses the EU Data Strategy and the EU Cybersecurity Strategy) is a complete overhaul of the digital policy landscape with the proposal and negotiation of 23 new legislative initiatives. Among the most significant legislation delivered has been

• the EU AI Act regulating the use of AI for the first time,
• the Digital Services Act strengthening protection against online harms and disinformation,
• the Digital Markets Act ensuring fair and contestable digital markets,
• as well as the Digital Governance Act, the Data Act and more.

Find more information on these initiatives on our EU Digital Decade website.

The Commission also highlights that the EU has taken steps to implement the major legislative building blocks of the Digital Single Market (with the 2019 Copyright Directive and the European Electronic Communications Code, for example), and to update the frameworks for resilience and cybersecurity (with the NIS 2 Directive and Cyber Resilience Act, among others).

According to the Commission, the EU now has a ‘state-of-the-art digital rulebook’ which puts the EU ‘at the forefront as a global policy innovator’. However, that is not the end of the story. As the Report acknowledges, in the second half of the decade, the EU will need to pivot its focus on implementation and enforcement; improving consistency and synergies across regulatory authorities is considered ‘essential’ to ensuring the objectives and targets of the Digital Decade can be met. This corresponds with the broader strategy to reduce the administrative burden for (small) EU businesses presented by President Ursula von der Leyen in her re-election statement at the European Parliament Plenary on 18 July 2024.

Uptake in funding

The Report indicates that the EU has noted unprecedented levels of funding for the digital transformation over the past years. The digital transformation receives substantial coordinated financial support from EU bodies, receiving EUR131.9 billion, 17.4% of the total EU budget in 2021 and 2022. Alongside other funding programs, the Recovery and Resilience Facility, which was established as the EU’s post-Covid recovery response, represents the largest source of funding for digital transformation in Member States.

Progress in 2024

However, despite the funding efforts, the Commission report concludes that there is currently insufficient progress to reach the objectives and targets set for the Digital Decade by 2030.

One of the reasons why the Digital Single Market’s full potential remains untapped, is significant fragmentation across Member States.

The findings are underpinned by some staggering statistics about the state-of-play of the Digital Decade:

• Businesses’ uptake of digital technologies is a key challenge, with cloud adoption, for example, increasing by only 7% instead of the 9% target.
• 80% of the technologies and services needed for Europe’s digital transformation are designed and manufactured outside of the EU.
• European firms make up only 3 of the world’s top 50 ICT companies by market capitalization.
• EU digital platforms have no more than 5% of global market value.
• Intra-EU trade in services represent a mere 8% of GDP (vs. 25% for trade of goods) .
• The EU start-up system remains underdeveloped, with only 13% of the world’s total unicorns (privately owned startups valued at over USD1 billion) based in the EU.
• The number of ICT specialists on the market remains ‘alarmingly’ below target, with a progress rate that is around 2.75 times less than what is needed to reach the target of 20 million by 2030.
• Cyberattacks are on the rise, European Union Agency for Cybersecurity (ENISA) recorded more than 2500 cybersecurity incidents in a year (reference July 2022 to June 2023).

Roadmaps to success and the way forward

With the Member States’ collective efforts falling short to reach the Commission’s ambitions for at least 8 out of 12 key indicators, the Report unsurprisingly urges significant action and investment in digital skills, high-quality connectivity, AI, data analytics, semiconductors, and start-up ecosystems.

Based on the report’s findings, the Commission presents a range of recommendations revolving around:

• strengthening of the EU’s competitiveness based on reliable, fast and secure connectivity and networks
• fostering technology dissemination at local level including by regions and cities in the EU
• further leveraging the potential of digital transformation to foster a smart green transition, with a focus on pivoting from smaller to large scale public-private cooperations
• ensuring the safety of the online space and safeguarding people’s rights online with a focus on children
• relying on the ‘Digital Decade Board’ to streamline efforts and share best practices across the EU

Moreover, in terms of regulatory initiatives, it is noteworthy that the Commission’s approach seems to shift from adopting new legislation towards ‘swift implementation and enforcement’ of the digital regulatory frameworks, with explicit reference to instruments such as the DSA, DMA, the AI Act, the EU Digital Identity Regulation and the data and cyber initiatives.

In addition, the Commission announces a focus on the reduction of the administrative burden in terms of legislative implementation and enforcement in the digital sphere. This includes ‘avoiding duplication’ and ‘adopting a consistent approach’ to managing the existing governance structures.

The various digital regulations indeed have the potential of double or even triple enforcement for some businesses. With this statement, the Commission seems to open the door to address inconsistencies in, and potentially even some early reviews of, the upcoming legislative framework. In a recent statement, the EDPB leverages this shift in EU policy to present the EU’s data protection authorities as preferred supervisory authorities to be appointed under the AI Act.

While many businesses active in the EU will welcome the idea of a reduction in new EU regulation in the next years, many might now need to step up their efforts to prepare for implementation and regulatory enforcement.

How DLA Piper supports your business

DLA Piper has established teams of experts on each of the recent EU digital regulations. Relying on our global reach, we are in an excellent position to advise clients on national transposition laws of the Directives and consolidate experiences with the new laws in various jurisdictions. In addition, we advise clients on the interplay between the different regulations and offer holistic advice to develop coordinated implementation strategies across the EU.

For more information, please refer to our EU Digital Decade website.