-: European business leaders will need to adopt
a number of strategies to respond to these challenges.
Firstly, they need to plan for a range
of different possible future outcomes.
There's no longer one obvious way the world
or the European continent will develop.
We need to adopt scenario-based approaches
in order to plan for the future.
Secondly, the future will continue
to be uncertain and volatile,
and that will impact the macroeconomic environment
through things like high interest rates,
volatile commodity prices, and so forth.
Thirdly, a more fragmented world
means that multinational companies
need to adopt different strategies
and maybe even different organizations
for different parts of the world,
rather than relying on a single common
organizational structure or policies or rules.
And finally, trade growth,
we at BCG predict will predominantly be in emerging markets
over the next decade,
and so anyone involved in trade and export
needs to seize the opportunities
that those markets will present over the coming years.
One of the key future developments
that we're really seeing now is the increased interlinking
between trade, geopolitics, and climate action.
And Europe, and the European Union in particular,
is at the heart of this shift,
and it's something that business leaders
really need to understand, whether they are in Europe
or serving Europe's markets,
or in supply chains that involve Europe.
The European Union has shown global climate leadership
for many years,
but as it struggles with its own competitiveness challenges,
it's starting to connect its domestic regulation
with its large single market.
Whether it is ramping up carbon pricing
or introducing new market access conditions
like climate levies on imports
or new rules on forced labor and deforestation,
we're seeing the EU use its market size to influence
and try to decarbonize and improve ESG standards
throughout global supply chains.
Business leaders globally need to understand
and adapt to this new European trend
linking climate regulation and trade.
Whether you are a business exporting
a carbon-intensive product like steel,
whether you might have labor
or other challenges within your supply chain,
or whether you're trading in a product
that's made on deforested land
or potentially deforested land,
these new rules will impact you
if you are trading with the EU.
The EU's linkage between climate,
ESG, and trade has the potential
to reshape global supply chains,
whether that is decarbonizing your products,
complying with new compliance
or transparency rules when serving the EU,
or thinking about where you might want
to locate your manufacturing facilities.
It's important to understand this geopolitical dimension
and factor that into future business strategy.