Digital transformation: importance, benefits and EU policy

Source: European Parliament (EP) i, published on Tuesday, October 12 2021.

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Learn how the EU is helping to shape a digital transformation in Europe to benefit people, companies and the environment.

The digital transformation is one of the EU's priorities. The European Parliament is helping to shape the policies that will strengthen Europe's capacities in new digital technologies, open new opportunities for businesses and consumers, support the EU's green transition and help it to reach climate neutrality by 2050, support people's digital skills and training for workers, and help digitalise public services, while ensuring the respect of basic rights and values.

In May 2021, Parliament adopted a report on shaping the digital future of Europe, calling on the European Commission to further tackle challenges posed by the digital transition and especially take advantage of the opportunities of the digital single market, improve the use of artificial intelligence and support digital innovation and skills.

What is digital transformation?

  • Digital transformation is the integration of digital technologies by companies and the impact of the technologies on society.
  • Digital platforms, the Internet of Things, cloud computing and artificial intelligence are among the technologies affecting ...
  • ... sectors from transport to energy, agri-food, telecommunications, financial services, factory production and health care, and transforming people's lives.
  • Technologies could help to optimise production, reduce emissions and waste, boost companies' competitive advantages and bring new services and products to consumers.

Funding of the EU's digital priorities

Digital plays an essential role in all EU policies. The Covid crisis accentuated the need for a response that will benefit society and competitiveness in the long run. Digital solutions present important opportunities and are essential to ensuring Europe's recovery and competitive position in the global economy.

The EU's plan for economic recovery demands that member states allocate at least 20% of the €672.5 billion Recovery and Resilience Facility to digital transition. Investment programmes such as the research and innovation-centred Horizon Europe and infrastructure-centred Connecting Europe Facility allocate substantial amounts for digital advancements as well.

While the general EU policy is to endorse digital goals through all programmes, some investment programmes and new rules specifically aim to achieve them.

Digital Europe programme

In April 2021, Parliament adopted the Digital Europe programme, the EU’s first financial instrument focused specifically on bringing technology to businesses and people. It aims to invest in digital infrastructure so that strategic technologies can help boost Europe’s competitiveness and green transition, as well as ensure technological sovereignty.

It will invest €7.6 billion in five areas: supercomputing (€2.2 billion), arfitifical intelligence (€2.1 billion), cybersecurity (€1.6 billion), advanced digital skills (€0.6 billion), and ensuring a wide use of digital technologies across the economy and society (€1.1 billion).

Platform economy

Online platforms are an important part of the economy and people's lives. They present significant opportunities as marketplaces and are important communication channels. However, there also pose significant challenges.

The EU is working on new digital services legislation, aiming to foster competitiveness, innovation and growth, while boosting online security, tackling illegal content, and ensuring the protection of free speech, press freedom and democracy.

Read more on why and how the EU wants to regulate the platform economy

Cybersecurity

As digital and physical are increasingly intertwined, new dangers arise, making cybersecurity important for areas ranging from consumer safety online to the normal functioning of hospitals, water and power supplies.

In October 2021, MEPs called for common EU cyber defence capabilities and are working to ensure a high common level of cybersecurity in the EU.

In 2021 Parliament adopted rules to establish a new European cybersecurity centre and to prevent the dissemination of terrorist content online.

Read more on why cybersecurity is important

Artificial intelligence and data strategy

Artificial intelligence (AI) could benefit people by imroving health care, making cars safer and enabling tailored services. It can improve production processes and bring a competitive advantage to European businesses, including in sectors where EU companies already enjoy strong positions, such as the green and circular economy, machinery, farming and tourism.

To ensure Europe makes the most of AI's potential, MEPs have accentuated the need for human-centric AI legislation, aimed at establishing a framework that will be trustworthy, can implement ethical standards, support jobs, help build competitive “AI made in Europe” and influence global standards. The Commission presented its proposal for AI regulation on 21 April 2021.

Read more on how MEPs want to regulate artificial intelligence

The success of AI development in Europe ilargely depends on a successful European data strategy. Parliament has stressed the potential of industrial and public data for EU companies and researchers and called for European data spaces, big data infrastructure and legislation that will contribute to trustworthiness.

More on what Parliament wants for the European data strategy

Digital skills and education

The Covid-19 pandemic has demonstrated how important digital skills are for work and interactions, but has also accentuated the digital skills gap and the need to increase digital education. The Parliament wants the European skills agenda to ensure people and businesses can take full advantage of technological advancements.

42% ; of EU citizens lack basic digital skills

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Fair taxation of the digital economy

Most tax rules were established well before the digital economy existed. To reduce tax avoidance and make taxes fairer, MEPs are calling for a global minimum tax rate and new taxation rights that would allow more taxes to be paid where value is created and not where tax rates are lowest.

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