The role of companies in the new geopolitical order: Notes for Europe

Article published in Newsletter #25 of the Esade Center for Corporate Governance

We are witnessing a profound transformation in the global strategic environment. The unquestioned hegemony of the United States during the final decades of the 20th century has given way to a multipolar 21st century, where China plays an increasingly influential role. What is more, since Donald Trump’s return to the White House, the US itself has become the main driver of deglobalization and the dismantling of an international order based on rules and mutual respect among nations. 

It is still too early to know how far we will go under the unprecedented influence of a newly unfamiliar and dangerous United States—one that advocates a global coexistence based on the law of the strongest, economic self-interest over human welfare or sustainability, the abandonment of democracy promotion and human rights defense, contempt for science, and the promotion of sectarianism that ignores global diversity and pluralism. 

A renewed interest in geopolitics in boards of directors

At EsadeGeo, alongside the Esade Center for Corporate Governance, we have addressed this reality from the perspective of boards of directors, responding to questions long posed by companies but which have now gained particular relevance. As an analytical approach to complement the rigorous risk and strategic analyses companies already conduct—but which are not always visible to boards or the public—we have structured our work around three key axes. 

• The first is security. How does national security impact business decisions? What issues should companies and boards focus on?
• The second is value chains. Globalization has lost momentum, and the relocation of supply chains has come under review in entire sectors of the economy due to experiences during the COVID-19 pandemic, the war in Ukraine, and now the trade war, regulatory disruption, and political risk tsunami triggered by Trump’s return. What is happening to globalization? Are supply chains no longer global? In a more conflict-ridden environment, supplier origin is no longer neutral. China and the US compete for technological leadership, aware that this is essential to strengthening their power.
• Third is the technological outlook. Technology continues to advance exponentially and is a key factor in tackling inflation, which is largely driven by rising energy costs, deglobalization, and the shortage of skilled labor in an aging world. In a context of rising capital costs, what technologies will be critical? Where should investment be focused? Without artificial intelligence (AI), for instance, no real progress can be made in any of the main technological fields. 

The challenge for Spain and the European Union

In this context, Spanish and European companies face the challenge of preventing Europe from falling behind the US and China and meeting the competitiveness challenges of the new geopolitical environment by overcoming the barriers hindering their development and technological capacity. The geopolitical complexity, the general risk of the global environment, and Europe’s weaknesses and vulnerabilities are such that the only viable priority to sustain our way of life is to recover competitiveness and productivity—because everything else depends on these two variables. 

Without greater competitiveness, polarization, extremism, and authoritarian nationalism cannot be contained

Without improvement in this area, Europe will no longer be a space of strong economic and social cohesion. Without enhanced competitiveness to support jobs and the economy, polarization, extremism, and nationalist authoritarianism will flourish, leading inevitably and irreversibly to collective impoverishment and possibly even renewed fragmentation or the breakdown of civic and democratic coexistence. 

In this context, both from an economic policy and broader political standpoint, the business sector is the key agent, because competitiveness and productivity can only be improved through internal transformation within companies. This is a huge challenge, as it requires a transformative strategy in public policy that views public-private collaboration through a radically different and necessarily innovative lens. 

How can we boost competitiveness and productivity?

As emphasized in the Letta and Draghi reports, the European Union is not a global benchmark in productivity and innovation, which casts doubt on Europe’s ability to sustain its way of life as we know it. 

How did this happen? The main reason is that economic integration remains incomplete and the single market is fragmented and inefficient. This is all occurring in a context where the reforms called for by Letta and Draghi face strong resistance from anti-European and nationalist right-wing populism, which can only lead to collective impoverishment and deepen the gap separating Europe from China and the US. The challenge facing us as Europeans requires a deep transformation of the productive system—value chains, knowledge generation and transfer, and human capital—within a hostile and uncontrollable geopolitical environment. 

Competitiveness and productivity rely on internal business decisions. Public policies can support and incentivize them, but only companies can act through their own market strategies. Companies can and must contribute to Europe’s goal of remaining a stable industrial location; leading in key technologies; building strategic production capacity in critical areas such as semiconductors and energy conversion technologies—wind, solar, electrolyzers, power grids, heat pumps, batteries, CCU, CCS, nuclear fission—and advanced technologies like AI and quantum computing; and ensuring full economic security—digital, defense, and energy. 

In this new European phase, all public policies must embrace the new geopolitical and strategic framework

To achieve this, some of the EU’s core policies need to be transformed. Competition policy, for instance, should also help European companies grow in global markets by ensuring they have incentives to invest, innovate, and scale. EU competition policy must adopt the new geopolitical and strategic framework, considering sector-specific realities to guarantee Europe’s resilience and strengthen its competitiveness. 

Growing in the global market

All policies should ultimately aim to help European companies grow globally, ensuring they have the incentives to invest, innovate, and expand. In this new European phase, all public policies—including competition, R&D, university funding, and research support—must embrace this new geopolitical and strategic context. 

Boosting competitiveness and productivity also requires addressing every contributing factor—financing, capital markets, R&D and deep science, technology and knowledge transfer, competition and scale, administrative simplification and tax harmonization, and STEM human capital—from a European perspective and at a European scale. This involves reshaping the structure of the entire value chain and identifying potential risks to guarantee European resilience. Geopolitics and international alliances must be integrated into all decision-making processes in service of these goals.