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Resource Regions: Western Europe

Railways are becoming increasingly strategic. They are more energy efficient and pollute less than private vehicles, and they are 15 to 20 times safer than cars.

Compared with private vehicles, they do not entail any fixed cost for travellers. No wonder governments around the world are making huge investments in rail. For instance, 21 out of 27 EU member state national recovery plans have allocated billions to invest in electrification and modernisation of rail infrastructure. President Biden’s Bipartisan Infrastructure Law has nearly tripled funding for rail infrastructure — to $1 billion a year for the next five years.

Airlines struggled to survive when COVID reduced traffic to unprecedented levels. Fuel price increases and labour shortages compounded the effect of COVID by creating the urgency to profoundly rethink business and operating models, while regulators and passengers demand accelerated investment in environmental sustainability, such as more fuel-efficient traffic management, more sustainable fuels and, in the future, zero-emission aviation.

Both industries have reached an inflection point. Hiring more people and growing the size of fleets and number of routes will not be enough to increase capacity utilisation and offer more competitive and personalised services, while maintaining high safety standards and improving environmental sustainability. Achieving those strategic goals will require railway and airline executives to invest in technology innovation.

Bold Ambition for the Future Will Depend on Realising the Value of Technology Innovation

Railways and airlines have invested in technology for many years to deploy digital customer experience capabilities, such as loyalty programmes, self-service booking and mobile payments, intelligent asset and fleet management capabilities to enhance operational excellence, and scheduling of routes and dispatch to bring together high-capacity utilisation and safety.

However, our recent studies show that they are not standing still. They are now looking at the next generation of technologies, such as 5G, artificial intelligence and machine learning, IoT and edge computing, augmented and virtual reality, even quantum computing for traffic optimisation. They are not doing so for the sake of technology, but to achieve four interdependent strategic business goals:

  • Increase operational efficiency, while targeting net-zero impact​
  • Increase capacity utilisation by combining intelligent scheduling, dispatch and traffic control systems to increase frequency of travel and smart predictive operations to help prevent delays and disruptions 
  • Ensure that efficiency goes hand in hand with safety and security, even with higher utilisation rates thanks to digitally enabled physical security systems, regulatory compliance of operations and cybersecurity​
  • Increase revenue growth through innovative service offerings, often by making their services and hubs — stations and airports — the anchors of a mobility-as-a-service ecosystem

To empower railway and airline executives to make strategic choices about next-generation technology investments, implement new organisational competencies and capacities that accelerate technology investment benefit realisation, and select tech partners that understand the technical and business evolution of their industry, IDC has launched new research on railways and airlines and transportation hubs.

Stay tuned for upcoming research on topics such as ticketing and revenue management, digital twins for intelligent operations, 5G and cybersecurity.

Massimiliano Claps - Research Director - IDC

Analyst Profile
Massimiliano (Max) Claps is the research director for the Worldwide National Government Platforms and Technologies research in IDC's Government Insights practice. In this role, Max provides research and advisory services to technology suppliers and national civilian government senior leaders in the US and globally. Specific areas of research include improving government digital experiences, data and data sharing, AI and automation, cloud-enabled system modernization, the future of government work, and data protection and digital sovereignty to drive social, economic, and environmental outcomes for agencies and the public.

In Europe, the primary driver for corporate sustainability initiatives is the EU’s Corporate Sustainability Reporting Directive (CSRD). It came into force in January 2023 at EU level and must be transposed into national law in all EU countries within 18 months (by mid-2024).

The EU CSRD aims to improve transparency and accountability around corporate sustainability performance. It also aims to accelerate the integration of environmental, social and governance (ESG) considerations into corporate business practices to support the transition to a more sustainable, inclusive economy.

From 2025, those companies already subject to the Non-Financial Reporting Directive (NFRD) — around 10,000 in Europe — will have to report on a variety of sustainability indicators for their FY24. In the following years, the CSRD will be widened to cover around 50,000 companies — all those listed on EU regulated markets with more than 250 employees, more than €40 million in revenues and/or more than €20 million in total assets. The directive also covers non-EU companies with operations in the EU.

 

Download eBook: Sustainability in EMEA: Opportunities for Tech Vendors, Challenges for Tech Buyers

 

The key differences to previous laws are:

  • The introduction of standardised, mandatory sustainability metrics on companies’ policies, risks, impacts and outcomes relating to ESG issues
  • The mandate to consider double materiality, i.e., identifying all potential negative and positive impacts on people and environment connected with a company’s own operations and its value chain
  • The requirement that reported information is audited
  • The requirement that reported information is digitally tagged to feed into a European single access point

Non-compliance can lead to sanctions and financial penalties, but also reputational damage.

Our recent surveys have revealed that most companies are in the very early stages of being able to meet these requirements. The measurement of value chain sustainability performance (including Scope 3 emissions and product life-cycle assessments) is very complex and requires the creation of new KPIs and respective data architectures that enable continuous data collection and analysis, real-time monitoring, automated performance reporting, and data assurance.

 

Register for the webcast: Sustainability in EMEA: The Challenge of Moving from Ambition to Action

 

Will CSRD Legislation Lead to the Same Last-Minute Rush and Soar in Penalties as with GDPR?

Remember when the GDPR came into effect in May 2018? Shortly before, there was a great rush as organisations prepared for compliance. Why? Because of the threat of severe penalties. And penalties were imposed: since its launch, hundreds of millions of euros of fines have been handed out by data protection authorities around Europe. In 2019, those fines totalled €73 million, rising to €172 million in 2020 and €1.3 billion in 2021 (source: enforcementtracker.com).

As with GDPR, CSRD legislation replaces older laws with new, stricter and better enforced legislation. While they are EU directives, both GDPR and CSRD have “extraterritoriality” enforcement, meaning regulators can fine organisations anywhere in the world if they have operations in the EU and do not comply.

The risks of not being prepared for CSRD are significant. If member states implement similar penalties or sanctions as for financial reporting legislation, organisations could face legal sanctions (imprisonment or disqualification of company directors), public reprimands or penalties, depending on the country-specific enaction.

Non-compliance could also result in reputational damage, loss of stakeholder confidence, allegations of greenwashing and legal action from non-governmental entities such as climate activists.

And it’s not just the CSRD. The EU is also working on a Supply Chain Due Diligence Directive that aims to mitigate the adverse impact of governance, environmental and human rights risks in the value chain of companies selling products within the EU. Many national governing bodies are implementing or tightening mandatory carbon emission and other sustainability regulations.

Investing now in efforts to prepare data collection, analysis and reporting capabilities will keep an organisation ahead of the curve as CSRD and other new sustainability regulations are put in place.

Reporting compliance and impacts on risk management are one thing. Forward-looking companies are going further and are acting on the metrics. They are developing disruptive strategies and road maps for sustainable business transformation that redesigns end-to-end value chains and breaks up traditional industry models.

Circular (instead of linear) economy approaches are emerging, innovation is sustainability driven and products and services are becoming “sustainable by design”. Those approaches — not yet widely seen — are the basis for future-proof organisations that will have a much lower risk profile, greater resilience and long-term strategic growth potential. And they won’t have to fear sustainability regulations.

 

Related Research

2023 Key Sustainability Trends and Developments in EMEA

Sustainability and ESG Readiness Among European Organizations

Other Resources

IDC Survey Finds Organizations Turning Toward ESG Software Solutions and Independent ESG Program Management

The Need for Harmonised ESG Reporting for Financial Entities

Katharina Grimme - Associate VP, Research and Practice Lead, EMEA Sustainable Strategies and Technologies - IDC

Analyst Profile
Katharina Grimme has more than 20 years' experience as an industry analyst and strategy consultant in the tech industry and is leading is leading IDC's Sustainability research in EMEA. With her expertise and passion for sustainable concepts for business, society, and digitization, she drives thought leadership at the intersection of sustainability and digital transformation.
May 4, 2023

24 мая в Баку на IDC Day Forum соберутся руководители ведущих компаний Азербайджана, чтобы обсудить эффективные ИТ-стратегии и технологии для построения «предприятий будущего»

Аналитики IDC (International Data Corporation) прогнозируют увеличение расходов на ИКТ в европейском регионе на 2,8% в 2023 году – до 1,18 трлн. долларов.

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A few months ago, as I was walking down the aisles of a professional fair for public sector decision makers, I noticed two main themes on display:

  • Cybersecurity, from secure citizen identity verification to the resilience of systems and data to threats.
  • Efficiency of public services, with an emphasis on the need to better leverage and share data.

As a public decision maker, I would be lost, if not paralysed by, the contradiction of being asked to modernise my systems and organisation through better use of data and data sharing, while being constantly reminded that cyberthreats (and cyber attacks) are everywhere.

The first months of 2023 have been characterised by two sub-topics that illustrate this bipolarity: digital sovereignty (a country’s capacity for self-determination and in some cases data protection and isolation) and generative AI (a platform’s capacity to have access to all the data you might collect and extract, and lever this information to turn it into intelligible insights).

To bring these together, we felt something was needed and that some well-implemented borders and security measures are needed to be reconsidered.

An Inflection Point in the Importance of Data

Governments have long classified data primarily on its sensitivity. The UK government’s security classification, for example, defines “the sensitivity of information (in terms of the likely impact resulting from compromise, loss or misuse) and the need to defend against a broad profile of applicable threats.” Based on that definition of sensitivity, UK government policy applies three levels of classification for government data: top secret, secret and official. The majority of EU governments have also classified the data they manage based on sensitivity.

This classification showed its limits in February 2022 when Ukraine rushed to identify and migrate strategic data assets critical for the government to enable operational continuity and bolster resilience. Previously, Ukrainian law required some government data to be stored in local servers in Ukraine, but this was changed a week before the invasion. Essential data has already been migrated from over 27 Ukrainian ministries.

IDC analysis shows the public sector is at an inflection point when it comes to the importance of data, and that it’s not only a matter of protecting sensitive data but also of anticipation. This is done by recognising data as a critical and strategic asset for governments to function more efficiently, effectively and resiliently to deliver the outcomes and security solutions that citizens expect, in times of crisis and on a daily basis.

A Framework to Facilitate Readiness

This has led us to create a framework that builds a new layer in data classification. In our Learning from Ukraine: Building a Framework to Safeguard Governments’ Critical Data, we recommend that governments not only classify and manage sensitive data but also critical and value-added data.

Critical data can be defined as data that if not accessible or not reliable can jeopardise a government’s ability to function in its daily activities and in times of crisis. It’s important to highlight this difference between classifying data based on the level of sensitivity and the level of criticality because some data sets have both characteristics.

For example, a criminal record is both sensitive (because it contains personal information) and critical for the criminal justice system to function. However, land registry data does not contain the most sensitive information but is critically important to determine jurisdictional boundaries, settle property disputes and assess the value of taxable assets.

Bringing Everyone on Board

Data sharing and interoperability and the building of European data spaces are vital here; sovereignty (the capacity to self-determine your action) should serve this cause and not get in the way, as it is often confused with security.

Sovereignty is a current concern as many government entities are seeking to update their cloud policies, such as the “Cloud au Centre” in France and “cloud first” in the UK. Some initiatives also promote interoperability, with Portugal’s eSPap government authority developing a platform for public entities.

These initiatives aim to bring more coherence to IT systems and enable new services in healthcare and security, for example.

Local governments are still trailing European or central governments when it comes to transformation, partly due to trust issues. We believe that enabling this new layer of criticality, and adapting our framework for every local public entity CIO, will be key to creating a common secure language.

To learn more about government’s role in safeguarding critical data, see our new study Learning from Ukraine: Building a Framework to Safeguard Governments’ Critical Data and join us at the IDC Government Xchange.

Remi Letemple - Senior Research Analyst, IDC Government Insights - IDC

Analyst Profile
Remi Letemple leads IDC’s Worldwide Sustainable Transportation and Smart Vehicles Strategies service, where he provides strategic guidance and thought leadership on the future of mobility and transportation. Operating at a global level, he is recognized as a subject matter expert in smart mobility and transportation technologies—including connected, autonomous, shared, and electric mobility—enabled by software-defined vehicle (SDV) architectures, over-the-air (OTA) updates, cloud and edge platforms, and AI, including generative AI.