European businesses are navigating an unprecedented convergence of regulatory transformations reshaping the continent’s economic and technological environment.
For example, a Forbes article notes that the UK artificial intelligence market is worth more than £21 billion and will reach £1 trillion by 2035.
In line with this, the European Union (EU) has established a risk-based AI classification system to steer AI innovation in a positive direction. Data sharing has also been a hot-button issue, with the EU updating its Data Governance Act (DGA) to outline how businesses can manage consumers’ personal information.
Moreover, the EU has acknowledged concerns from businesses regarding the intricacies and administrative burden of sustainability regulations. As a result, the EU has recalibrated its approach to sustainability reporting, exemplified by the new Sustainability Omnibus Proposals. Ultimately, these shifts are redefining operational norms and demanding unprecedented levels of adaptability. Compounding these internal transformations are external pressures—notably the announcement of reciprocal tariffs by US President Donald Trump, which have brought on new layers of complexity and uncertainty for European exporters.
Amidst this landscape, the ability to anticipate, adapt, and innovate is no longer a competitive advantage but a prerequisite for survival and sustainable growth. This article will examine the evolution of these regulations, how they impact European businesses, and what organisations can do to stay ahead of the curve.
The EU AI Act: Setting a global standard for responsible innovation and ethical AI development
In August 2024, the European Union enacted the AI Act, establishing the world’s first comprehensive legal framework for AI. This landmark legislation, born from years of deliberation and stakeholder input, categorises AI applications based on risk levels—unacceptable, high, limited, and minimal—and imposes corresponding obligations on developers and users. Each AI tool will undergo an assessment by a third-party provider prior to being put onto the market to mitigate risks found in its system. For example, high-risk AI systems, such as those used in critical infrastructure, healthcare diagnostics, or employment decisions, are subject to stringent requirements. These requirements include rigorous conformity assessments, detailed transparency obligations, and mandatory human oversight mechanisms. If an AI product is deemed a potential threat to the public, it will likely be banned.
The AI Act’s phased implementation began in February 2025 with the prohibition of certain AI practises under Article 5. More specifically, banned AI applications include social scoring, real-time remote biometric identification, emotion recognition in workplace and education institutions, and more. The parliament has set up a working group to oversee the implementation and enforcement of the AI Act. Non-compliance can result in substantial fines of up to €35 million (£30.22 million) or 7% of global annual revenue, whichever is higher, underscoring the importance for businesses to align their AI strategies with the new regulatory landscape proactively.
“The fact that we now have a blueprint for how you put the right boundaries, while also leaving room for innovation, is something that will serve society,” stated Dragoș Tudorache, a key EU Parliament AI Act negotiator, in an MIT Technology Review interview. “It will also serve businesses because it offers a predictable path forward on what you can and cannot do with AI,” he added.
For European businesses, compliance necessitates a fundamental shift in how AI systems are designed, deployed, and managed. Companies must invest in robust governance frameworks, ensure algorithmic transparency, implement explainability mechanisms, and conduct thorough risk assessments to mitigate potential liabilities and ensure adherence to ethical standards. This includes establishing internal AI ethics boards, conducting regular audits, and providing comprehensive training to employees on AI compliance.
President Trump’s Tariffs: Navigating a new era of transatlantic trade uncertainty and market volatility
In a move that has reverberated through global markets, US President Trump has reintroduced tariffs targeting a range of imports, including a staggering 145% tariff on Chinese electric vehicles and a chaotic return to a 10% duty on imports from the EU. Meanwhile, the UK was hit hard with 10% tariffs across the board as of April 2, in addition to existing 25% duties on aluminium, steel, vehicles, and car parts—measures that the Trump administration has justified on the grounds of national security and economic competitiveness.
The impact on the UK’s manufacturing and metals sectors has been especially acute. British Steel, the country’s last remaining producer of virgin steel, is now facing such pressure that the House of Lords approved emergency legislation on April 12, giving the government the power to bring the company under temporary state control. The US remains the second-largest export market for British steel, making these duties a major blow to the industry. Prime Minister Keir Starmer has responded cautiously, stating that the UK will “keep calm and fight for the best deal with the US” while seeking to build coalitions with other nations to reduce trade barriers globally.
To soften the economic blow, the UK government has also moved to lower trade costs in other areas. Under a tariff reduction plan announced on April 13, a number of non-sensitive imports—including pasta, canned pineapples, fruit juice, coconut oil, plywood, and plastics—will now face zero import duties when entering the UK. The goal is to balance the rising costs of transatlantic exports by lowering domestic input prices and consumer goods costs.
On the continent, the EU is also contending with the fallout. Trump’s renewed 10% tariffs on EU exports have created fresh volatility in Germany, France, Italy, and other member states, particularly in the automotive, industrial machinery, aerospace, and luxury goods sectors. Companies in these countries now face higher costs and decreased price competitiveness in the US market. The unpredictable nature of these tariffs has led to sharp market fluctuations, disrupted supply chains, and increased pressure on profit margins.
As a result, many European companies are re-evaluating their supply chains, exploring alternative markets in Southeast Asia, Latin America, and Africa, and considering relocating production to North America to maintain access to US consumers under more favourable terms.
While the EU has not yet imposed retaliatory tariffs in response, it has prepared countermeasures. On April 9, EU member states voted almost unanimously to impose 25% tariffs on €21 billion (£18.13 billion) worth of US agricultural and industrial goods. These duties were devised in direct response to Trump’s February announcement on steel and aluminium tariffs. However, the EU has paused implementation in the interest of diplomacy.
European Commission spokesperson Olof Gill stated that the bloc has decided to “push the pause button” to allow space for negotiations with Washington. “We are not going to take the further step right now because we want new space for negotiations. We want to talk to our American counterparts,” Gill said.
The Commission has also frozen a second wave of proposed retaliatory measures that had been expected to be published in April 2025. This calculated delay stresses the EU’s interest in stabilising trade relations rather than escalating tensions further. Still, the potential for retaliation remains on the table, especially with up to €170 billion (£146.79 billion) in EU exports at risk. The current standoff leaves European exporters—especially those dealing in wine, cheese, cars, precision tools, and aerospace components—in a precarious position.
This complex landscape of tit-for-tat tariffs, diplomatic manoeuvering, and protectionist rhetoric demands robust risk management and contingency planning. Many are turning to tariff management software, alternative shipping routes, and even new US-based subsidiaries to protect their market share. Industry analysts warn that while some businesses may absorb the extra costs temporarily, prolonged exposure to these tariffs could lead to long-term structural shifts in European export strategies—including the possibility of permanent relocation of manufacturing away from Europe.
The EU’s Sustainability Omnibus Proposals: Driving corporate accountability and environmental stewardship
As we briefly touched on earlier, the European Commission has introduced a sweeping package of reforms—known as the Sustainability Omnibus Proposals—to simplify corporate sustainability reporting across the EU. The proposals aim to reduce administrative complexity, harmonise ESG reporting frameworks, and save businesses an estimated €6.3 billion (£5.44 billion) annually, while unlocking €50 billion (£43.17 billion) in sustainable investment.
A central component of the package is a revision of the Corporate Sustainability Reporting Directive (CSRD). The Commission proposes raising the employee threshold for in-scope companies from 250 to 1,000 employees, potentially removing 80% of companies from CSRD requirements. The changes would also ease supply chain data demands by limiting the ESG information companies must collect from smaller suppliers.
The proposed amendments are part of a broader effort to respond to calls from the European Council and business leaders to reduce regulatory burdens. “Simplification is one of the priorities,” said Adam Szłapka, Polish Council member, noting that this is a key focus of Poland’s EU Council Presidency, which began in January 2025.
In addition to narrowing the CSRD’s scope, the European Parliament is reviewing a “stop-the-clock” proposal that would delay compliance deadlines. Large companies that have not started reporting, as well as required small- and medium-sized entities (SMEs), would have an extra two years to comply. The Corporate Sustainability Due Diligence Directive (CSDDD) would also see a one-year extension for the largest firms.
Further changes include simplifying the European Sustainability Reporting Standards (ESRS), reducing the number of required data points, and aligning disclosures more closely with international standards. The CSDDD would no longer require systematic in-depth supply chain assessments; instead, firms must only investigate beyond direct partners when credible concerns arise.
These reforms could considerably ease the compliance burden, particularly for industries like logistics, construction, and energy, which face complex emissions tracking and sustainability alignment challenges. Still, over 50% of mid-sized companies remain underprepared, a KPMG 2025 ESG Readiness Report indicates. While negotiations between the European Parliament and Council may take up to a year, businesses are advised to begin building capacity now.
The European Data Governance Act: Building trust in the data economy and promoting secure data sharing
Enacted in June 2022, the European Data Governance Act (DGA) establishes a framework for secure and ethical data sharing across the EU. The DGA introduces mechanisms such as data altruism and data intermediation services, promoting trust and transparency in data transactions. By enabling more accessible and reliable data sharing, the DGA supports innovation and competitiveness while safeguarding individual rights and data sovereignty.
According to an Economist Impact report, the DGA is a cornerstone of the EU’s plan to create a single European data market, which is projected to be worth €829 billion (£715.80 billion) by 2025. While the DGA creates the processes and structures to facilitate data sharing, the Data Act clarifies who can create value from data and under which conditions. Consequently, businesses now face requirements to ensure compliance with consent frameworks, register data-sharing platforms, implement robust cybersecurity measures, and secure cross-border data flows.
Sectors like pharmaceuticals, agriculture, and transportation are investing in data governance systems to capitalise on trusted, shared data environments, fostering collaboration and innovation. These investments include establishing data trusts, implementing secure data-sharing protocols, and ensuring data privacy compliance.
Vice President of the European Commission for Values and Transparency, Věra Jourová, has said of the DGA: “To become a truly innovative continent, we need a fair data-driven economy. The Data Governance Act will help build confidence so that any data will be shared in line with European values. The Act is a milestone for creating a safe and trustworthy digital single market.”
How European businesses can adapt to sweeping regulatory changes with innovative compliance tools
In response to Europe’s rapidly shifting regulatory landscape—spanning sustainability disclosures, AI oversight, data governance, and external trade pressures—businesses are turning to advanced compliance technologies to future-proof operations and maintain competitiveness.
Streamline compliance with regulatory reporting software
The increase in tariffs, financial oversight, and cross-border compliance demands, fuelled by both geopolitical tensions and regulatory reform, has left many organisations in urgent need of robust and scalable reporting systems. This is where the OneSumX for Finance, Risk and Regulatory Reporting (FRR) comes in handy. This regulatory reporting software offers a powerful, cloud-native solution that automates and simplifies reporting processes across prudential, statistical, and transactional requirements.
Built for scalability and cross-border consistency, OneSumX supports compliance across more than 50 jurisdictions and 800 regulators. It delivers real-time data reconciliation, advanced validation, and regulator-ready output files, all backed by a comprehensive audit trail. Its adaptable architecture means businesses can quickly respond to new legislative demands—such as those introduced by Trump-era trade shifts or the EU’s evolving ESG reporting mandates—without overhauling their internal systems. By integrating data management, complex calculations, and report generation into a single SaaS solution, OneSumX boasts a cost-efficient, future-ready path toward regulatory compliance.
Manage ESG disclosure with AI-powered tools
The EU’s Sustainability Omnibus Proposals are set to reshape ESG reporting expectations, requiring larger firms to submit standardised annual sustainability reports starting in 2025. For many organisations, especially those facing a flood of ad-hoc data requests from investors, clients, and regulators, traditional reporting systems are ill-equipped to cope.
Benchmark Gensuite’s Responsio is explicitly designed to address this challenge. An AI-powered, end-to-end platform, Responsio transforms ESG, EHS, and sustainability data management by centralising disclosure requests, assigning accountability, and generating tailored responses through intelligent automation.
By learning from previous submissions and integrating with broader ESG systems, this AI-based solution ensures speed, consistency, and transparency—traits that are becoming critical as ESG becomes a regulatory and reputational priority. For companies juggling evolving expectations under the Omnibus Proposals, Responsio is not just a tool but a strategic compliance asset.
Proactive data governance and AI risk mapping
With the AI Act introducing tiered risk classifications and strict oversight for high-risk AI applications, European firms deploying AI technologies must rethink their AI governance strategies. Businesses should start by conducting risk assessments of AI systems to identify whether their tools fall under “high-risk” or “limited risk” categories and put mechanisms for human oversight, explainability, and bias mitigation in place.
In a previous post, we discussed how fintech companies are successfully leveraging AI to automate financial services and improve operational efficiency. Given AI’s ability to comb through large volumes of data and distinguish patterns, fintech firms have been able to use AI for fraud detection and more. Similarly, adopting AI governance platforms that offer automated documentation, audit trails, and compliance tracking will be key. Tools that map algorithmic decision-making and allow for model transparency can help organisations meet the Data Act’s core requirements before enforcement begins.
As for DGA compliance, businesses must begin reassessing data flows and building secure, interoperable data-sharing mechanisms. In line with this, firms should invest in platforms that facilitate data cataloguing, consent tracking, and secure exchange—especially when dealing with third-party or public-sector data. Leveraging metadata management and permissions tools can help companies stay within legal bounds and unlock greater value from shared datasets.
Building resilience through strategic tech adoption
As European businesses face a cascade of new regulatory demands, from AI ethics to sustainability reporting, the path forward lies in strategic, tech-enabled compliance. By integrating adaptable solutions and embracing governance technologies that align with new EU standards, companies can move from reactive compliance to proactive risk management—building both resilience and reputation in the process.
