2 March 2026
Making Impact Profitable: the next phase of European competitiveness
The European Union is searching for a new model of competitiveness. That brings Europe to a strategic crossroads: it can attempt to lower environmental and social standards to compete on price alone, or it can build markets in which organisations compete towards the highest impact. The choice determines whether impact remains a cost to be managed or becomes a structural source of competitive advantage.
Other major economies are already moving decisively towards a long-term strategy. China, for example, now derives more than 11% of its GDP, and roughly one-third of its GDP growth from clean technology sectors. Industrial policy and market incentives have aligned to turn the transition into an engine of growth.
Europe’s Strategic Advantage
Europe is uniquely positioned to be a leading player in clean technology and sustainable revenue models. More than 22% of clean and sustainable technologies and Europe has built strong industrial and innovation positions in sectors such as offshore wind and green hydrogen.
The question is whether Europe will align them into a competitive advantage.
The Profitability Gap
Despite its strengths, Europe faces a structural barrier: the Profitability Gap. Market prices and financial performance still fail to fully reflect key social and environmental externalities. Companies can generate strong financial returns while shifting costs to people, nature and future generations. As a result, impact-driven business models often compete at a disadvantage. The societal value they create across climate, biodiversity and health is not rewarded in market prices or financial returns. Where the value case is clear, the business case is too often missing.
Aligning impact and profitability: the next phase of European competitiveness
Closing this gap requires fair and predictable pricing of environmental and social externalities. When impact is priced consistently, the competitive edge shifts from the lowest short-term cost to the highest long-term value creation. Impact must become economically competitive.
There are already clear examples of how this works in practice. A recent study by Agora Industry shows that electrifying industrial process heat is already cost-competitive with fossil fuels in certain applications across Europe, provided there is a credible carbon price. When carbon is priced reliably, decarbonisation becomes a rational economic choice rather than a regulatory burden. Electrification reduces exposure to fossil fuel volatility, creates demand for industrial heat pumps and electric boilers, and strengthens Europe’s clean manufacturing base. In this case, the alignment of impact and price signals makes decarbonisation investable and scalable.
The challenges facing green ammonia illustrate the same principle in reverse. As reported by the Financial Times, Svein Tore Holsether, chief executive of Yara International, Europe’s largest fertiliser group, acknowledged that green ammonia is not yet a viable alternative to conventional production. “There will be no green transition with red numbers”, he said. “In order to scale, it has to be profitable”. When carbon incentives weaken or policy signals become uncertain, the business case collapses. The technology may exist, but without predictable pricing mechanisms or demand guarantees, projects stall and investment dries up.
Competitiveness and sustainability are not opposing forces, they simply only reinforce one another when markets reward impact.
From Transparency to transaction with True Profits
Making impact profitable requires more than ambition. It requires new metrics, new incentives and new rules of the game.
Through the True Profits initiative, the Impact Economy Foundation works to accelerate this shift by influencing how incentives, capital allocation and performance measurement evolve to reflect long-term societal value creation. Europe stands at a decisive moment. Its future competitiveness can be secured by ensuring that profitability and impact reinforce one another. That is, if we act accordingly.
The True Profits Alliance brings together frontrunning enterprises, investors and policymakers committed to making profit impactful and impact profitable. Now is the time to move from from impact as aspiration to impact as advantage.