This shift integrates defense into the EU’s broader resilience agenda while embedding ESG principles into procurement and financing. For businesses, the implications are significant. Navigating the new regulatory and security environment will involve managing complex compliance frameworks, adopting multi-strategy investment models, and anticipating long-term sector risks, including by leveraging dual-use technologies for strategic flexibility.
The fractured transition and the defense imperative
Europe is navigating a convergence of crises: the war in Ukraine, intensifying geopolitical competition, supply chain fragility, and the accelerating climate emergency. These shocks have exposed structural vulnerabilities in energy and security systems, prompting a strategic pivot toward resilience and autonomy.
To address this new reality, the EU in March 2025 introduced the White Paper for European Defence—Readiness 2030, also known as the ReArm Europe Plan, marking a shift from a peacetime mindset focused on regulation and compliance to one focused on preparedness, deterrence, and industrial scalability. With these shifts, defence has become a central driver of European policymaking.
This transformation is embodied in the Defence Readiness Omnibus, adopted by the European Commission in June 2025. The package combines legislative and non-legislative measures to strengthen Member States’ self-defense capacity and align national security strategies under the Common Security and Defence Policy (CSDP). It also seeks to foster innovation to meet technological and operational challenges.
Driving strategic autonomy: Operationalizing Readiness 2030
The next phase is implementation—and the immediate priorities here are creating industrial depth and promoting joint procurement at scale.
The White Paper translates strategic intent in this area into concrete policies:
- Security Action For Europe (SAFE) Regulation—a new financial instrument providing long-term loans for urgent defense investments and joint procurement
- European Defence Industry Programme (EDIP)—EUR1.5 billion to boost industrial readiness, surge capacity, and secure supply chains
- European Defence Industrial Strategy (EDIS)—targets 50% EU sourcing of defense equipment by 2030.
EDIP also creates a Defence Industrial Readiness Board to coordinate priorities. Indeed, flagship projects like the European Air and Space Shields and initiatives such as the European Drone Defence Initiative underscore the urgency of capability coalitions as they would not be achievable without Member States acting in concert. Combined with measures like the Defence Omnibus Simplification and the European Armament Technological Roadmap, these actions aim to build an agile, interoperable, and technologically advanced defence ecosystem.
The EU Defence Readiness Omnibus: A regulatory reset
The Omnibus removes structural barriers that have long slowed defense investment and cooperation.
Key measures include:
- creating a 60-day fast-track for defence infrastructure projects
- streamlining the licensing of intra-EU transfers of military goods
- setting higher procurement thresholds to accelerate collaborative programs.
These reforms could unlock EUR800bn in defense investments over four years, delivering an estimated EUR42–51bn in cumulative benefits over the next decade.
Beyond the simplification and streamlining of procurement rules, the Omnibus clarifies that the existing “national security” exemptions allowing deviations from strict EU procurement rules also apply to tenders aimed at improving the EU’s/NATO’s defense readiness.
Further, the Omnibus embeds sustainability principles in procurement—requiring transparency and risk-based due diligence. In this way, it serves as both a regulatory reset and a strategic enabler of industrial scalability, technological innovation, and responsible investment under the CSDP.
ESG meets defense: A complex convergence
Defense, once largely excluded from ESG frameworks, is now becoming a part of these, marking a move to a more risk-based and pragmatic approach. The documents published by the European Commission in 2025 like the White Paper for European Defence—Readiness 2030 and the 2026 Work Programme (“Europe’s Independence Moment”) reframe defense as a contributor to resilience and social sustainability. This shift is reflected in a June 2025 Commission Notice within the Defence Readiness Omnibus, clarifying how the EU sustainable finance framework applies to defense. Activities that exclude prohibited weapons and meet transparency and due diligence requirements may qualify for ESG-linked financing, aligning with sustainability goals.
However, several challenges remain, including:
- human rights risks in export markets
- the carbon footprints of military operations
- reputational concerns for investors.
To reconcile sustainability goals with security imperatives, the Omnibus streamlines defense procurement by simplifying procedures, raising thresholds, and introducing fast-track permitting to accelerate critical projects. Financial signals confirm the shift: the European Investment Bank now permits up to EUR3bn in defense-related loans, including EUR1bn for dual-use infrastructure.
What to expect over the short, medium, and long term
In the short term (6–12 months), businesses should prioritize compliance by strengthening internal governance, tightening export control screening, and ensuring alignment with EU and national requirements. Simultaneously, track the Omnibus—aimed at streamlining procurement and permitting—to identify compliance gaps and assess where new rules may ease obligations and improve efficiency.
In the medium term (12–18 months), leverage new EU rules and funding by submitting proposals under European Defence Fund and upcoming EDIP calls. To secure funding, prioritize high-impact projects—such as capacity expansion, innovation, and supply chain resilience—while fostering strategic partnerships and aligning internal processes with streamlined procurement and permitting requirements.
Over the long term (18 months–5 years), focus on balancing defense, dual-use, and adjacent industrial sectors to diversify risk and maintain exit options, while localizing critical management and operations within the EU to strengthen resilience and secure eligibility for public support. Regularly refresh exit strategies to reduce reliance on defense-only markets and capture value from assets with durable civilian demand.
Ultimately, businesses that prioritize these focus areas and pair compliance mastery with strategic flexibility will be best positioned to thrive in Europe’s defense-driven transition.
