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The importance of digital resilience in times of crisis

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EU Commission released the results of the 2020 Digital Economy and Society Index (DESI), which monitors Europe’s overall digital performance and tracks the progress of EU countries with respect to their digital competitiveness. This year’s DESI shows that there is progress in all Member States and all key areas measured in the index. This becomes all the more important in the context of the coronavirus pandemic, which has demonstrated how essential digital technologies have become, by allowing work to continue, monitoring the spread of the virus, or accelerating the search for cures and vaccines. Furthermore, the DESI indicators relevant for the recovery show that EU Member States should step up their efforts to improve the coverage of Very High Capacity Networks, assign 5G spectrum to enable the commercial launch of 5G services, improve citizens’ digital skills and further digitise businesses and the public sector.

Executive Vice-President, Margrethe Vestager, said: “The coronavirus crisis has demonstrated how crucial it is for citizens and businesses to be connected and to be able to interact with each other online. We will continue to work with Member States to identify areas where more investment is needed so that all Europeans can benefit from digital services and innovations.

Commissioner for Internal Market, Thierry Breton, added: “The data we publish today shows that industry is using digital solutions now more than ever. We need to ensure this is also the case for small and medium businesses and that the most advanced digital technologies are deployed throughout the economy.

In the context of the recovery plan for Europe, adopted on 27 May 2020, DESI will inform country-specific analysis to support the digital recommendations of the European Semester. This will assist Member States to target and prioritise their reform and investment needs, thereby facilitating access to the Recovery and Resilience Facility worth €560 billion. The Facility will provide Member States with the funds to make their economies more resilient and ensure that investments and reforms will support the green and digital transitions.

Main findings of the 2020 DESI

Finland, Sweden, Denmark and the Netherlands are the leaders in overall digital performance in the EU. Malta, Ireland and Estonia are following right after. The International Digital Economy and Society Index (I-DESI) shows that the best performing EU countries are also worldwide leaders. The largest EU economies are not digital frontrunners, which indicates that the speed of digital transformation must accelerate for the EU to successfully deliver on the twin digital and green transformations. Over the last 5 years, Ireland has made the most significant progress, followed by the Netherlands, Malta and Spain. These countries also perform well above the EU average as measured by the DESI score.

As the pandemic has had a significant impact on each of the five dimensions tracked by DESI, the 2020 findings should be read in conjunction with the numerous measures taken by the Commission and Member States to manage the crisis and support the recovery. Member States took action to minimise contagion and to support healthcare systems, such as by introducing applications and platforms to facilitate telemedicine and coordinate healthcare resources. The Commission also took action, such as issuing a Recommendation on a common Union toolbox for the use of technology and data to combat and enable the exit from the crisis, in particular on mobile applications and the use of anonymised data in tracing apps. The Body of European Regulators of Electronic Communications (BEREC), upon request of the Commission, started to monitor internet traffic to avoid congestion.

Main findings in 5 digital areas

The Digital Economy and Society Index tracks the progress made in Member States in 5 principal policy areas, namely connectivity, digital skills, internet usage by individuals, integration of digital technologies by businesses and digital public services.

Connectivity has improved but more needs to be done to address fast-growing needs. Member States are working on the transposition of new EU rules adopted in 2018 into national legislation, with a view to fostering investment in Very High Capacity Networks, both fixed and mobile. 78% of households had a fixed broadband subscription in 2019, up from 70% 5 years ago, and 4G networks cover almost the entire European population. But only 17 Member States have already assigned spectrum in the 5G pioneer bands, (5 countries more than last year). Finland, Germany, Hungary and Italy are the most advanced on 5G readiness. Fixed Very High Capacity broadband networks are available to 44% of EU homes.

More progress in digital skills is needed, especially since the coronavirus crisis has shown that adequate digital skills are crucial for citizens to be able to access information and services. A large part of the EU population, 42%, still lacks at least basic digital skills. In 2018, some 9.1 million people worked as ICT specialists across the EU, 1.6 million more than 4 years ago. 64% of large enterprises and 56% of SMEs that recruited ICT specialists during 2018 reported that vacancies for ICT specialists were hard to fill.

Although the pandemic has seen a sharp increase in internet use, the trend was already present before the crisis, with 85% of people using the internetat least once a week(up from 75% in 2014). The use of video calls has grown the most, from 49% of internet users in 2018 to 60% in 2019. Internet banking and shopping are also more popular than in the past, being used by 66% and 71% of internet users respectively.

Enterprises are becoming more and more digitised, with large companies taking the lead. 38.5% of large companies already rely on advanced cloud services and 32.7% reported that they use big data analytics. However, the vast majority of SMEs do not yet use these digital technologies, as only 17% of them use cloud services and only 12% big data analytics. As for e-commerce, only 17.5% of SMEs sold products or services online in 2019, following a very slight increase of 1.4 percentage points compared to 2016. In contrast, 39% of large enterprises made use of online sales in 2019.

In order to boost e-commerce, the EU has agreed on a series of measures ranging from ending unjustified cross-border barriers and facilitating cheaper cross-border parcel deliveries to ensuring protection of online customer rights and promoting cross-border access to online content. Since December 2018, consumers and companies are entitled to find the best online deals throughout the EU without experiencing discrimination based on their nationality or place of residence.

Finally, there is an increasing trend towards the use of digital public services in the areas of eGovernment and eHealth, which allows for more efficiency and savings for governments and businesses, improved transparency, and the greater participation of citizens in political life. 67% of internet users who submitted forms to their public administration in 2019 now use online channels, up from 57% in 2014, showing the convenience of using ICT-enabled services over paper-based ones. The top performers in this area are Estonia, Spain, Denmark, Finland and Latvia.

Background

The annual Digital Economy and Society Index measures the progress of EU Member States in their steps towards a digital economy and society, on the basis of Eurostat data as well as specialised studies and collection methods. The DESI 2020 reports are based on 2019 data. To improve the methodology of the index and take account of the latest technological developments, a number of changes were made to the 2020 edition, which now includes fixed very high capacity network (VHCN) coverage. The DESI was re-calculated for all countries for previous years to reflect the changes in the choice of indicators and corrections made to the underlying data. Country scores and rankings may thus have changed compared with previous publications. As the figures refer to 2019, the United Kingdom is included in the 2020 DESI and in calculated EU averages.

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Clean energy demand for critical minerals set to soar as the world pursues net zero goals

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Supplies of critical minerals essential for key clean energy technologies like electric vehicles and wind turbines need to pick up sharply over the coming decades to meet the world’s climate goals, creating potential energy security hazards that governments must act now to address, according to a new report by the International Energy Agency. 

The special report, The Role of Critical Minerals in Clean Energy Transitions, is the most comprehensive global study to date on the central importance of minerals such as copper, lithium, nickel, cobalt and rare earth elements in a secure and rapid transformation of the global energy sector. Building on the IEA’s longstanding leadership role in energy security, the report recommends six key areas of action for policy makers to ensure that critical minerals enable an accelerated transition to clean energy rather than becoming a bottleneck.

“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions,” said Fatih Birol, Executive Director of the IEA. “The challenges are not insurmountable, but governments must give clear signals about how they plan to turn their climate pledges into action. By acting now and acting together, they can significantly reduce the risks of price volatility and supply disruptions.”

“Left unaddressed, these potential vulnerabilities could make global progress towards a clean energy future slower and more costly – and therefore hamper international efforts to tackle climate change,” Dr Birol said. “This is what energy security looks like in the 21st century, and the IEA is fully committed to helping governments ensure that these hazards don’t derail the global drive to accelerate energy transitions.”

The special report, part of the IEA’s flagship World Energy Outlook series, underscores that the mineral requirements of an energy system powered by clean energy technologies differ profoundly from one that runs on fossil fuels. A typical electric car requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a similarly sized gas-fired power plant.

Demand outlooks and supply vulnerabilities vary widely by mineral, but the energy sector’s overall needs for critical minerals could increase by as much as six times by 2040, depending on how rapidly governments act to reduce emissions. Not only is this a massive increase in absolute terms, but as the costs of technologies fall, mineral inputs will account for an increasingly important part of the value of key components, making their overall costs more vulnerable to potential mineral price swings.

The commercial importance of these minerals also grow rapidly: today’s revenue from coal production is ten times larger than from energy transition minerals. However, in climate-driven scenarios, these positions are reversed well before 2040.

To produce the report, the IEA built on its detailed, technology-rich energy modelling tools to establish a unique database showing future mineral requirements under varying scenarios that span a range of levels of climate action and 11 different technology evolution pathways. In climate-driven scenarios, mineral demand for use in batteries for electric vehicles and grid storage is a major force, growing at least thirty times to 2040. The rise of low-carbon power generation to meet climate goals also means a tripling of mineral demand from this sector by 2040. Wind takes the lead, bolstered by material-intensive offshore wind. Solar PV follows closely, due to the sheer volume of capacity that is added. The expansion of electricity networks also requires a huge amount of copper and aluminium.

Unlike oil – a commodity produced around the world and traded in liquid markets – production and processing of many minerals such as lithium, cobalt and some rare earth elements are highly concentrated in a handful of countries, with the top three producers accounting for more than 75% of supplies. Complex and sometimes opaque supply chains also increase the risks that could arise from physical disruptions, trade restrictions or other developments in major producing countries. In addition, while there is no shortage of resources, the quality of available deposits is declining as the most immediately accessible resources are exploited. Producers also face the necessity of stricter environmental and social standards.

The IEA report provides six key recommendations for policy makers to foster stable supplies of critical minerals to support accelerated clean energy transitions. These include the need for governments to lay out their long-term commitments for emission reductions, which would provide the confidence needed for suppliers to invest in and expand mineral production. Governments should also promote technological advances, scale up recycling to relieve pressure on primary supplies, maintain high environmental and social standards, and strengthen international collaboration between producers and consumers.

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Global e-commerce jumps to $26.7 trillion, fuelled by COVID-19

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Parts of the online economy have boomed since COVID-19 began, while some pre-pandemic big-hitters have seen a reversal of their fortunes in the last year, amid widespread movement restrictions, UN economists have found.

According to UN trade and development experts UNCTAD, the e-commerce sector saw a “dramatic” rise in its share of all retail sales, from 16 per cent to 19 per cent in 2020.

The digital retail economy experienced most growth in the Republic of Korea, where internet sales increased from around one in five transactions in 2019, to more than one in four last year.

“These statistics show the growing importance of online activities”, said Shamika Sirimanne, UNCTAD’s director of technology and logistics. “They also point to the need for countries, especially developing ones, to have such information as they rebuild their economies in the wake of the COVID-19 pandemic.” 

The UK also saw a spike in online transactions over the same period, from 15.8 to 23.3 per cent; so too did China (from 20.7 to 24.9 per cent), the US (11 to 14 per cent), Australia (6.3 to 9.4 per cent), Singapore (5.9 to 11.7 per cent) and Canada (3.6 to 6.2 per cent).  

Online business-to-consumer (B2C) sales for the world’s top 13 companies stood at $2.9 trillion in 2020, UNCTAD said on Friday.

Bumpy ride

UNCTAD also said that among the top 13 e-commerce firms – most being from China and the US – those offering ride-hailing and travel services have suffered.

These include holiday site Expedia, which fell from fifth place in 2019 to 11th in 2020, a slide mirrored by travel aggregator, Booking Holdings, and Airbnb.

By comparison, e-firms offering a wider range of services and goods to online consumers fared better, with the top 13 companies seeing a more than 20 per cent increase in their sales – up from 17.9 per cent in 2019.

These winners include Shopify, whose gains rose more than 95 per cent last year – and Walmart (up 72.4 per cent). 

Cashing-up

Overall, global e-commerce sales jumped to $26.7 trillion in 2019, up four per cent from a year earlier, the UN number-crunchers noted, citing the latest available estimates.

In addition to consumer online purchases, this figure includes “business-to-business” (B2B) trade, which put together was worth 30 per cent of global gross domestic product two years ago.

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COVID-19 has reshaped last-mile logistics, with e-commerce deliveries rising 25% in 2020

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COVID-19 has shifted the way people buy goods, accelerating the rise in online shopping and e-commerce deliveries. According to a new report from the World Economic Forum, this has led to a 25% rise in consumer e-commerce deliveries in 2020.

The new report, Pandemic, Parcels and Public Vaccination: Envisioning the Next Normal for the Last-Mile Ecosystem, explores changes seen over the last year which will greatly influence last mile deliveries in the future. For example, it’s expected that 10%-20% of the recent increase in e-commerce deliveries will continue after the pandemic and the lifting of COVID-19 restrictions.

“Covid-19 shutdowns have completely reshaped how we live and of course this includes how and what we’re buying,” said Christoph Wolff, Head of Mobility, World Economic Forum. “Leaders must consider and respond to the effects COVID-19 has had on e-commerce deliveries and what impact these changes will have on their cities and communities.”

Beyond rising demand, the past year has also seen a large shift to greener delivery options, with wider spread EV across the industry and more stringent carbon emission rules from cities expected to shape delivery networks in the near future.

Overall, the report finds six main structural changes to the delivery and logistics sector that are expected to last:

Six structural changes

The pandemic has caused an increase in last-mile deliveries that are likely to persist.
In 2020, business-to-consumer parcel deliveries have risen by about 25%. The report suggests that part of this increased demand will be durable, with at least 10%-20% of the growth remaining post-pandemic.

Consumers increasingly buy new types of products online and consider environmental and health impact when buying.
As consumers continue to buy a wider array of goods online, they are also becoming more ecologically aware. For example, 56% of millennials cite environmental protection as the reason for choosing alternatives to home delivery.

Decarbonization of last-mile deliveries has accelerated.
Companies and cities have ramped up commitments to make emission-free deliveries, while many pandemic-related economic stimulus packages, especially in the European Union and China, contain provisions to support green mobility and goods transport.

Faced with budget challenges and increased transport needs, cities steer last-mile transitions.
Many cities, like Seattle and Boston, have started to repurpose kerb space to designated delivery pick-up. Others, including Santa Monica and Amsterdam, are taking bold action on cleaner delivery with “zero-emission delivery zones” and electric vehicle charging infrastructure.

Proven technologies are fuelling the last-mile ecosystem revolution.
While disruptive new technologies, such as drones and delivery robots, will continue to emerge, the last-mile revolution is happening now as proven technologies scale up. The likes of parcel lockers and data sharing for load pooling are being adopted around the world as the costs of implementation decrease

New business models emerge to meet increased demand for sustainable delivery vehicles.
Certain logistics companies are now offering services to online retailers, which will help them identify the delivery routes most suited to make the immediate transition to electric delivery vehicles.

Last mile for vaccines

While ensuring equitable access to COVID-19 vaccines remains the most pressing issue in global vaccine distribution, effective last-mile delivery is another critical issue for countries. The key challenges are cold storage, second vaccine dose needs, and a disconnect between the vaccine and patient journey.

“Governments and logistics companies could think about teaming up with players who are experienced in managing very local, capillary demand and with integrating a large number of local retail outlets,” says Anja Huber, Engagement Manager, McKinsey & Company. “Examples include large online retailers, eGrocery giants and technology platform players”

Potential solutions countries can implement for efficient vaccine delivery include real-time logistics planning, data integration, centralized management of delivery strategies at the national level and many more.

There are also early examples of countries that have handled this challenge particularly well. While there are many factors in vaccine distribution success, broadly speaking, countries with tight integration of healthcare and logistics stakeholders seem to show the highest national vaccination rates two months into 2021.

These include Israel, the UK and Chile outperforming other countries with more decentralized healthcare systems, like the US and Germany, which had slower initial vaccine rollouts.

Clearly, much still needs to be done to ensure developed countries overcome operational issues with vaccine delivery. However, mobility solutions should not overshadow an even larger ethical challenge in the differences of vaccine access between the global north and global south, which is a priority for greater equity.

Future of the last mile

The impact of COVID-19 on the last-mile delivery has accelerated existing trends across the sector, leading to six structural changes expected to shape the future of last mile deliveries.

These will be part of a broader urban mobility transition, driven by public policy and company actions. As cities and logistics leaders continue the sustainable urban delivery transition, close public-private coordination will be critical. Zero Emissions Urban Fleets (ZEUF) network, for example, provides a relevant dedicated stakeholder platform for this work.

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