This article is a collaborative effort by Dan Svoboda, Jakub Zivansky, Mladen Fruk, and Tomasz Marciniak, with Marton Bekes and Oleg Prokhorenko.
Central Europe’s economy is relatively carbon intensive, which means that building further momentum around the green transition will be critical to the success of the European Green Deal. Green businesses could also contribute significantly to the development of the region. For example, 30 years after the fall of communism, Central Europe has 30 percent of Europe’s population but accounts for only 10 percent of its GDP. As Dan Svoboda, managing partner of McKinsey’s Central Europe office, noted, “Building and scaling green businesses offers a real opportunity to close that GDP gap. With the right support and a commitment to innovation, companies in the region can lead the way in sustainable practices and create a lasting impact on the global stage.”
In recognition of this opportunity, McKinsey held a Central European–focused Green Business Building (GBB) Summit in Warsaw, Poland, in October. This event—which was the seventh McKinsey GBB Summit held so far this year and the first to focus on Central Europe—brought together key stakeholders in the Central European green-business-building ecosystem, including industry leaders, legacy companies, start-ups, entrepreneurs, and investors.
Across seven breakout sessions and multiple panels, participants held in-depth discussions on key emission-reduction technologies, challenges, potential value pools, and winning operating models.
Participants were united in their belief that the future of green businesses in Central Europe is bright. The remainder of this blog lays out a high-level summary of the opportunities and challenges for companies looking to build green businesses in Central Europe.
Opportunities in green-business building
Central Europe has made significant strides in moving away from fossil fuels and embracing renewable-energy sources, though the region still lags behind other parts of the European Union. For example, renewable energy made up about 18 percent of the 2023 energy mix in Poland, Central Europe’s largest economy, against an EU average of 24 percent. Accelerating the energy transition will be essential for reducing emissions, combating climate change, and creating a resilient ecosystem to bolster energy security.
Fortunately, the region holds considerable potential for the generation of renewable energy. Recent estimates indicate that the Central and Eastern European region could deploy 130 gigawatts (GW) of solar and 65 GW of wind power by 2030, which would constitute a sixfold increase from 2023 levels.
It is unsurprising, then, that many of the opportunities highlighted by participants at the Warsaw GBB Summit relate directly to the energy transition. Participants highlighted five areas as offering particularly high potential for businesses in Central Europe:
- Renewable-energy projects: With the European Union’s carbon-reduction targets, wind, solar, and hydroelectric power projects are gaining traction, providing ample opportunities for businesses to invest and innovate.
- Sustainable fuels and materials: Companies that can innovate in the production and use of biofuels, synthetic fuels, and sustainable materials could capture a significant share of new value pools in these areas.
- Sustainable mobility: Businesses involved in electric-vehicle (EV) manufacturing, battery technology, and EV-charging infrastructure could be well positioned to capitalize on the shift toward sustainable transport solutions.
- The hydrogen economy: Hydrogen, a versatile energy source, will play a crucial role in decarbonizing hard-to-electrify sectors, including heavy industry and long-haul transportation. The hydrogen value chain offers significant opportunities for Central Europe, from equipment manufacturing to hydrogen production.
- The circular economy: Circular technologies are maturing, offering businesses the chance to reduce waste and create value through recycling and reusing materials. Summit participants discussed best practices in scaling these technologies, particularly emphasizing the importance of collaboration and innovation.
Potential challenges for companies looking to build green businesses
Summit participants highlighted several challenges that companies in Central Europe may need to overcome to seize green-business-building opportunities.
Financing and investment
Securing financing for green projects remains a significant challenge at all levels. At the national and regional levels, significant investment will be required to create the infrastructure needed for the energy transition. Event participants mentioned, for example, that transitioning the electricity network from coal to renewables will cost €25 billion in Poland alone.
Start-ups and scale-ups—which play a crucial role in the green-business ecosystem—can also struggle to attract the capital they require. To succeed, these companies will need to be creative. Summit participants noted a growing interest from capitalists and private equity firms in sustainable businesses, which may bode well for the future of the sector. Government grants and subsidies can also offer promising funding opportunities, as can establishing connections with established corporations, which can also provide mentorship and market access.
Tomasz Marciniak, managing partner of McKinsey’s Warsaw office, noted, “The path to success for young companies lies in leveraging available resources, forming strategic partnerships, and remaining committed to their green principles. Companies that can demonstrate a clear value proposition, supported by a strong business model, will be best placed to thrive.”
Technological advancements
Many of the climate technologies needed to achieve deep decarbonization already exist. To be successful, Central European green businesses will need to keep up with ongoing rapid technological advancements, which can be particularly challenging for smaller businesses.
Summit participants highlighted innovative technologies such as smart grids, energy storage solutions, and decentralized energy systems as key enablers of the energy transition in Central Europe.
Evolution of the regulatory landscape
Navigating the complex European regulatory landscape can be daunting. In major EU countries, permitting times range from three to nine years for onshore-wind installations and from about one to five years for solar, for example. Companies must stay abreast of changing regulations and ensure compliance, which can be resource-intensive. Participants agreed that deep and sustained collaboration between governments, businesses, and communities will be vital to achieve emission-reduction goals.
Overall, the McKinsey GBB Summit offered many valuable insights into the considerable opportunities and challenges related to green-business building in Central Europe. As Jakub Zivansky, a partner in McKinsey’s Prague office, noted, “Events such as this one play a crucial role in fostering dialogue, sharing knowledge, and inspiring action—which is more important today than ever. Central Europe has the potential to produce truly world-leading companies. It is now up to businesses, investors, and policy makers to turn that potential into reality.”
About the authors
Dan Svoboda is the managing partner for McKinsey Central Europe, in the Prague office. Jakub Zivansky is a partner in the Prague office. Mladen Fruk is a senior partner in the Zagreb office. Tomasz Marciniak is a managing partner in the Warsaw office. Marton Bekes is an associate partner in the Budapest office. Oleg Prokhorenko is a delivery director at Orphoz, a McKinsey company.
The authors would like to thank Lukasz Kowalik and Natalie Vogt for their contributions to this article.