Can Ukrainian businesses withstand harmonizing with EU standards? McKinsey expert discusses risks and opportunities

However, a cautious approach should be taken when it comes to complete synchronization with the EU, Oleksandr Kravchenko, Managing Partner at McKinsey & Company in Ukraine, told the audience at the “NV Dialogues on Ukraine’s Restoration” special event held on June 8 in Kyiv.

In response to a question about whether the country’s integration into Europe could hinder the development of Ukrainian entrepreneurship and its preparedness for European regulations, Kravchenko emphasized the need for a pragmatic approach to integration with the European community.

Several factors can help implement this approach, including maximizing the utilization of current trends taking place in the EU that impact its economic processes. Kravchenko cited three examples of such processes:

·         The significant push in the EU towards decarbonization.

·         The EU’s pursuit of strategic autonomy, particularly in reducing dependence on supplies from China.

·         Technological development and digitalization.

As part of the EU’s decarbonization efforts, both the EU as a whole and certain member countries allocate funds to Ukraine’s recovery needs, including the revitalization of its enterprises. For example, Germany recently announced a support package of 50 billion euros ($54 billion) for companies involved in the decarbonization process.

“Ukraine is strategically positioned with abundant natural resources, making it a key player in Europe’s decarbonization efforts. We possess low-carbon energy sources, valuable resources that can pique the EU’s interest in reducing reliance on China, and we benefit from a logistical advantage. These are concrete examples where we can pragmatically integrate into the EU and access the financial resources that Europe dedicates to modernizing its economy,” emphasized Kravchenko.

He also advocates for maximizing production localization in Ukraine, enabling the country to supply not only raw materials but also processed goods.

“Does this mean that Ukraine needs to fully adopt European standards? It doesn’t seem so,” he said.

Some European countries initially adhered to national standards in environmental safety matters before gradually transitioning to European standards over an extended period. This approach could be part of Ukraine’s integration strategy with the EU, Kravchenko argued.

“When we discuss ‘green’ products, it’s one thing to export ‘green’ cement or ‘green’ steel to the EU and receive a premium for these products, amounting to 10-20% of production. However, it’s another matter to impose these standards on Ukrainian enterprises, which would ultimately burden Ukrainian consumers,” he said.

“While there are undoubtedly risks involved, it is crucial to strike the right balance. We must approach this matter pragmatically, leveraging the advantages offered by the European market while exercising caution in full synchronization with Europe,” said Kravchenko.

A new event, “Great Day with NV: Dialogues on Ukraine’s Restoration”, was held in Kyiv on June 8. NV hosted prominent diplomats, experts, businessmen, and politicians on an independent platform to discuss post-war recovery in Ukraine.

Among the speakers were U.S. Ambassador to Ukraine, Bridget Brink; Ukrainian Minister for Communities, Territories, and Infrastructure Development, Oleksandr Kubrakov; Dragon Capital CEO, Tomáš Fiala; Regional Director of NEQSOL Holding Ukraine, Volodymyr Lavrenchuk; Ukrainian Defense Minister, Oleksii Reznikov; Executive Director of Union of Ukrainian Entrepreneurs, Kateryna Hlazkova; Managing Partner of McKinsey & Company in Ukraine, Oleksandr Kravchenko; Kyiv Mayor, Vitali Klitschko; Naftogaz Board Chair, Oleksiy Chernyshov; and others.