The EU AI Act: Compliance or competitive edge?

The EU AI Act, approved in 2024, is the world’s first comprehensive framework for AI governance. Much like GDPR did for data privacy, it sets global standards that others are likely to follow. Its aim is twofold: to ensure AI systems are safe, transparent, and trustworthy, while still supporting and encouraging innovation and growth. The Act acknowledges AI’s potential to transform society – from better healthcare and safer transport to more efficient manufacturing and energy use – but it also addresses valid public concerns related to bias(es), accountability, and privacy.

For European businesses, the impact will no doubt be significant. The Act introduces new requirements based on risk levels, with strict rules for high-risk applications such as healthcare, finance, and infrastructure. Its scope is broad: even companies outside Europe must comply if their AI systems are used within the EU. And the penalties for non-compliance are steep – up to €35 million or 7% of a given company’s global annual turnover.

Yet this regulation should by no means be regarded as just another compliance hurdle. By aligning early with the AI Act, companies can build trust with customers and investors, accelerate innovation through regulatory sandboxes, and gain first-mover advantage in global AI regulation. The message is clear: responsible AI is no longer optional – and those who embrace it will be better positioned to compete.

Clear business benefits

While the EU AI Act does introduce new duties and costs, it also brings substantial opportunities for forward-looking businesses to move from a strict compliance focus to actual competitive advantages.

Companies that proactively comply stand to gain in (at least) four ways:

1. Strengthening trust with customers and investors

The EU AI Act is fundamentally about due diligence, making sure AI services are trustworthy, reliable, and responsibly managed. Reliable and transparent governance is all about responsibly reducing and managing risks, not only for customers, but also for employees and for the overall resilience of the business.

With growing public concern over AI’s implications, being able to demonstrate that your systems are ethical, safe, and transparent is a key market differentiator. By meeting the Act’s requirements, such as thorough risk assessment, clear documentation, and human oversight, companies signal they have nothing to hide and welcome accountability. This is particularly valuable in sensitive sectors like healthcare, finance, or HR, where trust is paramount.

Businesses that embrace the Act can gain a competitive edge by showcasing responsible AI use, attracting customers and partners who prioritise ethics, and reassuring investors who seek ventures with strong governance. In short, compliance enhances brand reputation, builds loyalty, and directly supports long-term business value.

2. Driving innovation through clarity and sandboxes

Paradoxical as it may sound, regulation can spur innovation by providing clarity. The AI Act defines boundaries (banning certain practices, setting standards for others), which can actually encourage companies to innovate within safe, agreed lines. Engineers and product teams have clear targets for what is acceptable, which can accelerate development of compliant-by-design AI features. Moreover, the Act explicitly promotes innovation via the use of regulatory sandboxes.

By 2026, each EU country must have at least one sandbox where businesses – especially startups – can collaborate with regulators to test AI systems in real-world conditions. This allows companies to experiment with cutting-edge AI, including high-risk applications, under regulatory guidance and without the threat of immediate penalties. It is a unique opportunity to innovate, gather feedback, and shape best practices. Businesses that leverage these sandboxes can accelerate R&D and potentially influence future guidelines, giving them a voice in the evolution of the AI regulatory environment.

3. Boosting AI investment and adoption

A stable and ethical regulatory environment tends to increase confidence among investors, business partners, and the public. When the rules of the game are clear (and stringent), it weeds out bad actors and snake-oil solutions, leaving a more trustworthy ecosystem of AI suppliers. Investors are more willing to fund AI ventures knowing that there are guardrails that reduce the chance of scandal or legal crackdowns.

In Europe, both public funding and private capital are expected to flow more into AI projects that align with the Act’s requirements. Additionally, large customers (like governments or corporations) may soon prefer or even require AI solutions that are AI Act-compliant. By moving early on compliance, companies can tap into these emerging preferences and potentially command a premium for compliant AI services. We are likely to see the rise of a “responsible AI market,” and those already meeting high standards will be well-positioned to capture new business.

4. First-mover advantage in global AI regulation

Finally, consider the broader global trend. The EU AI Act is likely a forerunner of AI regulations worldwide, with many jurisdictions already influenced by the EU’s approach. By complying with it, companies also prepare themselves for similar laws that may emerge in other countries in the near future, giving them a valuable head start.

Businesses that proactively align with the Act will have already built the internal capacity – processes, documentation, culture – to handle strict AI oversight, whereas competitors might still be scrambling when other regions catch up. In the meantime, you can market yourself as a leader in responsible AI, which can open doors to partnerships.

In sum, these four categories offer significant competitive advantages by treating compliance as a strategic initiative rather than a simple legal checkbox. The EU AI Act should be seen as more than just a regulatory hurdle. It is a framework that, yes, demands investment in compliance, but it pays dividends in trust, market access, innovation, and future-proofing our businesses. Companies that internalise this mindset will be well-positioned to thrive in the AI-driven economy, turning regulatory compliance into a selling point and a source of business value.

A risk-based approach

If companies start small, by focusing on low-hanging fruit, they can gradually build the resources needed to implement more sophisticated AI in the future. However, it is easy – and a common pitfall – to create unintended dependencies on AI. The technology carries risks that any company should take seriously.

The Act addresses this by sorting AI systems into four risk categories – unacceptable, high, limited, and minimal – each with varying requirements:

• Unacceptable Risk AI – These are AI applications that are banned outright because they pose a threat to safety or fundamental rights. Examples include AI systems that attempt “social scoring” of individuals or real-time biometric identification systems used for mass surveillance. Such systems are prohibited from the EU market entirely.
• High-Risk AI – These AI systems have significant implications for citizens’ safety or rights and are often used in critical sectors, such as medical devices, recruitment, credit scoring, infrastructure management, or law enforcement. High-risk AI is permitted but subject to strict requirements to ensure trustworthiness and accuracy. Before deployment or sale in the EU, such systems must undergo conformity assessments and be registered in an EU AI database
• Limited-Risk AI – These AI systems are generally beneficial but interact with humans or generate content, which could cause confusion if their AI nature is not clear. Examples include chatbots or generative AI producing text or images. Limited-risk AI is lightly regulated, but transparency obligations apply: companies must inform users when they are interacting with AI or when content has been AI-generated, clearly labelling it as such (so they are not misled into thinking it was done by a human).
• Minimal-Risk AI – The vast majority of AI systems fall into this category. These are AI tools that pose little to no risk and thus face no additional obligations under the Act. Examples include spam filters or basic AI analytics tools embedded in software. For these, the Act does not mandate any extra compliance steps beyond general EU consumer protection or product safety laws.

Beyond categorising AI by risk, the Act also sets out a comprehensive governance and enforcement framework to ensure these rules are followed. A key aspect of the Act is its governance and enforcement structure. EU member states will each appoint national supervisory authorities (much like data protection authorities under GDPR) to enforce the AI rules. Additionally, a new European AI Office is being established to coordinate enforcement and guidance across Europe, with powers especially over large-scale general-purpose AI providers. Companies could potentially face scrutiny from multiple national regulators as well as the European AI Office. This dual oversight model means organisations should be prepared for robust enforcement to help them avoid severe penalties for non-compliance that will be higher than GDPR fines.

Looking ahead

The EU is sending a clear message that it is taking AI seriously. But again, complying with these rules should be seen not merely as an effort to avoid penalties, but as a chance to strengthen a company’s trustworthiness and effectiveness. The EU AI Act is more than a compliance exercise – it is an opportunity to lead responsibly in AI, and as EU has made very clear with this regulation, that responsibility ultimately rests with the CEO