Assessing human-centric, resilient, sustainable and smart transformation in the EU-27 countries: A new balanced composite index method

Dynamic changes in the global economy are generating a new approach to the development of our civilization, culminating in the concept of Industry 5.0. Its essence lies in the integration of four pillars (dimensions): human-centricity, resilience, environmental sustainability, and the smart use of digital technologies. This new paradigm requires a reassessment of the existing approach to civilizational development and leads to a series of transformations implemented also in the EU-27 countries. The paper presents the Balanced Composite Index Method (BCIM), developed to assess and compare the progress of EU-27 countries in the transformation process within the context of Industry 5.0. The direction of these changes is oriented towards human-centric, resilient, sustainable, and smart development (HRS²-I5). The BCIM introduces a penalty mechanism that adjusts the results of individual countries according to the degree of imbalance among the four identified dimensions of transformation. As a result, strong performance in one area does not fully compensate for weaknesses in others. The dataset used in the study comprises 24 indicators representing social, environmental, digital, and economic dimensions. Through the application of normalization, weighting, and penalty correction procedures, the method provides a more balanced and equitable representation of the developmental profiles of the analyzed countries. The findings reveal significant disparities among EU-27 countries. Nordic and Western European nations dominate the HRS² transformation process, while Central and Eastern European countries lag behind due to uneven progress across dimensions. The developed method and the obtained results offer policymakers a comprehensive diagnostic and analytical tool that enables the identification of structural strengths and weaknesses of individual countries. Moreover, they support the formulation of evidence-based development strategies fostering a sustainable, resilient, and inclusive industrial transformation within the European Union.