COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 16.04.1997 
COM(97) 153 final 
COMMUNICATION FROM THE COMMISSION 
TO THE COUNCIL, THE EUROPEAN PARLIAMENI 
THE ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 
BENCHMARKING 
IMPLEMENTATION OF AN INSTRUMENT 
AVAILABLE TO 
ECONOMIC ACTORS AND PUBLIC AUTHORITIES 

Table of Contents 
1. BENCHMARKING: AN INSTRUMENT TO PROMOTE CHANGE AND CONTINUOUS 
IMPROVEMENT OF EUROPE'S COMPETITIVE PERFORMANCE 2 
2. THREE LEVELS OF BENCHMARKING 4 
3. A COMMUNITY FRAMEWORK 7 
ANNEXE ELIGIBLE THEMES FOR PILOT PROJECTS ON BENCHMARKING 9 
1. BENCHMARKING: AN INSTRUMENT TO PROMOTE CHANGE AND 
CONTINUOUS IMPROVEMENT OF EUROPE'S COMPETITIVE PER­
FORMANCE 
Internal market integration within the Community, the perspective of Economic and 
Monetary Union as well as globalisation present European industry with the chal­
lenge to continuously improve its competitiveness. 
In its Communication on "Benchmarking the competitiveness of European industry" 
COM (96) 463 of 9 October 1996, the Commission identified certain deficiencies in 
the performance of the European economy, in particular low growth of total factor 
productivity, insufficient adaptation of economic structures towards new markets and 
new technologies and massive underutilization of the population of working age; 
These handicaps for the European economy are particularly difficult to bear because 
of the ever faster rate of change in the world economy, under the combined impulse 
of globalisation and the introduction of new technologies, in particular information 
and communication technologies. 
In order to reply to this challenge and restore rapid growth in employment and pro­
ductivity, Europe needs to address systematically and with determination factors 
which limit its growth potential. 
The Commission proposed in order to assist this process to use benchmarking in 
the economy and society to compare performance in the different key areas and fac­
tors that determine economic success, including, in addition to the initiatives outlined 
below, the development and use of benchmarking in support of the European em­
ployment strategy. 
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A request from industry 
On several occasions, industry has proposed that the Commission and Member 
States use benchmarking as an instrument to optimise policies affecting competitive­
ness. 
The Competitiveness Advisory Group recommended extensive recourse to bench­
marking of framework conditions, in particular those relating to public infrastructure, 
the labour market and internationalisation of the European economy. 
In its report on "Benchmarking for policy-makers - Tne way to competitiveness, 
growth and job creation" (October 1996). the Round Table of European Industrial­
ists (ERT) drew the Council and Commission's attention to the potential contribu­
tion of benchmarking for pursuing growth and emp!o}'ment. The ERT invited more 
particularly public authorities to examine priorities for, the objectivss and methods of 
benchmarking, as well as the means of transposing results into their policies. 
An invitation from he Council 
In its conclusions on benchmarking (14 November 1996), the Council of Ministers 
invited the Commission to present proposals on developing use cf this instrument as 
a means for improving the competitiveness of European industry. The European 
Council at its meeting in Dublin on 13 and 14 December, 1996 also considered that 
e there should be regular monitoring and evaluation of the Union's competitiveness 
against world best practice'*. 
An instrument for competitiveness 
As noted in the Commission's Communication to the Dublin European Council on 
the mutually beneficial effects of greater co-ordination of economic and structural 
policies (Europe as an economic entity) CSE(96)8 final. "Competitiveness in the EU 
and the competitiveness of different regions, sectors, companies or even individuals 
can only be increased on a lasting basis by raising the productivity of companies and 
the people who work in them. Competition is not between countries but between 
companies - within and across borders." Benchmarking is an important tool in 
working towards these improvements in competitiveness, and is based on two ele­
ments:" 
- the comparison of societal behaviour, commercial practice, market structures and 
public institutions across countries, regions, sectors and enterprises in order to 
identify best practice; 
- applying reference to best practice as an instrument to identify changes required 
and to mobilise all actors of the economy and society to evolve in this direction. 
The Erst step requires that all the actors concerned accept to question existing prac­
tices. Benchmarking can succeed only if exposes weaknesses and inefficiencies. This 
is why the process can provoke resistance and increase opposition to change initially. 
Its benefits can nevertheless be substantial: better services for the individual and for 
enterprises, less costs, more user friendly administration, better economic perform­
ance, more work, improved health and safety, and wealth creation. It can also con-
tribute to economic convergence within the Union by closing gaps in productivity 
and reducing economic inequality. 
The comparison of commercial practices and of market structures requires the devel­
opment of reference indicators. To be supportive of the competitiveness of European 
industry, this exercise cannot be associated with anti-competitive practices such as 
exchanging between companies specific information on their prices, quantities pro­
duced, quantities sold, market shares, capacities and investments. Any exercise of 
benchmarking leading to the production of statistical reference indicators must be 
managed so that the companies do not have access to the individual data concerning 
the activity of their competitors. 
The second step requires a commitment to undertake the changes required from all 
the actors involved. This implies not only that they be willing to adopt best practice 
but that the unceasing search for best practice becomes a permanent characteristic of 
the decision making process for enterprises, institutions and public administrations. 
2. THREE LEVELS OF BENCHMARKING 
Benchmarking can be implemented by enterprises, at the level of sectors and that of 
framework conditions for economy and society. Whichever the level of implementa­
tion, this tool serves the competitiveness of European industry. It serves to improve 
the competitive performance of enterprises, of industrial sectors as well as that of the 
environment in which people work, enterprises operate and society functions. 
at enterprise level 
Benchmarking at enterprise level is mainly a "quality" tool for continuous improve­
ment of industrial processes and management. For those enterprises that have inte­
grated quality as a determining element for strengthening competitiveness, it is an 
element of global strategy. It is identified as such in the framework of the European 
Quality Policy. 
Establish the processes to be analysed, identify world-wide best practice for these 
processes, evaluate the gap in performance compared with this and understand tho 
reasons behind the gap are the steps which should lead the enterprise in question to 
perform better, improve competitiveness and thereby surpass the competition. 
Benchmarking at enterprise level is above all the responsibility of industry itself. 
Public authorities can usefully contribute to its promotion amongst a wide audience, 
in particular to small and medium sized enterprises which do not have the resources 
or the necessary experience to do it alone. The Commission proposes to examine 
with all the parties concerned the possibility of creating a European network for en­
terprise benchmarking. Such a network should ensure that coherent, trustworthy and 
equivalent services are available, in particular for SMEs, throughout the Union. To 
this effect, two initiatives are in the process of being sponsored by the Commission 
(see the following box). 
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Examples of enterprise benchmarking 
The Commission sponsors two initiatives in this area: 
- a pilot project from Forbairt (Ireland) to identify experience, services and meth­
odologies developed at the current time in Europe, and to prepare an action plan 
for the creation of a European Network of enterprise benchmarking; 
- a project from Eurochambres to use the existing network of European Chambers 
of Commerce and Industry to promote awareness programmes about quality to 
SMEsv to encourage them to apply benchmarking through pilot projects and to 
improve the conditions for SMEs access to the European network mentioned 
above. 
The UK Department of Trade and Industry (DTI) sponsors a national benchmarking 
system which provides for the exchange of statistical information and the identifica­
tion of best practice on a national level. 
- this system was built on an initiative of the London Business School which cre­
ated a panel of industrial enterprises, including many small and medium sized 
ones, and developed a benchmarking model with them for key aspects linked to 
business management and organisation; 
- after demonstrating its value and faced with increasing interest from participants, 
including enterprises from overseas, the experiment received the backing of the 
Confederation of British Industries; 
- the DTI then decided to approve and support the experiment through public 
statements and through the creation of a national network of outlets where enter­
prises could access the panel. With the increase in the size of the panel, its repre-
sentativity as a reference tool also increased. 
Some Member States and private bodies have also launched programmes for the 
diffusion of best environmental practice (for mstsnce the UK Environmental Tech­
nology Best Practice programme). 
at sectoral level 
Sectoral benchmarking concentrates on specific factors for the sector concerned: in 
this way certain environmental regulations affect almost exclusively certain sectors 
(automobile emissions, dangerous substances, etc.). 
Examples of sectoral benchmarking 
Pilot programmes - managed jointly by the Commission and MITI - for consumer 
electronics and automobile parts and component suppliers are intended to improve 
the competitive performance of European industry compared with Japanese best 
practice. 
Other initiatives are being launched by the chemicals and automobile industries.! 
Benchmarking the European chemicals industry comprises the permanent review of 
improvements made to competitiveness, a comparison of the European competitive j 
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situation against world-wide best practice and the implementation of actions to help 
convergence towards this best practice. 
A joint Commission/industry working group was created in July 1996 to undertake 
this benchmarking. The working group decided to concentrate at first on the chemi­
cals industry as a whole and subsequently on the different sectors of which it is made 
up, for example petrochemicals. 
Although this benchmarking does not concern enterprises directly, a distinction can 
be made according to enterprise size. In this way, specific problems posed for large 
firms or SMEs can be examined separately. 
In the same way, although benchmarking of Community policies is not the objective 
of the exercise in itself, operational proposals concerning framework conditions can 
still be formulated. 
The working group is evaluating a limited number of indicators relating to the factors 
of competitiveness the most pertinent for the chemicals industry. Preference has been 
given to those indicators for which comparable data exists. Collection of data is diffi­
cult because of statistical confidentiality, differing definitions of various parameters 
and lack of data on third countries. 
The Netherlands also undertook to evaluate the competitiveness of the European 
information and communications technology industry by benchmarking its principal 
competitors. 
at the level of framework conditions 
Benchmarking framework conditions - in particular factor costs, infrastructures, 
skills, innovation, the environment - enables the efficiency of public policies which 
affect competitiveness to be evaluated and to identify the steps required to improve 
them. Its main object should be the evaluation of those framework conditions which 
directly affect the competitiveness of European industry. 
Benchmarking framework conditions relies on a full evaluation of industry's com­
petitive situation and a diagnostic of the principal areas to be examined. In a second 
stage, it becomes the tool to address the areas of weakness identified. 
If macro-economic indicators which enable the tracking of the development of com­
petitiveness of the economy as a whole are readily available, the same does not go 
for more detailed indicators on framework conditions which affect competitiveness. 
Methodological difficulties and the lack of accurate and comparable statistical indica­
tors are prevalent for certain indicators which relate to areas that either have a direct 
quantifiable impact on competitiveness or that have an effect on the long term. 
To benchmark framework conditions is a very complex exercise because it can be 
difficult to isolate the effect of a specific policy from the effect of other policies. To 
implement it with success, a number of principles can be applied such as: 
- benchmark the outcomes and the inputs (for example the share in sales of prod­
ucts introduced over the previous three years and expenditure on R&D); 
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benchmark the causes not the symptoms (for example the situation in the labour 
market not the rate of unemployment); 
benchmark the process as well as the performance (for example the capacity of a 
training system to deliver skills as well as the level of skills attained). 
Examples of benchmarking framework conditions 
The Commission has undertaken to inventory Member States' experience with 
benchmarking framework conditions. It has also launched a benchmarking exercise 
with the Member States in the framework of the Employment and Labour Market 
Committee 
The Dutch Ministry of Economic Affairs recently published a report on 
"Benchmarking the Netherlands: Test of Dutch competitiveness", which examined 
different approaches tc benchmarking framework conditions. The analysis covered 
such areas as labour, capital, taxation, education and infrastructure. The results 
identified strengths of the Dutch economy, but also handicaps which prevented it to 
exploit its full potential. On this basis, the Dutch government has undertaken reforms 
to correct these handicaps. These corrections will be continued in 1997 on the basis 
of an update of the benchmarking exercise. 
j The OECD Industry Committee has set up a working group to develop criteria for 
benchmarking framework conditions. It has identified eight significant parameters for 
I industrial competitiveness covering: R&D infrastructure, education and labour force, 
j corporate governance, labour market regulation, labour costs, corporate taxation, 
( energy costs, telecommunications costs and infrastructures. 
3. A COMMUNITY FRAMEWORK 
If the initiative on benchmarking lies with all the actors of economic life, the value 
added of the Community dimension is to ensure access to expertise with the capacity 
to develop and apply the most sophisticated methodologies, to make use of experi­
ence and to pool knowledge held by the different national systems, whilst still playing 
a stimulating rôle with regard to Member States. 
It is what the Commission intends to do in the field of framework conditions' 
benchmarking by the implementation of pilot projects. 
These pilot projects should permit a limited number of Member States to try out co­
operation on specific areas which are of common interest tot he Community and to 
put in place mechanisms for co-operation and transparency along with the networks 
of know-how which will be required for future actions: 
- each Member State may not be equally interested in a benchmarking exercise. 
However, this should not be detrimental either to those Member States who are 
interested in such an exercise or to the efficiency of the business environment for 
European enterprises as a whole. This implies that the expertise and capacity for 
dialogue at Community level are made available to all those that are willing to un­
dertake such an exercise; 
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- in the same way, each Member State does not necessarily have sufficient capacity 
for the requisite analysis and research to execute benchmarking in a way that it 
provides the appropriate elements of comparison and their interpretation to guide 
the necessary political choices to improve framework conditions for enterprises. 
The Commission will implement a number of pilot projects, selected in particular 
among the themes in annexe, where possible with a financial contribution within the 
limits of current budgetary resources. This implementation will be conducted in such 
a way that a working procedure is developed ensuring transparency, dialogue and 
expertise. Other benchmarking exercises could then be undertaken on the basis of 
this procedure, in particular in the fields of the weight of regulation on SMEs, pro­
tection of intellectual property and innovation. ; 
- to the extent that this action is intended to improve the competitive performance 
of the economic environment, all actors should be allowed to participate in setting 
out the guidelines and priorities for benchmarking. For this reason, the Commis­
sion will put in place a High Level Group on Benchmarking composed of in­
dustrialists, representatives of Chambers of Commerce, trade unions, consumers 
and the civil society. The Commission will ensure that the composition of this 
group will reflect the different aspects of society, and in particular small and me­
dium sized enterprises, which suffer the most from rigidities in the regulatory 
framework. This group will help the Commission to fix priorities for benchmark­
ing, organise the participation of industry in its implementation, cooperate with 
the Commission for the interpretation of results with a Community-wide impact 
and transmit to industry those results which are its responsibility; 
- Directors General for Industry will follow all work and ensure coherence in the 
political approach taken. They will establish case by case the degree to which 
Member States participate in the individual projects identified by the High Level 
Group. They will also assist the Commission in exploiting the results obtained 
from the different benchmarking exercises; 
- finally, on the basis of the inventory of experience of benchmarking in Member 
States, the Commission will invite those public and private research institutes with 
expertise in this field to form a network of expertise in order to assist the imple­
mentation of benchmarking. Respecting the rules on public procurement, this 
network will be invited to undertake benchmarking on the basis of terms of refer­
ence drawn up by the participants in and co-financiers of a project. As the imple­
mentation of pilot projects progresses, this network of expertise will be strength­
ened by establishing its visibility, credibility and therefore its autonomy. 
Results will be communicated to all Member States, Community institutions and 
other interested parties. They will provide input to regular discussions on industrial 
competitiveness. In these debates, the Commission will make known its own position 
and the lessons that it will draw for itself from these results. 
This working method should also allow continuity of the action. Experience will 
show whether continuity of the action can be based on annual budgeting or whether 
a pluri-annual programme is required. 
ANNEXE 
ELIGIBLE THEMES FOR PILOT PROJECTS ON BENCHMARKING 
New technological and organisational paradigm 
The new technological and organisational paradigm driven by globalisation and the 
introduction of new technologies poses a number of challenges for European indus­
try. In this context, benchmarking will cover mainly the diffusion and use of new in­
formation and communication technologies by enterprises. This exercise will be 
based either on existing data or on that of a new sample sun/ey of enterprises. 
Financing of innovation, in particular that of tnteUecfiscti property 
Financing of innovation is of critical importance because it enables the results of 
R.&D to be translated into goods and services. Benchmarking in this area will be un­
dertaken in close co-operation with indusiry and other economic actors. To begin 
with, benchmarking should be based on a few major indicators such as access to risk 
capital, its cost, quality, the cost of filing patents etc.. 
Logistics and transport 
Bearing in mind the rôle of the European Union in world trade and the peripheral 
situation of certain Member States, logistics, which concerns the management of 
flows of raw materials, information and products between suppliers and clients, rep­
resents an essential factor for European competitiveness. The vast nature of this area 
means that it is be difficult to adopt a focused approach, which instead should be de­
veloped step by step. 
Development of human resources 
In the area of vocational training, benchmarking of qualifications can contribute to 
the analysis of training systems and thereby improve training policy and business 
management. The pilot project will permit the evaluation of the approach adopted by 
certain systems of vocational training in industry, including both implementation of 
training in the enterprise and the forecasting of needs in the light of economic and 
technological change . The pilot project will concentrate on vocational training in 
SMES. 
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ISSN 0254-1475 
COM(97) 153 final 
DOCUMENTS 
EN 15 
Catalogue number : CB-CO-97-158-EN-C 
ISBN 92-78-18715-1 
Office for Official Publications of the European Communities 
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