EN Official Journal of the European Union C 74/1

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the Council and the European Parliament, the European Economic and Social Committee and the Committee of the Regions — Action Plan: The European agenda for Entrepreneurship’

COM(2004) 70 final

(2005/C 74/01)

On 11 February 2004 the Commission decided to consult the European Economic and Social Committee, under Article 262 of the Treaty establishing the European Economic Community, on the abovementioned communication.

The Section for the Single Market, Production and Consumption, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 14 July 2004. The rapporteur was Mr Butters.

At its 411th plenary session of 15 and 16 September 2004 (meeting of 15 September), the European Economic and Social Committee adopted the following opinion with 150 votes in favour, one against and six abstentions.

1. Context

1.1 The 2000 Lisbon Presidency conclusions and the European Charter for Small Enterprises underlined the importance of entrepreneurial activity to sustainable development in Europe and the need to engender a policy environment conducive to promoting enterprise.

1.2 The President of the European Commission, Romano Prodi, subsequently announced at the 2002 Spring European Council in Barcelona that the Commission would be submitting a Green Paper on entrepreneurship before the 2003 Spring European Council. The Commission fulfilled this task in January 2003, which initiated a rigorous and open consultation of stakeholders over the coming months. The 2003 Spring Council called on the Commission to present an Entrepreneurship Action Plan to the 2004 Spring Council.

1.3 The Committee opinion on the Green Paper was approved by the Plenary in September 2003 (1).

1.4 The Commission subsequently adopted its European agenda for Entrepreneurship Action Plan in February 2004 (2).

2. Objectives of this opinion

2.1 As with the preceding Committee opinion on the Entrepreneurship in Europe Green Paper, this opinion seeks to contribute to an ongoing process of understanding and stimulating entrepreneurship. It aims to do so by providing some general comments and more precise analysis of the Action Plan. The opinion will then present a series of constructive recommendations from the Committee on how this initiative can be converted into realistic, tangible initiatives that will benefit current and future generations of European entrepreneurs.

3. General comments on the Action Plan: does it meet its stated aim of providing a ‘strategic framework for boosting entrepreneurship’?

3.1 The Entrepreneurship in Europe Green Paper demonstrated a clear appreciation of the issues and the scale of the challenge of raising the level of entrepreneurship in the EU. The Committee's opinion recognised this and congratulated the Commission for the Green Paper and the subsequent open and rigorous consultation process.

3.2 Building on the Green Paper, the Action Plan provides a further analysis of the nature of Europe's entrepreneurial challenge. The Action Plan's aims are justifiably ambitious but are combined with indefinable objectives. The overall impression is one of a vague and conservative document. The Action Plan demonstrates little of the creativity hinted at in the Green Paper and public consultation, frequently preferring to cite existing initiatives. It offers few delivery mechanisms and fails either to delegate delivery responsibilities or to set out monitoring and evaluation procedures.

3.3 One of the key points to come out of the discussions during the drafting of the Green Paper and subsequent consultation was the broad range of policy areas that affect entrepreneurs and the resulting need for a horizontal approach to tackling the challenges identified. The Action Plan tellingly fails to demonstrate to stakeholders that this initiative has received anything more than token support from Commission services beyond DG Enterprise or Member State administrations. Without gaining such support, the Action Plan is destined to have a minimal impact.

3.4 The Commission received 250 responses to its consultation. While the Committee recognises the transparency shown by the Commission in publishing all contributions received on its website, the Action Plan makes very few specific references to comments submitted and it is unclear to the reader how the responses were analysed and incorporated. Given the scale of this exercise and the interest generated across the EU, it would be unfortunate if these responses were not considered carefully and, if they were, then the Action Plan should demonstrate this.

3.5 The Action Plan could have acknowledged the heterogeneity of SMEs, recognising that this diversity requires focussed, rather than generic policy solutions. For example, the recent Commission communication on the Promotion of the cooperative enterprises in Europe (3) acknowledges the importance of promoting cooperatives in Europe and a correlating reference to the specific role of social economy enterprises should have been included into the Action Plan (4). Equally, the needs of self-employed entrepreneurs differ significantly from those of incorporated businesses (5). As well as demonstrating an appreciation of such specific business ownership forms, the Action Plan should recognise the need for targeted policy approaches to businesses with specific needs and characteristics, such as innovative start-ups or established businesses engaged in more conventional activities.

3.6 The Committee argues that it is also important to encourage an entrepreneurial mindset within the public sector. While the Committee understands that the Action Plan concentrates on entrepreneurship in the form of creating, running and developing a business, it could also have reiterated the need for entrepreneurial attitudes to be stimulated in public administrations.

3.7 Structure

3.7.1 In its opinion on the Green Paper, the Committee advocated ‘that the Action Plan divide its content into two distinct areas: — promoting the spirit of entrepreneurship: this action should be aimed at developing a culture of entrepreneurship, “restoring” and improving the reputation of the entrepreneur among potential entrepreneurs in schools, universities and family circles, as well as in public and private services, especially financial institutions and European and Member State administrations; — creating an environment that encourages entrepreneurial activity: this is aimed at defining a programme of operational measures to encourage business activity in response to the ten questions in the Green Paper.’ (6)

3.7.2 The Committee generally concurs with the areas covered in the five strategic policy areas, yet is concerned by the lack of specific actions outlined within each area. Moreover, the Committee would maintain that the two-pronged approach cited above would have been more consistent than the somewhat arbitrary nature of these five strategic policy areas. These five policy areas appear to be inconsistent, seem to overlap and include four broad challenges and one specific issue (improving access to finance).

3.7.3 Nonetheless, to provide consistency, specific comments on the Action Plan will be divided into the same five areas in the next section of this opinion.

3.7.4 The Committee would argue that the Commission's document outlines the broad agenda. The next stage must be to develop specific actions plus policies, monitoring and review mechanisms, as well as entrepreneurship indices and data that will ensure progress.

4. Specific comments on the five strategic priority areas

4.1 The Committee identifies a number of specific priorities under each of the five strategic priority areas.

4.1.1 Fuelling entrepreneurial mindsets

4.1.1.1 This has to be a long term objective and it involves many bodies at many different levels. DG Enterprise needs the support of DG Education and Culture, as well as national and sub-national agencies involved in the formulation and delivery of education policy.

4.1.1.2 As the Green Paper underlined, entrepreneurs are motivated by a wide variety of ambitions, such as financial gain, independence, or job satisfaction. Whatever their motivation, it is essential that potential and existing entrepreneurs recognise the social responsibilities that are integral to business ownership.

4.1.1.3 The Committee welcomes the Action Plan's recommendations relating to young people, but would also highlight the demographic shift towards an ageing population in Europe. It would be remiss not to provide an environment which enables opportunities for business ownership amongst the older population who have the capabilities (skills, management, capital etc.) to establish and run a business.

4.1.1.4 The Committee equally welcomes the emphasis in the Action Plan on addressing the specific needs of female entrepreneurs. Women seeking to start and develop businesses face particular practical, economic and cultural challenges, which vary significantly between Member States. Officials could better appreciate and act upon these challenges if they involve successful and unsuccessful female entrepreneurs in the policy-making process.

4.1.1.5 There is a longstanding tradition in several Member States of entrepreneur programmes in schools. There is no need to re-invent the wheel and the Action Plan should be based on analysing, sharing and encouraging the adoption of good practice. The Commission coordinated several valuable BEST projects in this area in the 1990s and their findings and recommendations should prove invaluable in developing policies under the Action Plan.

4.1.1.6 Mechanisms to facilitate further involvement of business membership organisations in projects with schools should be built into the new Commission Multi-Annual Programme for SMEs for 2006-2010.

4.1.1.7 Creating a more entrepreneurial society in Europe is not, however, merely a matter of grooming future entrepreneurs. This policy will fall on stony ground if Europe does not also create an environment which will allow potential entrepreneurs to succeed. This means sensitising a much broader range of actors involved in the business community, from the public and private sector and indeed society at large, to understand and appreciate entrepreneurship. Entrepreneurship should hence be embraced by public sector officials seeking to execute their duties effectively, as well as by those involved in running businesses.

4.1.1.8 The Committee would argue that policies should seek to de-dramatise entrepreneurship by reducing the perceived and real barriers between entrepreneurs and the rest of society. Modern working patterns allow people to try different ways of engaging in the economy and switch from employment to self-employment or employer and then back again relatively easily. Entrepreneurship should therefore be viewed by many more people as either a long-term or short-term option. This will have the dual advantage of encouraging more people to consider business owner-management as a positive option, while also improving attitudes towards entrepreneurs among a whole range of relevant stakeholders. In generating such an environment, attention needs to be placed on the ability to register and de-register an enterprise with the minimum of bureaucratic procedures. This need is particularly acute in several of the new Member States, where the administration involved in switching from self-employment to employment is reported to be excessively onerous and bureaucratic barriers to entry are high.

4.1.1.9 At the same time, authorities and other stakeholders must ensure that facilitating interchange between these various work statuses is not abused. In achieving a balance, it is important that employees, or the unemployed, are not cajoled or compelled to enter self-employment against their better judgement and that less scrupulous employers are not allowed to relinquish their responsibilities to employees (7).

4.1.2 Encouraging more people to become entrepreneurs

4.1.2.1 The Action Plan covers well the central issue of a fair balance between risk and reward.

4.1.2.2 The Committee looks forward to the Commission's forthcoming communication on business transfer. It is envisaged that this will build on its valuable May 2002 BEST report and continue the task of raising the stakes and awareness among Member State officials and the financial community on this important policy area. Several specific problems need to be tackled to facilitate transfers and maximise the opportunity for the continuity of enterprises. In particular, tax regimes, inheritance taxes, inheritance legislation and company law all currently discourage the succession of business and so need to be reviewed.

4.1.2.3 The Action Plan rightly highlights the stigma of failure as a significant barrier to increased entrepreneurial activity. This challenge can partly be addressed through successful strategies to sensitise society to entrepreneurship. However, more direct attention needs to be paid to the attitude of financial institutions, which must be more flexible in their treatment of individuals associated with business closures. The Committee would recommend that the Commission targets financial institutions with evidence that demonstrates that entrepreneurs with previous (successful or unsuccessful) experience are more likely to succeed with new ventures.

4.1.2.4 In this process, it is important that a balance is struck between enabling ‘honest’ failures to start again and ensuring that illegal practices are prohibited. Bankruptcy law consequently needs to be less judgemental and more transparent.

4.1.2.5 Whilst seeking greater details on specific actions envisaged, the Committee welcomes the reference in the Action Plan to further work by the Commission and Member States on social security schemes for entrepreneurs.

4.1.3 Gearing entrepreneurs for growth and competitiveness

4.1.3.1 Research shows that there is a need for training and support provision to owner-managers, especially in marketing. There have also been significant developments in the transfer of knowledge into SMEs through placements and stronger links between research institutes and the SME community. Mentorship programmes whereby young companies/entrepreneurs can learn from experienced ones should be further developed and supported.

4.1.4 Improving the flow of finance

4.1.4.1 The Committee welcomes the proposal to encourage Member States to exchange good practices and to produce a further Action Plan on electronic procurement.

4.1.4.2 The Committee recommends a more holistic approach to considering access to finance, incorporating: — raising business acumen of owner-managers to understand what is required to secure finance for growth. This could be achieved via accredited business support networks; — sensitising financial institutions to the needs of businesses seeking funding and support for growth: this again entails fostering a greater understanding of entrepreneurship in the financial sector; — opening up public contracts to smaller businesses. This is the most direct form of demand-side action that the public sector can take. As the Committee identified in the opinion on the Green Paper, many obstacles restrict small firms' access to public contracts (8), while public officials similarly encounter administrative hurdles. Yet the potential benefits to both parties and to the economy warrant further reflection and action in this area. The USA provides a positive model, whereby federal departments and agencies aspire to assign 23 % of public procurement contracts to small companies. — simplifying and reducing tax compliance procedures. Although the Action Plan puts forward some interesting ideas in this area, this has not yet been adequately thought through. The Committee recognises that competence for the implementation of concrete measures falls with national and, in some cases, regional or even local authorities. The Committee reiterates its call for fiscal incentives for the re-investment of profits (9), which receives no mention in the Action Plan.

4.1.5 Creating a more SME-friendly regulatory and administrative framework

4.1.5.1 The Committee's opinion on the Green Paper highlighted the need for policy options to support small firms to be ‘embedded horizontally, into all relevant policy-making areas (employment, taxation, environment, education, etc.) and, vertically, at all policy-making levels’ (10). Despite the broadly encouraging June 2002 Better Lawmaking Package, many services of the Commission still fail adequately to assess the effect of policy proposals on SMEs, or indeed other stakeholders. The Committee would consequently support recent calls for a Vice-President of the European Commission with more direct responsibility for overseeing regulatory reform.

4.1.5.2 More broadly, there is still significant scope for improving the procedures for regulatory impact assessments within, not only the Commission, but also the Parliament and Council.

4.1.5.3 The Committee regrets that reference is no longer made to the ‘think small first’ approach. This stipulates that any regulation or legislation should be developed taking into account the specific characteristics and challenges of small enterprises. Central to this are specific business-impact assessments, targeted to small and micro-enterprises, of all new and existing legislation. If put into practice throughout the EU policy-making process, this approach would represent the single most significant contribution by the institutions to greater entrepreneurial activity.

4.1.5.4 The recent accession to the EU of 10 new Member States brings with it a much larger SME constituency, many of whom are struggling to come to terms with existing EU legislation even before they are able to monitor potential new regulatory proposals. The Commission must, therefore, build on various isolated initiatives whereby the SME community's opinion is proactively sought. More significantly, the Commission must also demonstrate that it is taking on board feedback if disaffection and a culture gap between the EU institutions and policies and small firms are to be avoided.

4.1.5.5 The Committee stresses the importance of effective dialogue between the Commission and SME representatives. Consultation of SMEs through their representative organisations should be central to all Commission consultation procedures. To facilitate this and to ensure that all Commission services remain aware of the views of the SME community, the Committee would recommend building on the role of the SME Envoy through the appointment of an SME Commissioner under the new Commission. Central to this role should be overseeing the application of the ‘think small first’ principle across the Commission.

4.1.5.6 The same principles of dialogue are applicable to the social partners, which deal with many issues of great importance to future and existing entrepreneurs. The Committee recommends a review of the social dialogue - principally at EU level, but also in some cases at national level - to consider how to formalise a more proportionate level of participation by the increasingly significant and diverse SME community.

4.1.5.7 With specific reference to state aid rules, the Committee warmly welcomes the development of an instrument to identify aid that is unlikely to produce significant effects on competition. It is important, for example, that state-aid processes do not hinder the exploration and implementation of innovative ways of tackling any finance gaps for small firms.

5. Recommendations for maximising the positive impact of the Action Plan

5.1 The Committee calls for the following procedural clarifications and/or improvements:

5.1.1 Coherent enterprise policy approaches: within the Commission, the Enterprise Directorate-General clearly has a key role to play in piloting progress. The Action Plan touches on all areas of Commission enterprise policy and, as the Committee recommended in its opinion on the Green Paper (11), this must be reflected by the Directorate-General's individual policy initiatives. In particular, the 2006-2010 Multi-Annual Programme for SMEs must demonstrate a clear correlation with the Entrepreneurship Action Plan and thereafter provide a mechanism for responding to a number of its priorities.

5.1.2 Evaluation: although some improvements have been made recently, the business community has not been satisfied with the approach used for the evaluation of the European Charter for Small Enterprises. Currently, this allows public officials, at EU and national level, to act as both ‘judge and jury’. It is crucial that business representatives are more closely involved in the evaluation of the Action Plan.

5.1.3 A framework for future ex-post evaluation must be defined to allow for ongoing policy improvement. This should involve Commission and Member State officials and recognised business representatives at EU and national level.

5.1.4 Appropriate indicators of performance are an essential tool in setting and measuring targets for increased entrepreneurial activity. This was recommended by the Committee in its previous opinion (12) and underlined in the 20 February Competitiveness Council conclusions. Such data will also allow comparative study of Member States' policies and entrepreneurial environments.

5.1.5 Clear timeframes: the 20 February Competitiveness Council conclusions call on the Commission to set out a more ambitious timetable. To be effective, the timetable must also be precise and focussed in terms of objectives. The Committee understands that the Commission has, since publishing the Action Plan, elaborated in a series of worksheets, more precise targets and timetables for specific actions. In the same spirit that prevailed during the consultation, the Committee urges the Commission to promote the existence of these worksheets and to make them readily available to interested parties.

5.1.6 Monitoring the process and delegating responsibilities: the Commission cannot and should not implement much of the action needed, but it must carefully supervise and monitor progress on the implementation of the Action Plan. In parallel, it is therefore essential that responsibility for the delivery of various actions is delegated to the relevant level and that the timetable is communicated and agreed by all parties concerned. This requires the concerted involvement of various actors and the Committee recommends the following initiatives to ensure their engagement in the work ahead.

5.1.7 In order to broaden the Commission's engagement in the process, some form of Action Plan monitoring committee should be established, within the revised Commission structure post November 04. This would comprise representatives from each of the relevant Directorates-General from which legislative proposals affecting businesses originate, as well as those Directorates-General responsible for overseeing the delivery of Community programmes stemming from the Action Plan.

5.1.8 The creation of a working group of relevant Member State officials would increase their engagement in the process. This should meet regularly to discuss specific aspects of the Action Plan's recommendations, chart progress and identify shortcomings.

5.1.9 It is vital that the business community is closely involved in the implementation, monitoring and evaluation of the Action Plan. By this, the Committee means the business community in its broadest sense, comprising businesses of all shapes and sizes, from the self-employed to multinational corporations and from social enterprises to public limited companies. Any failure to achieve this broad engagement risks disenfranchising the business community from the ongoing process, which will in turn minimise its impact. The Committee therefore recommends a systematic approach to consultation throughout the process with the business community via their recognised representatives at EU and Member State level.

5.1.10 As the responses to the Green Paper illustrated, an increasing number of actors beyond the SME community are interested in entrepreneurship. For example, trade unions generally recognise the importance of enterprise policy. All such interested parties should be allowed to contribute to the implementation of the Action Plan.

5.1.11 Generally, the Committee would recommend a concerted effort from the Commission to keep the Action Plan in the spotlight, both among policy-makers and more broadly across the community. Ongoing promotional activities and awareness-raising campaigns linked to specific objectives within the overall plan will help to maintain the momentum and engagement of the wide variety of actors required to ensure that this vital initiative succeed.

6. Conclusions

6.1 The Committee welcomes the Commission's Action Plan and reiterates its appreciation of the Enterprise Directorate-General's efforts since this process began in early 2002. The Committee recognises that much of the ongoing action required has to be taken by policy-makers beyond DG Enterprise.

6.2 The Action Plan is just the starting point of an ongoing, long term process. This process will only succeed if it connects horizontally across a broad range of policy areas, and vertically among policy-makers at many levels. The Action Plan and other related forthcoming Commission initiatives must trigger a positive response from these policy-makers. The Committee calls particularly on other Commission Directorates-General and Member State authorities to play an active role.

Brussels, 15 September 2004. The President of the European Economic and Social Committee Roger BRIESCH

(1) OJ C 10 of 14.1.2004

(2) COM(2004) 70 final, page 4

(3) COM(2004) 18

(4) See EESC opinions 242/2000 (Olsson) and 528/2004 (Fusco and Glorieux) for further references to the significance of social economy enterprises.

(5) OJ C 10 of 14.1.2004, points 5.4 and 6.12

(6) OJ C 10 of 14.1.2004, point 2.2.2

(7) OJ C 10 of 14.1.2004, point 5.3

(8) OJ C 10 of 14.1.2004, points 6.10.1 and 6.10.2

(9) OJ C 10 of 14.1.2004, point 6.11.1

(10) OJ C 10 of 14.1.2004, point 6.2.1

(11) OJ C 10 of 14.1.2004, point 4.3

(12) OJ C 10 of 14.1.2004, point 8.4 final bullet point.