EN Official Journal of the European Union C 327/33

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions — Smart regulation — Responding to the needs of small and medium-sized enterprises’

COM(2013) 122 final

2013/C 327/07

Rapporteur: Ms DARMANIN

Co-rapporteur: Mr BURNS

On 18 April 2013 the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Smart regulation - Responding to the needs of small and medium-sized enterprises

COM(2013) 122 final.

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 27 June 2013.

At its 491st plenary session, held on 10 and 11 July 2013 (meeting of 11 July), the European Economic and Social Committee adopted the following opinion by 156 votes to two with two abstentions.

1. Conclusions and recommendations

1.1 The EESC supports the Commission's objective of placing smart regulation high on its agenda. Regulation is a necessity but needs to be well designed in order to achieve EU policy goals at minimum cost. The EESC welcomes the European Commission's efforts over the year to promote the design and application of better regulatory tools, including impact assessments (IAs) and stakeholder involvement.

1.2 The Committee therefore: a) notes that, while smart regulation is necessary for businesses of any size, red tape has a disproportionate impact on small companies, especially on micro-enterprises; b) reminds all Commission services that the SME test is an integral part of IAs. It invites the European legislator to take into account the specific characteristics of the small and micro companies within the SME group when preparing impact assessments and drawing up legislative texts; c) welcomes the REFIT programme which will identify burdens and ineffective measures for SMEs. This programme should be used to identify and propose withdrawal of existing regulations that are no longer fit for purpose and the consolidation of existing legislation. We propose that the Commission launches new fitness checks as soon as possible by prioritising those arising from the "top ten" most burdensome regulations presented in the current Communication, with a specific focus on micro-enterprises; d) points to one principle of that programme which mentions that IAs are made more user-friendly by using a standard template and having a clear executive summary highlighting the main issues, including implementation costs, especially as regards micro businesses; e) supports the creation, in the long term, of a single independent assessment board (IAB) operating across all EU institutions. This independent IAB should make use of external experts to provide additional scrutiny of Commission proposals to ensure that the different concepts involved are properly understood; f) agrees that micro-enterprises should not be given blanket exemptions but rather that a case-by-case approach on legislative proposals should be adopted, following a thorough impact assessment exercise; g) reminds the Commission to attach details of what changes were made and the reasons for the changes, as a result of the consultation process; h) considers that the European Commission should constantly monitor the SME scoreboard that is set up through a centralised coordinating service in close cooperation with SME organisations; i) asks for a new programme for reducing the unnecessary burden of regulation and ensuring that smarter regulation does not exempt businesses from regulation on worker protection, gender equality standards or environmental standards. It therefore strongly advocates a new mandate until 2020 for the Stoiber Group that will monitor and implement policies, especially relating to micro and small businesses in cooperation with SMEs organisations; j) asks the Council and the Parliament to limit the administrative burden on businesses also when dealing with EU legislation policy-making; k) proposes that Member States exchange best practices in the area of Smart Regulation in order to avoid gold-plating.

2. Commission proposal

2.1 In November 2011, the Commission published a Report on "Minimising regulatory burden for SMEs – Adapting EU regulation to the needs of micro-enterprises (1)" setting out measures aimed specifically at SMEs. This Report reflected on the "Think Small First" principle set out in the Small Business Act (2) (SBA) which required that impacts on SMEs be taken into account when designing legislation and that the existing regulatory environment be simplified. The Commission expressed its willingness to address SMEs burdens via the new Regulatory Fitness and Performance Programme (REFIF) (3) launched in December 2012 as well.

2.2 The Commission's Communication to the Spring European Council on "Smart Regulation – Responding to the needs of small and medium-sized enterprises (4)", adopted on 7 March 2013, takes stock of all the measures carried out by the Commission since 2011 as regards SME burden issues. The report reviews progress in: — discussing the role of impact assessments for SMEs regulation; — introducing an annual SME scoreboard; — ensuring regulatory fitness checks.

3. Observations and comments

3.1 Drafting smart regulation is key for SMEs – especially micro-enterprises

3.1.1 The EESC has always supported and encouraged initiatives for better regulation, as indicated clearly in its various opinions (5). We recognise that, while smart regulation is necessary for all businesses, red tape has a disproportionate impact on micro and small enterprises. Therefore, the application of the Think small first principle has to be a priority guideline when drawing up new legislation and throughout the decision making process.

3.1.2 SMEs differ in their size, field of activity, objectives, financing, management, geography and legal status (6). Policymakers therefore need to take into account these variations when drafting regulation for them. They need to remember that individual regulations may not seem especially burdensome, but it is, inter alia, the accumulation of rules and legislations that discourages a micro or a small business from developing new ideas, expending existing markets or employing more people.

3.1.3 As a consequence, many SMEs, especially micro and small enterprises, perceive legislation as a way to stifle entrepreneurial development rather than facilitate growth. The EESC takes the view that smarter regulation at EU level is not going to help unless legislation clearly identifies which businesses it is trying to help and which (if any) exemptions these businesses are being given or allowed to claim. The EESC therefore strongly urges the Commission to fully implement the SME test during all Impact Assessment exercises carried out in different DGs. Our Committee is of the opinion that the SME test must include the potential costs and benefits of the proposals with respect to the business size, clearly differentiating between micro, small and medium enterprises. If the SME test would not be carried out properly, then it would receive a negative opinion from the Impact Assessment Board.

3.2 The role of impact assessments (IAs)

3.2.1 The EESC therefore acknowledges the role of IAs (7) as a key element of SME policy making at EU level. The Committee insists that the Commission prepare robust IAs that are fit for purpose and logical. The EESC reminds the Commission that the principles of subsidiarity and proportionality need to be respected. Impact assessment must focus on cost analysis as well. The increased costs borne by business as a result of regulation render uneconomic some activities that, in the absence of regulation, would be profitable. As a consequence, therefore, some marginal firms will be forced to leave the market, thereby depressing the potential for private sector economic activity. The EESC invites the Commission to issue an independently verified annual statement of the total net cost to business of regulatory proposals. The statement should also report key changes to policy proposals introduced as a result of IAs.

3.2.2 The EESC recognises that IAs are technical documents, but their length and language can make them impenetrable, especially if small companies want to contribute. The Committee recommends making them more user-friendly (8) by using a standard template and a clear executive summary highlighting the main issues that have been addressed and focussing on each SME subgroup.

3.2.3 The EESC calls for independent and transparent scrutiny of draft impact assessments by stakeholders, including business organisations representing micro/small and medium enterprises, to ensure that they are of a high quality and drawn up according to the guidelines (9).

3.2.4 Impact assessments need to judge in detail how and to what extent special measures and models (such as exemptions, simplifications, etc.) should be used to reduce the regulatory burden on SMEs. The EESC welcomes increased application of the SME test but reminds the need to screen thoroughly and individually the impact of legislation for the three different subgroups and thereafter examine the scope for exempting micro-enterprises from new regulations or adopting lighter regimes.

3.2.5 The EESC notes that the Commission seems to be moving away from its plans for blanket dispensation for micro-enterprises from EU rules when concluding the impact assessment exercise. The EESC welcomes this move and underlines the fact that smart legislation should be modulated, relevant to the type and size of the business and not overly complicated. Providing that these parameters are met, it is easy for business owners to respond by developing appropriate internal procedures that meet the objectives of smart legislation.

3.2.6 Micro and small businesses recognise that they are closer to their customers than large multinational companies. They also recognise that there is a growing demand from customers to use local businesses that are ethical and care for the local environment. The EESC reminds the Commission that it is therefore essential that standards and regulations governing the quality of enterprises, their products and their services be respected by companies if they want to be successful and remain competitive in different markets. Exempting micro-enterprises from consumer and environmental protection regulations, for instance, may ultimately harm those businesses (10).

3.2.7 The Committee feels that, in addition to the above-mentioned points, impact assessments should also aim to quantify accurately the possible domino effect of measures aiming to reduce the administrative burden by amending regulations targeting SMEs. Such measures could have side effects for social balance and relations with State authorities (undeclared work, knowledge of tax data, social contributions, classification and nature of employment contracts, etc.). Smart regulation aimed at SMEs must, by its very nature, ensure that it has no external impact, or at least no negative consequences. In this respect, the EESC reminds the Commission that smart regulation should neither undermine worker's rights (11) nor reduce their basic level of protection, especially in terms of occupational health and safety.

3.3 The SME scoreboard

3.3.1 The EESC welcomes the establishment of an annual SME scoreboard making it possible to track specific measures throughout the decision making cycle. We await to see its implementation and outcome.

3.3.2 The EESC considers that the European Commission should constantly monitor the SME scoreboard through a centralised coordinating service in close cooperation with the different institutions and organs of the EU. Member States and SME organisations are invited to join the exercise as well.

3.4 Improving consultation of SMEs

3.4.1 The EESC welcomes the fact that roadmaps informing stakeholders about possible Commission initiatives are made available to them in planned preparatory and consultative work. Consultations with stakeholders should be widely advertised so that they can respond in good time. However, they should be based not on quantity but on quality and supported by empirical evidence gained from interviews with real businesspeople, including employees, and business organisations, visits or observation of micro and small companies. The EESC recalls the Commission that roadmaps should always include a first rough assessment of expected costs in order to allow stakeholders to provide a quality check of the possible impacts. Our Committee reminds the Commission that comprehensive stakeholder consultation is crucial for collecting high quality data as well as drawing up proposals for smart regulation.

3.4.2 After consultation has taken place, many business associations and their members are left wondering whether their efforts to help identify potential problems and possible solutions have been worthwhile. The EESC advocates that some of them, following an official procedure, participate in the IAB as external experts to provide additional scrutiny of Commission proposals in order to ensure that different concepts at stake are properly understood.

3.4.3 The EESC has noted a relative increase in the number of delegated acts passed by legislators in recent years. Many of the decisions taken via delegated acts have a significant impact on SMEs. The Committee therefore feels that the scope of consultation should also be extended to cover some key delegated acts which may have a substantial economic, environmental and/or social impact on a specific sector or on major stakeholders.

3.4.4 The EESC calls for a genuine and structured "SME dialogue" with different parties when drawing up legislation. This partnership should ensure participation by all SMEs and their organisations, especially small business associations defending application of the "Think Small First" and "only once" principles of the SBA (12) in order to stimulate efficiency objectives.

3.4.5 The EESC supports the Enterprise Europe Network (EEN) in principle. It regrets that its potential has not yet been realised because many European SMEs appear to be unaware that it exists. The services offered by the EEN should be grounded in real SME demands and needs with a close cooperation of SMEs organisations. The Committee takes the view that Enterprise Europe Network host organisations shall be supported to dedicate more resources towards SMEs needs when dealing with public administration. The EESC believes that this support should especially focus on the smallest enterprises which should be directly consulted by their local Enterprise Europe Network Center when facing regulation issues. The findings out of the face to face meetings and the input of SME organisations should be taken into consideration by all Commission services in order to put the "Think small first" principle into practice.

3.4.6 The EESC welcomes the extension of the mandate of the High Level Group of Independent Experts on Administrative Burdens (13) (the Stoiber Group). The EESC would especially like to see the group given a new key role in assisting the Commission with the preparation, monitoring and implementation of policies relating to micro and small businesses in close cooperation with SME organisations and trade unions.

3.4.7 The EESC notes the results of the TOP 10 consultation on the worst examples of red tape affecting SMEs (14). The Committee invites the Commission to respond to its findings as soon as possible by publishing specific proposals for simplification.

3.5 Taking SMEs' needs into consideration

3.5.1 The EESC supports a regulatory fitness check for SME policy making (15) (the so-called "REFIT programme"). The EESC looks forward to seeing the results of the pilot assessments (16), and would encourage the Commission to launch further fitness checks in its 2014 programme in key areas which we believe are crucial to creating growth and jobs. The Commission is invited to publish on its website all fitness checks that have been carried out or are planned.

3.5.2 The EESC also proposes a comprehensive fitness check of EU legislation that businesses encounter when trading across the EU's external borders. The EESC considers that the regulatory burden of such legislation is high and that such a check would make a significant contribution to the EU's agendas for smart regulation, growth, and trade.

3.5.3 The EESC invites the Commission to use the REFIT programme to identify and propose for withdrawal as soon as possible existing regulations and pending proposals that are no longer of use, and to pursue the consolidation of existing legislation as part of its simplification efforts. It is recommended that all reduction targets must be measurable and aimed at delivering tangible, positive change for businesses.

3.5.4 The EESC considers that a better selection of legal instruments should be used, including mechanisms for self-regulation and co-regulation (17).

3.6 Towards better governance and a coordination mechanism in SME policy-making

3.6.1 The EESC points out that smart regulation is the shared responsibility of all those involved in EU policy-making whether at European level or Member States level.

3.6.2 At European level: — The Committee believes that while the Commission commits to keeping administrative costs for businesses to a minimum in its legislative proposals, the Council and the Parliament should similarly undertake to reduce or limit the administrative burden on businesses to levels intended by the Commission’s proposal. — If the Council and the Parliament go above these levels, they should have to justify these decisions. The EESC calls therefore on the Parliament and the Council to further commit themselves to carrying out impact assessments on substantive amendments to Commission proposals if needed.

3.6.3 At Member State level: — The EESC is of the opinion that the principle of Smart Regulation will only work if there is also smart implementation. The Committee calls on Member States to avoid undermining simplification measures taken at EU level when enacting them in national laws. This "gold plating" clearly hampers entrepreneurial development. Our Committee therefore suggests that specific training be mandatory for politicians, ministry officials and others involved in enacting legislation in national law. — However, this does not preclude any Member States for having higher standards if they so wish. — The EESC invites the Commission to provide assistance to Member States in the form of meetings and workshops with public authorities to smooth the implementation process. The EESC considers that the Commission should carefully coordinate follow-up of implementation in close cooperation with the various DGs and with Member States. — The EESC proposes that the Commission and Member States work more closely together to share examples of best IA practice, with a view to developing comparable, transparent and flexible procedures. Member States are also invited to step up exchange of examples of best practice in simplifying SME regulation (18) (for example, e-government solutions for businesses to comply with and understand rules (19)).

Brussels, 11 July 2013. The President of the European Economic and Social Committee Henri MALOSSE

(1) http://ec.europa.eu/dgs/secretariat_general/simplification/sme/sme_en.htm.

(2) See Lannoo – Opinion on "Review of the SBA", OJ C 376, 22.12.2011, p. 51.

(3) http://ec.europa.eu/governance/better_regulation/documents/1_EN_ACT_part1_v8.pdf.

(4) http://ec.europa.eu/governance/better_regulation/documents/1_EN_ACT_part1_v4.pdf.

(5) See Pegado Liz - Opinion on Smart Regulation OJ C 248, 25.8.2011, p. 87.

(6) See Cabra de Luna - Opinion on Diverse forms of enterprise (Own-initiative opinion) - OJ C 318, 23.12.2009, p. 22.

Example: Liberal professions as a group which have to respect strong professional regulations to fulfil the clients and public interest.

(7) See Pegado Liz - Opinion on Smart Regulation - point 4 A OJ C 248, 25.8.2011, p. 87.

(8) The recent IA of the Roadworthiness Package ran to 102 pages, while the one on Data Protection ran to 241 pages.

(9) See Pegado Liz - Opinion on Smart Regulation - point 4 B OJ C 248, 25.8.2011, p. 87.

(10) BEUC – Smart Regulation – Response to stakeholder consultation. http://ec.europa.eu/governance/better_regulation/smart_regulation/consultation_2012/docs/registered_organisations/beuc_en.pdf.

(11) http://www.etuc.org/IMG/pdf/our_priorities_soc_dial_in_smes.pdf.

(12) Idem Point 2.

(13) http://ec.europa.eu/dgs/secretariat_general/admin_burden/ind_stakeholders/ind_stakeholders_en.htm.

(14) http://europa.eu/rapid/press-release_MEMO-13-168_en.htm?locale=FR.

(15) http://ec.europa.eu/governance/better_regulation/documents/com_2013_en.pdf.

(16) http://ec.europa.eu/dgs/secretariat_general/evaluation/docs/fitness_check_en.pdf.

(17) http://www.eesc.europa.eu/?i=portal.en.self-and-co-regulation.

(18) http://ec.europa.eu/dgs/secretariat_general/admin_burden/best_practice_report/best_practice_report_en.htm.

See following example: http://www.bru.gov.mt/15-6-reduction-in-administrative-burden-registered_news-posted-on-17th-december-2012. In Malta, the Better Regulation Unit (BRU) was set up at the beginning of 2006, following a national commitment by Government to foster an environment conductive to Better Regulation.

(19) http://www.irma-international.org/viewtitle/21237/ Ron Craig, "E-government and SMEs".