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
Date: 2004-09-15
Institutions: European Economic and Social Committee
Subjects: action programme, aid to undertakings, entrepreneur, entrepreneurship, school-industry relations, social security

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(Preparatory Acts)

EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

411th PLENARY SESSION OF 15 AND 16 SEPTEMBER 2004

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

2. Objectives of this opinion

1.1
The 2000 Lisbon Presidency conclusions and the Euro-
pean Charter for Small Enterprises underlined the importance
of entrepreneurial activity to sustainable development
in
Europe and the need to engender a policy environment condu-
cive 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 Entrepreneur-
ship Action Plan to the 2004 Spring Council.

The Committee opinion on the Green Paper was

1.3
approved by the Plenary in September 2003 (1).

The Commission subsequently adopted its European

1.4
agenda for Entrepreneurship Action Plan in February 2004 (2).

(1) OJ C 10 of 14.1.2004
(2) COM(2004) 70 final, page 4

2.1
As with the preceding Committee opinion on the Entre-
preneurship in Europe Green Paper, this opinion seeks to contri-
bute 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 recommenda-
tions 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 Commit-
tee's opinion recognised this and congratulated the Commission
for the Green Paper and the subsequent open and rigorous
consultation process.

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3.2
Building on the Green Paper, the Action Plan provides a
further analysis of the nature of Europe's entrepreneurial chal-
lenge. 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 consul-
tation was the broad range of policy areas that affect entrepre-
neurs and the resulting need for a horizontal approach to tack-
ling 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.

The Commission received 250 responses to its consulta-
3.4
tion. 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.

developing a business, it could also have reiterated the need for
entrepreneurial attitudes to be stimulated in public administra-
tions.

3.7 Structure

In its opinion on the Green Paper, the Committee
3.7.1
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 entrepre-
neur 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 opera-
tional measures to encourage business activity in response
to the ten questions in the Green Paper.’ (4)

The Committee generally concurs with the areas
3.7.2
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 some-
what 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).

the

in Europe (1)

acknowledges

The Action Plan could have acknowledged the heteroge-
3.5
neity 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
importance of
enterprises
promoting cooperatives in Europe and a correlating reference
to the specific role of social economy enterprises should have
been included into the Action Plan (2). Equally, the needs of
self-employed entrepreneurs differ significantly from those of
incorporated businesses (3). As well as demonstrating an appre-
ciation 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.

The Committee argues that

3.6
to
encourage an entrepreneurial mindset within the public sector.
While the Committee understands that the Action Plan concen-
trates on entrepreneurship in the form of creating, running and

is also important

it

(1) COM(2004) 18
(2) See EESC opinions 242/2000 (Olsson) and 528/2004 (Fusco and
social

to the significance of

references

further

Glorieux)
economy enterprises.

for

Nonetheless,

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

consistency,

provide

to

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

The Committee identifies a number of specific priorities

4.1
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.

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

(4) OJ C 10 of 14.1.2004, point 2.2.2

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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 motiva-
tion, 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 recom-
mendations 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, manage-
ment, 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.

There is a longstanding tradition in several Member
4.1.1.5
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 poli-
cies 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.

Creating a more entrepreneurial society in Europe is
4.1.1.7
not, however, merely a matter of grooming future entrepre-
neurs. This policy will fall on stony ground if Europe does not
also create an environment which will allow potential entrepre-
neurs 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 under-
stand
Entrepreneurship
should hence be embraced by public sector officials seeking to
execute their duties effectively, as well as by those involved in
running businesses.

entrepreneurship.

appreciate

and

The Committee would argue that policies should
4.1.1.8
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 entre-
preneurs 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 adminis-
tration involved in switching from self-employment to employ-
ment 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 impor-
tant that employees, or the unemployed, are not cajoled or
compelled to enter self-employment against their better judge-
ment and that less scrupulous employers are not allowed to
relinquish their responsibilities to employees (1).

4.1.2 Encouraging more people to become entrepreneurs

4.1.2.1
fair balance between risk and reward.

The Action Plan covers well the central issue of a

The Committee looks forward to the Commission's
4.1.2.2
forthcoming communication on business transfer. It is envi-
saged 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, inheri-
tance taxes,
inheritance legislation and company law all
currently discourage the succession of business and so need to
be reviewed.

The Action Plan rightly highlights the stigma of
4.1.2.3
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) experi-
ence are more likely to succeed with new ventures.

(1) OJ C 10 of 14.1.2004, point 5.3

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In this process,

4.1.2.4
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 trans-
parent.

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. Mentor-
ship 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
approach to considering access to finance, incorporating:

The Committee

recommends

a more holistic

— raising business acumen of owner-managers to under-
stand what is required to secure finance for growth. This
could be achieved via accredited business support networks;

— sensitising financial institutions to the needs of busi-
nesses seeking funding and support for growth: this again
entails fostering a greater understanding of entrepreneur-
ship 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 (1), 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 posi-
tive 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 (2), which receives no mention in
the Action Plan.

4.1.5 Creating a more SME-friendly regulatory and adminis-

trative framework

4.1.5.1
The Committee's opinion on the Green Paper high-
lighted 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, verti-
cally, at all policy-making levels’ (3). 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 stake-
holders. The Committee would consequently support
recent calls for a Vice-President of the European Commis-
sion with more direct responsibility for overseeing regula-
tory reform.

4.1.5.2 More broadly,
there is still significant scope for
improving the procedures for regulatory impact assess-
ments within, not only the Commission, but also the Parlia-
ment 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
the specific characteristics and challenges of small
account
enterprises. Central to this are specific business-impact assess-
ments, targeted to small and micro-enterprises, of all new and
the EU
existing legislation.
policy-making process,
the
single most significant contribution by the institutions to
greater entrepreneurial activity.

into practice throughout
this approach would represent

If put

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 legisla-
tion even before they are able to monitor potential new regula-
therefore, build on
tory proposals. The Commission must,
various
isolated initiatives whereby the SME community's
opinion is proactively sought. More significantly, the Commis-
sion 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.

(1) OJ C 10 of 14.1.2004, points 6.10.1 and 6.10.2
(2) OJ C 10 of 14.1.2004, point 6.11.1

(3) OJ C 10 of 14.1.2004, point 6.2.1

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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
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.

the SME community,

the views of

4.1.5.6
The same principles of dialogue are applicable to the
social partners, which deal with many issues of great impor-
tance 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 instru-
ment 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 implementa-
tion of innovative ways of tackling any finance gaps for small
firms.

5. Recommendations for maximising the positive impact

of the Action Plan

The Committee calls for the following procedural clarifi-

5.1
cations 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 (1),
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.

5.1.3
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.

tool

in setting and measuring targets

Appropriate indicators of performance are an
5.1.4
essential
for
increased entrepreneurial activity. This was recommended
by the Committee in its previous opinion (2) and underlined in
the 20 February Competitiveness Council conclusions. Such
data will also allow comparative study of Member States' poli-
cies 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.

the action needed, but

5.1.6 Monitoring the process and delegating responsibil-
ities: the Commission cannot and should not implement much
it must carefully supervise and
of
monitor progress on the implementation of the Action Plan. In
parallel,
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.

is therefore essential

it

some

In order to broaden the Commission's engagement in
5.1.7
form of Action Plan monitoring
the process,
revised
committee should be established, within the
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.

5.1.2
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 offi-
cials, at EU and national level, to act as both ‘judge and jury’. It
representatives are more closely
is crucial
involved in the evaluation of the Action Plan.

that business

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.

(1) OJ C 10 of 14.1.2004, point 4.3

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

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It

that

is vital

5.1.9
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 consulta-
tion 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.

Generally,

5.1.11
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

Brussels, 15 September 2004.

across the community. Ongoing promotional activities and
awareness-raising campaigns linked to specific objectives
within the overall plan will help to maintain the momentum
the wide variety of actors required to
and engagement of
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
the ongoing action
that much of
required has to be taken by policy-makers beyond DG Enter-
prise.

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.

The President

of the European Economic and Social Committee

Roger BRIESCH