SME Connect Forum for Better Regulation: Improving Legislative Processes

 

On Tuesday, November 19, SME Connect organized a working breakfast titled „SME Connect Forum for Better Regulation: Improving Legislative Processes” at the European Parliament in Brussels. The event was hosted by Marion Walsmann MEP and Co-chair of the EPP SME Circle, Vice-Chair of the JURI Committee, Member of the IMCO Committee.

With a fresh perspective and innovative ideas, the members of SME Connect have started a forum for open, constructive dialogue to achieve real political outcomes. The SME Connect Forum for Better Regulation is dedicated to improving legislative processes. It seeks to enhance the evidence base, transparency, and systematic consideration of the impact on SMEs in EU laws. The initiative places particular emphasis on the “Think Small First” principle and a robust SME Test to assess the potential impact of legislative proposals on SMEs. Read more from press release.

The event was held under the auspices of Marion Walsmann, MEP and Vice-Chair of the Committee on Legal Affairs (JURI), who warmly welcomed the participants. “I can assure you that we are following developments closely and intervening where necessary. In the last five years, the legislative workload has been extremely high—13,000 legislative acts were adopted, averaging 13 per day. We must prioritize slowing this pace to ensure smooth and sustainable implementation during this term,” Ms. Walsmann reassured participants.

Keynote speaker Michael Wimmer, Director of Strategy, Better Regulation & Corporate Governance at the European Commission, emphasized that not all solutions should fall solely on the shoulders of the Commission. “Should all the solutions lie within the Commission? It would be better to achieve these goals as a collective effort, involving the Parliament, Member States, and stakeholders alike,” he noted.

The EU faces many challenges, including labour and skills shortages, the energy crisis, and others. The Draghi and Letta reports are timely contributions to addressing these issues. Mr. Wimmer emphasized that the EC has been implementing a new Better Regulation system since March 2023. Mandatory competitiveness checks and Regulatory Scrutiny Board meetings are now part of the process. “This system is considered one of the most effective tools the EC has implemented to date,” he added. The system’s effectiveness is evaluated by the OECD, and it is estimated that €6.3 billion was saved by companies in 2023 as a result of these reforms.

The Commission is working on 24 work programs focused on improving competitiveness. Some of these have already been adopted, while others remain in progress—for example, initiatives related to customs reporting and sector-specific reporting standards.

Mr. Wimmer confirmed that the evaluation of fitness checks must occur more frequently, and stress testing should encompass additional sectors and span the entire value chain. “We must focus on business priorities. We set a new target, to set two implementation dialogues per year with stakeholders. To put it really into core of our Commission work,” he concluded.

Wolfgang Hiller, Director for Impact Assessment & Foresight at the Directorate-General for Parliamentary Research Services (EPRS) of the European Parliament, presented a comprehensive overview of the services they offer legislators in the area of impact assessment. EPRS provides a range of impact assessment services to MEPs under tight deadlines, focusing on four main pillars:

• Impact assessments on current files in the legislative pipeline, upon request by MEPs.
• Additional impact assessments on request from Parliamentary Committees, including assessments of substantial amendments.
• Monitoring the impact of legislative proposals.
• Providing an overview of current legislation through concise reports.

EPRS systematically alerts Committees regarding absent impact assessments and has noted a lack of interest among some MEPs in utilizing impact assessments during the legislative process. “Our aim is not to replace the political decision-making process but to strengthen it—to reduce burdens and help legislators make informed decisions,” Hiller concluded.

Ralph Kamphöner, Head of the Brussels Office and Head of International Trade at the Confederation of the German Textile and Fashion Industry, shared several positive and negative experiences his industry association has had with the legislative adoption process. He concluded with the hope that the 25% reduction in bureaucracy will successfully move from being a plan to actual practice, avoiding it becoming “yet another ticking-the-box exercise”.

Eva Rytter Sunesen, Partner and Co-founder of Implement Economics, presented the findings of her firm’s survey, which consulted 3,300 SMEs across 11 Member States. Among the key findings was the recognition that the Single Market is a driver of creativity. However, bureaucracy complicates matters, with 91% of SMEs identifying it as the most significant barrier. Surprisingly, the second most common issue, noted by 81% of SMEs, was the inconsistency of regulations across Member States.

The survey led to nine specific and impactful recommendations:

• The SME Stress Test should be conducted more systematically. Currently, only 38% of these tests are cross-industry and provide adequate results.
• Improve the application process for SME Stress Tests and consultations.
• Clearly define roles and responsibilities related to impact assessments.
• Include implementation risks, such as gold-plating, across Member States.
• Ensure that Member States do not introduce additional burdens beyond EU requirements.
• Use regulatory sandboxes to help SMEs identify potential barriers and adopt more agile practices.
• The competitiveness check launched in 2023 is seen as a helpful tool and should be expanded.
• Evidence-based, high-quality data is essential for systematic evaluations.
• Explore the potential of AI to support practical implementation in this area.

Michael Jäger, President of the Taxpayers Association of Europe, emphasized the importance of maintaining Europe’s competitiveness and sustainability. “We need to return to the principle of subsidiarity. The best regulation is less regulation,” he remarked.

Lusyne Kesziszjan, Public Affairs Manager at the Union of Entrepreneurs and Employers (ZPP), highlighted the need to compare the “two out, one in” regulatory plan in financial terms to ensure it reduces costs for SMEs. She pointed out that administrative duties cost SMEs approximately €10 per person, compared to €1 for larger companies. Furthermore, 16 out of 24 consultation initiatives from the EC overlapped with holiday periods, and 10 of them did not properly account for SMEs. “Money spent on administration cannot be invested in innovation,” she concluded.

Peter Loosen, Managing Director at Food Federation Germany, appreciated the EC’s toolbox but questioned its effectiveness. “We need MEPs and Member States to engage fully in this process and avoid proposals that would further complicate matters,” he remarked.

Patrick Coppens, Director of Scientific and Regulatory Affairs at Food Supplements Europe, extended the discussion to include implementing legislation, which often bypasses proper impact assessment. He cited examples of restrictions and labelling legislation being introduced without adequate transition periods, negatively impacting SMEs, farmers, and their operations. “The European Parliament must monitor and set proper SME burden limits,” he stressed.

Simone Skovshoved, Head of Policy at Danish Entrepreneurs, reflected on the challenges faced by start-ups, including extreme regulatory burdens. “In addition to difficulties in accessing capital and talent, start-ups face significant bureaucracy. For example, nearly 90 pieces of legislation in the digitalization sector alone create huge barriers for new digital start-ups. They either fail to grow or leave Europe altogether,” she concluded.

Mathilde Adjutor, Senior Policy Manager at CCIA Europe, noted that their members are grappling with 17 new legislative files from the last term alone. “We need more time to reflect and implement these new rules,” she stressed, adding her interest in the current development of the Regulatory Scrutiny Board.

In conclusion, we can summarize this fruitful debate with the statement that while it is easy to set political goals, fulfilling them is far more challenging due to the complexity of the task. However, we should ensure that political decisions are based on the best possible data. Proportionality and subsidiarity should always be at the core of the debate when determining the proper balance for SME regulations.