Wednesday, March 11th, 2020

A strategy for SMEs to become sustainable

On the 10th of March 2020, the European Commission published the new SME Strategy for a sustainable and digital Europe, which aims to help turn the challenges of sustainability into opportunities for SMEs and entrepreneurs  through digitalisation, innovation, simplification and investment. This comes hot on the heels of ESBA’s Manifesto for Change, an eight point manifesto that challenges the EU institutions to work with, and through, the SME community across Europe to put in place targeted measures to secure Europe’s sustainable growth.

The Commission has correctly identified SMEs as central to the EU’s transition to a sustainable and digital economy and its strategy is starting to flesh out how we get from where we are now to where we need to be for us to survive and thrive.  But are the measures set out in the strategy enough to make the transition? And is the critical role of SMEs and entrepreneurs properly addressed in the accompanying strategies and plans to help Europe meet its ambitions of becoming carbon neutral by 2050?

MAKING THE TWIN TRANSITION

We know that the average micro or small business has relatively limited digital skills [1], which makes them either vulnerable (whether to cyber security attacks from which less than half recover, or to data breaches due to non or over compliance with GDPR)  or unable to compete on a global scale.  So we fully endorse the strategy’s ambitions to improve SME access to digital skills and look forward to working with the Commission to strengthen the alliance between the public and private sector.

We also hope to see a strong digital focus in the Skills pact and an European Skills4SMEs Partnership. Europe’s entrepreneurs need the right skills to understand the digital risks they face in their day to day business; the right skills to embrace the 21st century digital economy; and for these to be recognised across Europe.

Which is why ESBA warmly welcomes the European Commission’s proposal for Digital Crash Courses for SME employees to become proficient in areas such as AI, cybersecurity or blockchain.  And we believe that these should be given once SME owners/managers receive supported subsidised help to do a digital risk assessment, which would help them identify their specific digital security needs – as set out in our ESBA manifesto, where we also advocate for more EU investment in basic digital skills, and the development of an EU wide certification scheme to speed up capacity and boost mobility.

We also know that most SMEs are not truly sustainable, so they need as much incentive as possible to become so.  This means making it easier for them to cut their carbon footprint (for example, through administrative simplification and proportionate reporting; or investment in diversification) and conversely providing incentives: so for example, the lower the carbon footprint, the easier borrowing conditions could be.

That is why ESBA fully supports an SME dimension to the Sustainable Europe Investment Plan, and examining the reduction of bank capital requirements to spur green investment in Europe. We look forward to working with the institutions to put more flesh on the bones. We also recognise the clear need for the Just Transition Fund to encourage diversification and reconversion in those areas most reliant on fossil fuels.

ESBA also welcomes the efforts of the EU institutions and agencies to improve access to information and advice on IPR for businesses, as well as its ambition to reduce costs and complexity for the management of IP protection. ESBA is currently working with relevant stakeholders and agencies such as the European Union Intellectual Property Office, to ensure that SMEs and entrepreneurs have the necessary tools, information, and support to ensure IPR protection.

REDUCING THE BURDEN

Now more than ever, it is critical that the new rules and standards, to which we must agree to help meet our sustainability challenges, are framed with SMEs in mind.  It is a cliché to say that SMEs are disproportionately impacted by regulation – because it is true.   The road to sustainability will be a shorter one if we make it as easy as possible for EVERY business to adapt. ESBA has been supportive of the overall efforts of the European Commission to reduce administrative burdens for SMEs and to alleviate market access obstacles.  But it is time now for more stringent measures that are consistently applied.  Every single proposal affecting business should be screened for its impact on SMEs at every step of the EU decision making process.  And it is not enough to invite a token SME expert on the Regulatory Scrutiny Board – there should be a committee made up of SME experts that advises the RSB. This expert group would be responsible for carrying out the test thoroughly, and for quantifying the compliance cost and ensuring that the quality of the SME test is without doubt. We would also like to see how the ‘One In, One Out’ principle would work, and would welcome the opportunity to work with the Commission to develop a robust methodology across all departments.

FINANCING SUSTAINABLE GROWTH

In terms of protecting existing jobs and encouraging the creation of new and sustainable jobs, we also support the measures in the SME strategy designed to combat late payment – which is one of main scourges for entrepreneurs, and a major risk of bankruptcy and job loss.  We believe the European Commission is right to step up infringement procedures and launch a pilot on conflict resolution/arbitration mechanisms. Nonetheless, for the European Commission to deliver on its overall ambition, stricter measures and stronger sanctions to late payers should be put in place, as well as strong fines for firms that misuse arbitration mechanisms to delay payment and, thus, damage arbitration credibility.  The ‘zero tolerance’ in the strategy doesn’t go far enough.  The evidence shows that those member states that have the strictest measures have the best outcomes in terms of reducing bankruptcy – which is why ESBA is calling for a ‘30 Day or Pay’ policy across Europe .

As consortium leader of the WEgate 2020 project, we are delighted to see the European Commission´s commitment to empower women and girls to be founders, through educational and upskilling activities; and to improve gender balance among those creating and managing businesses.[2]

We know that women set up fewer businesses than men, and that their business are smaller.  And yet they are more sustainable.  One of the major obstacles to women-led business growth is access to finance; so we want to see more dedicated measures for women entrepreneurs, and to see the EU institutions setting the highest standards. The new SME Strategy does refer to gender-smart financing, and we stand ready to work with the EU and financial institutions to scale up the financial products offered to Women Entrepreneurs, and to agree a 50% gender balanced target for EIB investment decision-making bodies.

Every business from now on will be digital and every business must be green.  This strategy will be successful if it ensures that the Commission reaches out to every business.  The creation of an SME Task Force, Strategic Entrepreneurship Ambassadors, as well as a strengthened SME Envoy network, are all excellent initiatives that will amount to nothing unless there is real political will to make every business everybody’s business.  We call upon all the EU institutions to make that challenge our opportunity.

[1] OECD Skills Outlook 2013: First Results from the Survey of Adult Skills, pp.227-8; cf.Employment and Social Development in Europe 2018, pp.92-3

[2] Gender Equality Strategy 2020-2025 COM (2020) 152 final, 04.03.2020