Cumulative impact of obligations on SMEs

Subject: Cumulative impact of obligations on SMEs

Several new pieces of legislation and tabled legislative proposals are introducing, among other things, reporting obligations for companies. Most notably, Regulation (EU) 2020/852 (Taxonomy Regulation), the forthcoming Corporate Sustainability Reporting Directive, as well as the proposal for a directive on corporate sustainability due diligence (COM(2022)0071), and the proposal for a regulation on deforestation-free supply chains (COM(2021)0706).

1. Does the Commission have an objective assessment of the cumulative impact the obligations arising from these pieces of legislation will have on small and medium-sized enterprises (SMEs)?

2. If so, what does it make of the cumulative impact these obligations will have on SMEs?

3. Do these cumulative requirements not place EU SMEs at a serious competitive disadvantage to third-country companies?

Submitted: 17.11.2022

Answer given by Vice-President Šefčovič on behalf of the European Commission (20 January 2023)

The Commission prepared impact assessments for all four proposals mentioned, looking, inter alia, at impacts on small and medium- sized enterprises (SMEs) of each specific proposal.

The cumulative impact of the four proposals will depend on the varying degree to which any individual SME is affected by all four proposals. However, each of these impact assessments addresses the coherence between different proposals and existing legislation and their effect in the overall legal framework.

The analysis shows that additional costs on SMEs will be proportionate and mitigating measures have been taken for SMEs within the legal scope of the proposals to limit burdens (1). For SMEs outside the scope, which may be affected indirectly, measures have been taken to account for their particular conditions and ensure that they are not disproportionally affected (2).

In addition, the proposals will also have positive impacts for SMEs as the new rules are expected to bring multiple benefits to EU companies, such as a harmonised legal framework in the EU, a level playing field vis-à-vis third-country companies, greater innovativeness, better risk management and resilience as well as better access to finance.

The Commission is aware of the risks of adverse impacts on SMEs with regulatory demands. To prevent this, it has adopted a range of general measures, such as the ‘one-in, one-out mechanism’ (3), which has been fully deployed since January 2022 and its results will be presented in the Annual Burden Survey.

The Commission has also recently strengthened the better regulation requirements for SME testin g (4) and is working on strengthening its requirements for the assessment of impacts on competitiveness.

⋅1∙ e.g. lighter reporting regimes or longer transition periods to adapt to the new demands.

⋅2∙ e.g. planned guidance about voluntary model contract clauses to avoid shifting burden of compliance to SMEs.

⋅3∙ Better regulation: joining forces to make better laws (COM(2021) 219 final).

⋅4∙ See footnote 3.