The Cost driven Approach to Regulatory burdens (CAR)

Transcription

1 The Cost driven Approach to Regulatory burdens (CAR) What will the Nordic business environment look like in the future? Conference organized by the Swedish Ministry of Enterprise, Energy and Communications and Nordic Innovation, within the framework of the Swedish Presidency of the Nordic Council of Ministers in 2013 Presentation Peter Bex, managing director SIRA Consulting

2 Introduction The Dutch government identified 10 business sectors in which the Dutch Economy is most competitive internationally; so called Top Sectors. The Top Sectors are: Chemical industry; Horticulture; Water; Agri & food; Gmo; Life sciences & health; High tech; Energy; Logistics; Creative industry (design, media & entertainment, fashion, etc.). The intention of the top sector approach is to strengthen the international lead of Dutch companies by amongst others reducing their regulatory burdens and coordinating investment in R&D and innovation. The Dutch Cabinet aims to achieve 2,5 billion in regulatory burden reduction. The Dutch Ministry of Economic Affairs asked SIRA Consulting to develop the CAR methodology in order to support the top sector approach.

3 Working principles Perspective of business: Any approach should focus on the real costs (i.e. compliance costs) as much as possible (VNO NCW, MKB Nederland). Responsive government: The CAR methodology integrates the perspective of the end-user (business) in a cyclical better regulation program. Better Regulation Program Sector Reduction Plan Sector Analysis Business Analysis The CAR methodology takes the financial administration of a business as its starting point and makes all regulatory burdens visible. The focus on real costs enables scoping of new reduction measures that directly increase competitiveness, innovation and employment opportunities.

4 Stepwise approach Ste p 1 Ide ntify cost ce ntre s In th is ste p w e ge t an u n d e rstan d in g of th e m ain ch aracte ristics of th e b u sin e ss an d h ow it is stru ctu re d. Re su lt : A n ove rvie w of th e organ isation an d an outlin e of its cost stru ctu re. Busine ss Analysis W e take as our starting point the busine ss adm inistration. Through it w e ide ntify and quantify the costs of le gal obligations. The se re gulatory burde ns are the n e xpre sse d as % of total busine ss costs. The goal is to scope solutions and ide ntify m e asure s that le ad to a tangible burde n re duction. Findings are sum m arise d in a se ctor spe cific re duction plan that le ads to incre ase d profitability, com pe titive ne ss, and e m ploym e nt opportunitie s. Ste p 2 Ste p-dow n allocation of costs Ste p 3 Quantify re gulatory burde ns Ste p 4 Trace origin of re gulatory burde ns Ste p 5 Re port In th is ste p w e q u an tify th e cost flow s in th e b u sin e ss, its tu rn ove r, an d (in )d ire ct an d conve rsion costs. In th is ste p w e m e asu re th e costs of le gal obligations p e r cost ce n tre an d e x p re ss th e se as % of (n on)p e rsonn el costs. In th is ste p w e trace le gal obligations to th e ir codifyin g law s, in clu d in g EU d ire ctive s an d /or re gu lations. In th is ste p w e re p ort our fin d in gs, an d m ake re com m e n d ations on a se ctor sp e cific re d u ction p lan. Re su lt: A (m acro) u n d e rstan d in g of th e b u sin e ss e conom ics b ase d on an n u al accounts. Re su lt: A (m icro) u n d e rstan d in g of th e costs of le gal obligations b ase d on in voice s an d accountin g. Re su lt: A (ge n e alogic) u n d e rstand in g of th e origin an d origin al form of le gal obligations. Re su lt: A re p ort su m m arisin g ste p 1-4 in clu d in g grap h s, figu re s, tab le s an d re com m e n d ations.

5 Results The CAR methodology quantifies regulatory burdens in relation to a company s real costs. The methodology examines the impact of regulation from the perspective of business. It provides factual information and hard data about the cost of legislation. The CAR methodology traces the origin of all regulatory burdens (administrative burdens and compliance costs). But rather than emphasizing abstract reduction targets, the focus is on growth and freeing up creative energy for innovation. 40% 35% 30% 25% 20% 15% 10% 5% Regulatory burdens Business expenses Business expenses AB CC IN 0% Non-personnel costs Personnel costs Material costs From: Comparison regulatory burdens SMEs in four EU member states (2013) From: Comparison regulatory burdens SMEs in four EU member states (2013)

6 Results The CAR methodology allows for a comparison over multiple years. This makes it possible to assess the impact of one-time, periodical and annual regulatory burdens and expands the scope of possible reduction measures. The CAR methodology identifies tangible burden reductions. However, the objective is never to change or delete certain policy goals, but rather to make sure that these policy goals are reached at lower costs. Business expenses Food Safety (Food Hygiene) Regulations CBA/CEA pension obligations Employment Law Food Labeling Regulations Control and traceability From: Top Sector Chemistry (SIRA Consulting 2012) From: Comparison regulatory burdens SMEs in four EU member states (2013)

7 Pilot studies Chemical industry Top Sector Chemical Industry in this study the CAR methodology was applied in the Chemical Industry; the focus was on formulators (these are blenders of chemical products, producing paint, pigments, glue, detergents etc.); results of the pilot are used to draw up a specific Regulatory Burden Reduction Plan for the chemical industry; the Dutch Branch organization for the Chemical Industry (VNCI) is enthusiastic about the CAR methodology, and therefore a second project is planned for March; the new project will focus on chemical production plants (more specifically, plants involved in the production of plastics); both projects will be included in the policy initiative Top Sector Chemical Industry. Bakery Sector Comparison Regulatory Burdens small and medium-sized enterprises (SMEs) in four EU member states an international comparison of the regulatory burdens experienced in the bakery sector of four EU member states: the Netherlands, Lithuania, Ireland and Spain; provides an insight into the regulatory burdens (= administrative burden and compliance costs) of micro, small and medium sized bakeries; reduction measures aimed at SME bakeries carry over and benefit other sectors too; study is in its final stage and the report will be published in March.

8 Examples of possible burden reduction measures Fees for permits: a bakery in the Netherlands serves ready-to-eat sandwiches for lunch; provides clients with a small seating area outside like an outdoor café; the municipality charges 5.000,- for a permit for this outdoor terrace ; the bakery has to literally sell thousands of breads just to pay for the permit. Reliable sampling: a bakery in Lithuania is required to sample food and water for microbiological examination in a laboratory and has to pay an up-front fee for the privilege; as there is no supervision of how or where samples are taken, Lithuanian bakers have no confidence in the credibility of the results as there are no safeguards build in to prevent cheating (if results are unreliable all costs are too high); independent sampling by the inspectorate or an auditor would be such a safeguard. Labeling requirements: allow different ways of labeling; by allowing experimentation with other, more innovative ways of providing product information, it is possible to arrive at more sustainable solutions with smaller packages and less paper labels (i.e. a product book, a printout from the register, a digital information column, using an app for a smart phone); relevant for many sectors, from small traditional food manufacturers to chemistry (which is confronted with a quick succession of changes like VOS2010 and REACH).

9 SIRA Consulting Edisonbaan 14 G MN Nieuwegein Netherlands Tel: Fax: Contact Peter Bex, managing director