Small and medium-sized enterprises (SME) are the backbone of the European economy, accounting for over 99% of all businesses in the EU. They are often the drivers of innovation and economic growth, creating jobs and stimulating economic activity across the continent. SMEs are also critical to the success of the EU Green Deal, which the EU chemical industry has long supported. From supplying raw materials to providing specialised services, SMEs play a crucial role in driving the transition to 2050, while also contributing to the sector’s competitiveness.
The “double twin” transition that the chemical industry needs to undergo by 2050 (that is, become climate neutral, digital, circular and shift towards safe and sustainable chemicals) is a significant challenge even for large corporations. This challenge is magnified for smaller companies. SMEs need to generate investments into new processes, anticipate and understand regulatory changes, increase their spending on regulatory costs, upskill and reskill their workforce to meet new demands, often with limited resources.
The European Commission intends the REACH revision to support Europe’s transition to safe and sustainable chemicals. With this, Cefic brought together the European Commission and 11 SME representatives from the chemical sector to hear challenges and exchange possible solutions. Together, they proposed five actions how the revision could acknowledge challenges of the transition.
1. Ease access to funding
According to the Chemical Industry Transition Pathway, SMEs face excessively high investment costs, have less favourable borrowing conditions, and have greater risk for failure than larger companies. Yet accessing funding comes with a huge bureaucratic process and unrealistic deadlines. As highlighted in the Transition Pathway, SMEs call on the European Commission to “consider cutting red-tape (at EU and national level), and improve coordination to facilitate access to funding for industry through a ‘single window’ approach”.
“We need incentives for digitalisation and innovation, not burdened by bureaucracy, and we need real funding.”
Paolo Bonamigo, Head of Product Safety & Regulatory Affairs, hubergroup
2. Improve financial support
More financial support at the national level could be offered. For instance, the shift from restricted chemicals to new chemical alternatives, means that customers are increasingly requesting more complex safety testing. This costs on average between 250k – 3 million euros. Further costs in research and innovation, new digitalised software and registration costs, makes the transition to safe and sustainable chemicals unaffordable for SMEs. Reducing administrative costs for REACH could make compliance costs more bearable.
3. Offer more educational support
REACH is complex and requires in-depth expertise to ensure compliance. The risk of non-compliance is then higher with SMEs as they have less regulatory experts and often depend on external consultants. Helping SMEs build more expertise in the areas such as new testing requirements, use of in-vitro and New Approach Methodologies, better application of read-across and grouping, etc. is essential. Support could take the form of training, external dedicated experts to support SMEs for some time, reduced testing costs, financial support, etc.
4. Update the definition of an SME
The current definition, which includes company turnover and balance, has not been updated for 20 years. The definition is important because it determines whether a company is eligible for business and financial support; like research and innovation funding and specific national support programmes for SMEs. It also impacts REACH compliance fees. The turnover and balance should therefore be adjusted to account for inflation.
5. Create a predictable, stable and prioritised EU legislation
More broadly, our EU chemicals industry needs a predictable regulatory system that enables both industry and authorities to focus resources where it matters the most and simplifying administrative processes. Prioritising regulatory actions that bring the most benefits to health and the environment while keeping the regulatory framework as stable as possible, and maintaining coherence of REACH with all other pieces of EU legislation.
“For the transition, you need innovation, flexibility and entrepreneurship. SMEs have these three characteristics. We cannot do it without them.”
Roeland Kiewiet, General Manager, ChemCom