Conference_20130305_Peter Bex

The Cost driven Approach to Regulatory burdens (CAR)

“What will the Nordic business environment look like in the future?”06-03-2013

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

SIRA Consulting BV | Edisonbaan 14G-1 3439 MN Nieuwegein | www.siraconsulting.nl

IntroductionThe 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.



Working principlesPerspective 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.

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.


Better Regulation Program

Sector Analysis

Business Analysis

Sector Reduction

Plan


Stepwise approach


Business Analysis

We take as our starting point the business

administration. Through it we identify and quantify

the costs of legal obligations. These

regulatory burdens are then expressed as % of

total business costs.

The goal is to scope solutions and identify

measures that lead to a tangible burden reduction . Findings are summarised in a sector specific reduction

plan that leads to increased profitability,

competitiveness, and employment opportunities.

Step 1Identify cost

centres

Step 2Step-down

allocation of costs

Step 3Quantify

regulatory burdens

Step 4Trace origin

of regulatory burdens

Step 5Report

In this step we get an understanding of the main

characteristics of the business and how it is structured.

In this step we quantify the cost flows in the business, its turnover, and (in)direct and

conversion costs.

In this step we measure the costs of legal obligations per cost centre and express these as % of (non)personnel costs.

In this step we trace legal obligations to their codifying laws, including EU directives

and/or regulations.

In this step we report our findings, and make

recommendations on a sector specific reduction plan.

Result :An overview of the

organisation and an outline of its cost structure.

Result:A (macro) understanding of

the business economics based on annual accounts.

Result:A (micro) understanding of the costs of legal obligations based

on invoices and accounting.

Result:A (genealogic) understanding of the origin and original form

of legal obligations.

Result:A report summarising step 1- 4

including graphs, figures, tables and recommendations.


ResultsThe 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.


Business expenses

AB

CC

IN

From: Comparison regulatory burdens SMEs in four EU member states (2013) From: Comparison regulatory burdens SMEs in four EU member states (2013)

0%

5%

10%

15%

20%

25%

30%

35%

40%

Non-personnelcosts

Personnel costs Material costs

Regulatory burdens

Business expenses


Results


Business expenses

Food Safety (FoodHygiene) Regulations

CBA/CEA pensionobligations

Employment Law

Food Labeling Regulations

Control and traceability

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.

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.

From: Comparison regulatory burdens SMEs in four EU member states (2013)From: Top Sector Chemistry (SIRA Consulting 2012)


Pilot studiesChemical 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.



Examples of possible burden reduction measuresFees 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).


SIRA ConsultingEdisonbaan 14 G-13439 MN NieuwegeinNetherlands

Tel: 0031 30 602 4900Fax: 0031 30 602 4919www.siraconsulting.nl

ContactPeter Bex, managing director