Research results of the IfM Bonn point to setting screws for relieving the burden on SMEs
"In the current situation, SMEs need good and reliable framework conditions to play to their strengths again in (global) competition – and no sectoral and size-related support measures. The support measures would only cement the obsolete image of SMEs that cannot master economically difficult times independently," warns Professor Dr Dr h.c. Friederike Welter (IfM Bonn/University of Siegen).
Three aspects, in particular, count towards good and reliable framework conditions, according to the research results of the IfM Bonn: A consequent reduction of bureaucracy, a SME policy that sees itself as a cross-sectional policy and SME-oriented financing of the ecological transformation.
Releasing resources by reducing the bureaucratic burden
The Institut für Mittelstandsforschung (IfM) Bonn has conducted case studies which show that the fulfilment of bureaucratic obligations at the federal level alone ties up around three per cent of the annual turnover of a small company in the mechanical and plant engineering sector. With a turnover of 23.5 million, this is around 705,000 euros – and ten full-time employees in terms of employment costs. The costs of this bureaucratic effort for a larger company in the same sector with a turnover of 239.5 million euros are one per cent (2.48 million euros) or the employment costs for 40 full-time employees. "Even if bureaucracy fulfils important economic functions, such as ensuring planning and legal certainty or equal treatment, its current scope ties up valuable company resources," the IfM president explains.
However, not only regulations at the federal level contribute to the bureaucratic burden but also, for example, time-consuming planning and approval procedures at the state and municipal level as well as the requirements of self-governing organisations of the economy, standardisation institutes or within value chains. For this reason, both the legislator and all other standard-setters should regularly check where bureaucracy can be responsibly reduced.
Assess the possible consequences of legislative initiatives at an early stage
However, SME policy must also be considered more strongly as cross-sectional. The practical consequences must be examined early in the conception phase – e.g., through practice checks and the consultation of relevant stakeholders. Otherwise, there is a danger that the legal requirements initiated in the different ministries will indirectly burden smaller companies, particularly in the long term. "An example of this is the Supply Chain Sourcing Obligations Act: Although smaller companies are currently still excluded from this law, which has been in force since the beginning of 2023, they are affected by it as suppliers – and must provide data to their larger customers," criticises Prof. Dr Dr h.c. Friederike Welter. A third of the smaller companies with large companies as customers stated in a regional survey in the Siegen-Wittgenstein and Olpe region in 2022 that they had already been asked for corresponding data.
Take into account the financing characteristics of SMEs
According to IfM Bonn, in the recent past, a good one in four small and medium-sized enterprises (SMEs) has implemented structural measures to protect themselves from the consequences of climate change or to operate more sustainably. However, further investments are still necessary during the ecological transformation. Many SME entrepreneurs want to finance these primarily with the help of loans, according to another IfM survey. In doing so, they mainly seek cooperation with their house bank, with which they have long-standing relationships. The advantage is given due to the ecological transformation process: The house bank is usually well familiar with the business model of the relevant company and can take into account the increasing importance of sustainability risks for business success when granting loans.
Banks and savings banks are obliged by the EU "Strategy for Financing a Sustainable Economy" to examine the sustainability of their lending to companies and, for example, disclose the taxonomy-compliant asset shares in their portfolio within the Green Asset Ratio (GAR) framework. SME loans will be rated as "brown" across the board until 2025, which may lead to savings and cooperative banks, which grant a disproportionately high number of SME loans compared to larger commercial banks, being disadvantaged in the GAR calculation. The lower GAR then looks to outsiders as if the loan portfolio of regional banks is less green than that of large banks, which can distort competition among credit institutions. Moreover, the additional information required by lenders also increases the effort SMEs must expend to obtain the necessary information, which increases the cost of credit. "As a result, this creates needless credit hurdles, which in turn prevents investment and innovation – and thus hinders rather than promotes the intended transformation," says Prof. Dr Dr h.c. Friederike Welter.
The detailed studies "Adapting to climate change: Exploring the specific challenges for SMEs", "The EU's support measures for sustainable financing – implications for the Mittelstand", and "Bureaucracy costs of companies in the mechanical and plant engineering industries" with all survey results are available on the homepage of the Institut für Mittelstandsforschung (IfM) Bonn (www.ifm-bonn.org).