‘Stifling’, ‘expensive’ and ‘inefficient’ are just some of the words that regularly find their way into conversations about regulation.
Such perceptions have not been helped over the years with the introduction of new mandates such as the General Data Protection Regulation(GDPR) which make it “nearly impossible to market to new customers”, as one entrepreneur described it.
It seems this view is echoed by others in the small business community with a survey released at the end of 2020 revealing that nearly20% of UK SMEs expected legislation and regulation to be a major obstacle to their growth.
The hard numbers and anecdotal data are damning, but could there be a place for regulation that does serve small business interests? In the last of our three-part blog series, we look at the regulatory landscape and how it can evolve to help small businesses do well by doing good.
The secret may just be in the hands of small businesses.
Taming the giants
Regulation is often grouped into two camps – economic and social. While the former is responsible for fair pricing and competition, the latter focuses on protecting public interests such as health and the environment.
Mandatory regulatory frameworks have been critical in keeping multinational and listed companies in check and holding them to account to consumers, employees, investors and the general public.
The EU taxonomy – a classification system that provides a list of environmentally sustainable economic activities – is a great example of how this works in practice.
Such frameworks have created acceptable industry standards with clear guidelines, a shared language and a mutual understanding of what ‘good’ looks like between the global giants.
But where does that leave small businesses?
The small business story
Despite contributing £1.6 trillion to the UK economy and employing over 13 million people, SMEs benefit from no such global standardisation.
SMEs have traditionally had to comply with national regulations, such as health and safety certifications, or operate within individual industry standards.
Not only have they not been fully recognised within existing mandatory frameworks, but SMEs have also had few opportunities to participate in public consultations to help shape existing regulations to better support them.
No need for despair
However, it’s not all doom and gloom. Over the past decade, we as a society have become more savvy to environmental and social issues and with that has emerged a swathe of new voluntary regulatory frameworks.
The most popular of these are the world-renowned Global Reporting Initiative (GRI) – offered by DiginexESG – and SASB, which focuses on the investor perspective.
These frameworks have done a huge amount in terms of providing clear guidelines to enterprises on the ESG disclosures they should be reporting.
This has helped them to enhance transparency and protect their businesses, both commercially and reputationally.
Collaboration is key
We are proud to provide access to such frameworks for SMEs through DiginexESG, by making reporting simple, digital and affordable.
We do however fully acknowledge that every stakeholder group has a role to play if regulation is to work for the benefit of our thriving small business community.
While mandatory regulatory frameworks can provide incentives to shift the market towards better behaviour (e.g encouraging businesses to choose suppliers that align with their corporate values),long-standing voluntary frameworks have the power to influence policy and offer guidance based on the wealth of data they are privy to.
And, of course, not forgetting industry bodies who also have an important role to play when it comes to knowledge-sharing and developing best practice, as well as technology companies who can help create efficiencies with data collection and quality control.
As the lines of communication between the key stakeholders become cleaner and clearer, SMEs can take their ESG credentials into their own hands.
Those that choose to do so through tools like DiginexESG may soon find themselves in a position to share their insights with policymakers and help to shape the regulatory landscape for the small business owners that follow in their footsteps.
A wave of SMEs that pay it forward is on the horizon – find out how you can unlock the commercial benefits of self-regulation here.
As a member of Issuer Service Marketplace, Diginex Solutions has joined a carefully selected list of service providers, curated by LSE.
In our third and last part of our ESG blog we look at how SMEs can navigate the regulatory landscape