April 2004

SMEs: Small but Damaging!

SMEs must be encouraged to adopt Environmental Management Systems according to a European Commission (EC) report.

The EC’s Enterprise Directorate published a report last month that urged governments across the European Union (EU) to further consider the needs of small to medium sized enterprises (SMEs) when trying to promote the uptake of Environmental Management Systems (EMSs).

SMEs in the manufacturing industry and the service and trade sectors account for 99% of the EUs private sector businesses; yet less than 0.5% of these businesses have an EMS.

Although smaller companies pose little environmental threat individually, many believe that collectively, SMEs could be responsible for up to 70% of all industrial pollution. Most SMEs are unaware of their environmental impacts and are equally oblivious of the legislation that surrounds them.

Putting in place systems and procedures to address environmental issues is one way in which companies can begin to improve their environmental performance. This can be done using a systems approach, as defined in the EMAS (Eco-Management and Audit Scheme) or ISO 14001 standards, or using a less formal, individual approach.

Smaller companies have always faced bigger barriers when implementing an EMS, and tend to use local markets and word of mouth to build up their reputation rather than promoting environmental excellence. SMEs have identified internal barriers to implementing an EMS including lack of human resources, frequent interruptions, attitudes and company culture, and lack of information.

National governments need to address these ‘dis-benefits’ when it comes to promoting the values of an EMS. There are clearly a large number of benefits to establishing an EMS including general organisational improvement, costs savings, increased employee motivation and enhanced skills. Furthermore, an EMS can offer external benefits such as increased customer satisfaction and the opportunity for companies to win new contracts. Improved environmental performance also means companies will comply with legal regulations and experience better communication with regulators.

The EUs report describes 24 case studies from countries across the EU that have been successful in engaging SMEs in adopting EMSs. A network approach implemented in Sweden is one example of good practice that was detailed in the report. Here clusters of SMEs located in the same area were assisted in EMS implementation, making up over 58% of Sweden’s certificate achievements.

The report made some clear recommendations to EU Governments, including stepping up initiatives directed by public authorities and others to offer material benefits to companies with an EMS. The need to increase the use of sectoral approaches to EMS implementation was a further recommendation, where the specific characteristics of the sector can be further explored.

Specific methods of offering benefits to companies addressed in the report include the following:

Increasing Public Awareness and Recognition

Public authorities need to raise general awareness of the meaning and value of an EMS and such initiatives need to be directed at specific audiences, such as customers within the supply chain, banks, insurance companies and permitting authorities.

Material Benefits

Initiatives can be implemented, such a lowering insurance premiums and improved access to finance, for those companies with an EMS. EMS-related provisions in tender specifications should be closely monitored to ensure that SMEs are not disadvantaged and potentially put out of business.

Regulatory Relief/Deregulation

Work is already ongoing in this area, but initiatives should be stepped up to connect EMSs with permitting, inspection and enforcement activities. In the UK, such relief is already in place for those companies who fall under the IPPC (Integrated Pollution Prevention and Control) Regime. Those companies with an EMS in place, particularly a certified system, are subject to lower permitting fees from the Environment Agency.

The findings and recommendations of this report are of great importance for national governments who will be using it to develop policies and campaigns aimed at SMEs.

If you are an SME and interested in implementing an EMS or believe you can benefit from making environmental improvements please contact Galit Hart.