Key take-aways from SME Assembly 2022
On 28 - 30 November 2022, the SME Assembly 2022 took place in Prague and we were there!
SME Assembly is considered to be the most significant event for small and medium-sized enterprises (SMEs) in Europe. The event takes place once a year during the European SME week. Hundreds of guests from the European Commission, governments of EU member states, businesses, SMEs, startups, NGOs, business associations gathered to help stimulate Europe’s enterprises and equip them with the right tools for the transition towards digital transformation, sustainability and better resilience.
We bring to you the summary of the discussions and key policy recommendations. The topics of this year’s Assembly focused on the future of work and technological upskilling; support for energy and sustainable transition; financial opportunities for SMEs; sharing successful stories of entrepreneurs; supply chain security; fostering female entrepreneurship; strengthening the resilience of the EU economy; digital transformation of SMEs; innovation procurement; green investment; SME economic performance, the role of regulations was mentioned in several debates as a cross-topical challenge and others.
A perspective from the host of the SME Assembly - Czech Republic
Czech Republic is one of the countries with the highest digital density of e-commerce businesses in Europe. It is an industrial country, so for many years there has been a strategy on how to transform SMEs in the country such as Industry 4.0 and SMEs are always at the heart of the national strategies. Czech National Strategy for SMEs is based on the same principle as on the EU level and SMEs are at the core of Czech economy, the government tries to have SMEs in other strategies like Digital Czechia, National Artificial Intelligence Strategy, National RIS3 Strategies and others.
There are several funding programmes, but what is missing is the adoption and deployment of technologies in the EU. These funding programmes include Digital Europe Programme/DIGITAL which contributes to the continued deepening and completion of the digital single market in the EU. The financial envelope for the implementation of the Programme for the period from 1 January 2021 to 31 December 2027 amounts to almost EUR 313 million. Digital funds projects are set in five key capacity areas: supercomputing, AI, data & cloud, cybersecurity, advanced technical skills, ensuring a wide use of digital technologies across the economy and society.
The establishment of a network of European Digital Innovation Hubs supporting the digital transformation of European public and private organizations is one of the key milestones. They are designed to develop and transform SMEs and will deepen international cooperation and foster the digital transformation (AI, high performance computing, cybersecurity, digital skills), in particular of SMEs and public administration organizations.
The EU should support more academia - industry collaboration. SMEs are often afraid of cooperation with universities because they are afraid they cannot speak the same language. One of the special czech programmes is focusing on SMEs that have never cooperated with universities on research. THis programme is an example that these areas are important for Czech government. There are other programmes on technological innovations focusing on startups and connecting them to big companies and research organizations and creating ecosystems around strategic areas like AI, future of mobility and so on. The Czech Republic is trying to get as much use from the National Recovery and Resilience Plan as possible in supporting digital transformation of SMEs. There are 3 main pillars: first focuses on digital infrastructure, second supports digital innovation and third one aims to look at adoption. So there is a complex system built around that. Adoption is of crucial importance, policymakers also rely on the networks of European Digital Innovation Hubs and there are some other networks and programmes. EDIHs are a cornerstone of a network of digital transformation of Czech Republic focusing primarily on SMEs. There are five EDIHs in the Czech republic, but one more could be established soon.
The key message by which Mr Petr Očko, Deputy Minister for Innovation and Digitalization at the Ministry of Industry and Trade of the Czech Republic is to work on each of the above mentioned pillars constantly - meaning work on the capacity building, make sure that digital technologies are available at scale in the country and to support startups and help them innovate fast, and not to forget about successful SMEs and think about SMEs across different industries.
A perspective from Spanish stakeholders (EU Council Presiding country at the second half of the
year 2023)
Spain is quite well placed in DESI 2022, it is the 7th country in the country, especially well placed in connectivity because of mobile communications - Spain is the 3rd country in the ranking in terms of connectivity and it is 5th in terms of digitalization of public services. There is still a lot of work to do, but the current position is quite good. Since the beginning of digitalization, the country has maintained the top 10 positions depending on the year. We have improved a lot over the past, but there are still a number of issues to improve and especially in skills.
The Digital Spain 2025 is absolutely linked to structure the Recovery plan. In skills, the country is implementing programs for growth trying to achieve a target of more than 6000 companies participating in this programme - focus on SMEs to give them technical assistance and not only digitalization tools - financing, logistics. Digitization is a main guideline. Within the Recovery plan, there is a specific program to increase and raise the upskilling of SME managers and to generate the ecosystem of Agents for digital change - technical assistant, consultants, experts on digitization that afterwards can work for companies and for SMEs - the target is to achieve more than 15k people involved in this programs.
As for the digital transformation of SMEs, these programs are about to support 1 million micro and small companies to digitize from the base (from the software package to advanced digital programs). In addition to it, several ACTIVA programs are in place - ACTIVA Growth (basic digitalization, technical assistance to the digitization plan in the SMEs), ACTIVA Industry (for industrial companies), ACTIVA Financing (how to finance these projects and these investments) and Digital Toolkit. Some of the additional programs and initiatives include support to the promotion of women entrepreneurship, developing their businesses, providing finances etc.
SME Test - policy recommendations
During the event, Eurochambres, BusinessEurope, and SMEunited presented the analysis of the application of the SME Test across the European Commission services. 26 impact assessments have been checked against the European Commission’s own better regulation guidelines to assess whether and to what extent the SME Test, a mandatory tool in ensuring an SME-proofed regulatory regime, is carried out. While better regulation principles have steadily grown in importance in the working procedures of the EU over the past two decades, the SME Test guidelines are still not applied consistently by all Commission services.
Main recommendations include:
Step 1:
Dedicate full chapters to the assessment of the impact of SMEs
differentiate between different size-classes of SMEs
Step 2:
guarantee the 12-week consultation period and allow SMEs and SME representatives to identify themselves
consider the consultation results as integral part of the Impact Assessments (IAs)
Step 3:
Include IAs analysis for every file and every policy option
quantification must be the norm to evaluate the real impact of a policy
Step 4:
alternative options and mitigating measures should be considered whenever direct or indirect disproportionate impact of SMEs is identified
Powerful data - source by the European Commission
Following figures are based on the data presented by the European Commission through the Annual report on SMEs. The report is every year focusing on a different topic. This year, the special focus deserved an area of greening - how SMEs can become green, what they are doing and what obstacles they have to overcome.
We saw a huge drop in the value added due to the pandemic, however, it has continued until early this year. According to the data and the forecast, we see a sharp decline again next year which is expected to fall to 3,9%. The data show us that among SMEs, the recovery of micro SMEs was strongest or that 20% of EU SMEs have a strategy to reduce their carbon footprint and become climate neutral.
The majority of SMEs have already taken action to become more resource efficient. These actions includes: minimizing waste; saving energy; saving materials; recycling, by reusing material or waste within the company; saving water; switching to greener suppliers of materials; designing products that are easier to maintain, repair or reuse; selling their residues and waste to another company; using predominantly renewable energy.
European businesses predict a strong decrease in export levels for 2023, replacing the mildly positive expectations registered last year.
Temporary measures provided during the pandemic appear to be unsustainable in 2023. Inflationary pressures on salaries will play a crucial role in business decisions regarding the downsizing of their workforce.
Investments will likely be put on hold for next year, prioritizing the need for savings. This is an alarming signal for the post pandemic recovery and the twin transition objectives.
Business confidence level confirms the challenging environment that entrepreneurs will face next year. The performance is worse than the ones registered for the 2008-2009 financial crisis and the pandemic period.
Why are SMEs key in the transition towards a sustainable and climate neutral EU? Because the EU’s 23 million SMEs account for the lion’s share (ca. 63%) of greenhouse gas emissions of the EU business sector are accounted for by SMEs. (European Commission)
Challenges to greening business are not focused on just 1 or 2 issues but encompassing many policy domains, including: complex regulation process (most urgent); difficulty in implementing legislation; technologically outdated regulation; difficulty in choosing right action; lack of human resources; lack of supply of required inputs; cost of environmental actions; lack of demand; complex labeling and certification.
2023 will be a new year, but challenges remain similar, such as affordable access to energy and raw materials; lack of skilled workers; labor costs; financing conditions; supply chain disruption; sustainability requirements; potential new COVID restrictions.
Key policy messages consist of:
Common EU efforts to tackle high energy prices, improve energy efficiency and enable access to renewables.
Tackle remaining single market barriers to create growth opportunities.
A proactive and ambitious EU trade agenda.
A regulatory process that boosts competitiveness.
Concrete actions to tackle shortages during the 2023 European Year of Skills.
Missing spots within the SME Relief Package
SME Relief Package announced by President von der Leyen in September aims to support SMEs in several key areas, such as combating late payments, making business easier in the Single Market and facilitating access to finance and skills. One of the workshops during SME Assembly resulted in the feedback from the audience on the missing issues that the participants would suggest to put forward for the Relief Package. Among the identified ideas, we can mention:
longterm, low cost loans for internal upskilling and talent acquisition
forecast new skills
funding for business to purchase upskilling products and services
support/train managers to get conscious and to work towards the new personal/professional need of workers
mentor SME owners in detecting skills gaps and planning reskilling pathway for employers
put efforts on lifelong learning and continuous vet at SMEs to reskill and upskill current workforce
integration and harmonized labor and tax regulation allowing remote cross border workers. This would balance skills shortages between countries.
improve labor regulation so that freelancers, short-term workers and displaced workers have similar rights and social security protection as full time labor workers. In practice, work conditions have become more flexible and varied, but labor and social security regulations have not evolved in consonance.
take and give the opportunities to shift the skills of employers and employees.
Key conclusions:
We are facing very high inflation, sky rocket energy prices which remain a major challenge to many SMEs. Moreover, we suffered from lack of many critical raw materials, issues with logistics during the pandemic, and suffered from Russian invasion in Ukraine.
During the discussions, we have heard of lack of skills as one of the obstacles to SMEs which want to prosper and grow. In terms of looking into individual measures in individual areas, there were discussions about what SMEs learned. The pandemic already gave a big push to digitalization, however small companies in general still lack behind the larger ones in terms of the uptake of the digital tools and in terms of skills. Apart from what was mentioned as potential policy tools, were a strengthening of Digital Innovation Hubs, but also cloud computing, AI, and blockchain for data management were identified as key issues. In terms of sustainable economy, the discussions on greening and green transition have been concluded in triple S: speed of processes, scale in terms of finance and simplicity of regulation.
The role of regulation was an area mentioned in each of the discussions. The European Commission was questioned on how to make impact assessments, how to make sure the needs of SMEs are taken into account in preparation of new legislation. This is a key area, the European Commission wants to strengthen the SME Test and want to have a better competitiveness check in while preparing the new legislation. According to the survey which has been running in the European Commission, with regards to the greening, SMEs face bigger problems with the complexity of regulations than actually they would believe that cost would have the major impact. So addressing regulation which is accessible to SME would be a key. These are some of many ideas the European Commission has taken the notes of.
Among the other observations which had been underlined were:
the legislation was identified as a burden, but also as a possibility
better forecasting capabilities would extremely help SMEs to identify skills and anticipate the lack of workforce
life-long learning should be a long-term goal across the sectors and industries
regulation in mobility concerns people who are born in one country, but work in a second country, so improving the labor regulation should be the topic to pay attention to as well.
Martina Dlabajová, a member of the European Parliament concluded her final remarks with a call to action: “We need concrete measures for SMEs and what is most important, we need them immediately. We must not wait and we must not waste any more days.” Ms Dlabajová stated we have three main pillars to focus on in the coming weeks and months and these are: first, a predictability and stable regulatory environment; second - an affordable access to energy and raw materials with urgency; third a skilled workforce and attention to labor costs. We need to take SMEs into account in all legislative proposals and the SME Relief Package will be crucial. The European Commission is still missing the SME Envoy and it is up to the European Parliament to bridge this vacuum and to be de facto SME Envoy – to fight for SMEs, to step into their shoes, and think as them. Step into entrepreneurs' shoes, but not only for a day, it is a matter of mindset. Let’s be entrepreneurial in thinking.
