Joint call for a ban on deregulation for SMEs


CFDT, FO, CFTC UNSA and DGB with the support of the ETUC call for a ban on deregulation for SMES


Deregulation: no - Simplification: under strict conditions

The Franco-German Initiative on the relief package for SMEs is disguised deregulation: SMEs fall in a legal no man’s land; Business cannot be above the law

In the wake of the Franco-German Initiative to ask EU to cut bureaucracy for companies, and the forthcoming SME relief package announced by the European Commission, CFDT, FO, CFTC UNSA and DGB with the support of the ETUC calls for a BAN ON DEREGULATION for SMEs.

The Franco-German demand to extend the limit of small and medium size enterprises (SMEs) to 500 employees is unacceptable. The current 250 threshold is de facto already covering more than 99% of business in Europe.

Raising the monetary thresholds (coupled to the number of employees) in the EU Accounting Directive to qualify for SME would allow many large companies to avoid their reporting requirements obligations and could prove problematic, since large multinationals will have report additional information for preventing tax avoidance and allow to tax profit where the value is created, at a fair level of taxation. Further it would have negative impacts on board level representation.

Coupled with the request to exempt SMEs from reporting obligations, such an initiative puts business above the law, irrespective of their obligations toward workers, and makes a mockery of social dialogue.

Simplification of some administrative rules – where relevant – and in full respect of unions and workers’ rights might be necessary. On process, however, it cannot be based on business-only involvement. Despite recurrent alerts, trade unions are systematically underrepresented and not taken seriously when stressing the importance of the social dimensions in different EU level fora such as the Industrial Forum and the Fit for Future Platform.

We express support for improving EU regulation via a simplification of reporting obligations if requirements are genuinely unnecessary or if procedures can be made easier to facilitate compliance, and avoid duplication, notably via digitalisation. However, such simplification should not reduce nor negatively impact protection of workers’ and trade union rights, nor pre-empt what co legislators are still in the process of adopting.

To name but a few, the large scope targeted by this initiative risks undermine the implementation of the Corporate Sustainability Reporting Directive, recently adopted with a large majority after a democratic process. It will also endanger related delegated act to set European Sustainability Reporting Standards (ESRS). Furthermore, it will impact the current trialogue on the Corporate Sustainability Due Diligence Directive, given that most of the supply chain is composed of SMEs.

Rather than streamlining reporting obligations such a drastic initiative risks ending up in a wide open-ended deregulation exercise, as a consequence undermining regulation that are instrumental to key EU policy objectives and core values. Reporting procedures are often at the core of regulations, especially for their implementation and enforcement.

Setting ex nihilo a quantitative target of -25%, as announced by the European Commission in its “Long-term competitiveness of the EU: looking beyond 2030” communication runs counter to the EU ambitious legislations to cope with the social and environmental challenges of our time, in particular on the Social Pillar and on the Green Deal agenda contravenes the -25% target.

Such a target only emphasises the Commission’s mechanical approach to better regulation, focussing on the quantity rather than on the quality of regulation and its merits. As such, it is arbitrary and without evidence-base, completely ignoring the Commission’s own procedures for impact assessment. The EU’s commitments to the UN Sustainable Development Goals require economic, social, and environmental aspects to be considered with the same level of detail and accuracy.

Setting an arbitrary bureaucracy costs index is a disgrace, at a time when common rules democratically is key for the EU to move towards innovation, sustainability, resilience, with a green and social deal for all.

We urge the Commission

  • to clarify in the very specific terms of reference for such an initiative
  • to limit the scope to a set of administrative reporting procedures of existing legislations,
  • jointly identified within the social dialogue between European social partners
  • not to diminish existing workers and trade union rights and further development of labour and social standards
  • to respect in full the precautionary principle 

Concerning digital advancement, in particular on posting of workers notifications, we urge the Commission to develop digital solutions that primarily serve to improve the monitoring, enforcement of applicable rules and compliance by business. Those rules should deliver for workers and business in setting a level playing field to avoid social dumping, exploiting workers by circumventing national and EU labour and social security rules.

Business interests cannot be put on an equal footing with the general interest, which includes the interests of workers, citizens, consumers and the environment. A Union that only serves the few will not earn the support of the many. Making sweeping assumptions about EU law as being costly and burdensome for business and people only feeds the arguments of Eurosceptics.

Competitiveness should be built on robust social or environmental standards and proper enforcement of the law, to avoid a race to the bottom. In fact, unfair competition constitutes one of the greatest obstacles to genuine competitiveness, including for SMEs. Simpler rules are not necessarily easier to apply or cheaper to monitor. Ultimately, less could mean more bureaucracy, poorer quality, less predictability, unfair competition, and ineffective enforcement.

We urge the Commission to shape the market so that it contributes to delivering on the EU fundamental objective of a social market economy, characterised by sustainable development and social progress. Innovation must not take place at the expense of precaution.

 In the wake of the recent European Commission’ action in support of the gold-plating narrative for the transposition of the public country-by-country reporting Directive, we reaffirm that the constant improvement of living and working conditions not only requires that the EU acquis be maintained and advanced, but also that minimum standards are not turned into de facto maximum standards