October 15, 2007

SMEs call for better information, simpler rules to enhance their environmental efforts

Canada's small- and medium-sized enterprises (SMEs) believe it is possible to grow the economy and protect the environment at the same time, and the majority have taken steps in this area through energy conservation and recycling programs. To do even more, however, they need better information and a less costly, complicated regulatory regime, says the Canadian Federation of Independent Business (CFIB).

"Operators of Canada's small- and medium-sized businesses believe the health of the economy is strongly dependent on the health of the environment," said Corinne Pohlmann, CFIB's vice-president of national affairs and a co-author of Achieving Eco-prosperity: SMEs' Perspectives on the Environment. "But while SMEs are willing to do what they can to protect the environment, it must be balanced with how such measures will impact their business," she added.

The report, a survey of the CFIB's 10,826 members, found that 83% are already taking steps to conserve energy, including reducing electricity usage and renovating their buildings. Over 70% have introduced or expanded workplace recycling programs, two-thirds have reduced energy use and 35% have made changes to their buildings. Almost one-third reported using environmentally friendly products.

Personal views emerged as by far the most important reason SME owners gave for making environmentally beneficial changes at their place of business, with 83% saying they personally believe it is an important thing to do. About one in two (49%) consider potential cost savings (both short- and long-term) in deciding to make changes, while about one in four regard current regulations (29%), employees' views (27.5%) and the needs of customers and suppliers (23%) as motivations for change. Only about 10% cited financial incentives or fear of more regulations as motivations for change.

The importance of personal conviction in influencing behaviour clearly shows that efforts to foster even greater efforts on environmental issues by SMEs must take this into consideration if such efforts are to succeed, says the CFIB. And since regulation is not a significant stimulus for environmental improvement, governments should focus more on information and education as key strategies when working with SMEs, says the report.

Materials recycling, energy conservation and clean water/sewage are ranked as the most important environmental issues to SMEs. Almost half also cite climate change, while about one-third mention dumps and landfills, management of toxic waste, air pollution and forest preservation.

The study also points out changes in environmental priorities between 2007 and 2000: top-ranked materials recycling has moved up from sixth place in 2000, while climate change has moved from tenth place in 2000 up to fourth place. Clean water remains almost as important an issue for SMEs in 2007 as in 2000 (third place, down from first). Dumps and landfills have also risen in importance, from eighth place in 2000 to fifth in 2007.

Toxic waste handling and storage, air pollution/smog, ozone depletion and preservation of forests are relatively less important to SMEs than in 2000, partly because other environmental issues have commanded increasing attention, but also because SMEs perceive that progress has been made in dealing with these air and waste issues, making them of less immediate concern.

The main barriers to SMEs doing more to protect the environment fall into three main areas: lack of information, high cost/lack of funds, and complexity. In addition, overlap among levels of government is common and creates confusion and uncertainty for SME owners relating to environmental regulations.

"For the average SME, it is virtually impossible to learn about, and be compliant with, the countless regulatory requirements of all levels of government," Pohlmann says.

As a result, many business owners say their competitiveness is hindered by the costs of environmental compliance. The CFIB says governments need to be aware that imposing more of a regulatory burden on SMEs will not only harm their business competitiveness, it may even cause SMEs to be less responsive to environmental issues and will have a detrimental effect on Canada's overall prosperity.

Regardless of which level of government imposes the regulations, the types of regulation most likely to affect SMEs are related to waste disposal (74%); care and use of chemicals (64%); transportation, handling, storage and disposal of harmful materials (51%); and recycling (45%). The survey also reveals regional variations: recycling regulations are much more important in Nova Scotia (64%), Prince Edward Island (61%), Newfoundland and Labrador (61%) and British Columbia (55%), while SMEs in Alberta are more affected by regulations governing care and use of chemicals (73%) and harmful materials (65%).

The CFIB survey further reveals growing concern about issues relating to environmental standards and certification. The trend among governments and some larger industries to require adherence to formal environmental standards has meant that SMEs are increasingly being asked to obtain certification or to meet certain standards in order to sell a product or provide a service. Not only does the time and cost burden of doing so discourage SMEs from making even small improvements, the effort may not even add any real environmental value to the business process, says the report.

A positive way of addressing this problem might be to develop a "lite" version of these certification processes that takes into account the limited means and lower environmental impact of SMEs, said the CFIB.

Instead of more regulations or new taxes and penalties, two-thirds of SMEs said they would prefer to see governments focus on raising awareness of energy efficiency and supporting research into alternative energy sources. About half of respondents support tax credits or rebates for energy efficiency, help for SMEs in developing environmental management plans, and enforcement of current regulations.

Based on the survey results, CFIB is making a number of recommendations to government, utilities and other stakeholders. The recommendations focus on enhancing communication of environmental opportunities, simplifying regulations and reducing the paper burden for SMEs.

*Information sources for SME owners should be readily accessible and easy to find, including the creation of a "one-stop" Web portal.

*Environmental programs should recognize the distinct needs and challenges of SMEs, focusing on areas that will be the most economically productive.

*Technical and financial resources should be made available to SMEs to help them implement energy conservation and environmental protection strategies.

Governments should also:

*actively engage in education and outreach initiatives for SMEs;

*develop a flexible regulatory framework that recognizes the unique characteristics of SMEs;

*work together at all levels to deliver harmonized, easily understood regulations that SME's can comply with without incurring excess cost or hardship;

*focus on outcome-based regulation and provide clear guidance regarding what constitutes compliance and non-compliance;

*support research on alternative energy sources; and

*refrain from introducing new environmental taxes.

The report, which includes provincial and sectoral breakdowns, is accurate within +/- 0.9 per cent 19 times out of 20. The report may be viewed on the CFIB Web site, www.cfib.ca. The CFIB represents more than 105,000 business owners who collectively employ 1.25 million Canadians and account for $75 billion in GDP. More information is available from Anne Howland, 613/235-2373.

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