I recently had the privilege of chairing a conference for firms looking to expand overseas. The attendees included small family businesses as well as well-established brand names, and the atmosphere in the room was generally optimistic. However, following the panel discussion, the issue that cropped up time and again (alongside rising costs) in questions from the floor was regulatory compliance.
Small and medium-sized enterprises (SMEs) consistently voice the same frustration: they feel swamped by red tape. Lacking the resources of larger corporates, they find themselves increasingly burdened by compliance requirements. This sentiment was especially pronounced among food industry businesses at the conference. For them, exporting represents their most viable growth opportunity given the limited size of the domestic market. Yet many were shocked at the sheer amount of paperwork required to access international markets.
Stringent environmental legislation at home and abroad is a growing challenge
Hefty overhead
They believe a growing challenge lies in adapting to stringent environmental legislation at home and abroad. It is an issue that resonates across sectors, with many at the conference complaining that complying with environmental, social and governance (ESG) standards has become a major hurdle.
While the need to reduce carbon emissions is undeniable, the burden of compliance often falls disproportionately on smaller businesses. SMEs lack the financial muscle and dedicated teams that larger corporations rely on to address ESG mandates. This disparity in resources represents a significant barrier, hindering smaller businesses from seizing opportunities in international markets.
A recent Grant Thornton survey highlights the scale of the challenge for mid-sized Irish businesses. Compliance demands were identified by 51% of respondents as a major obstacle to overseas expansion. These companies do not reject the principles of sustainability or compliance – they understand the necessity of contributing to global climate goals. Instead, their concern is the strain being put on limited resources. Staff time was cited as the primary compliance challenge by 38%, while 29% pointed to the significant capital investment required.
Streamlined reporting tools and targeted financial assistance are key
This resource gap is further underscored by a worrying statistic. Of the Irish firms surveyed, 41% said they lacked the policies or tools necessary to comply with the EU’s Corporate Sustainability Reporting Directive. The comparable figure for the rest of Europe is 8%.
Addressing this disparity requires urgent action. The benefits of compliance, such as the ability to access cheaper green finance and gain competitive advantage, must be made more tangible for Irish SMEs, who face significant cost barriers to investing in the systems and expertise required to meet compliance standards.
Double boost
Two targeted solutions stand out as essential for bridging the resource gap: streamlined reporting tools and financial assistance.
SMEs often struggle with the complexity of sustainability reporting and data collection, which can demand specialised knowledge and systems and significant staff time. Developing user-friendly, digital platforms tailored to SMEs could alleviate these pressures.
There is a disparity in compliance-readiness between Irish SMEs and their European counterparts
Financial aid is equally critical. SMEs are frequently stymied by the upfront costs of compliance measures, such as adopting new technologies or implementing reporting systems. Governments grants, subsidies or low-interest loans designed to support compliance efforts are needed.
The disparity in compliance-readiness between Irish SMEs and their European counterparts underscores the need for targeted interventions. Simplifying reporting processes and providing financial support are practical, achievable steps that can help Ireland’s smaller businesses overcome the barriers they face.
By addressing these challenges now, we can create a more inclusive business environment that will let SMEs grow sustainably and compete on a global stage. The regulatory landscape presents undeniable challenges, but with the right tools and resources, it can also offer Irish firms a chance to thrive.
More information
Take a look at the resources on ACCA’s sustainability hub, and toolkits for SMEs and SMPs
ACCA’s flagship conference, Accounting for the Future, 26–28 November 2024, has a full day of sessions covering a range of sustainability and accounting topics
