The Maltese business sector is expressing caution over a set of initiatives earmarked to develop the social dimension of a revitalised European Single Market. The draft Single Market Act proposes three new initiatives for a single market based on a “highly competitive social market economy”, the legal basis extrapolated from the recently-enacted Lisbon Treaty to further develop the social dimension of EU single market policies.
The proposed initiatives are: Social Business Initiative; A Regulation on a European Foundation Statute; and Corporate Governance and Corporate Social Responsibility.
CSR-initiatives for business should be encouraged, however they should not be streamlined into mandatory obligations for enterprises and preferential treatment particularly in public procurement procedures should be avoided. CSR policies come at a cost, often from internal revenue reserves of companies – a cash-flow which inevitably small businesses find hard to harness.
Maltese companies are themselves becoming increasingly conscious of the benefits to be derived from CSR activities. In this regard, EU regulation is not the best instrument for incentivising the further uptake of CSR practices within the private sector.
Maltese business calls on the government not to accept these pan-European benchmarks unless there is the capacity in Malta to implement and enforce them fairly and uniformly. It must provide adequate and demonstrable assurances to businesses that regulations will provide an equal, level-playing field.
More specifically, Maltese business calls for clarifications on the European Commission’s proposal on disclosure of non-financial information by business. The company disclosure of both financial and non-financial information is already regulated by the Accounting Directives, where a general reference is made to the need to report on non-financial elements, wherever necessary and appropriate. Therefore the need for strengthening reporting requirements is rather questionable.
The creation of an EU internal market for business services
On a more upbeat tone for Maltese business, the Single Market Act denotes that the creation of a single market for business services is still a challenge. The Commission also announces its commitment to continue developing the internal market for services on the basis of the ‘mutual evaluation’ process. This is the process used within the framework of the implementation of the Services Directive at member-state level.
The regulatory framework put in place by the correct transposition of the Services Directive is crucial for the future development of the business services industries in the EU. It is a recognised fact by all institutional and business stakeholders alike that the growth potential in the services sector is huge. As stated within the Communication on the Single Market Act, the potential gains from high-quality implementation of the Services Directive ranges between €60 billion to €140 billion worth of cross-border commercial activity. This represents an increase between 0.6 per cent and 1.5 per cent of EU GDP.
Local business backs the Commission’s intention to create a performance test that would be utilised for assessing whether the business services sector is “delivering all that it should in terms of growth, jobs and innovation.” The Commission’s proposed initiative on the establishment of a high-level group on services-to-businesses tasked to study market deficiencies in economic sectors such as logistics, installations management, marketing and advertising is a recommendable initiative. However its scope must go beyond the mere creation of yet another study group mandated to carry out a report. The creation of a single market for the services-to-business sector requires an in-depth assessment of the operational feasibility of such sectors to conduct business on a cross-border basis.
In this context, Maltese business recommends that government should undertake an assessment of the size, composition and contribution to GDP of the local logistics, installations/events management, marketing and advertising sectors. These sectors are intrinsically connected to the creative industries often utilising the same skills-profile and constituting a critical link within the supply chain sustaining these industries.