- proALPHA study: 39 percent of SMEs report significant impacts from Supply Chain Act and Climate Change Act
- 43 percent of manufacturing companies complain about negative effects of the Supply Chain Act on expansion plans and international competitiveness
Weilerbach, 05. June 5, 2024 – Data Protection, Climate Change and Supply Chain Act have the greatest impact on German SMEs compared to other regulations. This is shown by the recent study "Deutscher Mittelstand im Regulierungskorsett" (roughly: German SMEs in the Regulatory Stranglehold) by proALPHA – one of the leading providers of ERP+ software solutions for the mid-market manufacturing industry. While the surveyed companies see the German Climate Change and Supply Chain Act (39 percent each) as a setback for growth and expansion, every third company (33 percent) has to expand its workforce and intensify reporting to larger companies due to the General Data Protection Regulation (GDPR). A glance at the industries shows: While the manufacturing industry and the trade, transport and logistics sector are struggling particularly with the impacts of the Supply Chain Act as a setback for growth, innovation and investment, the IT and technology sector is experiencing increased reporting requirements primarily due to data and climate protection laws.
With 43 percent, the German Supply Chain Act represents a greater impediment to growth and expansion for the manufacturing industry than for all other industries analyzed in the study (39 percent on average). In addition, the law is seen as a disadvantage in international competition by 43 percent of the mid-market manufacturing companies surveyed (compared to an industry average of 34 percent).
Darüber hinaus wirkt der EU AI Act – das erste gesetzliche Regularium für Künstliche Intelligenz weltweit – besonders für die produzierende Industrie als Innovationsbremse (38 Prozent im Vergleich zu 32 Prozent im Branchendurchschnitt). Auch wollen in der Fertigung mehr Unternehmen (34 Prozent im Vergleich zu 26 Prozent im Branchendurchschnitt) ihre Produktion aufgrund des EU AI Acts ins Ausland verlagern. Weitere 32 Prozent (im Vergleich zu 28 Prozent im Branchendurchschnitt) stimmen der Aussage zu, dass Deutschland aufgrund dieses Gesetzes seine führende Position im internationalen Wettbewerb einbüßt.
Furthermore, the EU AI Act, the world's first regulatory framework for Artificial Intelligence, is perceived as a innovation barrier particularly for the manufacturing industry (38 percent compared to 32 percent across the industry). Another finding was that a larger number of companies are planning to relocate production due to the EU AI Act (34 percent compared to 26 percent on industry average). An additional 32 percent (compared to 28 percent on industry average) agree with the statement that Germany is losing its leading position in international competition due to this law.
"For the manufacturing industry, it's evident that the Supply Chain Act has a negative impact on growth and (international) expansion in particular. Furthermore, according to our survey, the EU AI Act impedes innovation and Germany's status as an economic hub," says Michael Finkler, Head of Business Development at proALPHA.
Trade, transport & logistics: regulations inhibit expansion and innovation
Almost half (44 percent) of the companies in trade, transport and logistics (T&L) consider the German Supply Chain Act an impediment to innovation (32 percent on industry average). 44 percent also stated that the European Supply Chain Act was forcing them to postpone planned investments in this sector. Here, too, the industry average is only at 32 percent.
Trade, transport & logistics are also more likely than other industries to see their growth or expansion slowed down by the European General Data Protection Regulation (GDPR) (45 percent compared to 31 percent) and to postpone planned investments (29 percent compared to 23 percent). In this sector, ESG reporting also acts as a more significant barrier to investment compared to other industries (35 percent compared to 26 percent).
"The Supply Chain Act appears to hinder the trade, transport & logistics sector in terms of innovation and investment. Moreover, ESG reporting and the European Data Protection Regulation reduce the investment and expansion potential compared to other industries," adds Finkler.
IT and technology: high reporting effort
The IT and technology industry is struggling most with reporting under the European Data Protection Regulation. Almost half (46 percent compared to 33 percent on industry average) of the surveyed companies interviewed state that the GDPR entails increased reporting efforts for them. Furthermore, the tech sector demonstrates that SMEs are affected by legal regulations originally intended for larger companies. For example, 38 percent (29 percent on average) of the surveyed IT and tech companies interviewed stated that the ESG and CSRD framework imposes significant additional reporting burdens on them, because larger business partners (ESG obligations start at 500 employees) require it from them.
The EU Resilience Act and the KRITIS umbrella law (both dealing with information security in the broadest sense) have a negative impact on innovation (50 percent agree, which is 16 percent higher than the average for SMEs) and planned investments (37 percent compared to 27 percent overall) especially in the IT and tech industry. It comes as no surprise that particularly this sector faces the need to build up expertise by hiring additional staff or external experts (41 percent agree, which is 21 percent more than the overall average) due to the KRITIS umbrella law.
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"The IT and technology industry complains more frequently than the industry average about increased reporting requirements. This is partly because larger companies demand it of them based on regulations that don't technically apply to them due to their size. Moreover, current European security regulations such as the KRITIS umbrella law and the EU Resilience Act seem to be detrimental to innovation and investment in this sector." Michael Finkler, Head of Business Development, proALPHA |
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The complete proALPHA study "Deutscher Mittelstand im Regulierungskorsett" (roughly: "German SMEs in the Regulatory Stranglehold") can be requested here (available in German only).
