Five tips for small business regulatory compliance

The EHS regulatory landscape across the world is continually evolving, influenced by profound changes and significant events in legislation. According to the statistics collected by Enhesa, regulatory requirements have grown by 35% since 2020. As regulatory requirements expand, the challenges grow.

In this article, Enhesa expert Yujing Pan explores why keeping up with this fast-evolving landscape is especially challenging for small businesses and provides a series of useful tips on how to overcome this challenge.

Why remaining compliant with ever-changing regulations is more challenging for small businesses

Navigating the dynamic regulatory environment can be challenging, but it’s crucial for the longevity and success of a business — especially a small business.

Compared to large-size companies or multinational businesses, small businesses may not have enough budget or resources to stay abridged of the relevant developments in a timely manner and have a clear understanding of the required actions. Due to these limited capacities, it could also become extremely difficult for small businesses to implement the necessary actions — especially if there are multiple requirements that come into force at the same time.

For small businesses to keep up with regulatory developments and ensure compliance, a more proactive, informed, and strategic approach is required.

Advice for small businesses faced with EHS regulatory changes

1. Understand the main sources of regulations

Understanding the main sources of regulations is the key for small businesses for two reasons:

1. Knowing and adhering to relevant legislation helps businesses avoid penalties. A company is unlikely to receive an unanticipated fine due to the unawareness of a recent law amendment which requires the change of the company’s operation, if it follows the main sources of regulations. Huge amount of fine could be a financial devastation for small businesses.
2. Misinformation is a major risk. Nowadays, there’s a considerable amount of incorrect or incomplete information on the internet and social media. Such information is often too easy to access while too difficult to verify. In many cases, it can cause anxiety among small business owners. Seeing news on social media that competitors are engaging in a new environmental initiative which isn’t feasible for their own business increases the pressure to keep up with competitors and retain market share.

Understanding the main sources for regulations means you can stay focused on the official information that’s applicable and fundamental to your business, while mitigating unnecessary anxiety and enhancing your business’ resilience.

2. Prioritize changes or new requirements with higher impact

Prioritizing the relevant changes or new requirements that have higher impact on business is essential to keep operations going. Failing to comply can potentially result in the shutdown of facilities and a loss of market access.

High-impact requirements are usually mandatory requirements that companies have no other choices but to comply with, such as obtaining an operation permit or registering a manufactured product.

These types of requirements can, for example, impact the right to operate or trigger imprisonment sentences for non-compliance.

Other developments that don’t have a direct and immediate impact could still potentially or indirectly affect the right to operate or cause business disruption. While less of an immediate concern, these types of developments also deserve adequate attention.

Due to the increased impact non-compliance may have for a small business, it’s more important for them to develop their own prioritization plan, set clear objectives, and create a feasible timeline for implementation. By evaluating and prioritizing developments, small businesses can ensure an efficient use of limited resources to achieve strategic goals.

3. Seek expert advice in different ways

Accessing expert advice is often a challenge for small businesses due to limited budgets, lack of awareness, and time constraints.

While hiring in-house legal analysts and paying for external lawyers are the mainstream methods for multinational companies, there are also a lot of alternative cost-effective and easy ways to seek expert advice.

Many law firms and consulting firms have free newsletters and webinars to inform companies of major regulatory trends, or to give expert insights on a certain topic. Small companies can also join industry associations or local business groups that provide guidance, translations, and best practices for a specific industry. Some associations and governmental authorities also organize free training and Q&A sessions when major developments are released.

Such documents and sessions help small companies build a more concrete view on how they should implement regulatory changes.

For small companies that are part of a supply chain to larger corporations and global organizations, seeking support from business partners can be also a useful strategy. Larger businesses are more likely to have the budget and resources to access the information and expert insights needed to fully understand regulatory requirements. This is a mutually beneficial strategy, as it ensures compliance across the supply chain — a significant concern for multinational corporations in light of frameworks such as the Corporate Sustainability Reporting Directive.

4. Address concerns with regulators

Small businesses can understandably feel that their concerns and opinions won’t be taken seriously when voiced in public consultations on proposals of regulations.

However, public consultation on proposed regulations and policies plays a significant role in shaping the final outcome of the regulations and policies. It provides regulators and policymakers with diverse perspectives from the real world and allows minorities, like small companies, to raise their concerns that may not have been fully considered — especially when a proposed regulation is supposed to be applicable for various industries.

While certain requirements make sense for most industries, lawmakers may overlook one small factor from one specific industry, which could have serious repercussions for that industry. It’s the companies operating within an industry that best know how the business is being managed. Ergo, in effect, small companies are also responsible and vital in providing practical insights of regulatory implications for the regulators developing them.

5. Stay proactive with policies

Although complying with mandatory and high-impact requirements is the top priority, small businesses shouldn’t be dismissive of policies that don’t impose an obligation. From a long-term perspective, assessing policies with a proactive mindset ensures effective navigation of regulatory challenges and continuous compliance.

Policies usually establish a blueprint at a higher level such as national goals and yearly targets, even if it doesn’t seem to have directly actionable requirements for business operators. However, companies should note that those goals and targets are often implemented through more detailed regulations in the pipeline. That’s why, when a policy is published, companies are highly recommended to already look into it and get a sense of what’s possibly coming and take into account in their company strategies. For small businesses, it could take longer for them to adapt the upcoming changes, so the sooner they get started, the better.

Keep up with regulatory changes to protect your business

By understanding the main sources of regulations, prioritizing changes or new requirements with higher impact, seeking expert advice in different ways, addressing concerns with regulators, and staying proactive with policies, small businesses can manage the complex regulatory landscape more effectively, reduce the risk of non-compliance, and remain focused on their core activities.

Small businesses may need to use different tactics to maintain regulatory compliance, but the underlying principles are the same for organizations of any size. It’s important to understand the intrinsic value and impact businesses large and small have on one another, especially with the emergence of supply chain inheritance being incorporated into many of the latest regulations.

To learn more about how the latest regulatory changes and requirements are impacting businesses around the world, check out these other resources from Enhesa…