Regulating small and medium sized enterprises

In industrialised economies, small and medium sized enterprises (SMEs) form a major proportion of businesses and give rise to a substantial proportion of total industrial pollution. Yet the inherent nature of these businesses presents a substantial policy challenge in all jurisdictions, especially for overstretched regulatory agencies. This article examines systematically a range of environmental policy instruments that can be employed in relation to SMEs and tests them against both empirical data and a framework for design. Education, self-inspection and self-audit, supplier relationships, incentives, and both traditional regulation, and what is termed here 'co-regulation', are all considered. Not all have proved successful in their application to SMEs, and important lessons can be drawn for future improvements. It is equally clear that not all these instruments will be suitable in all circumstances or to all SMEs, and effective regulatory design crucially requires a sensitivity to the characteristics of particular sectors.