Smart Regulations, Strong Business

Executive summary

In the current environment of fast-paced change driven in large part by technological advances, governments are facing the challenge of adapting their long-established policy tools, including how they design and implement their regulations. Regulation is a key tool for governments to achieve economic and societal benefits, ensure predictability and trust in government. But in a fast-changing, complex environment like today’s, rules and procedures can quickly become excessive, overlapping or inconsistent, stifling productivity and undermining competitiveness. Despite increased adoption of good regulatory practices, regulatory stock has expanded steadily over time, with adverse economic outcomes such as weaker productivity growth and economic dynamism. In this context, streamlining and simplifying regulatory frameworks has emerged as a renewed political priority across the world. Three-quarters of governments surveyed now rank burden reduction as a high or very high priority, and over 90% have launched related initiatives since 2022. Based on emerging OECD evidence from the Simplifying for Success (S4S) initiative which surveyed governments’ and business’ views on regulatory simplification, this report identifies drivers of regulatory burden for businesses, explores lessons from past simplification efforts that have fallen short of expectations, and proposes a way forward.

Governments and businesses agree that regulatory burdens have become excessive…

Multiple evidence sources tell a consistent story: excessive regulatory burdens are a significant, unresolved challenge. Government respondents from 72% of countries and business organisations from 90% of countries consider the level of regulation and bureaucracy in their country to be excessive. In over three-quarters of countries, business organisations feel full compliance is too costly and that the regulatory environment negatively impacts competitiveness, investment and innovation. These views are consistent with evidence linking growing regulatory burdens with slowing productivity growth and economic dynamism. Crucially, over three-quarters of business organisations think that administrative costs have increased over the last three years, pointing to a growing challenge.

…but diverging perceptions point to possible blind spots on where burdens are heaviest

Business organisations and governments agree SMEs bear higher costs from regulatory and administrative burdens. There is also agreement on construction and public administration/procurement as priority sectors for simplification. In other areas, their views on priorities diverge, pointing to potential “blind spots” and information gaps: for business organisations, utilities, manufacturing, labour and employment regulations and environmental protections stand out as high priorities but are all ranked significantly lower by government respondents.

Burdens often stem from reporting and other procedural “red tape” …

Survey evidence suggests that perceived burdens often stem from the procedural and administrative requirements of regulations rather than from their substantive policy requirements. Business organisations in 67% of countries cite overall reporting costs among the top three causes of burden; by comparison, 53% cite substantive compliance costs. This is consistent with views of business organisations in 77% of countries, stating that they face high administrative costs related to filing and reporting requirements. In addition, business organisations in over two-thirds of countries think that permitting requirements are not proportionate to risks they are seeking to mitigate and that inspections processes are unpredictable and duplicative.

…and are exacerbated by fragmentation, complexity and lack of predictability

A patchwork of overlapping, sometimes inconsistent, and frequently changing rules issued by different institutional actors within and across borders can weigh heavily on business productivity and their capacity to grow. For instance, business organisations in 70% of countries do not believe that regulations are generally consistent with one another. In 63% of countries, they report facing high costs to keep up with regulatory changes. As a result, they devote substantial resources to understanding and complying with regulations.

Simplification outcomes are limited by structural challenges, including lack of co-ordination, resources, support, and digital capacity

The focus on reducing burdens or simplifying regulatory frameworks is not new, but there is broad agreement that past simplification efforts have only been partially successful – a sentiment shared by business organisations in 97% of countries and 86% of government respondents. Government respondents highlight that challenges with co-ordination, resourcing, internal resistance, and lack of sustained political support impede better simplification outcomes. Moreover, while most countries report using digital tools for simplification, their potential remains largely under-exploited; for instance, the most common application, data analysis and sharing, is reported by less than half of governments.

Way forward: embed simplification in a wider renewal of regulatory governance with a focus on efficiency and effectiveness

The findings highlight that rulemaking practices and institutions have not fully kept up with a complex and fast-changing world. Despite decades of experience and substantial investment, existing regulatory governance tools, from one-off simplification approaches to ex ante impact assessment or ex post evaluations, are not always fully utilised and are sometimes perceived as too costly and rigid. To deliver lasting results and to ensure a cost-effective approach to simplification, current efforts need to be fully embedded within renewed, future-focused regulatory reform. This report sketches a roadmap to begin this journey by identifying emerging priorities.

1. Target simplification efforts where it matters most: Governments need to listen to stakeholders, first through broader engagement, to identify priority sectors and regulations, and then, through more targeted engagement, to explore specific issues and seek input on possible solutions. Using reliable evidence to calibrate measures and communicate their impact is critical to manage trade-offs and expectations. Continuous improvement through proportionate ex post evaluation is needed to keep regulatory frameworks up-to-date and prevent them from becoming unduly burdensome.

2. Leverage smart approaches for regulatory implementation to streamline administrative procedures and ease compliance: To cut red tape from day-to-day regulatory compliance procedures – including reporting, inspections, licensing, and permitting – governments must consistently adopt risk-based, data-driven, and digital approaches. Planning for implementing procedures and processes needs to be hardwired into the design stage of regulations.

3. Future-proof rulemaking with a focus on effectiveness and efficiency: Early and proportionate analysis of evidence and stakeholder engagement are essential to compare different options and keep rules simple from the outset. In doing so, governments should scan the horizon for emerging issues, leverage flexible and outcome-based approaches and co-ordinate action across sectors and borders.