Analysis

REGULATING FOR INNOVATION, INNOVATIVE REGULATION. Opening and Concluding Remarks at the Conference of 13 June


This analysis by Robert Madelin, Chairman, Fipra International, crystallises the Opening and Concluding Remarks at the Conference of 13 June.

We have been privileged to hear many intersecting truths, many of them overlooked by most of us most of the time. And to see the outline of a way for Europe to become a pro-innovation space, where regulatory enforcement becomes both more effective and more open and just, less blame-driven and adversarial.

The challenge

A time of profound technological and social disruption is a time when we need to invest more and urgently in new governance – better rules and better ways of managing our society is not just nice to have.

In a time of change, it is an essential investment in the social and economic public health of Europe. If we fail to direct more effort to this need, social and economic disease and decay will result.

If we get this right, Europe can maintain its innovative share of global economy and leadership.

The lessons

Vice-President Ansip has been good enough to take this occasion for a majestic overview of his time in leadership of the Digital Single Market endeavour across all the segments of that work. He reminded us that we must think carefully and deliberate rather than rushing to judgement and intervention. The preservation of the ecosystem of innovative small firms is a particularly crucial and delicate responsibility for legislators in a time of fast change.

Andrus Ansip also underlined that rules were necessary, and that the DSM had by rule-making achieved great gains in the coherence of the EU citizens’ digital experience, at home and on the move. Still, the ways they were created, and finalised and enforced would continue to matter in the life of the new Parliament, in which he will sit.

From Christopher Hodges and Ruth Steinholtz, we have heard how much the enforcement of rules matters, and how much evidence of how to do it better is available, but tragically ignored.

The lessons of Ethical Business Regulation are rich. My own summary would be that it starts with ethical business practice, and Ruth has shown how any Board can deliberately measure its internal values and shift towards better practice, and has shown evidence that suggests shareholders will thank them for it.

Beyond that, and despite the trend today for all stakeholders to hanker after micro-regulation and a culture of retribution, the key shift needed is to move from an enforcement culture that assumes corporate slackness, looks for error and punishes and blames. In the field, the evidence repeatedly shows that a culture that allows regulators to work with companies on a blame-free, but nevertheless accountable basis saves lives, drives customer satisfaction, and reduces costs to society. A blame-free culture is not one that leaves key actors blameless for any underperformance, or leaves any detriment uncompensated. But it is more open to the fact that no one is perfect, that honest mistakes and misjudgments take place, and that these are opportunities to do better not to merely blame and punish.

This shift in emphasis would be particularly advantageous in the Data Age, as it frees up regulator access to the wealth of data that is now so easily available in principle and so often withheld in practice.

Our learnings on the day

What I think the conversation in the room has added to this accumulated wisdom is a three-point specification of what we should now assemble within the EU space, as key success factors in the pursuit not of ‘soft law’ or ‘laisser-faire’ but of smart rules, made and updated with agility and smart, rather than blame-driven enforcement.

First, leadership.

It will take political and corporate leadership to create a European risk culture that is resilient, adult and entrepreneurial. There is no successful innovation without failures. Key leaders sharing this vision in the EP, College, Council and civil society in its wide sense need to find each other and maintain a community of practice in the pursuit of this vision.

Such a vision must be pursued in global cooperation. New technologies cannot be rightly regulated by any single jurisdiction, unless all continents are aware of what is afoot and have had a say.

This vision should drive a straight path through the current swamp of regulatory Manicheism, which sees rules as all-powerful, and all-good or all-bad. As Paul Hofheinz underlined, echoing the VP, more rules should not be seen by corporate lobbyists as a failure. Nor, I would add, should the institutions allow themselves to believe that law alone effects any change whatsoever – it takes time, culture, people, resources…

The pursuit of this vision can start with a doubling-down on better law-making:

  • look before we leap,
  • deliberate with all interested parties in the room,
  • act with reluctance where consequences are hard to know,
  • weigh carefully the trade-offs that always arise among the desirable goals- citizen needs, the environment, innovation and growth.

But it will need also – at EU level – greater attention to a more explicit and flexible mandate for the enforcers.

Second, then, the EU enforcement culture.

A core component of the new vision must be a shift in regulator and not solely rule-making culture. There are precedents for EU framing the enforcement step in greater detail, for example in pharma and in food, rather than leaving the behaviour and roles of local regulatory enforcers to local discretion. We need to learn more from these experiences what can work across the board.

Regulators do what they are told to do.

The EU level rules (ideally in Regulation form not Directives, but in either case) must specify more systematically and more carefully that any regulator has the duty and discretion not just to apply the rules, or pursue safety at whatever price, but to do so with flexibility where that contributes to a sustainable set of trade-offs balancing all our outcome goals – goals, for example, such as growth, innovation, citizen needs…

Fact-finding should be enshrined as a core regulator competence, and company cooperation with this should be recognised as a foundation stone for trustworthy corporate behaviour.

Regulators need to be assured the resources to do the job well: and to be pointed to data gathering and analysis tools and to EU-wide data-sharing, that can enhance their effectiveness in overseeing a low/no-blame approach to enforcement. The recent work on Platform-to-Business transparency is an encouraging case in point.

Finally, regulated entities, usually companies, can hugely bolster the search for this better way by what they can do all on their own. Ethical Business Practice builds trust and deserves the changes we want in Business Regulation. Oliver Gray has emphasised how much success will depend on what companies choose to do.

Companies can be effective leaders in the more systematic creation, usually under public auspices, of trusted space for multi-stakeholder deliberation.

Companies need to embrace the new balance of risk-sharing implied by EBP/EBR. Liability limitations and a move away from blame-driven cultures are key enablers for this shift in stance. This means top-level internal change leadership, and cannot be left to outward-facing functions.

Last but most challenging, a company that allows its people out to talk the story in primary schools and pubs, and allows people in more operationally than on annual open days. Participative processes are the secret sauce for 21st century company trust.


Downloads

  • Andrus Ansip, Commissioner for Digital Single Market and Vice-President of the European Commission – speech
  • Christopher Hodges, Professor of Justice Systems at Oxford University and Fellow of Wolfson College – lecture
  • Ruth Steinholtz, Business Ethics Advisor, AretéWork – presentation
  • Elisabeth Crossick, Head of Government Affairs, RELX – speech notes

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