"Revenue Gaps from Environmental Regulation Shift"... SME Ombudsman Recommends Supplementary Measures

The Ombudsman for Small and Medium Enterprises (SMEs) is embarking on reforms to reduce the burdens faced by partner SMEs—such as revenue gaps—arising from the tightening of environmental regulations.

On August 13, the SME Ombudsman announced that it had held an 'S.O.S. Talk' event with the Korea SMEs and Startups Agency at the Daegu Trade Center in Dong-gu, Daegu, to listen to regulatory and operational challenges voiced by regional SMEs. The S.O.S. Talk is a roundtable co-hosted by the Ombudsman and the Korea SMEs and Startups Agency since 2015, for discussions with SMEs.

During the roundtable, a suggestion was raised to ease the burden on companies based in industrial-agricultural complexes during the chemical registration process. Company A requested expanded support for drafting registration documents such as hazard information, and asked that companies located in industrial-agricultural complexes—which generally face more challenging environments—be prioritized in the chemical registration consulting support program.

In response, the Ministry of Climate, Energy and Environment explained that, for existing chemical registration application materials, joint utilization is possible if the owner's permission for use and cost-sharing are secured. It was also noted that a government-organized dispute mediation system regarding licensing fees has been in effect since May.

Further expansion of support for companies based in industrial-agricultural complexes is also under review. The Ministry of Climate, Energy and Environment is considering including measures in the 2027 project RFP to award extra points or priority selection to groups that include SMEs from these complexes in the chemical registration consulting support program.

The issue of 'revenue gaps' affecting partner semiconductor SMEs due to stricter environmental regulations was also discussed. Since the semiconductor manufacturing sector has now been included in the scope of integrated environmental permits, major firms such as Samsung Electronics and SK hynix completed their integrated site permits by December 2024. However, it was pointed out that their SME partners are struggling to transition their products and facilities accordingly.

Jae-Hwa Kim, CEO of OH Engineering, explained that when prime contractors replace equipment to comply with environmental regulations, partner SMEs have to develop new parts and go through prototyping, performance testing, client company approval, and mass production validation—a process that takes at least six months. During this period, orders for existing parts are suspended, but delivery of new products is impossible until approval is granted, resulting in a section of lost revenue. Kim stressed, "Although we did not lose clients or lose competitiveness, we ended up with lost revenue simply because we were complying with the new regulations."

The Ombudsman responded that they would communicate the realities and supply-chain structure—which make it difficult for SMEs to match the pace of large enterprises during regulatory transitions—to the concerned ministries, and would request supplementary measures and support to offset losses incurred during the transition process.

In addition, participating companies proposed: ▲ rationalizing personal information regulations and clarifying standards to promote artificial intelligence (AI) development; ▲ streamlining procedures for importing existing chemicals; ▲ improving systems to protect SMEs with regard to the anti-dumping investigation on Chinese special steel bars; and ▲ improving standards for rules-of-origin determinations under the Korea-US Free Trade Agreement (FTA).

Ombudsman Choi Seungjae said, “When the pace of regulatory change outstrips the reality on the ground, the entire burden falls on SMEs. We will continue to work with relevant ministries, based on the proposals raised today, to achieve reforms that SMEs can tangibly feel.”

This content was produced with the assistance of AI translation services.